Impediments to Nepal’s hydropower development

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    South Asia is said to be rich in hydropower. India occupies first place with techno-economic hydropower potential (84044 MW), followed by Pakistan (59000 MW), Nepal (43000 MW), Bhutan (24000 MW) and Sri Lanka (2550.7 MW). Out of this Sri Lanka has tapped 54.93% of its hydropower potential, the highest in the region, followed by India (46.48%,) Pakistan (11.11%), Bhutan(6.2%) and Nepal (1.53%). Nepal occupies third place in terms of hydropower potentiality but appeared last with respect to utilization. What are the causes behind its slow development? There may be several impediments responsible for this block. This article aims to analyze some of them.

    Since 1990 hydropower sector has been liberalized. Acts regulations and policies have been implemented to attract private sector investment. But they failed to act efficiently. None of the elected government remained in power in their full term. Programs, policies and priorities have been changing with the change in government. Fraud and corruption were rampant leading to frustration and pessimism. The outcome was the decade long insurgency which ended in 2006. The Constitution Assembly was formed in 2008 that abolished monarchy. Ethnic groups have been continuing protests for the cause of the name, size and power of the proposed federal states. Political parties failed to address these issues. Consequently, the Constitutional Assembly was dissolved after four years of its operation without promulgating the constitution. This prolongs political crisis indefinitely. It puts the economic agenda as a captive.

    Hydropower generation is capital intensive. It needs investment in a huge scale. Given the tiny size of the Nepalese economy, the domestic banks and financial institutions seem unable to provide loans to the power developer even to construct a size of 20 MW hydropower project. Obviously, domestic capital is not enough to invest in large hydropower projects. It calls for foreign investment. But in a given situation, foreign capital could not be attracted unless the government puts efforts to create congenial environment for investment. Profit, market, stability with consistent programs and policies and security are the prerequisites for foreign capital to invest.

    Electricity if produced by private developer needs transmission lines as the prerequisite to transfer power from the production site to the market. Some of the independent power producers have shown interest backed by their capability. But they failed to do so due to the lack of transmission line. The same obstacle has been faced by international developers. They would be interested to invest in large hydropower projects only if their product has huge market for sale at competitive prices. For this to happen, transmission lines from Nepal to India is needed to transfer electricity (surplus over the domestic consumption) generated from their investment. This situation calls for the transmission line to be constructed as a prerequisite for both the domestic and foreign investors.

    Nepal Electricity Authority (NEA) is responsible for hydropower development. Transmission, distribution and generation are its three primary factions. These functions are overlapping. Functional nature of this type would be in trouble in delivering effective performance. Mixed functional responsibility could deviate from accountability. Slow pace of hydropower generation among other thing is the outcome of this strategy. Priorities could be shifted from one to another function as to the responsibility and accountability. It hampers achieving the desired level of outcome. Therefore, it is necessary to commission separate entity to handle these functions separately. This will increase the sense of responsibility, accountability and sustainability.

    Political will power seems very weak. The vision, plan and action differ among the political parties. They have no unanimous views about foreign investment. Some are advocating for export and the rest are for domestic consumption. It makes acts, policies, regulations and priorities ineffective. Such working style could not produce desired results in short and in the long run. It calls for building a national consensus with commitment on programs, policies, acts, regulations and priorities. This helps to keep policies and programs consistent which is the prerequisite to attract domestic and foreign investment.

    Regional initiative is a must for hydropower development. Adequate investment and necessary expertise can be mobilized through regional cooperation. India, Bangladesh, Pakistan etc are in need of electricity. They can invest to generate electricity if consensus among nations is built. Therefore, it is necessary to build regional and national consensus within and across the political parties to mobilize regional expertise and investment for the development of large hydropower projects.

    All rivers and rivulets have seen licensing. Most of the license holders are cadres of political parties. They do not have adequate investment, knowledge, expertise and other prerequisites. It creates a doubt as to the development of hydropower. Thus, the government should issue licenses to those who are actual developers and confiscate license from those who are not.

    Source : The Himalayan Times (DR. KAMAL RAJ DHUNGEL)