It’s all about the water – Hydropower has further energised relations between Nepal and India

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    Nepal-indiaJAN 26 – A thread that has woven a deep relationship between Nepal and India— energy —has also created a complex state of interdependence between the two neighbors . When it comes to energy , the issue of water comes to the fore creating further complexity. After having embarked on an economic journey almost together in the early 1990s, Nepal and India “did much” only over the table, but less on the ground in the energy sector. After Indian Prime Minister Narendra Modi took the helm in May 2014, the game seems to be changing a little faster than expected.

    Nepal and India have reached a number of landmark agreements after the advent of Modi who prioritized the neighbourhood.

    The much awaited Power Trade Agreement (PTA) has enabled both the nations to trade hydroelectricity like other commodities. The Project Development Agreement (PDA) for two major projects—Upper Karnali and Arun III—has been successfully completed. Both the projects are being built by Indian developers. While the GMR-ITD Consortium is a private sector developer, Satluj Jal Vidyut Nigam Limited (SJVNL) the developer of the Arun III project, is a government entity.

    Likewise, the establishment of the Pancheswar Development Authority has rekindled hopes regarding the multipurpose project that many hydro experts say has the capability to change the face and fate of the country. The fact that Pancheswar is showing signs of taking off after 18 years in itself shows the narrowing differences between the neighbours.

    “When it comes to the relationship between Nepal and India, energy and water come forward as major components. India seems more interested in Nepal’s water resources while Nepal’s interest lies in the development of hydropower projects,” said Sheetal Babu Regmi, formerenergy secretary. According to Regmi, the factor that played a spoilsport in harnessing cooperation between the two nations was the “defensive” strategy of Nepal and “taken for granted status attitude” of India.

    “Unfortunately, due to this, we saw a lot of ‘table talk’ and very less ‘ground level activities’,” Regmi said, adding that the recent development in the political relationship between the two nations had shown some positive indications, and that the right push for projects could change that dynamics. Regmi feels that since both the nations have the common goal of achieving economic prosperity and sustainability, there should be no issues that will play a spoilsport in forging a development consensus.

    According to Khadga Bahadur Bisht, president of the Independent Power Producers’ Association Nepal (Ippan), electricity as a commodity has evolved very recently in Nepal and India as compared to the Western world, and that the time has come to rise above political activism and move ahead on water sharing and energy issues. “The Mahakali, Koshi and Gandak treaties with India took a toll on our domestic politics, and this caused instability too,” Bisht said. “With a new political regime in India now, Nepal should be able to capitalize on her generosity.” According to him, both the nations should try to forge a consensus on water andenergy related issues and move ahead following the improved political ties.

    Energy experts share a common view that both the nations need to be able to take “water” and “ energy ” as commodities, and use these resources to fulfil their national interests.

    The data shows it all

    The improved political relationship between Nepal and India has been clearly reflected in the country’s energy sector. According to a rough calculation, Nepal has received investment pledges of around Rs 267.5 billion in the energy sector so far.

    The data of the Department of Industry (DoI) shows that Nepal received investment pledges of just Rs 12.11 billion in the energy sector during the past one decade (2061 2004 to 201571).

    Within the first six months of the current fiscal year, the DoI’s statistics show that Nepal received investment pledges worth Rs 256.19 billion.

    While it is still unclear what percentage of the promised Rs 12.11 billion has translated into actual investment, the latest commitment of Rs 82.5 billion for Arun III and Rs 140 billion for Upper Karnali is most likely to be translated into actual investments.

    “There has been a paradigm shift,” Bisht said. “If we succeed in generating abundant energyin the near future, it will help us realize our actual demand. Once this happens, investments might go up.” Likewise, Regmi says that though Nepal’s energy requirement is estimated to be around 1,200 MW, the country has the potential to absorb 2,000- 2,500 MW. “People will start replacing LPG. Also, industries and individuals will get rid of their gen sets,” Regmi said.

    PTA and PDA, the game changer

    The much awaited PTA with India and the PDA of two major projects has triggered hopes that the year 2015 might just be the investment year,year Nepal has been looking for since a long time now. According to energy experts, if Nepal succeeds in executing these projects without substantial problems, it will not be a big deal for the country to bring in further investments in the energy sector. The PTA with India has already enthused prospective investors.

    The Ministry of Energy (MoE) has said that it has been receiving a decent amount of enquiries and that a series of meetings are being held. “For any sector to flourish, you need discipline and a conducive environment and have to execute the task properly based on the schedule. This is something the government of Nepal must guarantee in case of Upper Karnali and Arun III,” Regmi said.

    Bisht added that since both Upper Karnali and Arun III were being built under the BOT (Build-Operate-Transfer) model, all the stakeholders should help the project. “These projects are not perpetual,” Bisht said. Both the projects will be handed over to the Nepal government after 25 years of commercial operation.

    India is the market

    Unlike other commodities, Nepal will have to depend largely on India for a market to sell theenergy generated here. Going by the status of hydropower development in the country, there might be surplus energy during the wet season within a couple of years. Though the Saarc Framework Agreement for Energy Co-operation (electricity) has been reached among the Saarc member states for addressing the increasing demand for power in the region, India will have the crucial role as it has a shared border with Nepal on three sides.

    Revitalizing Pancheswar

    The positive indication about the development of the Pancheswar Multipurpose Project further highlights the relationship between Nepal and India.

    The project to be developed on the Mahakali River on the Nepal-India border is expected to generate 6,720 MW of energy and irrigate 93,000 hectares of land in Nepal and 1.6 million hectares in India. The project, which was envisaged by the Mahakali Treat signed around 18 years ago, will largely serve the interests of both the nations.

    “Pancheswar is a very good project for Nepal. While both the nations have agreed on dividing the power equivalently, there should be similar sharing of the water, and the project should be initiated at the earliest possible,” Regmi said, adding that the best thing about the project was that the inundation area would be very high in India as compared to Nepal. According to Bisht, the Pancheswar project should be set as a benchmark and its development should be initiated. “This project is not just about energy but also about irrigation. Hence, it can do wonders for both the nations.”

    Creating greater interdependence

    According to Bisht, the creation of stronger trade ties through energy can help Nepal regain the ground it has been losing to India. “You can see a lot of tension between India and China at their border. But their economic ties are so strong that they don’t have any other option but to clear off the differences,” said Bisht. Regmi feels the same way.

    “Though Russia and the rest of Europe have huge differences, the need to import gas from Russia has prompted Europeans to maintain a healthy relationship,” Regmi said. Both the experts feel that energy should be identified as a crucial raw material to accelerate development. “When you construct a road, it does not necessarily make the people living around it rich. It rather helps them to fulfil their requirements. Energy is the same,” Bisht said, adding that energy might not be the sole factor to upgrade the economy of Nepal, but it certainly holds significance for fuelling the economy.

    According to Regmi, both Nepal and India, especially Nepal, should be able to make their citizens realize that there is no harm in fulfilling each other’s needs by making appropriate use of the resources they possess.

    Source : The Himalayan Times