Nepal and India Fail to Reach Agreement on Pancheshwar Project


In May/june, an agreement had been reached for the detailed project report (DPR) of Pancheshwar to be submitted within three months during Prime Minister Pushpa Kamal Dahal’s visit to India. However, even after five months since the visit, an agreement on the DPR between Nepal and India has not been possible.

Agreement for consensus between both countries, Nepal and India, on Pancheshwar, has not been reached in meetings held in both countries

The eighth meeting of the Pancheshwar ‘Governing Body’ was scheduled for July 21 and 22 in Pokhara to complete the discussion regarding the Prime Minister’s visit to India. During this meeting, an agreement was reached to finalize the work of the expert group. After that, on August 5-6, a meeting of the expert group was held in New Delhi, India. While the meeting had instructed to understand the revised report within 15 days and an agreement had been reached to finalize the DPR within 21 days, it took nearly two months for the workshop to comprehend the revised report despite providing directions within 15 days. After that, in September 19 and 20, a meeting was held in Kathmandu, but no progress has been made in the plan due to the lack of agreement.

Currently, according to Madhuprasad Bhetuwal, the Chief Executive Director of the Pancheshwar Multipurpose Project, agreement remains pending in some aspects of the report. He explains, ‘Previously, we had pending disagreements in 126 points, but now only 4 or 5 are left. Preparation is underway to address those in the next meeting.’ He also points out that the agreement has taken a lot of time due to the delay in comprehending the revised report provided by the workshop.

After the final revision of the DPR, the joint team of both countries, as explained by Navin Raj Singh, spokesperson for the Ministry of Energy, Water Resources, and Irrigation, plans to utilize this energy resource and irrigation effectively. He says, ‘We will work to maximize its benefits and make it a headline news. It takes time to finalize this due to the complexity of the large-scale project. After the Mahakali Treaty, the process of jointly constructing the Pancheshwar Multipurpose Project through foreign investment began. The agreement mentioned the timeline of submitting the DPR (Detailed Project Report) for the Pancheshwar project within six months. The then parliament approved the Mahakali Treaty in the month of july, 1996 allowing for the agreement to create plans for the Pancheshwar project.

According to the agreement for the project, both countries had agreed to invest based on water usage, with approximately 65% of the investment coming from India and 35% from Nepal. It was estimated to cost around 3 billion US dollars. However, due to the long duration of the agreement, the actual cost has not been calculated at the prevailing market rate. The question of how much each country should invest in the Pancheshwar project is still not mutually agreed upon. India may benefit more from irrigation, so it is inclined to contribute more, which Nepal resists. However, India argues that both countries should contribute their share to the overall project cost, regardless of the individual benefits. After nearly 28 years without progress, an agreement was reached during Prime Minister Dahal’s recent visit to give new momentum to Pancheshwar.

During Dahal’s visit to India, an agreement was reached between the Prime Ministers of both countries to complete the Pancheshwar DPR within three months. Indian Prime Minister Narendra Modi, during his first visit to Nepal in 2014 had mentioned that Pancheshwar would be completed within five years in the parliament. He stated, ‘I assure you, within a year, this project will commence with a production capacity of 5,600 megawatts. You can’t even imagine how significant this will be for Nepal. With the electricity Nepal has now, it will have six times more production,’ he said. After Prime Minister Dahal’s visit to India in september 2016 a joint press release was issued, and point number 19 mentions the speedy progress in Pancheshwar.

After returning to Nepal, Dahal’s press release stated that ‘the DPR for the Pancheshwar Multipurpose Project has been studied and finalized with an agreement between both parties.’ In August 2014, Indian Prime Minister Modi, during his visit to Nepal, had mentioned in parliament that the DPR for Pancheshwar would be completed within one year, and the project itself within five years. Former Prime Minister Deuba, during his visit to India in september 2017, raised the issue of Pancheshwar again. An agreement to complete the DPR within one month was reached during Deuba’s visit.

During the governance of the former Nepal Communist Party (NCP) leadership, Prime Minister K.P. Sharma Oli made Pancheshwar a central agenda during his visit to India in April 2018. In the context of the SAARC Summit, Indian Prime Minister Modi, during his second visit to Nepal, informally brought up the topic of Pancheshwar once again. When Modi visited Nepal in may 2018 to lay the foundation stone for the Arun-3 Hydropower Project, which is under the investment of the Indian company Satluj Jal Vidyut Nigam (SJVN), Pancheshwar was also on the agenda.

Former Prime Minister Oli had informed the parliament on may 13, 2018, that Nepal had proposed to build a 1,300-meter link road in Tanakpur under the Pancheshwar project, construct three bridges in Sharda Barrage, and viewed it positively by India. In december 2020, during the visit of Indian Foreign Secretary Harsh Vardhan Shringla to Nepal, he informed that the dispute over Pancheshwar had been resolved with India’s consent. Following Shringla’s visit, Energy Secretary Dinesh Kumar Ghimire visited India in 2020 and agreed to finalize the DPR within two months. In 2078, during former Prime Minister Deuba’s visit to India, an agreement was reached to expedite Pancheshwar. A detailed study conducted earlier had shown that this project could displace around 22,765 households, affecting 2,926 households in Ghardhuri and potentially requiring their resettlement.

The Ministry of Forests also sent a letter to the Supreme Court: IPPAN

The Independent Power Producers’ Association, Nepal (IPPAN), has informed that they have also raised objections to the Supreme Court. They mentioned that they have not implemented the court’s order despite the issuance of an order for the construction of physical infrastructure inside the protected areas in the policy amendment of 2008, and have not secured investments despite issuing orders to create rules/regulations/directives in the coming days.

Nepal, divided geographically into the Terai, Hilly, and Himalayan regions, makes use of the rivers originating from the Himalayas. These rivers flow from the mountains to the Terai, and this topography allows for hydroelectric power generation in the Hilly and Himalayan regions, as well as water utilization for irrigation in the Terai. IPPAN conveys that the country can quickly prosper through these means.

The majority of the Himalayan and Hilly regions, with potential for hydroelectric power production, have been designated as “National Parks,” “Conservation Areas,” and similar names, posing policy challenges for the development of hydropower projects. This was stated in IPPAN’s press release concerning the policy titled “Policy for the construction and operation of physical infrastructure within the protected area, 2008” issued by the Nepalese government.

The aforementioned policy was amended by the Council of Ministers on may 28, 2018, with a view to making it time-sensitive for “Development and Environment” cooperation. Despite a writ petition filed in the Supreme Court, the court refrained from enforcing the last amendment of the writ until interim orders were given, preventing the implementation of the revised provision.

The full verdict issued on June 6, 2023, directs not to halt the work of the project mentioned in it, and it provides instructions to formulate a policy in the future to ensure the security of such investments.

In the full verdict, it is stated, “The work carried out after obtaining permission for hydropower production and the investments made in the project have the right to protect and manage it accordingly.

The directive order and the decision, issued by the Ministry of Forests and Environment and the bodies underneath, have created hindrances to the hydroelectric projects, by halting the procedures such as Environmental Impact Assessment (EIA)/Initial Environmental Examination (IEE) approval, removal of forest land rights, land acquisition approval, approval of transmission line construction works, etc. The statement comes from IPPAN’s announcement.

The government has set a goal of achieving 28,500 megawatts of electricity production within the next 12 years as part of the Energy Development Decade and the roadmap. IPPAN has stated that while the government aims to export electricity from Nepal to South Asian countries such as India and Bangladesh to make the country prosperous with energy, the Ministry of Forests and Environment’s failure to follow the court’s orders has posed a challenge to this goal.

The Secretary-General of IPPAN, Balaram Khatiwada, expresses concern over the impact of the court’s honored orders on the continuous activities of the government’s responsible bodies. Due to the risk incurred by the private sector in the hydropower sector, it has resulted in significant losses. Prior to the Supreme Court’s decision, the Ministry of Energy, Water Resources, and Irrigation, along with related agencies, had already granted the necessary approvals/agreements as per the ‘Protected Area’s Physical Infrastructure Construction and Operation Policy, 2065’. Therefore, IPPAN requests the court’s order to be strictly adhered to, ensuring the safety of private investments in Nepal’s hydropower sector.

Source: Kantipur ( kamal Dhital )