- A long-awaited dream was dashed when China Three Gorges pulled out of West Seti
Sep 9, 2018
The news that China Three Gorges International (CTGI) had decided to withdraw from the West Seti Hydroelectric Project is a painful matter, not only for the people from the far western region, but also for foreign direct investment (FDI) authorities, well-wishers and people promoting the energy sector in Nepal. The decision has pushed the long-awaited dream of the people of Province 7 into a state of vacuum and uncertainty. It also indicates a prolonged resource curse situation for Nepal if certain issues are not well addressed.
West Seti is a national pride project planned to be developed on the Seti River on the border of Doti, Bajura, Bajhang and Dadeldhura districts. The first meeting between Investment Board, Nepal (IBN) and CTGI was held in November 2013. This meeting was set up right after a field visit confirmation by a team led by the secretary of the Ministry of Water Resources that the promoter was really China Three Gorges International, the renowned Chinese company which built the Three Gorges Dam Project in China, the world’s largest hydroelectricity project with a capacity of 22,500 MW.
During that very first meeting and several follow-up meetings, CTGI and its subsidiary China Water & Electric Co International (CWEI) showed keen interest in developing the West Seti scheme. They sought clarifications, mainly with regard to three issues. One, they raised serious concerns about land acquisition. It was very clear that they doubted the capacity of the government of Nepal regarding land acquisition, rehabilitation and resettlement of project affected people. They stated clearly that the government did not have sufficient policies and coercive power to acquire the land needed for the massive 750 MW storage-type project.
Two, they wanted to know about the development of the transmission line. They were eager to meet with the responsible authority for developing the transmission line and when it would be completed. Three, they had a valid query about the power market. They wanted a power purchase guarantee from the government of Nepal for the power produced by the project because it was intended to provide electricity for domestic consumption. Nepal’s sole electric utility, the Nepal Electricity Authority (NEA), never said that all the electricity produced by the project would be purchased. In fact, the NEA continued to reiterate that there would be a huge power surplus after the project was completed, so they could not guarantee that they would buy all the electricity.
After that meeting, IBN asked the government and NEA for their official opinion on these issues, but it did not get any proper and prompt response. Following constant prodding by former Member of Parliament (MP) from Doti Bir Bahadur Singh and the parliamentary Water Resources Committee to expedite the project, IBN was able to get some answers. However, the responses were not so clear and forward-looking for the investors and IBN itself. Although they were not satisfied with the clarifications, the developer circulated a draft of the joint venture agreement, but the NEA held on to it for a very long time. Again, following serious efforts by IBN, a preliminary joint venture agreement was signed between the NEA and CTGI in November 2017. But it couldn’t be converted into real project execution. Clarity on policy statement is the most important issue for West Seti. The government says that the project is for domestic consumption, but the NEA is not ready to consider it. This ambiguity should be removed first.
It is well known that the power market in Nepal is mostly influenced by the decisions and behaviour of the Indian government. One of the serious concerns of CTGI and other potential investors in Nepal’s power sector is the Indian government’s power purchase related regulation passed last year. The regulation says that companies fully owned by the governments of the concerned countries, and those having 51 percent equity investment of Indian public and private companies, can export power to the Indian market after obtaining one-time approval from the designated authority in India.
This seems to be an obstacle for non-Indian private investors in the power sector in neighbouring countries including Nepal. The government should resolve this issue in a way that addresses the concerns of all investors through bilateral negotiations with the Indian government. It is obvious that investors will certainly think twice about the market for their product before investing such a huge amount of money.
Land acquisition, resettlement and rehabilitation processes have to be more investment-friendly by urging people to be more receptive to large-scale infrastructure development projects. Another significant issue, power purchase, has to be ensured. It is also crucial to mobilise the diplomatic wings simultaneously for achieving bilateral and multilateral power trading agreements with neighbouring countries. Finally, if we consider the example of Bhutan, a large-scale hydroelectric project can change the face and status of the people along with the country. So, the government of Nepal and IBN should take immediate steps to develop a modality and decide the mode of investment—whether it should be developed through full government funding, public-private partnership or a cooperative model. The long-awaited dream of the people of the far western region should come true very soon at any cost.
Source: The Kathmandu Post