The West Seti Hydropower Project is again in the news for wrong reasons. Twenty-one years after first license was issued for its development and seven years after it was handed over to the Chinese side, perhaps not unexpectedly it is on the verge of being cancelled again.Separate the fluff and the financial viability of West Seti was always a suspect. As a storage-type, it makes sense for Nepal to develop it for energy security. But it’s relative remoteness from urban centers in Nepal and the fact that it needs a very long transmission line for power evacuation, if it is not exported to India, didn’t seem to make much economic sense. It was originally conceived as an export-type project for obvious reasons.
But with India’s new regulations on cross-border power import that proscribes importing power from Beijing-invested projects in Nepal, the door for exporting it to the southern neighbor remains shut. While there may be talk about consuming the generated power in the far-west and developing a local economy, that is unlikely before the transfer within the Build Own Operate and Transfer (BOOT) period is over.
The China Three Gorges Corporation was worried about the profitability of the project and return on investment. Nepal Electricity Authority (NEA) was expected to make a 25 percent investment in this $1.6 billion project—arranged through concessional loans from China EXIM bank. (Now there is talk of the project being built with the help of Nepali investors.) Even NEA management would much rather invest the borrowed amount in other projects, if it were not for political pressure.
When the government of Nepal cancelled the license given to Snowy Mountain Engineering Corporation (SMEC) in 2011, it had become clear that the SMEC would not be able to arrange financing for the project. By then ADB and China National Machinery and Equipment Import and Export Corporation (CMEC) had decided not to offer financing as well. But curiously enough the project was handed over to another Chinese state-owned firm in August 2011.
The story of repeated failure of the West Seti hydropower project is emblematic of our lack of pragmatism. This is also a strong indictment of our development model that perpetuates a slack and nonchalant attitude in everything we do. A degree of discipline is required in any undertaking, more so in huge national infrastructural development. Our inclination to take at face value commitments made by our neighbors is also a problem. We tend to assume that China will fund anything and everything, if we only ask. Reality is much different. Chinese political leaders may give assurances to fund our request, but they are only being polite.
More important, the failure of West Seti is symptomatic of our unrealistic expectations from Beijing; our inability to see through cultural differences during negotiations continues to create a bubble of unrealistic expectations.
As Nepal begins a phase of negotiations with China on a raft of projects both in and outside the ambit of Belt and Road Initiatives (BRI), the failure of West Seti offers a stark reminder of what could happen to other much-hyped undertakings, including the railways, if we do not do due diligence.
