Hydro without power

After the restoration of multiparty democracy in 1990, Nepal has been taking steps toward hydropower generation. The 1990s saw efforts aimed at developing the Arun III hydropower project for domestic consumption with the World Bank pledging a loan for the same.

However, certain quarters, in favor of developing small hydropower projects over ‘big ones’, stood in opposition, in a pointer that the environment was not conducive for the same. Eventually, the World Bank withdrew its financing program for the project. 

Fast forward 2023. Per reports, India is on the verge of completing the export-oriented Arun III project. Most of the green energy generated from this project will be transmitted to India while Nepal will get a tiny fraction.  

China has also shown interest in hydropower generation in Nepal, but not with much success. 

In the 2010s, construction of the Upper Trishuli hydropower project was set to begin with investment from China’s Exim Bank and in cooperation with Nepal Electricity Authority. The Chinese company, which had completed one-fourth of the project works, abandoned this project altogether after facing obstructions in the name of capacity expansion. The capital invested in developing project components has gone waste. Currently, South Korea is showing interest in developing the project under the build, own, operate and transfer (BOOT) model. If geopolitical interests do not prevail, this project can still materialize. 

In cooperation with the Asian Development Bank, Snowy Mountain Engineering Corporation was to develop a 750-MW West Seti hydropower project. As the project remained stuck for long, the government canceled the license awarded to SMEC and picked China Three Gorges Corporation for project development, but to no avail. Now, an Indian developer has bagged this project without bidding. 

In 2017, the then government granted the China Gejuwa Group Corporation the license for developing the Budhigandaki hydropower project without opting for competitive bidding. But the new government that came to power the same year canceled the license. Now, the Pushpa Kamal Dahal-led government is trying to develop this 1200-MW project by mobilizing internal and external technical and financial resources. 

Despite its failure to bag big hydropower projects, China has two hydropower projects with a combined capacity of 75 MW—Modi and Upper Marsyangdi—in its hands. The BOOT-modeled 50-MW Upper Marsyangdi has materialized, whereas the 25-MW Modi hydel is under construction. A Chinese company has already developed the 456-MW Upper Tamakoshi hydel, while India is developing the 900-MW Arun III hydel.

Recently, India has expressed its ‘commitment’ to importing 10000 MW from Nepal in a period of 10 years while making it clear that it will not import electricity from projects developed with Chinese involvement.

It should be noted that India bagged the lucrative West Seti project after China opted out. West Seti is not an isolated case. The southern neighbor has gotten hold of a number of other attractive hydropower projects like SR-6, Arun IV and Lower Arun. It seems India wants to bag all lucrative hydropower projects by imposing direct or indirect restrictions on Chinese involvement in hydropower generation in Nepal. In this context, it may be worthwhile to recall Chinese ambassador Chen Song’s observations about trade imbalance between Nepal and India.  

Chen,  while commenting on a working paper presented at a program in Kathmandu last month, had noted that Nepal had exported electricity worth Rs 10bn to India in the last fiscal, while importing electricity worth Rs 19bn from India during the same period.

Three decades have passed since the signing of the Mahakali Treaty along with a plan for the development of the Pancheshwar project, with precious little done on the ground. 

This pretty much sums up the status of hydropower development in the country.