Trading off a jewel

At an October 2003 'track two' meeting in the Nepali capital between the Centre for Policy Research, (CPR) from New Delhi and the Institute for Integrated Development Studies (IIDS), Kathmandu on Indo-Nepal water resources development, the Indian delegation extolled the virtues of the 'Bhutan model'. According to them the USD 600 per capita income accrued to Thimphu from 336 megawatt (Mw) Chukha is expected to rise to USD 1200 once the 1,020 Mw Tala hydroelectric project comes on stream in 2005. The CPR representatives also apprised the Nepali participants that India's National Hydroelectric Power Corporation Limited (NHPC) was in town, negotiating the 300 Mw Upper Karnali hydropower project. A CPR gentleman further stated that the estimated equity distribution for the project could be 85 percent NHPC, 10 percent for the Nepal Electricity Authority (NEA) and the remaining 5 percent for the Soaltee Group, a Nepali private company. The Nepali participants were not bowled over by the Bhutan model projects as they were constructed entirely on India's financial strength and ended up with India-imposed power tariffs. The Nepalis instead questioned the status of several regional projects: the American-led Four Border South Asian Regional Initiative on Energy (SARI/E), the Asian Development Bank (ADB)-led Arun Valley Development and the Australian Snowy Mountain Electric Company's seven-year old project called West Seti. Furthermore, the Nepalis summed up that all roads lead to Delhi. But it was on the Upper Karnali issue, that Nepali eyebrows were raised, for the 85-10-5 sharing of the spoils was not something that was in the public domain before this.

How much private sector?
The fact that His Majesty's Government of Nepal (HMGN) had traded off the 300 Mw run-of-the-river Upper Karnali to the Government of India (GOI) had been reported in the media for some time. However, the sudden appearance of the GOI owned public sector undertaking, NHPC, in the present politically troubled waters of Nepal does indeed raise many questions, at least among the more critically inclined. When HMGN offered these two projects to GOI, it was believed that the private sector of both the countries— Federation of Nepalese Chambers of Commerce and Industry (FNCCI), Confederation of Indian Industry (CII), and the Federation of Indian Chambers of Commerce and Industry (FICCI)— would be involved. During King Gyanendra's last India visit, a memorandum of understanding (MOU) between FNCCI and FICCI was initiated for joint private sector participation in trade and investment with a tourism and hydropower development focus. In fact, knowledgeable circles assert that the strong Indian multinational, the Reliance Group of the Ambanis, was very keen to execute the Upper Karnali project. Reliance must have also had its eyes on the much larger jewel, the 10,800 Mw Karnali Chisapani "Kohinoor", to demonstrate that it could succeed where Enron had failed in the past (see Himal March 2002). As it transpired, it was the GOI which effectively blocked Reliance's bid. GOI's policy, for the time being, seems to be that all infrastructure projects in Nepal will have to have the full stamp of Indian public sector undertakings. It was presumably this presence of the public sector that prompted the Embassy of India in Kathmandu to go out of its way to extend reassurances to Nepal. The Commercial Secretary of the embassy made the laboured explanation that this is "…the first time that an Indo-Nepal hydel project is being envisioned on commercial lines. … It is not a project run on a government to government basis but being done by a company on a commercial basis that makes sound economic sense".