- The Upper Karnali hydropower project deal should ensure that it benefits the local community
Oct 13, 2014-
Last month, the Project Development Agreement (PDA) of the Upper Karnali Hydro Project was signed between GMR, a private Indian company, and the Investment Board of Nepal, which is a Government of Nepal-owned board. The Investment Board claimed that the PDA document was finalised by “complying with international norms, standards and good practices”. As per the PDA, Nepal will get 27 percent free equity and 12 percent free electricity from the project. The equity is equivalent to Rs 145 billion while 12 percent free energy amounts to 108 MW.
For and against
While the project was praised as a gateway to foreign direct investment (FDI) in mega-water resource projects in Nepal, several senior political leaders, energy experts, and bureaucrats have expressed serious reservations over the deal. Chief among them was that the deal was signed between two different organisations, ie, a government body, which has a social responsibility, and a private company, which is guided by profit motives. So the latter may take undue advantage of the former. This point was raised despite the fact that several compensation provisions have been included in the deal, taking advantage of the fluid political situation in Nepal.
Similarly, the project may adversely affect the upstream possibility of power development (4,100 MW) and downstream irrigation schemes with irregular water discharge. Meanwhile, a writ petition has been filed at the Supreme Court challenging the deal. Several concerned groups have also reportedly been formed at the political level in Kathmandu as well as in the project area to oppose the deal.
Against this backdrop, how confident are we that the deal is indeed beneficial to Nepal and will indeed be a gateway for FDI in mega projects? Since this deal will set a benchmark for other projects in the future, can we provide similar concessions and compensation packages to other projects? How prepared are we to answer those who oppose the deal? These key points need to be assessed as early as possible. This is because, as we have seen in the past, mega projects such as the Arun III andWest Seti were cancelled after several years due to such resentments.
From the information available in the media, it appears that some crucial points were indeed missed in the deal. First, what will the people of the Upper Karnali region get from the investment of $1.5 billion? Is this compensation the employment of 2,000 people, along with roadways, hospitals, technical schools, and bridges? In fact, most of these infrastructures are for the project, which local people can also benefit from. However, locals may only get the job of unskilled labourers, as they lack the required technical skills. Besides, outsiders will rush in to grab business opportunities, petty contracts, and supply of food items due to a lack of local capacity. So locals might be marginalised in the whole process. Hence, should a part of the investment not be set aside for local capacity development and alternative livelihood development so that locals can gain maximum advantage from the investment?
Second, there are several engineering, environmental as well as social challenges, among others, to implementing such mega projects. On the social side, the reservoirs will inundate farmlands, displace people, and increase food insecurity in the region. This issue will be more prominent in another upcoming project, Pancheshwar, where 2,926 households will be displaced and food crops worth Rs 138.5 million will be damaged annually. This cannot be addressed merely with compensation packages, as planners would like. For a farmer, land is not only a fixed asset but also an industry, which continuously provides multiple benefits, such as employment, food security, income, and social status. Therefore, acquisition of their lands through one- time-compensation at the government rate (which is generally lower than the market price) may not be acceptable to the people.
An alternative could be sought. For instance, the land can be regarded as capital, which can also be considered as investment in the project. A mechanism could be worked out to provide resettlement as well as the equity share (for their land) of the project, which would entitle locals to get dividends from the project. This could be a more acceptable formula and would also generate a sense of ownership of the project among the people, which is crucial for its sustainability.
Similarly, there is also strong feeling at the political level that water sector projects should not be given to foreign companies. Such sentiments can be easily cultivated by certain groups under the guise of ‘patriotism’ which will make it difficult for the developer to construct and operate the project. Therefore, it would be better to develop a joint Nepal-India venture under a public-private partnership model for smooth implementation and operation. There are successful examples in the Upper Tamakoshi and Chilime projects, where 5 percent equity share is reserved for the project area. This has sent a different message to local communities.
Lastly, what is the upstream and downstream impact on the environment and ecology of Upper Karnali? Water will be controlled for 18 hours in the reservoir and discharged for six hours to generate maximum electricity during the peak
hour. Without thorough research and analysis of the impact on the environment and ecology, and without carefully designed preventive measures, there could be serious adverse effects on the environment, including the flora and fauna. In order to save the dam from high sedimentation in the rivers, more grass and tree-oriented livelihood methods, such as herbal plants, fruit farming, and livestock development needs to be developed in the hinterlands of the Karnali River basin.
Local communities are both victims as well as champions of mitigating the adverse consequences on the environment and ecology. Hence, understanding environmental impacts and developing community-level mitigation measures well in advance could outweigh the negative environmental consequences in favour of the economic benefits. Community-level development activities focusing on these areas need to be started from the very beginning to develop alternative opportunities as well as a favourable environment in the project area.
If this project is to be a gateway for FDI in mega power projects in Nepal, and several other projects that are in the pipeline, who will address these concerns? Will it be the Government of Nepal that licenced the project or the project developer that will make a profit out of it? Hence, while negotiating the project, such people-centred issues should have been discussed. A portion of the investment, as well as a portion of the profit, should have been set aside as the cost of construction and operation. This resource could be utilised for capacity building
of the local people, developing alternative livelihoods, and environment protection for project sustainability, among others. We should not forget that once the deal is finalised, the Government of India will stand behind it to implement it throughout the project life. Therefore, we must muster the courage to correct the deal well in time. Otherwise, we will be resigned to singing the same old elegy: India has taken all with an unequal deal.
Paudyal is Chairman and Executive Chief of Rural Self Reliance Development Centre, Kathmandu and can be reached at email@example.com
Published: 13-10-2014 08:24