Nepal has over 40,000 MW of hydropower potential, yet a small fraction of that is actually harnessed. While bigger hydropower projects are often embroiled in controversies around environment and trade, smaller ones are also deeply contested due to the lack of equitable benefit sharing mechanisms within local communities. However, there are a few examples where private power companies have partnered with local communities and enjoy mutually beneficial arrangements. Aadhikhola Hydropower Project is a good example of benefit sharing.The project is situated in Galyang VDC in Syangja district of Nepal. Butwal Power Company built the 5.1 MW project with technical and financial support from the United Mission to Nepal (UMN). The construction began in 1982 and power generation came into commercial operation in July 1991. After an upgrade in April of 2015, the company increased power production from 5.1 MW to 9.4 MW. Aadhikhola serves 31,000 electricity consumers including small enterprises in the districts of Syangja and Palpa. In addition, UMN and Butwal Power also support the Aandhikhola Irrigation Project (AIS) through community engagement.
UMN managed 282 hectares providing irrigation water to villages and households affected by the hydropower project. In 1995, management was assumed by the community-run Andhikhola Multipurpose Water Users Association. Today, the water users association comprises 13 members (9:4 male/female) representing various VDCs and wards. The association manages the irrigation systems supplying water to 330 hectares of land year-round including six wards of two VDCs from Syangja and two wards of Hungi VDC from Palpa districts. Farmers who once struggled to harvest one crop per year are now harvesting three crops per year due to the project.
What made the irrigation project unique is not only did landowners benefit, but landless households did as well. Through an innovative land purchase scheme, those with excess land were encouraged to sell 10 percent of that excess to the water users association. Seventy households were then provided land at a minimum price set by the association. As a result, farmers, even those who were previously landless, are now harvesting up to three crops a year and can sell their surplus in the market, achieving both food and income security.
A formal agreement between the private power company and the water users association which outlined water allocations from the hydropower project was signed in 2004. The parties agreed the flow of water through the irrigation canal varied between the monsoon and dry seasons. An agreement was reached in 2012 that the company would supply an additional 50 liters per second of water for maize planting for 15 days during the month of April. The water users association received financial support from the power company and also collected user fees from farmers.
Under the community electrification program, 29 VDCs from Syangja district, ten VDCs from Palpa district and Waling Municipality receive electricity from the hydropower project. Depending on affordability and local demand, the power company provides two types of tariffs. Under its basic "cut off system", consumers pay a basic tariff of Rs 19 per month for 24 watt equivalent of electricity. Under its "meter system," there are fixed-demand and variable-meter charges based on actual consumption.
In addition to supplying the local community, the power company also supplies electricity to the national grid. The company serves approximately 11,000 direct paying consumers and 20,000 consumers through community electricity consumer associations. Community associations enter into a contract with the private power producer and collect revenue on its behalf. It retains 10 percent of all revenue collected for its effort.
In addition to irrigation and electrification, the project funded a new hospital; financially supported schools, a road, a temple, and a bridge; provided several skill development trainings; and allocated one million Nepali rupees annually toward corporate social responsibility.
In addition, the project also pays royalties to Government of Nepal. Before the upgrade, the Aadhikhola Hydropower Project paid Rs 19.2 million per year as a royalty. Since the local governance act, the government now shares 12 percent of the royalties with Syangja district for housing the Aadhikhola Hydropower Project, and for electrification and development activities.
Aandhikhola shines as an example for private power producers, communities and policy makers. The project's successful implementation of its benefit sharing mechanism was a win-win partnership for the power producer and local communities alike providing irrigation, electricity, and bettering the lives of marginalized members of communities.
Innovative institutional mechanisms like land markets and electricity associations are designed to serve marginal communities. While Aandhikhola does offer useful lessons, it still faces challenges. Many of the irrigation channels are in a state of disrepair and famers near the dam site not covered by Aadhikhola Irrigation System are demanding 24 hours irrigation water supply for 10 hectares of their lands.
Nevertheless, strong community involvement and a realistic benefit sharing model enables locals to find innovative solutions to meet their water, food and energy needs. The lesson for policymakers is equitable benefit sharing mechanisms must underpin all current and future hydropower projects in Nepal.
Shrestha (rashmi.shrestha@icimod.org) is Consultant, Energy Portfolio, Water and Air and Mukherji (aditi.mukherji@icimod.org), Theme Leader, Water and Air at ICIMOD
Related story
8 Benefits of drinking grape juice
