The West Seti project has given the Far Western region a new ray of hope. Recently while I was in Mahendranagar I had an opportunity to meet a cross-section of people in the city. Most of them thought that the economic fate of the Far Western region was finally getting some much-needed attention. However, there was also deep concern about the possibility of the project being cancelled because of what may labeled “internal political disagreements and confusion”.
In the meantime the National Resource Committee of the parliament has also been active in reviewing the MOU between the Energy Ministry and the Three Gorges company. The discussion in the parliamentary committee on various aspects of this project had raised doubt about its future. However, the interest of the committee might also be viewed positively since it brings into focus the various issues related to the project that would, in any case, have cropped up in the future.
WEST SETI HISTORY
Around 16 years ago the then government signed an agreement with Snowy Mountain Engineering Co (SMEC) to construct this project for the generation of 750 MW of peak power primarily for exports by stepping on clause 35 of the Electricity Act (2049). SMEC was basically a consulting company and perhaps for this reason it was never able to manage resources to undertake this project. It was increasingly becoming clear after numerous extensions of licenses that SMEC was not up to the task. Against this background, the government’s decision to have an international investor with technical experience and financial strength to undertake this project on the basis of public-private partnership is a step in the right direction. Some analysts have argued that the government´s decision goes against the spirit of the Electricity Act. On this point let us remember that both Bhote Kosi and Khimti projects were undertaken on the basis of negotiation.
Similarly all governments, be they led by Nepali Congress, CPN-UML or the Maoists, have awarded survey licenses to many foreign companies through direct negotiations. The government has the right to negotiate new FDI projects in the power sector under the Electricity Act. Nevertheless we now have an Investment Board that has been given the mandate to be involved in hydro-projects over 500 MW capacity. Therefore, it would make sense for this Board under the chairmanship of the PM to be engaged in the project’s overall supervision. However the Board is still in its infancy and its new CEO will have to learn to work with the Energy Ministry in a spirit of coordination.
POWER FOR NATIONAL DEVELOPMENT
There is this belief in Nepal that we are a small nation as we are sandwiched between two emerging super powers. This is not a correct perception. At the global level we are the 46th largest nation in the planet. In the present day world a nation of 30 million people is not exactly a small nation. There is a huge unsatisfied demand for energy in the country which is only going to increase in the future. At present the per capita power consumption in Nepal, according to the World Bank, is around 100 units. Compare this with the average per capita consumption of around 10,000 units in developed countries in the OECD grouping. Even in our own region per capita electrical energy consumption for India, Bangladesh, Sri Lanka, and Pakistan is 590, 252, 411 and 469 units respectively. In the next 25-30 years if we aim to reach the status of a middle-level developed country with an average per capita energy consumption of 5,000 units and growth rate of 7 percent our energy demand will require a total power generation capacity of around 45,000 MW. What this means is that there is a huge market for hydropower in Nepal. So the whole idea of exporting electricity is based on a wrong analysis of our reality and ambition.
Development of West Seti as a multi-purpose project would contribute to poverty alleviation in Far West and help Nepal’s overall prosperity.
Electricity generated in Nepal must help the growth of agriculture, industry, tourism, services and transport inside the country, generating new jobs and creating new wealth and income. A demand study of electricity has found that if we want to replace the use of gas by electricity for cooking purposes in Kathmandu there will be an additional demand of 600 MW.
Similarly, if we are to supply adequate electricity to all the four industrial corridors in the country another 400 MW will be needed. In view of this reality does it make any sense to talk of exporting electricity while the nation remains starved of power? And the irony is that once we export 90 percent of power for a mere free energy of 10 percent of total exports under the present scheme of “dedicated export projects” we then import it again at a cost that is almost double the selling price in Nepal. This is one reason why there has been opposition to FDI ploughed into primarily export-oriented projects instead of those aimed at local consumption.
On this issue I had an interaction with the officials of the GMR, the Indian company that is now constructing the Upper Karnali project. I was told very clearly that the company would be happy to sell electricity to Nepal if the NEA would approach them with their requirements. This is a perfectly reasonable position and it is now up to the government to respond while taking all steps to speed up the construction of the project. The basic logic that we must all take to heart is that Nepali people must have the first right to use electricity produced in Nepal. We can think of exports only when our national requirements are met. It is on this theme that we should aim for a national consensus among all political parties.
SOME RELEVANT ISSUES
The pricing of power from West Seti will require a detailed cost estimate. However it is believed that SMEC had a contract to sell power to the Indian side at US $.049 cents per unit. This figure provides a sort of benchmark in any future decision on this important issue.
Since West Seti is a storage project, the regulated flow of water in the winter season will be enough to irrigate 250,000 acres of winter crop downstream. This opens up new possibilities of increasing food production in the Tarai districts of the Far Western region. To take advantage of this new potential the government must prepare plans for investment in irrigation so that districts like Kailali and Kanchanpur can turn into the country’s new granaries. It will help reduce unemployment in the region and people will not have to go abroad searching for work. As for investments both our neighbors to the north and the south have expressed their willingness to provide concessional loans for productive investments.
Furthermore there are institutions like the World Bank and the ADB that are committed to poverty alleviation. And there is no doubt that investment in irrigation is one of the effective means of reducing poverty while also promoting food security. This is a point the government may need to put forward effectively before international financial institutions. For the moment all that is needed is the determination and will on the part of the government to implement the West Seti project as a multi- purpose scheme so that the Far western region takes a “frog leap” in development while supporting the overall prosperity of the nation.
The author is co-chairman of Rastriya Janasakti Party and CA member
prakash_dr@hotmail.com
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