A hydropower project of this size has never been self-funded. In the case of the Upper Tamakoshi project, Employee's Provident Fund, National Insurance Company, Nepal Telecom and Citizen Investment Trust are all providing loans, accounting for 70% of the estimated total cost of US$ 441 million. The remaining 30% of the cost will be mobilised through equity. The result of economic and financial analysis shows that the Benefit Cost Ratio (B/C ratio) and Internal Rate of Return (IRR) are 2.94 and 24.41 percent respectively, making the project desirable for investors from a cost/benefit perspective.  This, in fact, provides an opportunity to divert our idle resources in the real estate sector to a more productive, dynamic sector.

Currently under construction, the Upper Tamakoshi hydropower project was started in 2010 and is expected to be completed in 2015. Four international contractors with different job assignments are jointly working on the project. Chinese contractor, Sino Hydro Corporation Ltd, responsible for civil works, has built an access road and completed the construction of 10.6 KM of a planned 16 Kms of tunnels, 40 percent of dam construction and has constructed half of an underground powerhouse. The prevalence of cracks, said to be appearing in the power house after just 28 metres of the tunnel was probed, are of some concern.

Though the exact reason for the cracks is yet to be known, three reasons have been posited for their occurrence: technological flaws, an inaccurate geological survey, and test and temperature change. If either of the first two reasons are responsible, a serious lack of accountability and transparency will be apparent. Whatever the reason, it is a serious matter, implying that the powerhouse needs additional work which would extend the project's duration by four to six months and require extra investment. While some modifications on the predesigned route of the tunnel are being proposed as a result of what many believe is an unsuitable geological structure, professional investigation is required.

On the road to Gogar, located at the bottom of Khare VDC, is a small track from where 20-25 school children  walk twice a day to go to their school and home. The construction of the project's access road dislocated the track, making it difficult for the children to traverse it. The consumers' committee of Khare VDC has already taken a sum of Rs. 2403249 to operate and improve 13 different programs from the project. Neither the project itself nor the consumers' committee are however, taking any responsibility for the improvement of the track. Meanwhile, the construction of the access road has been held responsible for landslides between Gogar and Lamabagar which have put nine houses in danger. Immediate action is needed to rehabilitate affected families.

Dolakha's residents are entitled to a 10% stake in the project. This implies that all are getting equal rights. Will this allotment be fair and just? As the project is wholly located in Lamabagar VDC, inhabitants of Lamabagar are suffering from social, economic and environmental pollution in the short term. In the long term they should have larger benefits: obviously, a special offer is needed for those who are  suffering from the project's construction. In this context, local demands to allot a 1-3 percent greater share in the project to those who are suffering directly from it can be well understood. For this to happen, however, special provisions need to be made. Likewise, provisions detailing Lamabagar VDC's right to benefit from the royalties generated from its resources, currently deferred to the District Development Committee, are required.

(Dhungel is a professor of Economics at the Central Department of Economics, TU)