The other project

Hydropower technocrats claim that there are no storage projects above the Upper Karnali Bend Scheme, identified as KR1A, in the Karnali Basin Master Plan Study. Technically, these technocrats are correct, as the Master Plan has none. However, Ananda Bahadur Thapa, former executive secretary of the Water and Energy Commission Secretariat, has been consistently saying that the 4,180MW storage scheme does exist. This storage scheme, the KR1B, was identified by Himalayan Power Consultants in their December 1989 Prefeasibility Study of Upper Karnali Hydroelectric Project (Karnali Bend Site KR1A) for the Nepal Electricity Authority (NEA). In 1986, the Canadian Himalayan Power Consultants was carrying out a World Bank-funded Feasibility Study of (10,800MW) Karnali Chisapani Multipurpose Project for the Government of Nepal. In parallel with the Feasibility Study on Karnali Chisapani, Himalayan Power Consultants was also tasked with carrying out a prefeasibility study of the Upper Karnali Hydroelectric Project, KR1A.

Bearing in mind Nepal’s then internal demands, the 1989 pre-feasibility report of Upper Karnali recommended a 240MW power plant. At the same time, the report also recommended the alternative development of Upper Karnali through a 260 metre high storage dam at the KR1B site, (slightly upstream of KR1A dam) whose backwater would extend to the Tila River. The single stage version envisioned a 4,180MW powerhouse at the 240MW site. The staged development version had three powerhouses: a 408MW at the toe of the dam releasing water for the 240MW downstream and a 3,532MW powerhouse near the 240MW one, receiving water straight from the dam.

After the 1995 Arun III debacle, the screening and ranking process carried out by the NEA identified Upper Karnali with a 300MW capacity, along with five other doable projects. With a design flow of 236 cubic metres per second and a mere 2.2 km tunnel to obtain a head of 141 metres, the average annual generation of Upper Karnali was estimated to be 1,915 gigawatt hours (GWh). With such a short tunnel to gain such good head with such good flows, the Canadian consultant aptly called Upper Karnali ‘a jewel in the crown’.

Multiple attempts were made to acquire this ‘300MW jewel’ by developers like Canada’s SNC-Lavalin, and even India’s National Hydroelectric Power Corporation, which optimised the plant capacity to 480MW for export purposes. Both attempts failed; the Government of India itself withdrew in 1997. The most memorable attempt was made by the ‘fast track committee’ approved Elysee Frontiere, which offered NEA a magical 30 percent free equity. NEA had to purchase all energy from the Elysee-NEA Upper Karnali Hydro Electric Power Company at Rs 2.90 per unit at the 1998 price with an annual escalation of 4 percent till 2013. In fact, 50 percent of the power generated during the wet season was priced at Rs 1.45 per unit for the first five years. This deal also failed to materialise, and the Nepali public definitely needs to know why.

GMR gets it

With the country reeling under 48 hours of loadshedding per week, then Water Resources Minister Gyanendra Bahadur Karki put the 300MW Upper Karnali, 402MW Arun III and 600MW Budhi Gandaki for global competitive bidding in December 2006. Minister Karki argued that “as the country cannot consume this amount of power, the developers themselves would have to find the market.” That is, Karki destined these projects for export, terming his decision “a necessity”. An ex-finance secretary Bhanu Acharya-led committee examined the bids and recommended that both the 300MW Upper Karnali and 402 MW Arun III be awarded to GMR Energy.

However, the Parliament’s Sub-committee on Natural Resources and Means, cautioned by the logic of anti-Arun III activists’ of putting ‘all eggs in one basket’, directed that only one project be awarded to one developer. With GMR opting for the ‘jewel in the crown’ Upper Karnali, Arun III fortuitously fell to the next lowest evaluated bidder, Satluj Jal Vidyut Nigam—a Government of India undertaking. With the Sub-committee on Natural Resources and Means once again directing that free energy be prioritised over free equity, an Anup Upadhaya committee negotiated with GMR Energy to increase the free energy component from 7.5 percent to 12 percent by bargaining down the offered 33 percent free equity to 27 percent. GMR Energy was awarded then the survey licence in January 2008.

Six years and eight months down this long road, the following Joint Press Release of August 4 emphasised the necessity to conclude the Project Dev-elopment Agreement (PDA) of ‘the jewel’:

“The two Prime Ministers directed the concerned authorities to conclude negotiations within 45 days on the PDA between the Investment Board of Nepal and GMR Group of India for the development of Upper Karnali hydropower project.”

Similarly, Nepal’s Parliamentary Agriculture and Water Resource Committee, on August 21, directed the government to sign the PDA for the Upper Karnali Hydropower Project with India’s GMR-ITD consortium within the stipulated time. It was reported that the Committee, led by National Planning Commission Vice-Chairman Govinda Pokharel, is studying the PDA document on issues like the GMR balance sheet,  tax exemptions for export projects, ensuring a fair rate of return on Nepal’s 27 percent free equity, mitigation of impacts on downstrea irrigation etc to create a ‘fair win-win situation’.

No sacrifice

There is, however, no word at all on what impact the 900MW Upper Karnali will have on the upstream 4,180MW storage project. It is imperative that the Parliamen-tary Agriculture and Water Resource Committee, along with the NPC vice-chairman-led Committee, ensure that the storage project is not sacrificed for the sake of the 900MW Upper Karnali. As it is, because of the governments’ sins of omission and commission, the inhabitants of the Karnali River Basin are already at the bottom rung of the development ladder.            

Pun is former Managing Director of the NEA and former Officer on Special Duty at the Ministry of Water Resources