In recent days, I have been very happy to see the Pancheswar Project move forward, the Power Trade Agreement (PTA) with India get signed, and the Project Development Agreement (PDA) of Arun III also go through. I had been closely associated with all three projects. In fact, the Mahakali Treaty and the PTA were agreements that I originally negotiated. The Water and Energy Commission discovered the Arun III project during my first stint as Water Resources Minister in the early 80s and we started the feasibility study of that project on an accelerated basis.

On equal terms

When I took over as Water Resources Minister for the third time under Prime Minister Sher Bahadur Deuba in 1995, the Tanakpur Agreement was an outstanding problem. So I called then Indian Ambassador KV Rajan to a meeting in my office. I told him that my idea of solving the Tanakpur problem was by getting additional water and electricity to Nepal from the Tanakpur Project and placing that small problem under the vast framework of the Mahakali Treaty and the Pancheswar high dam.

If we were able to negotiate this Treaty on the principle of equality, we would raise Nepal-India relations to new heights. Rajan was very taken with this idea and said he would discuss it with Indian External Affairs Secretary Salman Hyder. The idea went forward. The Ministry of Water Resources put together an excellent team and negotiated the Treaty with great skill. By establishing equality as the principle basis of the treaty on a border river, the Ministry served Nepal’s national interest. It was no mean achievement for Nepal to get India to agree to the principle of equality.

The Mahakali Treaty has five features: (a) It established the principle of equality; (b) but this principle would be used without prejudice to existing consumptive uses of water; (c) there would be equal size power houses on both sides; (d) if either side gets more benefits, it would bear an equally higher proportion of the costs of the project; and (e) the price of electricity was to be decided on the basis of avoided costs. To fulfill all these conditions, we had agreed to create a Mahakali Commission. While the Pancheswor Development Authority is about to be established, the Mahakali Commission seems to have fallen by the wayside.

According to this Treaty, a huge dam of around 6,800MW of electricity will be built at Pancheswor along with around 3,400MW power houses on both sides of the river and a reregulating dam at Rupali Gad. The Treaty was negotiated in secrecy. I made unannounced visits to Delhi to negotiate the Treaty with then Indian External Affairs Minister Pranab Mukerjee and External Affairs Secretary Hyder. At the same time, we took then General Secretary of the CPN-UML Madhav Kumar Nepal into confidence and kept him fully informed because we knew we would need the UML’s support to pass the treaty with a two-thirds majority in Parliament.

Our efforts to convince the UML to support the Treaty were nothing short of Herculean. The UML was very suspicious of the agreement. It asked very searching questions and quickly got very prickly over the whole issue. But because the Treaty was patently in the national interest, we were able to allay the party’s suspicions. The UML agreed to lend its support. How hard it must have been for party leaders to do so was later demonstrated by the fact that the party split, mainly over this issue. Remembering the vituperative criticism of the extreme left of that time, I was pleasantly surprised by the fact that latest developments on Pancheswor have not drawn any criticism from any leftist corner. This displays how the Nepali left has matured in 18 years.  

Trade in power

Alongside the Mahakali Treaty, we also negotiated the PTA with India. During the offical visit of Prime Minister Deuba to India, Dwarika Nath Dhungel, then Secretary of Water Resources, signed the PTA with the Indian Secretary of Energy, P Abrahams. Later on, the UML created an unnecessary hurdle to the Treaty by saying that it needed to be passed by a two-thirds majority, as it involves the use of natural resources. I tried very hard to point out that a simple power trade agreement does not involve the use of natural resources. I was, however, unable to convince them.

When the Deuba government fell, it was replaced by Lokendra Bahadur Chand as prime minister and the UML as a coalition partner. An odd event occured when Chand presented the Power Trade Treaty for ratification to Parliament. The UML voted against the Treaty. This prevented the ratification of the Power Trade Treaty and it did not come into force. If the Treaty had been ratified at that time, there would have been a great deal of investment in Nepal’s hydro resources with a view of selling the electricity to India. Unfortunately, Nepal lost this opportunity for 18 years.

Anyways, the Rastriya Prajatantra Party (RPP) made significant contributions to both treaties. So the RPP is very happy that these treaties, which had been gathering dust in some cupboard for 18 years, have finally moved forward due to Indian Prime Minister Narendra Modi’s visit.

Arun III complications

When I first became Minister of Water Resources in the early eighties, the Water and Energy Commission (WECS) was conducting the Kosi basin study under Japanese aid. During the course of that study, they came across three very attractive projects in cascade on the Arun. Amongst these, the most attractive one was Arun III, which WECS brought to my notice. I gave orders to immediately begin a pre-feasibility study on this project. I also ordered that work be done on an accelerated basis, which that could lead to a feasibility study in quick stages.

The Arun III’s main attraction was that its source is snowfed. As a result, it could provide firm power for over ten-and-a-half months. We explained the attractiveness of the project to the Finance Ministry and got the World Bank involved in the feasibility study. We were hoping to start the project as soon as the feasibility was prepared. Both the World Bank and Asian Development Bank had shown interest in financing the project.

Because 304MW was too large an amount of power to be consumed by the domestic market, two ideas were put forward. One was that the project could be built in stages; the first stage producing only half the electricity, full power being produced only in the second stage. The other was to export part of the electricity.

Then, in 1984, elections were declared and the Chand government ended. After the election, Marich Man Singh became prime minister. The new prime minister felt that I had made a lot of headway with the Water Resource Ministry. In fact, he felt I had made much too much headway. He decided to deny me that portfolio. If I could have stayed on in the Water Resource Ministry, I would have started building Arun III by 1985 or at least 1986. After I left the Ministry, work on the Arun III became dilatory.

In the next three to four years, the Panchayat system ended. Arun III reached a stage when it could have been restarted around 1994. But during the minority government of the UML, too many conditions were put on the project and the World Bank cancelled the project. Due to these vagaries, a project that could have started in 1986, and loadshedding in Nepal been largely avoided, is finally starting in 2014.

Rana is Chairman of the Rastriya Prajatantra Party