The development of Nepal’s hydropower progressed at a satisfactory pace till 1990. After that till 2005, performance was good. During those times, power projects were launched with the objective of selling energy to domestic consumers. Since 2006, progress slowed due to the institutional incompetence of the Nepal Electricity Authority (NEA) and the high importance given to huge export-oriented plants proposed by foreign companies.

Nepal subsequently lost its capability to implement even small power projects to fulfil its domestic requirement. As a result of shrinking production and rising energy demand, load-shedding for up to 16 hours daily became routine, which made life hard for the Nepali people. In 1995, the country’s hydropower sector received a great shock when the CPN-UML government scrapped the proposed 402 MW Arun project after a deal had been struck with the World Bank to finance its construction. This was one of the prime causes behind the failure of the hydropower sector in Nepal. Hydropower projects account for 75 percent of the commercial energy supply in Nepal while diesel-powered plants account for the rest. The total electricity supply in the country comes to 1,000 MW including 200 MW imported from India. The national requirement amounts to 1,420 MW.

Foreign projects

Nepal has signed agreements with GMR ITD Consortium of India for the construction of the 900 MW Karnali project, with Satluj Jal Vidyut Nigam of India to build the 900 MW Arun 3 project and with the government of India to build the 6,840 MW Pancheshwar multipurpose project. These giant India-executed projects would export power to India and beyond, and Nepal would also receive a specific share of the energy generated. But how many years will it be before these projects are implemented and start producing electricity? Possibly many decades, which means they cannot solve Nepal’s immediate load-shedding problem.

Power experts argue that the Indian power market is not open to Nepal, especially if the projects have been developed by non-Indian companies. In 1994, Snowy Mountains Engineering Corp of Australia had received a concession from Nepal to build the 750 MW West Seti project; but it returned the licence in 2012 after it failed to secure a market in India even after trying for 16 years. Subsequently, Three Gorges International Corp of China signed an agreement with the Investment Authority of Nepal to construct it to produce power for Nepal’s domestic consumption.

Nepal’s inability

Hydropower is a comparatively advantageous sector for Nepal. The only commodity Nepal can sell to the world is hydropower. It is a sustainable source for Nepal. Electricity, for any country, can be compared with the blood which circulates through the human body and keeps it alive. Lack of electricity signifies slow pace of development.

Cooking gas almost disappeared from the market due to the embargo by India, and people turned to electricity to cook their food. The massive upsurge in the load and poor quality of the equipment led to the explosion of more than 500 transformers. Thousands of factories shut down due to lack of power. They could not use their generator backup either as there was no fuel. Nepal’s present problem is not exporting electricity, it is producing enough to fulfil the domestic requirement.

The concept of small hydropower projects for electrifying small settlements was once popular in Nepal. It has now been overshadowed by the publicity hype over large and medium-sized projects.

The future seems to be even more frightening for Nepal due to the uncertainty of the power sector. The government does not appear to be serious about developing solar, wind and thermal power plants due to the heavy reliance on hydropower. The use of expensive petroleum products, which is draining the country’s foreign exchange reserves, can be decreased by the rapid development of hydropower. The NEA has been a complete failure with regard to the present power crisis. It is overloaded with unlimited and unbearable responsibilities of construction, transmission and distribution of electricity. The leakage level in its power distribution system stands at 25 percent.

The government has always looked at the private sector suspiciously. It does not give a second thought to covering the billions in losses the NEA has racked up, but is unwilling to provide more facilities to the private sector and cut red tape. Hydropower licences have been distributed just to block the river without doing a proper evaluation.

It would not be an exaggeration to say that Nepal could become a failed state due to lack of power. The country’s electricity tariff and cost of production are the highest in South Asia. Due to the heavy reliance on bilateral and multilateral agencies and extensive employment of international consultants and contractors on one side, and the difficult terrain, lack of infrastructure and very limited in-house construction and manufacturing capabilities on the other, Nepal’s hydropower sector is not only sick, it is seriously injured. Furthermore, corruption, no doubt, has been the root cause of the failure of the hydropower sector in Nepal.

Regional cooperation

The real problem is also lack of political trust in the country and between countries, and the reluctance to deal with energy as a shared opportunity in South Asia. For Nepal, hydroelectricity can be hydro dollars. Most of the infrastructural needs of Nepal can be fulfilled by the development of this sector. Roads, electricity, drinking water, industry, health and education in the villages would improve dramatically, which would help eradicate poverty and boost development.

Energy is an area where all the countries of South Asia have much to gain through cooperation. The development of the hydropower sector in Nepal is linked with other multiple benefits such as flood control, navigation and irrigation, opening the possibility of a new cycle of economic growth in the poverty-stricken areas of the Ganges Basin.

For the development of the hydropower sector, farsighted vision and national consensus are needed in Nepal. Providing strong support to the private sector and overhauling the NEA could boost power production and help end load-shedding. Lastly, India’s good intentions to construct hydropower in Nepal rapidly would be advantageous for both the countries. China and the Saarc countries are also interested in supporting and importing energy from Nepal.

Shrestha is a former Government of Nepal employee