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    Budhi Gandaki: invest more than 3 times for 35% additional electricity!


    November 23, 2022 - RaTNa SaNSar ShrESTha, Fca

     

      GoN is planning to implement 1,200 MW Budhi Gandaki hydropower project that entails building a 263-meter dam for an annual average electricity generation of 3,383 GWh. It is estimated to cost US $2,550 million in 2014 price.

      This requires temporal transfer of water: rainy season water will be stored in the reservoir behind the dam and gradually discharged at the rate of about 672 cumecs to generate electricity. According to the study report, half of the water discharged as such would amount to lean season augmented flow which will be windfall gain for India as Nepal is not implementing this project as a multipurpose project including irrigating land in the Tarai districts like Bara, Chitwan, Nawal Parasi, etc. Historical background Its installed capacity was 200-300 MW according to a study conducted in 1978. Another study commissioned by the Electricity Department of GoN fixed its installed capacity at 600 MW with a 225-meter dam in 1984, generating 2,495 GWh of electricity.

      The estimated cost was $774 million at the 1983 price.

      In 2012 a development board was formed under Development Board Act 2013 to implement this project at 1,200 MW installed capacity.

      The board was dissolved in 2016 and a Chinese contractor was entrusted to implement it under EPC-F (engineering, procurement, construction and financing) contract only to withdraw it in 2017 and decide to implement it through a subsidiary of NEA. It was entrusted again to the same contractor in 2018. Once more it was withdrawn from that contractor in 2022 saying it would be implemented as a national pride project through domestic investment in the company model.

      India keenly interested The then Indian prime minister Chandra Shekhar, during his Nepal visit in 1990, had evinced India's interest in this project and wished to implement it jointly.

      Therefore, the 1984 report recommending 600 MW installed capacity was handed over to the Indian delegation. Again in 1991 during India visit of then Nepal's prime minister Girija Koirala, it was agreed to form a joint team of experts to conduct field surveys to reach an agreement on the parameters of the project as outlined in Nepal's study; the field surveys to be completed by June 1992. It was also agreed to finalize modalities of financing it jointly pari passu. DPR was to be prepared such that construction could begin by 1994. However, during a meeting of water resources ministers of Nepal and India in 1996, held in Delhi, Nepal's request to withdraw this project from the list of joint projects was accepted by the Indian side so that it could be opened for private sector investment. Even in this meeting, no discussion/ negotiation was initiated by the Nepali delegation about India paying for the value of lean season augmented flow from this reservoir project. Officials of Nepal have taken it only as a hydropower project and no thought has ever been spared for the use of lean season augmented flow in Nepal or to sell to India. As the lean season augmented flow from this project is highly valuable for India, she was ready to finance the project jointly pari passu. But Nepal implementing it solely has created a circumstance wherein 100% of lean season augmented flow would fall in the Indian lap without having to pay a cent for it (advertently or hopefully inadvertently). If anyone thinks it is a scam of a grand scale, the person would not be mistaken. Doubled installed capacity Nepal was in the midst of an energy crisis when the installed capacity of this project was doubled to 1,200 MW by way of optimization. However, doubling installed capacity does not result in doubled electricity generation. Only 3,383 GWh is generated by 1,200 MW, while 600 MW could generate 2,495 GWh; an increase of only 888 GWh.

      In other words, incremental electricity generation is only 35%. Decision makers seem to have failed to realize that doubling installed capacity does not result in doubled electricity generation.

      Therefore, the decision to double the installed capacity was not made in Nepal's interest. It is not difficult to find out in whose interest this decision was made. Because lean season augmented flow from this project goes to India free of cost; no plan has ever been made to design this project as a multipurpose project including to use of lean season augmented flow for consumptive use in Nepal. More than three times more costly It has already been pointed out that the estimated cost of 600 MW was only $774 million while it is estimated to cost $ 2,550 for 1,200 MW; more than 3 times. It would not be out of the ordinary to suspect ulterior motives behind doubling the installed capacity, entailing a cost increase by more than 3 times but increasing electricity generation by only 35%. While the cost increases by $1,776 million to double the installed capacity of this project, the estimated cost of the 750 MW West Seti reservoir project is only $ 1,200 million at 2012 prices, which can generate 3,636 GWh.

      Therefore, it would have been prudent to construct this project at 600 MW installed capacity costing $774 million and also construct the West Seti project simultaneously. Total installed capacity would have been 1,350 MW and the total cost of both is $ 1,974 million only, resulting in a saving of $ 576 million. Further, total electricity generation from this option would be 6,131 GWh, which is 2,748 GWh more than the 1,200 MW Budhi Gandaki alone can generate. Against this backdrop, it is not clear why the installed capacity of Budhi Gandaki was doubled at more than 3 times the cost just to generate merely 35% additional electricity.

      Inundation in Nepal This project, if built at 1,200 MW installed capacity, would inundate 63 square kilometer of land including appurtenant involuntary displacement of the populace there, while 600 MW would have inundated only 49.8 square kilometers.

      In other words, doubling installed capacity would result in more inundation while costing more than 3 times and resulting in very low incremental benefit for Nepal. It should not be lost sight of the fact that inundation entails opportunity costs for Nepal in terms of forest products, agricultural produce etc.

      That Nepal would be deprived of till the project is in operation. Nepal to implement on her own In the early 1990s, this project was agreed to be implemented jointly by Nepal and India. However, in 1996 Nepal decided to go it alone in order to have it implemented by the private sector. After doubling its installed capacity, Nepal decided to implement it on its own.

      India has not proffered any reaction to this decision.

      In this context the Brahmaputra River, which originates in China, flows through India to Bangladesh and joins the Bay of Bengal, former is an upper riparian country and the latter a lower riparian. Whenever China decides to build any project on this river India protests vociferously. But India has been deafeningly silent with regard to Nepal going ahead to build this project without Indian involvement.

      The main reason behind the palpable deafening silence on the part of India is that she stands to receive 100% lean season augmented flow from it without having to invest a cent.

      India likes Nepal to commit such blunders time and again. Irrigation in India Since Nepal has no plan to use lean season augmented flow emanating from this project, the same would flow down to India, where 1.8 million hectares of agricultural land in Bihar and Uttar Pradesh states would be irrigated.

      This project would herald intensive farming there, affording 4/5 harvests in a year. As the extant dam on Gandak barrage is merely for the spatial transfer of Gandak River water, therefore, water for irrigation in India is available only in the rainy season. However, as the dam of this project makes the temporal transfer of water, irrigation in the dry season will become possible.

      Therefore, this project is of paramount importance to India; specially since 8 former prime ministers and the current prime minister are elected from Uttar Pradesh in India. Value of lean season augmented flow It has been mentioned above that this project would produce 336 cumecs lean season augmented flow, which Nepal has no plan to put to consumptive use since this project is not designed as a multipurpose project.

      The value of the augmented flow can be monetized on the basis of the precedent set by Lesotho and South Africa. As South Africa had paid Lesotho at the rate of $2.79 million/cumecs in 2020, India would owe $390.5 million for the lean season augmented flow from the 1,200 MW Budhi Gandaki project to Nepal.

      In other words, from the value of this lean season augmented flow of 6.5 years, Nepal should be able to cover the cost of implementing this project.

      Then India would be required to pay $390.5 million each year after 6.5 years of its operation till the project is in existence. But no such arrangement has been made yet. Because, although plans were made to implement this project by Nepal on its own since 1996, not even one discussion/ negotiation has been held with India with regard to lean season flow from this project that India stands to benefit from. If the electricity generated by this project is to be sold at 5 US cents, the sales proceeds would amount to only $ 124.75 million, while the value of lean season augmented flow from it is $ 390.5 million as pointed out above.

      Therefore, the value of lean season augmented flow is more than three times the proceeds from the sale of electricity generated by the 1,200 MW project. It should not be lost sight of the fact that sales proceed is not net profit at all (operational expenses, royalties, interest on debt financing, etc. would have to be deducted), while the value of lean season augmented flow would be pure net profit for Nepal if she was to demand payment from India for it that will fall in her lap. It is well known that there is no alternative to fresh water for uses like drinking, cooking food, irrigation etc. However, there are many sources to generate electricity: fossil fuel, which is neither clean nor renewable, traditional sources like firewood, cow dung, etc. which are neither clean nor renewable and sun, wind, water, etc. which are both clean and renewable.

      Therefore, it is detrimental to Nepal's national interest to build this project to generate electricity worth $ 124.75 million, while neglecting to collect $ 390.5 from India for lean season augmented flow.

      The proponents of this project could have worked in Nepal's interest by arranging to receive payment for lean season augmented flow for 6.5 years in advance to implement this project and also to receive money for the same for the period this project is in operation after 6.5 years of operation. But they did no such thing, sadly. Flood control Flood in the Sapta Gandaki River causes huge destruction in the Indian Bihar state almost every rainy season.

      In 2017 $ 32 million was distributed to flood victims and in 2019 $ 27 million. Flooding there is an annual phenomenon and one of the main causes is overflowing in the Budhi Gandaki River. Such floods cause costly destruction of life and property there, which requires rehabilitation and resettlement at an enormous cost. After the construction of a dam on the Budhi Gandaki River flood would be controlled by a magnitude.

      That means there would be huge savings in terms of lives and property saved and avoided rehabilitation and resettlement costs.

      In other words, this project with a 1,200 MW installed capacity would result in flood control in the Indian state of Bihar. According to the Columbia Treaty signed between Canada and USA, the latter had paid $64 million in advance for 60 years in 1964 to the former. Further discussion has already started with regard to the arrangement from 2024 onwards. However, unfortunately, proponents of this project have not even thought of sharing flood control benefits with India as no discussion/negotiation has been initiated to share the flood control benefit that is about to accrue to India. Conclusion Chandra Shamsher had been careful to obtain land from India in lieu of land used for Sharada barrage. However, he committed a blunder by first treating the Mahakali River as a border river and then agreeing to allow India to use 47% of the dry season flow of this river which belonged to Nepal, for an indefinite period.

      This allowed India to lay claim to prior existing use in the Mahakali Treaty and 50% share of water from the Mahakali River turned out to be 1.5% of the total. Further, any water that belongs to Nepal but is unable to use would belong to India free of cost.

      The extent to which Nepal got a raw deal in Koshi and Gandak treaties signed by Matrika and BP, respectively, requires no mention. Sharada, Koshi and Gandak barrages were built with Indian investment and India hogged all the benefits may not sound unnatural to some. But in the case of Budhi Gandaki, Nepal is planning to provide 336 cumecs of lean season augmented flow from it gratis to India without even signing an MoU, agreement or treaty. From this it becomes clear that it is not a case of India cheating Nepal, rather it is a shameful case of Nepal allowing India to cheat at Nepal's own initiative. It is a classic case of reverse colonialism; India not having directly done anything in this respect, nor made any financial investment or even persuaded/coerced to sign MoU, agreement or treaty. Contrasted with Sharada, Koshi and Gandak barrages, where India can be said to have colonized Nepal's natural resources, in the case of this project Nepal is consciously allowing India to colonize Nepal's natural resources. As pointed out above, the value of lean season augmented flow that is to be availed to India is worth $390.5 million/ year while electricity generated by it is worth only $124.75 million/year. Moreover, doubling the installed capacity costing more than thrice with incremental electricity generation of only 35% is another serious blunder.

      Instead, this project should be implemented at 600 MW along with 750 West Seti at a total cost of $1,974 million for both, resulting in a saving of $576 million. (N.B.: The US dollar values mentioned here are at prices of different years and adjustments must be made to level them. Besides, such adjustments may result in a deviation by a few million dollars, not exceeding $10 million.) Moreover, the total installed capacity of the two would be 1,350 MW and it would generate 6,131 GWh, resulting in the incremental generation of 2,748 GWh. However, unfortunately, the West Seti project has already been handed over to India. Implementing this project would result in flooding of 63 square kilometers in Nepal, while India will benefit from flood control in Bihar. But no arrangement has been made to receive recompense from India.

      This project is an extreme example of the reverse colonization of Nepal's water resources. Without even signing an MoU, agreement or treaty with India, without any financial involvement of India, India is going to be afforded benefits from flood control and lean season augmented flow and this is not only antinational but amounts to outright sedition.

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