Indian Companies Dominate Nepal’s Hydropower Projects

Raising Electricity Purchase Concerns, Nepal’s Hydropower Projects

7 large projects of 4639 megawatts in the grip of Indian companies

During Prime Minister Pushpa Kamal Dahal’s visit to India, two additional hydropower projects were signed, increasing the total number of major projects controlled by Indian companies in Nepal to seven. These projects aim to generate a combined capacity of 4,639 megawatts of electricity.

Power Struggle: Indian Companies Take Control of Nepal’s Hydropower Projects, Igniting Electricity Purchase Concerns

However, India has imposed almost exclusive rights to purchase the electricity generated from these Nepali water sources, disregarding the directive that prioritizes domestic consumption when foreign investments are involved.

In a recent meeting between the Prime Ministers of both countries in New Delhi, an agreement was reached for the Lower Arun (679 MW) and Upper Karnali (480 MW) hydropower projects. These projects will be developed through a joint venture between Indian and Nepali government-owned companies India-Nepal Cooperation Mechanism. Seven out of the six projects financed by Indian investments are owned by Indian government-owned companies NHPC and SJVN. The Upper Karnali project has been assigned to the private company GMR.

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Among the seven projects undertaken by Indian companies, the government directly awarded the West Seti and Seti River-6 hydropower projects under the leadership of Sher Bahadur Deuba. In the case of the Arun-4 project, the Nepal Electricity Authority has allocated a 51% share partnership to SJVN. Similarly, the Nepal government has granted a 51% share partnership to NHPC in the Upper Karnali project.

The West Seti project, although involving other international companies initially, eventually reached an agreement with an Indian company. The project was initially assigned to an Australian company called SMEC 26 years ago but was terminated in July 2011 due to funding issues. Subsequently, the project was awarded to a Chinese company called Three Gorges in 2014, with an expected completion date of December 2019.

However, after progress stalled, the government announced the project’s construction through domestic investment under the 2075/76 budget. Despite this, the Deuba-led cabinet awarded the project to the Indian company NHPC without a competitive process.

The Arun III project, originally intended to be financed by the World Bank and others in the early 2050s, became a subject of political disputes among Nepali political parties. After the World Bank withdrew its involvement, the Indian company SJVN entered the project. The same company was also given the responsibility for the Lower Arun project during Prime Minister Dahal’s visit to India under the Project Development Agreement (PDA) . SJVN is a joint venture between the Indian government and the state of Himachal Pradesh.

The Indian company has expressed satisfaction with the progress made in the project, with the Investment Board reporting approximately 65 percent completion. Sushil Bhatt, the Chief Executive Officer of the Investment Board, claimed that the work is progressing according to the board’s set timeline for the West Seti and Seti River-6 projects.

However, there has been no progress in the Upper Karnali project, which has a capacity of 900 megawatts, despite the Project Development Agreement (PDA) being signed in 071 B.S. The company has been unable to secure the necessary financial resources, leading to multiple deadline extensions by the Investment Board.

Some experts argue that since the market for Nepali electricity is stronger in India, it would be beneficial to involve them in project construction. However, India itself has adopted a policy of asserting rights over Nepali hydropower sources more than any other country.

India requires an energy agreement approved by Nepal for the purchase of electricity from projects, except for those with investments from India, Bangladesh, and Bhutan. This policy has inclined Nepal towards seeking investments from countries other than India for its hydropower projects.

It would be positive to give the responsibility for project construction to them. However, India itself has also adopted a policy of claiming rights in Nepali hydropower sources more than any other country. India has set a condition of not purchasing electricity from projects that do not have an energy agreement passed by Nepal, except for investment made by India, Bangladesh, and Bhutan. Due to this policy, Nepal is more inclined towards investment from countries other than India in Nepali hydropower projects.

Nepal’s electricity can only export India and China, although the transmission line study is still in the research phase in Chinese site. Similarly, for export to Bangladesh, the land and permission of India are required. If the market is not guaranteed, Indian investment is as necessary for Nepali hydropower.

Indian Prime Minister Narendra Modi has announced to import 10,000 megawatts of electricity from Nepal in the next 10 years. India, which has already crossed the target of 4,639 megawatts of capacity projects, has kept an additional provision in the new projects as well. Nearly 756 megawatts of electricity from the Tamor hydropower project, constructed after being taken over by the Indian company from China, has been agreed to be imported. A one-month clarification has been sought to remove project from power China. Indian companies are also interested in the 1,902-megawatt Mugun Karnali hydropower project. India has increased its stake in the Upper Arun.

The former Energy Secretary Devendra Karki, who observed that the investment of countries without an energy agreement is not acceptable in India’s directive, explains why Indian investment is seen as obligatory in Nepal. “We cannot ask India to change the guidelines,” he said. “If we want to build on time, the country will receive royalties. It’s appropriate to give. But it hasn’t been held up by the GMR company.”

Mukesh Kafle, the former executive director of the Nepal Electricity Authority, also mentions considering the long-term effects when incorporating Indian investment in project construction. “It is better to utilize it through the power generated rather than relying on water alone,” he said. “But it is also necessary to study its long-term effects.” He further states that with Indian investment in Nepal, there will be an open access to sell the generated electricity in India.

Ram Prasad Dhital, an energy expert, emphasizes the need for collaboration with India in hydroelectric development but mentions the necessity of a long-term agreement between governments. “The government should present a strong proposal that benefits Nepal and negotiate accordingly,” he said.

Radhesh Pant, the former executive officer of the Investment Board, highlights the indispensability of investment despite the economic slowdown, whether it’s from India, China, or the United States. “There are significant risks in large-scale projects. The government can bear some risks. Sometimes, the government has to be flexible for permissions. All these matters need to be addressed and executed in a timely manner,” he said. Nepal’s Hydropower Projects. Nepal’s Hydropower Projects.

This news has been translated from Nepali. Please refer to the original content Published in Kantipur Daily By Kamal Dhital.