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From owner-irn-narmada@igc.org Thu Jan 22 20:06:13 1998
From: owner-irn-narmada@igc.org
Date: Thu, 22 Jan 1998 15:56:34 -0800 (PST)
Message-Id: <199801222356.PAA10790@igc3.igc.apc.org>
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DEVELOPMENT-NEPAL: Small Dams Challenge State Wisdom
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>[Image]
>
>By Suman Pradhan
>KATHMANDU, Jan 19 (IPS) - Power projects on Nepal's gushing, mountain rivers
>could meet the energy needs of this Himalayan country and its giant southern
>neighbour, India.
>
>But the foaming waters are yet to be even partly harnessed, because of
>shortage of funds and opposition to big multi-million dollar hydroelectric
>projects from a strong, environmental lobby.
>
>In August 1995, the Arun-III project, which dam planners claimed would take
>care of the country's power needs well into the next century, had to be
>shelved when the World Bank pulled out for ecological reasons from the one
>billion dollar scheme.
>
>Left with little choice but to explore alternative power projects to meet
>vaulting energy demands that were already creating long power breakdowns in
>the capital city, Kathmandu, the government gave the go ahead to a number of
>projects that were smaller in scale and easier to finance and build.
>
>Six of those projects are already in various stages of construction. Their
>combined output is 280 MW, some 70 MW more than Arun-III's capacity.
>
>But a project conceived by a group of bright young engineers of the public
>utility, Nepal Electricity Authority (NEA), as a ''shining example of
>Nepal's potential'' has got bogged in controversy.
>
>The 20 MW dam in the hills north of Kathmandu was to be built by Nepali
>engineers and technicians using local design capabilities. The money also
>was to be tapped locally -- through loans from Nepal's financial
>institutions including the state- managed Employees' Provident Fund.
>
>A 'Chilime Hydropower Company Ltd.' was set up with 51 percent equity going
>to the NEA, another 25 percent to NEA employees and the rest to be offered
>to the public. The company promptly won a power generation license from the
>government, and also signed a power purchase agreement with NEA to sell the
>generated energy to the national grid. The price was fixed at three rupees
>(less than five U.S cents) per kilowatt hour of energy.
>
>But three years and millions of rupees later, Chilime has yet to see the
>light of day despite initial official support. For the last two months, new
>controversies over Chilime have cropped up as Nepal's Ministry for Water
>Resources and the project planners continue to wage a public war of words.
>
>While on the surface, the spat over Chilime appears to be no more than just
>another controversy over a project, what is at stake here goes right to the
>heart of the development debate in Nepal, say development experts.
>
>At stake is not only the fate of Chilime, but also a hitherto new concept --
>feasibility of indigenously built projects. Simultaneously though, other
>questions are being raised, chief among which is -- can a project be so
>cheap as to be unfeasible?
>
>''The government's attitude towards Chilime will reveal its true intention
>towards locally financed small projects,'' says Rajendra Dahal, a
>development journalist of the now-dissolved Alliance for Energy, a group
>which led the fight against Arun- III. ''Chilime is just the right sort of
>low cost project for Nepal. But we fear it could be doomed by the
>government.''
>
>The root of the Chilime controversy lies in the project's uncommon return on
>investment, which is 39 percent on a projected investment of some 25 million
>dollars. Last September, when it was time to renew the power generation, the
>government refused. It asked the promoters to reduce the 39 percent return
>by renegotiating a fresh power purchase agreement with NEA.
>
>''At a time when other private investor are getting only 17-20 percent
>return on investment, we cannot allow such fantastic profits for Chilime,''
>says Vijay Shanker Shrestha, the director- general of Electricity
>Development Corporation (EDC), the Water Ministry's project clearance arm.
>''We want to give consumers some benefit by reducing the price of Chilime
>power.''
>
>But government critics say, Shrestha's argument is flawed because the
>purchase agreement signed by Chilime is already lower than most other
>projects in Nepal. They point to a recent agreement signed by the NEA and
>the promoters of another small project -- the 5 MW Indrawati Hydropower
>Project -- that fixed the unit sale price of Indrawati energy at 5.88 cents.
>
>''If the government was so concerned about giving benefit to the consumer,
>why did it allow the NEA to sign a PPA with another private power producer
>at 5.88 cents a unit, that too in foreign currency,'' frets Damber Bahadur
>Nepali, the frustrated director of the Chilime Hydropower Company Limited.
>
>''If you convert our 3 rupees PPA into foreign currency, it comes to just
>under 4.7 cents. The consumers are already
>
>benefitting, because of the low generation cost of the project,'' he
>asserts.
>
>The company, however, seeing no other way out of the quagmire, and because
>it had already invested millions of rupees in construction of various civil
>works in hopes of renewing the generation license, yielded to government
>pressure.
>
>In November last year, it lowered the return on investment to 25 percent.
>However, it did so not by renegotiating a new PPA, but by escalating the
>project's cost 36.8 million dollars. The government promptly renewed the
>generation license.
>
>''To me,'' asserts Dahal, ''it appears that government officials are intent
>on showing that low cost projects are unfeasible for Nepal.''
>
>''If Chilime was allowed to come up as a low cost project,'' he adds,
>''questions over the high cost of past projects would have cropped up. The
>government feared facing such questions.'' (End/IPS/sp/an/98)
>
Date: Thu, 22 Jan 1998 16:01:01 -0800
From: patrick@irn.org (Patrick McCully)
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Subject: IPS: Small Dams Challenge State Wisdom
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