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Nepal offers two Power Projects to India

By News Canvass | Aug 22, 2022

Nepal and India have signed Power Projects Deals named West Seti Hydropower Project and Seti River Hydropower Project after   China withdrew from the projects.

Before we begin Lets Understand Nepal and India Relations
  • Nepal and India enjoy excellent bilateral ties.
  • Founded on the age-old connection of history, culture, tradition and religion, these relations are close, comprehensive and multidimensional and are pronounced more in political, social, cultural, religious and economic engagements with each other.
  • India has been a key development partner of Nepal. The latter received strong support and solidarity from the people and Government of India in advancing its home-grown peace process as well as in the process of writing the Constitution through the elected Constituent Assembly.
  • The Government of India has also been substantially supporting Nepal’s reconstruction efforts. Water resource is considered as the backbone of Nepali economy. The issue of water resources has always been getting due prominence in the agenda of bilateral cooperation between Nepal and India for a long time.
  • The partnership with India in the areas of trade and transit is a matter of utmost importance to Nepal. India is Nepal’s largest trading partner. India has provided transit facility to Nepal for the third country trade. Both public and private sectors of India have invested in Nepal. The trade statistics reveals phenomenal increase in the volume of bilateral trade over the years between the two countries.

Nepal and China Relations

  • The relations between Nepal and the People’s Republic of China are age old and deep rooted. Nepal-China relations have always remained friendly and cordial.
  • The historic and multi-faceted bilateral relations between the two countries have evolved since the days of Nepali monk and scholar Buddhabhadra.
  • Both countries have a long tradition of exchanging high-level visits on a regular basis which have been contributing to strengthening and consolidating bilateral ties.
  • Both countries have been utilizing the bilateral, regional and multilateral forums to hold meetings between the leaders in order to maintain regular contacts and share views on the issues of mutual interests.
  • Chinese assistance to Nepal falls into three categories: Grants, interest free loans and concessional loans. The Chinese financial and technical assistance to Nepal has greatly contributed to Nepal’s development efforts in the areas of infrastructure building, industrialization process, human resources development, health, education, water resources. China is the second largest trading partner of Nepal.

Why China Withdrew from the Power Projects

  • Initially, the 750MW West Seti was proposed by West Seti Hydro Limited, a storage scheme designed to generate and export large quantities of energy to India.
  • However, in March 2019, during the Nepal Investment Summit, the government bundled the West Seti and SR-6 as a joint storage scheme and showcased them at the summit. The projects were among eight hydro schemes showcased at the summit.
  • But they received no attention from potential investors. The NHPC Limited, an Indian government hydropower board under India’s Ministry of Power, had submitted a proposal in May to develop the projects.
  • The estimated cost of the two projects, according to the Investment Board, is  $ 2.4 billion . The West Seti project, first envisioned some six decades ago, is located on the Seti River in far-western Nepal.
  • The proposed dam site is located 82 kilometers upstream of the confluence of the Seti and Karnali rivers, forming part of the Ganges basin.
  • The project was originally designed as export-oriented with 90 percent of the power intended to be sold to India. However, the project, whose cost was estimated at Rs120 billion at that time, failed to go into construction.
  • The cash-strapped project got a boost when China National Machinery and Equipment Import and Export Corporation (CMEC) decided to invest in it.
  • The CMEC even signed an agreeement during the then prime minister Madhav Kumar Nepal’s China visit in 2009.
  • At that time, CMEC President Jia Zhiqiang and West Seti Hydro director Himalaya Pandey signed a memorandum of understanding in Beijing. The Chinese firm had decided to invest Rs. 15 billion in the project.
  • However, the CMEC later opted out of the project saying that Nepal lacked an investment-friendly environment.
  • Another important shareholder in the company, the Asian Development Bank, also did not show interest citing a lack of public acceptance of the project and the absence of good governance.
  • The project received yet another jolt when the main promoter of the company, Snowy Mountain, stopped sending funds for office operations in August 2010. The government revoked the licence of West Seti Hydro on July 27, 2011.
Nepal choses India for Power Projects
  • Investment Board Nepal with India’s state-owned NHPC Limited to develop the two projects—West Seti and Seti River (SR6)—joint storage projects totaling 1200MW.
  • The 750MW West Seti and 450MW SR6 projects are spread over four districts—Bajhang, Doti, Dadeldhura and Achham in far-western Nepal.
  • The agreement was signed following Nepal Prime Minister Sher Bahadur Deuba’s decision to expand power sector partnership between the two nations.
  • The two countries agreed to explore opportunities for expanding and further strengthening mutually beneficial bilateral cooperation in the power sector including joint development of power generation projects in Nepal, development of cross-border transmission infrastructure, bi-directional power trade with appropriate access to electricity markets in both countries based on mutual benefits.
  • The challenge lies in the maximum use of natural resources, which has not been possible for Nepal due to certain constraints. . In this scenario, provisions such as bilateral partnerships, especially with economically more viable neighbors such as India, can act as catalysts for Nepal to improve its hydropower setup.
  • Nepal’s enormous water wealth and huge hydropower potential may be the answer to India’s ever-increasing requirement for energy. Nepal and India must realize the sensitivity of each other’s positions in South Asia and not overemphasize the trade of electricity.
  • This will also help Nepal shed its image of a “buffer” between India and China and replace it with a more credible identity of a crucial supplier of hydroelectric power.
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