West Seti Power Project: Nepal

In News

• India will be taking over an ambitious hydropower project in Nepal, West Seti, nearly four years after China withdrew from it.

Key Points

• Why was the Project given to India: 
  • Since India was Nepal’s power market and it had a policy of not buying power from China-executed projects, West Seti was given to India.
• Project being handled by: 
  • India’s National Hydro Power Corporation (NHPC) has already begun preliminary engagement of the site in far-western Nepal following the Indian Prime Minister’s visit to Lumbini in May 2022. 
• Why china withdrew:
  • The CWE Investment Corporation, a subsidiary of China Three Gorges Corporation, had informed the Nepal Government in August 2018 that it would not be able to execute the 750-MW West Seti Hydropower Project it had undertaken on the ground that:
    • It was financially unfeasible and 
    • Its resettlement and rehabilitation costs were too high. 

Image Courtesy: IE 

• Cost of the Project:
  • Estimated to cost Nepali Rs 104 billion (Indian Rs 6,500 crore), the project is envisaged to provide Nepal 31.9% electricity free. 
  • Besides, locals affected by the project are being given a share of Nepali Rs 10 million plus 30 units of electricity per month free.
• Significance of the Project: 
  • Once the projects are made multi-purpose, with flood control, navigation, fisheries, irrigation contributing to agricultural growth etc, the cost of power will be much lower compared to existing rates.
  • This will help people on both sides and will have multiple benefits.

Nepal’s Constitution on such Projects

• It has a provision under which any treaty or agreement with another country on natural resources will require Parliament’s ratification by at least a two-thirds majority. 
• That will also mean homework will be required before any hydro project is signed and given for execution.

India -Nepal Power Relations

• Nepal is rich in power sources with around 6,000 rivers and an estimated potential for 83,000 MW. 
• But has a massive power shortfall as it generates only around 900 MW against an installed capacity of nearly 2,000 MW. 
• Although it is currently selling 364 MW power to India, it has over the years imported from India.
• India has formally approached Nepal on many occasions, seeking preferential rights over Nepali waters should it match offers coming from elsewhere.
• India is viewed as a feasible market for Nepal, but there has been some uncertainty in Nepal over India’s inability to deliver projects on time. 
• Earlier projects:
  • An ambitious Mahakali treaty was signed back in 1996, to produce 6,480 MW, but India has still not been able to come out with the Detailed project Report. 
  • The Upper Karnali project, for which the multinational GMR signed the contract, has not made any headway for years.
  • Three cross-border transmission lines were completed recently with GoI assistance: 400 kV Muzaffarpur-Dhalkebar line (2016); 132 kV Kataiya-Kusaha and Raxaul-Parwanipur lines (2017).
• Why the sudden surge of trust in India?
  • India’s success in executing the 900-MW Arun Three project in eastern Nepal’s SankhuwaSabha, which is being executed by India’s Sutlej Vidhyut Nigam under a BOOT (Build, Own, Operate and Transfer) scheme.
    • Its foundation was laid in 2018 and is set for completion by2023. 
    • The company executing Arun Three is also being awarded the 695-MW Arun Four project, followed by the decision to award West Seti to NHPC.

India Nepal Relations

• Friendly relations:
  • They share close and friendly relations characterised by age-old historical and cultural linkages, open borders and deep-rooted people-to-people contacts.

• Operation Maitri & post-earthquake reconstruction assistance:
  • In the wake of the 2015 earthquake in Nepal, GoI was the first responder and carried out its largest disaster relief operation abroad (Operation Maitri). 
  • India extended US$ 1 billion to Nepal as part of its long-term assistance for post-earthquake reconstruction in housing, education, health and culture heritage sectors. 

• Trade and economic ties: 
  • India remains Nepal’s largest trade partner, with bilateral trade crossing US$ 7 billion in FY 2019-20. 
  • India provides transit for almost the entire third country trade of Nepal. 
  • Nepal is India’s 11th largest export destination, up from 28th position in 2014. 
  • In FY 2021-22, it constituted 2.34% of India’s exports. Infact exports from India constitute almost 22% of Nepal’s GDP. 

• Cooperation in water resources:
  • Cooperation in water resources, primarily concerning the common rivers, is an important area of cooperation. 
  • Three-tier bilateral mechanism (with Ministerial meeting at the apex) was established in 2008 to discuss issues relating to cooperation in water resources, flood management, and inundation. 
• Development Partnership: 
  • GoI provides substantial financial and technical assistance to Nepal for implementation of developmental projects and infrastructure and connectivity projects. 
  • India and Nepal have also expanded bilateral cooperation to include new initiatives in the areas of agriculture, railways and inland waterways connectivity.
  • The ‘New Partnership in Agriculture’: It was announced in April 2018, which focuses on collaborative projects in Agriculture, Education and R&D.
  • India is providing financial and technical assistance for construction of two broad gauge cross-border railway links viz Jayanagar-Bardibas and Jogbani-Biratnagar. 
  • Signed a Letter of Exchange (LoE) to the India-Nepal Rail Services Agreement (RSA), which enabled all authorised cargo train operators including private container train operators to carry Nepal’s container and other freight.
  • Recently, a MoU was signed between India and Nepal on 1 February 2022 for the construction of a motorable bridge across the Mahakali River connecting Dharchula (India) with Darchula (Nepal), under Indian grant assistance.
• Defence and security cooperation:
  • India and Nepal have long standing and extensive mutually beneficial cooperation in the field of defence and security.
  • Historically, both armies have shared an excellent and harmonious relationship, and since 1950, India and Nepal have been awarding honorary rank of General to each other’s Army Chief. 
• Educational and people-to-people exchanges: 
  • India and Nepal extend visa-free entry in their respective territories to each other’s nationals. 
  • Nearly eight (8) million Nepalese citizens live and work in India and around 6,00,000 Indians reside in Nepal. 
  • Indians account for about 30% of foreign tourists in Nepal. 
• Cultural exchanges: 
  • GoI initiatives to promote cultural exchanges include cultural programmes, symposia and events organised in partnership with different local bodies of Nepal, as well as conferences and seminars in Hindi, Sanskrit. 
• COVID assistance: As part of our Covid-19 assistance, India had supplied more than 23 tonnes of medicines and medical equipment to Nepal on Grant basis during the first wave of COVID-19. India has recently resumed the supply of Covid-19 vaccine to Nepal. 

Issues in the Relationship

• China Factor:
  • The Chinese Propaganda and debt diplomacy is luring Nepal.
  • Nepal too is using the China Card to negotiate with India.
• Anti-Indian Sentiment post alleged Blockade by India:
  • India has been alleged to apply blockade after the Nepalese Constituent Assembly failed to acknowledge the demands of the Terai region Madhesis.
• Kalapani Boundary Dispute:
  • The place is located in the easternmost corner of Pithoragarh and shares a border on the north with the Tibet Autonomous Region of China and Nepal in the east and south.
  • The area resembles a slice of cake wedged in between Limpiyadhura, Lipulekh and Kalapani and is the largest territorial dispute between Nepal and India consisting of at least 37,000 hectares of land in the High Himalayas.
  • The area is in India’s control but Nepal claims the region because of historical and cartographic reasons.

Way Ahead

• India should harness or express intent to harness major rivers in the north of Nepal. 
• Unnecessary delays in the Projects should be sincerely avoided.
• Both sides should work on mutual distrust else it will continue to eclipse the potential for progress of both sides in the long term.

Source: IE