Officials of local bodies have obstructed works on hydro plants in their areas in order to extract donations for themselves and their party’s cadres
Bhim Gautam: Centre for Investigative Journalism-Nepal
Roughly 300 megawatt of hydroelectricity to be generated in a village of a remote district! This good news is from Khumbu–Pasang Lhamu Rural Municipality of Solukhumbu district. Four hydropower projects, with a capacity to generate 297 MW of electricity, are under construction in Khumbu-Pasang Lhamu Rural Municipality. With a series of a hydropower projects in the pipeline including 111 MW Dudhkoshi-9, 83 MW Dudhkoshi-6, 75 MW Dudhkoshi-10 and 24.8 MW Luja Khola, once completed it will not only transform the rural municipality, but will also contribute to the country’s electricity output.
However, there is another side to it. For the last one year and half, Dudhkoshi-10 hydropower project has not been able to conduct public hearing because the local bodies have failed to approve the procedure. The officials have even barred the project from issuing public notice for hearing saying that nothing could be done before the procedure is finalised. Lotus Investment Company obtained license from the Department of Electricity Development to build the project, but it will expire on July 17, 2019.
Following a failure to get permission to conduct public hearing, the license of the Dudhkoshi-9 Hydropower Project expired on February 13, 2019. The Urja Development Company obtained the license from the Department of Electricity Development, but its project license could be revoked. Due to the non-cooperation of the rural municipality, survey license of Dudhkoshi-6 obtained by Yeti Trade and Development Company was terminated on March 15. Similarly, the license of Lusa Khola Hydropower Project, developed by Mahashakti Engineering and Hydropower Company, will also expire on November 13, 2019.
Public hearings are essential for construction of hydropower projects. Why are rural municipalities, which are supposed to create conducive environment for development, causing trouble to the projects? In response to this question, Nima Dorje Sherpa, the chairperson, said that they did not allow the work for big hydropower projects because their intentions seemed only to occupy the projects. “Those who had access to power got the license from federal government, but we will not allow them to do anything here,” he said. “Local government does not have the right to decide on big projects. So we are formulating procedures for these projects.”
Hydropower investors say they are waiting for local officials to formulate procedures. Isha Shrestha, director of Yeti Trade and Development Company, said: “They said they will allow us to work after formulating the procedure, but it’s taken them a long time. How can we work on the project?”
Eye on money
In order to understand the reaction of the local officials at Solukhumbu to hydropower projects, one has to travel to Kaski district. A 12-point agreement signed between the locals and the 32 MW Karuwa Seti Hydropower Project in Machhapuchhre Rural Municipality offers some clue about it. The Jhamolongma On April 7, 2018, the company had obtained a license to construct the hydropower from the Department of Electricity Development. But it was forced to strike the agreement with locals after they obstructed work on the project.
According to the agreement, the company will spend Rs. 90 million for the construction of a 22-kilometre road in the area, provide 0.25 unit of electricity to villagers for 25 years, make an annual payment of Rs. 9 million to Machhapuchhre Rural Municipality, provide insurance worth Rs. 1 million for every household below the tunnel and prior rights on shares for the locals. “This is a model agreement, and we are seeking similar agreement on each project,” said Karna Gurung, the chairperson.
That might be why local officials have yet to allow 24 MW Super Seti Khola Hydropower Project, to be constructed by SN Power Energy Pvt Ltd, despite the company requesting it in August 2018. The Rural Municipality has demanded that the project spend at least Rs. 50 million in local area. The project’s survey license, which the company obtained on January 14, 2017, will expire soon. So the company’s officials are discussing on how to deal with the locals’ demand.
Machhapuchhre Municipality allowed the 25 MW Seti Khola Hydropower Project to conduct survey after dithering for eight months. Investor Vision Lumbini Pvt Ltd has agreed to spend Rs. 90 million in local area. “The project has started following our discussion with the Rural Municipality. The problem has now been solved,” said Jagat Pokharel, the company’s director.
It’s been nine months since Annapurna Hydro Power Development Company, the developer of the 86.59 MW Modi Khola Hydropower Project, has sought permission to study from Machhapuchhre Rural Municipality. That’s because the local officials have demanded that the company spend 1.5 billion rupees in infrastructure development. The survey license for the project will expire on May 22, 2019. So the investors are trying to resolve it before the deadline.
Similarly, local officials haven’t allowed the 24.6 MW Machhapuchre Modi Hydropower Project to start the survey of the project citing it would impact on local tourism. Despite the demand surrounding tourism, it appears that their motive is to collect donation. So Annapurna Energy Company, the project developer, is on discussion with the villagers to find a way-out.
Hydropower investors say they obtained licenses as per requirement set by the federal government and fulfilled requirement set by local bodies. But local officials have put inappropriate conditions for allowing work, according to them. A hydropower developer, who did not want to be named, said, “We have already poured our money into the projects. It is possible to backtrack. But if we are to meet all the demands, we cannot bear the cost of the project.”
Himal Hydropower and General Construction Pvt Ltd, which has invested in 44 MW Super Madi Hydropower Project, Madi village of Kaski district, started construction only after the 12-point agreement with the committee on November 23, 2016. Bed Bahadur Gurung, who was the chairman of the committee, is now the chairman of the Rural Municipality. Today, the ward chairpersons are the head of the Committees. Ekjung Gurung, chairman of Madi Rural Municipality-2, who is also the chair of the Committee, said, “We have decided to recommend hydropower projects only after ensuring employment for local people and construction of physical infrastructure.”
According to Gurung, the project has upgraded a road connecting to Tangding village as per the agreement. The project agreed to fund Rs.17.7 million to Namarjun village, most of which has been spent, according to him. Similarly, 12-13 locals have been employed and 30 others were recommended.
The 6.6 MW Garjyang Khola Hydropower Project, being built by Citizen Hydropower Company in Madi Rural Municipality, could start work only after it agreed to provide a fund of Rs. 9 million to locals. According to the agreement struck when Gurung was head of the committee, the company agreed to provide 10 percent of shares to the locals and to construct a road to Bhumisthan.
Public hearing for the 8.76 MW Nyache Khola Hydropower Project in Madi Rural Municipality was blocked for 6 months ago after locals demanded Rs. 10 million for permission to carry out survey. The license for the project, being developed by Surya Water Pvt Ltd, will expire on June 6, 2019. So the company is discussing with the locals to solve the problem.
On December 4, 2018, the Rural Municipality blocked the public hearing for the 24-MW Madame Khola Hydropower Project, developed Madame Hydropower Company, citing it would impact on the tourism. The local Concern Committee demanded that the project spend Rs. 40 million for locals. According to the company’s director Dhan Bahadur Shrestha, they were able to conduct public hearing after an agreement with the concerned committee.
The Rural Municipality showed strange attitude towards the 3.7 MW Upper Bhurundi Khola Hydropower Project, constructed in Madi Rural Municipality. Initially, the Rural Municipality stopped the construction of the project saying it will develop the hydropower itself. When the company asked for a recommendation for Environmental Impact Assessment (EIA), the officials put a precondition that they should have 50 per cent investment. Only after Chief Minister Prithvi Subba Gurung called up the officials urging not to interfere the official allowed to conduct the EIA.
The hydropower investors have already paid their dues to federal government, are frustrated after faced with demands from the local concern committee. Madi Rural Municipality of Kaski has authorised the concerned committee to deal with the matter. Bed Bahadur Gurung, the village head, said investors who don’t work with the local body will not be allowed to implement the project. “We sent a delegation to Department of Electricity Development, with a demand to coordinate with us before issuing license,” Gurung said, “I had been the chairman of the concerned committee. The Rural Municipality will issue recommendation only on the basis of the agreement with the concerned committee.”
Stalling work to bargain
In August 2018, Diprung Rural Municipality of Khotang sent a letter to Sapsu Khola Hydropower Project to stop work and resume it only after a deal with them. “We have called them for agreement with us. We will after discussing with them,” said Bhupendra Rai, the chairman.
Kalinchok Rural Municipality of Dolakha has delayed issuing a recommendation to the 5-MW Sanghu Khola Hydropower Project for 6 months. The project, which is being developed by Him Parbat Company, whose investors include Parbat Gurung, a lawmaker from the district, had applied for recommendation in September, 2018. According to Madhukar Gurung, ward chairman of Kalinchok Rural Municipality-5, he had called for a meeting with local community to address their demands, but then company’s representatives failed to contact.
The locals of Lamjung district last year blocked the public hearing for the 7.5 MW Midim Khola Hydropower Project developed by Bhujung Hydropower Company, demanding share of the projects and infrastructure development in the area. Kwhlosothar Rural Municipality also did not support the project. The project was forced to meet the locals’ demand because its license was going to expire on June 2, 2019.
For the last one year, Uttargaya Rural Municipality of Rasuwa has refused to grant permission to Perfect Energy Development Company to carry out Environment Impact Evaluation (EIA) for the 19.41 MW Madhya Trishuli Ganga Hydropower Project in Nuwakot and Rasuwa. The hydropower project requires EIA to obtain a production license. Despite the project assuring that it will release water without affecting the local shrine, the officials have not allowed the EIA. Bharat Khadka, a company representative, said, “We have received recommendations from Nuwakot district, but we have not received recommendations even after addressing concerns of the villagers.”
The officials of Annapurna Rural Municipality of Myagdi have written letter to Robust Energy, the investor of the 42 MW Listi Khola Hydropower Project, to release funds for using local materials. The letter has complicated the matter as the company has been paying such fee to the Annapurna Conservation Area Project.
Govinda Khadka, the chairperson of Likhu-Tamakoshi Rural Municipality, himself obstructed in the construction of 28.1 MW Likhu Khola Hydropower Project under the construction in Ramechhap. According to Dr. Subarna Das Shrestha, director of Swhet Ganga Limited, Khadka obstructed the work demanding free of cost shares and electricity to locals as well as construction of a large hospital in the area. As a result, the project’s work was partially halted from December 31, 2018 and fully halted between January 1 and January 7, 2019.
After locals disrupted the project, Kailash Dhungel, Economic Affairs Minister of Province-3, visited Ramechhap to help resolve it. Khadka said they disrupted the project, which according to him had failed to follow Environmental Impact Assessment, over its failure to address the local concerns.
According to the Constitution, local bodies, after getting an approval from federal government, can formulate laws on additional taxes on the use of natural resources including hydropower. However, a year ago, Shailung Rural Municipality in Dolakha sent a letter to hydropower projects asking them to pay an annual tax of Rs. 1 million. In the letter, Bharat Prasad Dulal, who said the decision was made by the village assembly on July 9, 2017, had asked Nepal Hydro Power Developer Limited, the investor of 35.20 MW Charnavati Hydropower Project, to deposit the amount under the electricity tax. According to Dulal, the decision to charge Rs. 1 million in tax was taken over the extraction of stones, sand and water by the project.
Transmission lines in limbo
Local governments have also obstructed construction of transmission lines. The Koshi Corridor Transmission Line, listed as a National Pride Project is a case in point. Dharan Sub Metropolitan City tried to jeopardize the project, which had already been approved by the locals after public hearing and approval of compensation.
Madi Rural Municipality (left) has demanded share from hydropower project while Shailung Rural Municipality of Dolakha has demanded Rs. 1 million in electricity tax.
On November 14, 2018, The Sub Metropolitan City wrote a letter to the Nepal Electricity Authority (NEA) to change the route at Chinde Danda of the municipality’s ward 20. In a strange turn of events, Manju Bhandari, the Deputy Mayor, who signed on the compensation settlement committee headed by the Chief District Officer, has written the letter to the NEA for change of route.
According to Kulman Ghising, managing director of the NEA, it was economically and technically impossible to change in the route. “Even then, everything from EIA to design of the tower should be done again,” he said.
The NEA has already signed Power Purchase Agreement with 28 projects that would generate 516 MW of electricity to supply the power through the transmission line. Though the deadline to complete the transmission line is by 2020, it is no longer possible. The electricity will be lost if the project is not completed on time. “It’s certain that this will push the project behind the deadline, and the power produced by the project will be lost,” said Rajan Dhakal, the project chief.
But Deputy Mayor Bhandari disagreed. “We requested to change the route because it would affect the proposed airport and paragliding. We still want them to change the route,” she said.
Locals of Mandan Deupur Municipality of Kavre have obstructed the construction of the 400 KVA Tamakoshi-Kathmandu Transmission Line, which will supply power to the Kathmandu Valley. This transmission line, which is being constructed by the NEA to supply electricity produced from projects under construction in Dolakha, Ramchhap and Sindhupalchok, is expected to complete in April, 2020. However, it’s been thrown into doubt after Mandan Deupur Municipality decided to change the route in Kuntabensi area.
The NEA officials say the route cannot be changed due to economic and technical reasons. A total of 800 MW of electricity would be generated by projects including Upper Tamakoshi (456 MW), Middle Bhotekoshi (102 MW) that will come online soon.
Disruption targeted at power plants
Following the installation of local bodies with legislative and executive power as well some judicial authority, it was widely expected that infrastructure development will take off. However, going by the experience of last one-and-a-half years, particularly the attitude towards hydropower projects, it is disappointing. Economist Bishwa Poudel said local officials were enforcing bad practices they adopted from federal government. “The federal government has refused to provide Rs. 5 million per MW VAT exemption to the private hydropower companies,” Poudel said. “Instead of teaching how to assist the projects, the federal government has taught the local government how to extract money. And, the latter seems happy in doing that.”
Hydropower is the most important infrastructure that could contribute to the economic growth of the country. According to experts, a 1 MW project, while producing electricity at annual capacity, can generate 60 million units (Rs.35 million worth of electricity). The government can receive about Rs. 2.5 million in revenue. Even more important, it can reduce the amount of electricity that is imported from India. According to the Nepal Electricity Authority, Nepal imported electricity worth Rs.19.37 billion from India during the last fiscal year. This year the amount is projected to reach Rs. 22 billion.
“We have been maintaining power supply from import. So if the projects are not complete on time, import increases, which also increases our trade deficit with India. It will have an impact on the national economy,” said Dr. Govinda Nepal, a former member of the National Planning Commission. Since energy is the major infrastructure for economic prosperity, local governments should charge taxes to hydropower projects according to the law and welcome them with open arms, said Nepal.
The National Planning Commission has drafted its 15th plan, with the goal to increase per capita income to $12,500 in 25 years. The plan’s success hinges on the energy production. However, local governments have begun interrupting power generation. Shailendra Guragai, the President of Independent Power Producers Association of Nepal (IPPAN), said despite though there was a ban on demanding donations from hydropower projects, the private sector has become its victim. “We have paid the revenue as per the government police. We are ready to pay as per the requirement of law. But, it hasn’t stopped them from demanding more money. Local governments do not ask for money up front, but they don’t allow us to work without being paid. They ask for money in the name of Concerned Committees and others,” he said.
According to the law, 100 MW hydropower project has to provide 0.75 percent of its cost to locals. Similarly, projects below that have to provide 0.5 percent of the cost to locals. These laws have already put the projects under tremendous pressure. In addition to that, the local bodies have also turned the projects into a cash cow. “Hydropower projects are the basis of economic prosperity. Everyone has turned it into a cash cow. There is no alternative to under the table transaction from the central government level to the local level,” said Prakash Dahal, a hydropower investor.
Though the Constitution has defined hydropower as having shared rights of the federal government, province and the local level, the root cause of problem now is lack of coordination between federal government and additional laws and procedures. Dinesh Ghimire, secretary of the Ministry of Energy, Water Resources and Irrigation, argued that it was natural to see such problems as the country begin practicing federalism. “There are some problems in the local government. The federal government will coordinates with the local government. Ministry of Energy and the Ministry of Federal Affairs are working to identify problems and solving them,” said Ghimire.
But the situation is so dire that only 3 years after the promulgation of Constitution, the government appointed officials at the National Natural Resources and Fiscal Commission. Dr. Baikuntha Aryal, the Commission’s Secretary, said his office was formulating laws on the use and distribution of natural resources as per the Constitution. In section 59 (4) of the Constitution, it is mentioned that ‘Federal, provincial and the local level should have to provide equitable distribution of the benefits obtained from the use of natural resources, and certain amount of such benefits should be distributed in the form of royalty, service or goods to the project affected area or local communities.’ Aryal said, “The law is clear about the tax. We are formulating regulations on the ways to distribute dividends from natural resources to the affected people and communities.”
But the champions of local bodies are themselves not satisfied with the role played by the federal government in this matter. Krishna Prasad Sapkota, an expert on local bodies and federalism and a former president of Federation of District Development Committees, said: “Everyone should stick to their jurisdiction. One should not go beyond jurisdiction and block public hearing and refuse to provide information to citizens,” he said.
Local Development Ministry spokesperson Suresh Adhikari, a spokesman for the Ministry of Federal Affairs and Local Development said the ministry has already sent the provision on the local government authority and jurisdiction to local level as well as draft of procedures on water resources. “Local governments should issue recommendation to the hydropower projects,” he said.
