This project could be very beneficial to the national economy if certain aspects related to profitability and infrastructural development are looked upon closely and plans are implemented efficiently.
Nepal Rastra Bank (NRB) has been forcing banks and financial institutions (BFIs) to speedily increase their investment in hydropower projects. However, Nepali BFIs are complaining that they are being forced to bear unnecessary burden of risks to invest in long-term and risky projects like hydropower while the sources of investible funds of the BFIs are short-term in nature.
In this background, the Employees Provident Fund (EPF) has started developing the Betan Karnali Hydropower Project with investment from its own sources providing some shares to the individuals who are depositors in the EPF. The project is based on Karnali river which lies between Surkhet and Achham districts. The project will have investment also from Nepal Electricity Authority (NEA), Electricity Generation Company Limited and the general public.
In various countries, there are examples of successful hydropower projects developed by institutions like EPF. As such institutions have to return the deposits of the people after a long time, these institutions have long-term sources of funds and thus are in comfortable situation as they don’t have to worry for quick profits. Therefore, it is a good initiative that EPF in Nepal is starting to invest in long-term projects.
The project site of Upper Karnali hydropower project of 900 MW is situated upstream from Betan Karnali and there is Karnali Chisapani Project of 10,800 MW downstream. Development of both Upper Karnali and Karnali Chisapani is still uncertain. Though Upper Karnali is awarded to India’s GMR for development, it is stalled as GMR is still not able to arrange market to sell the electricity. Besides, GMR itself is in financial problems. Karnali Chisapani is a mega project even from international standards and was conceived decades ago. Its development is uncertain as the investment required is really huge.
Road access is already there up to the proposed power house site of Betan Karnali though some 20 kilometres of road is yet to be constructed to access the other project related construction sites.
Though the project was initially identified as 688 MW and the company has a study license for the same, after further studies, it has been found that the ideal capacity would be 440 MW considering the costs and benefits. The project is being developed with 140 metres high dam to store 36 million cubic metres of water so as to supply power during peak demand periods of six hours in the morning or day and six hours in the evening or night. The dam will divert 536 cubic metres of water and take it through a 2 kilometres tunnel to surge shaft from where the water will fall to the power house about 100 metres down through an iron pipe to generate 431 MW of power. The project includes also another 8.7 MW power generation from the water that the project has to release perpetually down the river for environmental reasons.
The generated power will be evacuated to Baghmara substation located some 5 kilometres away from the power house. From there it will be connected to the national grid. The project will generate 2,300 million units of electricity in a year and it will take about six years to develop the project. The financial cost of the project is estimated to be about Rs 94 billion. As the project is still in the stage of study, there will be changes in the structures to be built, investment to be required and time of project implementation. However, the financial arrangements are already completed. Accordingly, the banks have agreed to provide Rs 49 billion as loan for the project.
Since Betan Karnali will have investment also from government employees, public institutions and the general public, it is important to make sure that the returns that the project will provide to the investors are secure. Hydropower projects are prone to a number of risks. Some of them are natural calamities, such as floods, landslide, excessive rains, droughts, glacial burst etc. They can be predicted and appropriate precautionary measures can be put in place. Some other are more serious. For example, problems that arise from the managerial weaknesses can have serious consequences. Others include construction delay and cost overrun which are quite common among Nepal’s hydropower projects. The history of the projects where government or other public institutions are promoters is even worse. They have incurred huge cost overrun mainly due to archaic government rules and inordinate delay in decision making. Necessary precautions must be in place well before starting the project implementation to minimise such risks. This project needs to be made more attractive from economic-technical aspects and the expected returns need to be made much more certain. As the project is still in the study stage, it can be made more attractive by making necessary changes in the technical designs and management systems or by using innovative methods in financial management.
As per the existing power purchase policy, NEA purchases power from such storage type projects at the average rate of Rs 6.50 per unit. While investing in this project, the expected normal costs as well as the potential cost increase in hydropower projects from various reasons should be considered.
Another important point in this connection is that when the Karnali Chisapani project gets started sometime in the future eventually, the generation capacity of Betan Karnali will come down to about half. While selecting a project where billions of Rupees are going to be invested from public institutions, it must also be considered whether it will obstruct future development projects of similar or higher importance. Betan Karnali is sure to generate a huge problem when Karnali Chisapani will be considered seriously for development. Similar problem has already cropped up in case of Kabeli A project and the proposed Tamor reservoir project.
Betan Karnali is surely a welcome project as it will channelise nearly Rs 100 billion in a project that is being developed in a remote area of the country. But in case this project eventually becomes unable to provide expected returns to the investors, there will be a challenge to meet the dual objectives of making profits and contributing in the social development. In such a situation the government itself will have to play an active role to create a situation of meeting both these objectives. Only then will the people of Karnali, the investors in the project and the Nepalis who use the electricity generated from that project will feel benefited.
