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Wednesday / March 29.

A new chapter in Indo-Nepal relations: A hydro power project

By Shubhra Agrawal

In a move that is aimed at strengthening Indo-Nepal ties, the Indian government approved a 900 MW hydropower project. It is going to be set in the Sankhuwasabha district of Nepal at a cost of Rs 5,723 crore.

The logistics at hand

The decision to approve the Arun III project was taken at a Cabinet Committee on Economic Affairs headed by Prime Minister Narendra Modi. Power Minister Piyush Goyal told reporters that the project will be implemented within a time period of five years and is expected to achieve financial closure by the end of September 2017. It was agreed upon that 21.9% of the power would be given to Nepal for a 25 year concession period. In return for the power, India would provide assistance for construction of the dam and embankments on all the other rivers as well.

Water resources: The ideal investment?

Nepal’s geography is well-suited to hydropower. The rainfall is heavily skewed towards the monsoon months of June-September which brings risks as well as opportunities for hydropower development. Hydropower project development in a mountainous country like Nepal is complex as it engulfs many areas of human lives and environment.

A hydropower project signed between the countries is not a novel one – The Mahakali Treaty was signed in 1996. It pertained to sharing the water of a river of the same name. Discussions also began between the two countries for irrigation and hydroelectric power generation with the help of a dam, The Pancheshwar Dam, on the Kali River.

The catalyst of trade: A treaty

The collaborations between Nepal and India can help solve multiple problems.

  1. Capital investment for dams: There is a lack of funds, as hydropower projects are capital intensive in nature. Collaborations with India can help develop the much-needed welfare in Nepal.
  2. Market for power generated: The expansion of electricity grid within Nepal and the growing energy demand of India also become the major markets for Nepal’s hydropower.
  3. Creating jobs in Nepal: The poverty and unemployment in Nepal is one of the main reasons for growing insurgency and militancy in the country. Security concerns in the region have aggravated. Development of hydropower projects in Nepal can help solve the root problems of the insurgency by providing impetus to the macroeconomic growth of these areas and can be a great enabler of regional stability. As a precedence, India supported mega hydropower projects in Bhutan (Chukha Project) that helped Bhutan double its per capita GDP.

On the other hand, India gets additional power generation capacity. China-Nepal relations have grown stronger in recent times. The relations between the two countries have political and strategic implications for India. India would want to stay in the good books of Nepal and thus ensure stable geopolitical conditions in the eastern sub-continent. The construction of the Arun III dam would facilitate trade relations and is an advantageous opportunity for both the parties involved.