Hydro Nepal Vol I Issue 1

Volume 1
Issue 1
5 June, 2007
Editorial
Looking ahead...
Briefings
Page 02
Project Updates
Page 57
News Updates
Page 58
Announcements
Page 58
Articles
Hydropower, a Good Alternative for Nepal: Challenges and
Approaches
By John C. Garcia
H ydr o
N
Journal of Water, Energy and Environment
Vol. I
Issue No. 1
Cover image
A view of Kali Gandaki dam
in Nepal
Photo courtesy
Rajendra P. Thanju
Page 03
Kali Gandaki A Hydroelectric Project in Environmental Perspectives

By Rajendra P. Thanju
Page 11
The Dynamics of Social Inequality in the Kali Gandaki A Dam Project
in Nepal: The Politics of Patronage
By Dr. Kavita Rai
Page 18
Maximizing Benefits from Hydropower: A Nepal Case
By Dr. Janak Lal karmacharya
Page 25
IRR: An Operational Risks Reduction Model for Population

Resettlement
By Professor Michael M. Cernea
Page 31
Legal and Policy Environment for Private Sector Participation in the

Power Sector in Nepal
By Anup Kumar Upadhyay
Page 36
Underground Space for Infrastructure Development and Engineering
Geological Challenges in Tunneling in the Himalayas
By Dr. Krishna Kanta Panthi
Page 39
Investment in Hydropower Sector: Opportunities and Risks
By Ratna Sansar Shrestha
Page 46
Three Gorges Dam Project: An Introducion

By Pranav Acharya
Page 50
Author Guidelines
Page 53
Hydro Nepal does not bear any responsibility for the views expressed by authors in the journal.
HYDRO NEPAL
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E d i t o r i a l
Advisory Board
Jeewan P. Thanju
Dr. Krishna Kant Panthi
Gokarna P. Sharma
Dhruva Kumar Uprety
Executive Editor
Dr. Don Messerschmidt
Associate Editors
Prof. Dr. Kiran K. Bhattarai
Dr. Rabin Shrestha
Rajendra P. Thanju
Salil Devkota
Publication Committee
Lalit P. Joshi - Coordinator
Milan Dahal - Member
Deepak KC - Member
Design
Akhanda Bhandari
e-RG Nepal
Empowering the power
Hydro Nepal is published by

e-RG Nepal
as a Souvenir to mark the
World Environment Day
5th June 2007
Contact:
Looking ahead...
It gives us immense pleasure to publish Hydro Nepal as a Souvenir to
mark the World Environment Day: June 5, 2007. The slogan of the
day is Melting Ice- A hot Topic?
Energy consumption is one of the main indicators of development of
a country and hydroelectric power is one of the cleanest, renewable
and environmentally benign sources of energy. Nepal is blessed with
an immense amount of hydro-electric potential and ranks second in
terms of water resources after Brazil on global scale. Nepal is endowed
with economically exploitable hydro-power potential as high as
42000MW of installed capacity out of total hydro potential of 83000MW.
This immense hydropower potential needs to exploitation in
broadening the market that is developing in the domestic and regional
areas. Despite the immense hydropower potential in Nepal, only 40%
of its population has access to electricity including 33% from Nepal
Electricity Authority (NEA) grid and 7% from other alternative source
of energy, according to the 10th plan.
The core area of Hydro Nepal is water, energy and environment. The
main objectives of this souvenir edition of the Hydro Nepal is to
provide insight in various aspects of hydropower development in Nepal
and sharing knowledge, skill and expertise among experts involved
in this process. We do hope that this souvenir edition and subsequent
editions of this professional journal will provide professionals involved
in the field of hydropower development and its environmental
management a common platform to contribute for a fruitful exchange
of ideas, knowledge and insights to support sound, sustainable and
environ-friendly generation of hydroelectric power. In addition, this
journal will be an invaluable source of resources for professionals,
students, business houses, companies, developers, bankers and
others interrelated in any aspects of hydropower development.
We believe that with a cooperative and collaborative approach and
efforts from among the experts who are involved in the pursuit of
excellence in the development of hydroelectric power and its
environmental management can help realize better results in
harnessing the immense hydropower potential of the country in
generating clean, green and sustainable energy.
Adwait Marg,
Kathmandu, Nepal
Telephone: 977-1-4243962
Fax: 977-1-4219195
Email: ergnepal@gmail.com
Url: www.erg.com.np
Don Messerschmidt
Executive Editor
Contribution:
Personal: NRs 300.00
Institutional: NRs 500.00
HYDRO NEPAL
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Hydropower, a Good Alternative for Nepal: Challenges and Approaches

John C. Garcia
Abstract: Although Hydropower development is a good option for Nepal, there are serious challenges to the successful construction and operations of such facilities. This article briefly addresses why hydropower development is
appropriate for Nepal as well as some of the more important social and environmental challenges. The author also
makes suggestions to approach these challenges.
Key words: Hydropower, social and environmental impacts, landslides, sediments, biodiversity, poverty alleviation,
fisheries, compliance, community relations, reporting, Nepal.
he adverse impacts of hydropower

development are well documented in the
published and gray literature (World Bank 1996; WWF
1999; Scudder 1997), as well as addressed by the
World Commission on Dams which commissioned a
world-wide comprehensive review of impacts and
mitigation (WCD 2000). A number of reviews and case
histories for hydropower projects in Southeast Asia
and Nepal have also been completed in recent years
(Garcia and Garcia 2000; Garcia et al 2005a,b; Garcia
1999; ADB 1999; SEATEC et al 2000a,b,c,d and 2001;
Upadhaya and Shrestha 2002; Onta 1998; Pandey
2001). Adverse impacts related to hydropower
development can be serious and significant, leading
to increased poverty, social dislocation, losses in
fishery resources and declines in biodiversity among
a host of other associated impacts. Adverse impacts
are project-specific and are related to project design
and the social, physical and biological environments
of the project site as well as the mitigation measures
implemented during both construction and
operational phases of the project.
Hydropower projects are not created equal. Runof-the-river projects with high head and small
reservoirs typically have a much smaller footprint
and have fewer adverse environmental impacts on
the social, biological and physical environments than
large reservoirs in lower elevations that can require
the dislocation of people and loss of productive lands
and major ecological changes. However, in some
cases, larger reservoirs can provide additional
benefits such as flood-control, irrigation, aquaculture
and recreation/tourism opportunities. Projects need
to be considered on a project-specific basis and be
fully committed to the premise that affected people
will be at least as well off with the project as they would
be without the project.
Given the adverse environmental impacts
associated with hydropower development, why is
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hydropower a good alternative for power generation

in Nepal?
Minimal contribution to global warming:
Hydropower generation does not generate
significant quantities of CO 2 . Some CO 2 is
generated during construction, but this is
minor and comparable to what would be
required to construct any power generation
facility.
Clean: Hydropower generation does not
generate air or water pollution, although
there is a potential for water quality impacts
in and downstream of larger reservoirs.
Security: Hydropower development requires
large capital outlays. But, once built, they are
not dependent on imported fuels and the
security issues associated with being a landlocked country.
Stability: Cost of development, construction
and operation can be well documented and
predicted. Once built, the fuel is free and
power generation costs are not subject to
fluctuations in fuel or transportation costs.
Many hydro projects I am working on are over
50 years old, and several are over 100 years
old. Under the right conditions, hydropower
facilities can run at low operational costs for
50 years or more providing low-cost, clean
electric power.
Technological transfer and self-sufficiency:
Within Nepal there is growing institutional
knowledge and capacity regarding this sector.
Enough projects have proceeded in Nepal to
enable Nepalese nationals to complete much
of the engineering, environmental and social
work elements and analysis. In addition, there
is now a large cadre of Nepalese construction
workers who have worked with international

construction companies and have had critical
safety and technical training. As a result,
Nepal has a trained work-force ready to work
on large construction projects.
Power exports: Nepal has the opportunity to
export power, thereby contributing to
balance of trade and providing needed
revenues for the general economic and social
development.
Peaking: Hydropower projects such as the
Kali Gandaki A Project can be designed to
provide peaking powera very useful tool in
power management. In most cases, peaking
capabilities requires some degree of storage
capacity.
Potential: Nepal has vast hydropower
generation potential that has only lightly been
tapped.
Poverty
alleviation:
Hydropower
development, in association with linked
development projects, can contribute to
poverty alleviation and improved living
conditions and health for communities in the
project area as well as nationwide.
Although I have provided what are, in my
perspective, good reasons why hydropower
generation is a good option in Nepal, there are serious
engineering, social, environmental, fiscal and political
challenges. Under the best of circumstances, large
infrastructure projects are subject to delays and cost
overruns as exemplified by high-profile projects in
the US and Europe, including Bostons Big Dig tunnel,
the San Francisco Bay Bridge Project and the English
Channel (Chunnel) Project. In Nepal maximizing
efficiency and meeting schedules is complicated by
having to transport large equipment through other
countries, graft, political instability, security, remote
project locations, poor roads and infrastructure,
monsoon, unstable steep slopes and high sediment
loads. This combination of obstacles synergistically
affects the ease by which projects can be successfully
completed and appropriate mitigation implemented.
In addition, local communities in various project
areas have learned that they can stop work on projects
(sometimes justifiably, sometimes not) and thereby
have their needs or desires met. Maintaining good,
clear and consistent communication with local
communities is a critical. Good community liaisons
cannot be overemphasized.
A brief review of key environmental challenges
and suggested approaches follow. These are neither
intended to be extensive or exhaustive but, in my
opinion, are of high priority and importance.
Landslides
Landslides are an important risk factor across much
of the Himalayas. The unstable geology, combined
with torrential monsoon downpours, provides
conditions that increase the risk and probability of
landslides across many areas of Nepal. The frequent
requirement to build roads in support of hydropower
project development contributes to the risk of
landslides.
Both the Kali Gandaki A (KGA) and the Khimti
Khola (KK) hydroelectric projects have had significant
landslide issues. The slope above the desander basin
on the KGA Project required extensive treatment and
material removal to minimize landslide risk into the
desander basin. The treatment and amount of
materials removed was well beyond that specified in
the construction contracts or the environmental
documents and had significant effects on schedule and
cost as well as environmental impacts. There was also
additional treatment required to stabilize slopes in
the area upslope of the pressure shaft and numerous
locations along the project-related road system.
Landslides also became an issue by periodically
blocking passage along transportation routes that
were not project-related.
In the Khimti Khola Project, landslides were an
issue upslope of the desander basin as well. Another
landslide issue became apparent at one of the muck
disposal sites where the toe of the slope was
destabilized by a stream course and resulted in
destabilization and significant downstream sediment
deposition.
As such, hydropower schemes in Nepal outside
of the Terai will have landslide issues and challenges.
Unanticipated landslide issues posed significant cost,
schedule and environmental challenges on both the
KGA and KK projects. In both these projects, landslide
risks were recognized early in the design and feasibility
phases, but they were nonetheless underestimated.
Early iterations of the KGA design included the
desander basin and powerhouse that were to be
constructed underground, in part, to minimize
landslide risks. However, after a number of design
iterations and geotechnical evaluations, they were
brought above ground. In the case of the KK project,
the powerhouse is underground. The KGA and KK
underground facilities were proposed and developed
by Norwegian engineers, but the resulting designs
were influenced by other local factors. Norwegian
engineers are typically comfortable with designing
underground facilities, as there is a long tradition of
underground facilities in Norway.
Suggested Approaches
Good geotechnical information and assessment
of landslide risk at the hydropower facilities and access
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routes are of paramount importance in successfully

constructing and operating a hydropower facility.
This cannot be overemphasized. Project-related
landslides or risk of landslides have had major effects
on cost, schedule and impacts to the local
environment and affected people. It is a keystone
issue in the design and construction process. Where
possible, high-risk landslide areas should be avoided;
if not, they should be clearly outlined and understood
and proper design, engineering and construction
measures carefully evaluated and implemented.
Where technically and financially feasible,
underground facilities should be fully considered and
should be at least evaluated as an alternative in the
feasibility and design stages. Best Management
Practices (BMPs) related to drainage control, road
design, slope stabilization and revegetation should
receive a high priority of attention during feasibility
and design stages. Minimizing and flagging areas of
disturbance and, where possible, scheduling ground
disturbance outside of the monsoon periods can also
reduce risk.
BMPs for road design must include a good routing
study that carefully considers landslide risks as well
as minimizing cut and fill. Issues are always sitespecific, but areas that pose long-term landslide risks
should be avoided. One wants to avoid situations like
the Devils Slide area along the California coast. After
50 years and multi-millions of dollars of remedial
costs to try to contain landslides along the route, the
highway will now be routed through a tunnel to avoid
the landslide area. There simply was not a feasible
engineering solution to stabilize the slopes, and the
final solution was to reroute and avoid the area.
Reasonable and planned sediment loading into the

watercourses during the Monsoon are not
problematic and can fall within the range of loads that
are common within various rivers.
A review of the success of the currently deployed
designs for sediment removal should be initiated.
Have the designs worked? Have they been costeffective? Are there operational considerations? The
review should also consider alternative design
elements that may improve the efficiency and
operation of the designs currently in place. It would
behoove Nepal and other Himalayan countries to be
at the forefront on this most pertinent issue. Other
engineering solutions such as generator designs that
are less sensitive to abrasion caused by sediment
loads should also be considered. Identifying
watersheds with reduced sediment loading, or reaches
where sediment loads are less problematic should also
be a consideration in terms of feasibility.
BMPs with regards to erosion control are not
complicated issues and should be required
consistently. Measures described above under
landslides should be applied including minimizing
surface disturbance when possible during the
Monsoon, proper drainage, silt fences and bails,
benching of slopes, and revegetation.
If necessary, sediment loading within stream
courses should coincide with the monsoon period and
should be controlled to fall within a small percentage
of the natural sediment loading that would be
expected without the project. Such a schedule for
sediment loading was prescribed on the KGA project
but not rigorously enforced.
Sediments
Sediment loads are both a design challenge and an
environmental
challenge
for
hydropower
development throughout the southern slopes of the
Himalayas. The large seasonal sediment loads
characteristic of Nepals rivers require sediment/
desander basins to remove sediments from the water
that eventually need to go through power generation
turbines. Construction, maintenance and operations
of these facilities present many engineering and
environmental challenges.
In addition, in part related to the landslide
challenge described above as well as the Monsoon
climate of the southern slopes of the Himalayas,
project-related
erosion
and
subsequent
sedimentation can be problematic. The discarding of
spoils into watercourses during non-monsoon periods
is a particular problem that can be avoided or
minimized. For instance, construction activities
within the wetted perimeter occurred commonly in
both the KGA and KK projects during the dry season.
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Biodiversity
epal is blessed with very rich biodiversity, both
aquatic and terrestrial. Included are many species
recognized nationally and internationally as
threatened or endangered. This includes high profile
species such as the Bengal tiger, snow leopard and
rock python, but probably also includes a number of
lesser known species or invertebrate taxon yet to be
described. Species richness is enhanced by the wide
range in elevation, habitats and ecosystems that occur
from the low elevation Terai plains to the upper slopes
of the Himalayas.
Hydropower Projects, including the KGA and KK,
can have adverse impacts on these species. There are
localized disturbances related to construction
activities, loss of habitat, project-related takes (kills
of individual specimens), migration impediment,
secondary impacts related to forest impacts and
improved human access. Other significant impacts
occur due to transmission line conflicts with bird
migration and primary (old growth) forests.

Preparing a Biological Assessment (BA)
specifically focused on rare, threatened or
endangered species is recommended for any
hydropower project having impacts on these species.
This should be a part of the overall Environmental
Impact Assessment process and should be prepared
by the project proponent. The BA should refer to the
project description and describe in detail project
impacts, measures taken to avoid or minimize
impacts, remedial actions and actions proposed to
compensate for unavoidable impacts. The BA needs
to be submitted to the national agency that is
responsible for endangered species (such as Nepals
Department of National Parks and Wildlife
Conservation) as well as the projects panel of experts
for review. The national agency will then need to
develop a Biological Opinion (BO) that details the
project requirements with regards to endangered
species. Measures could include biological monitors,
mitigation for degraded or lost habitat, allowance for
a certain take of habitat or individuals, constraints
on periods of activity, worker education, etc. The most
onerous penalty in this arrangement is that projects
that are not in compliance with the BO can be halted.
However, stopping projects on large infrastructure
projects is very expensive and politically difficult for
agencies to enforce. Nevertheless, agencies must
maintain their rigor in this regard to ensure, among
other things, continued donor agency support.
Projects should avoid primary forests, national
parks and wildlife refuges as much as possible, and
these factors should be considered during feasibility
studies and thereafter. If impacts to these areas are
unavoidable, major mitigation costs should be part
and parcel of the project. In the US, mitigation for
lost endangered species habitat is often compensated
by the requirement of acquisition and long-term
protection of similar habitat in adjacent areas. Ratios
are such that the loss of one acre of endangered
species habitat requires more than one acre of
compensatory habitat. Multinational corporations
are used to complying with agency regulations and
mitigation issues, so Nepal should not allow itself to
accept any less. For good or bad, this is part of the
business climate that must be factored into
successful project design, construction and
operation.
Fisheries
Impacts to fishery are well documented as a result of
hydropower development and were anticipated for
both the KGA and KK projects. Typically, impacts to
fisheries are significant and long-term and have
affected fishery resources wherever hydropower

projects have been developed. Migratory riverine
species are the fish community that is most likely to
suffer major adverse impacts. At times, riverine
fisheries can be replaced by a reservoir fishery that
can be larger than the original fishery; however, the
fishery will be different and there can be significant
off-site fishery impacts (upstream and downstream)
due to impediment to migration and impacts to
migratory species. In addition, there can be impacts
to communities accustomed to one type of fishery.
As described above, KGA and KK projects both
recognized the potential for adverse impacts to
fisheries. The potential impacts of the KGA project
were larger, as the fishery was larger and migratory
fish populations were a major component to the
fishery. Both projects implemented mitigation
measures that addressed fish passage, entrainment,
minimum flows and peaking flows. Mitigation
measures included fish passage design, trapping and
hauling, a trash rack and louver system, a mitigation
hatchery, ramping and monitoring. However, during
the construction phases, only a portion of the
mitigation measures stipulated in the EIAs were
implemented. Some measures that were clearly
spelled out were never implemented. For example,
on the KK project, measures to minimize entrainment
were never taken. On the KGA project, the testing of
trapping and hauling during the construction phase
was funded but never successfully implemented for
various reasons. As a result, significant adverse
impacts to fisheries are possible, if not probable.
The establishment of Wild and Scenic Rivers or
selected watersheds that would not be developed for
hydropower, but maintained for recreational and
ecological purposes, would be a major step in
protecting fishery resources and aquatic biodiversity.
There are opportunity costs in terms of hydropower
generation in these systems, but recreation, tourism
and ecological benefits to Nepal for protecting
selected watersheds should be considered.
Measures taken to date to mitigate for fishery
impacts should be evaluated for effectiveness,
feasibility and cost effectiveness. A number of
hydropower projects have been completed in the
foothills of the Himalayas and an assessment of
attempted fish mitigation measures and their success
or failure should be considered in future efforts. A
selected Panel of Experts could do this quickly and
cost effectively.
Where possible, projects should be developed in
reaches above the major migratory areas of the rivers.
Alternatively, projects above the facilities that
already block migratory fish should be considered.
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But this should be tempered with more information,

as the extent and patterns of migratory behavior for
fish in the southern slopes of the Himalayas are poorly
documented. This should only be considered where
it can be documented that long-range migratory fish
such as masheer have been extirpated.
The artisanal fisherpersons should become a
strong part of the mitigation planning effort with
regards to fishery impacts. It is their livelihood and
way of life that are often jeopardized by hydropower
development. Including them in setting the goals for
mitigation and even in implementing and monitoring
are highly recommended. Special social measures
may be required, such as retraining, should adverse
impacts to their income and way of life become
apparent.
Compliance
Both KGA and KK had extensive mitigation measures
spelled out in the EIAs, SEIAs, Environmental
Compliance Monitoring Plans, Acquisition,
Compensation and Relocation Plans, construction
contract clauses and clauses in various loan
documents of the international lending agencies. Both
projects had Environmental Management Units that
monitored and reported on compliance. In these two
projects, and in other projects reviewed by the
author, non-compliance with measures identified in
the regulating documents were simply not
implemented or poorly implemented. In some cases,
mitigation measures were unreasonable. However, in
many cases, compliance took a much lower priority
than schedule or budget. In some cases it was more
expedient not to comply, as there was little to force
compliance. Oftentimes, the policing was done by a
Panel of Experts or its equivalent. There were earnest
attempts to implement mitigation measures,
particularly where local communities benefited from
the measures. There was less compliance on measures
that had little local political clout. However, enforcing
compliance was a difficult matter, largely due to
conflicts of interest and weakness in the institutional
strengths of the oversight agencies.
With regards to the construction contractors,
Environmental Performance Bonds are an option, as
well as enforceable penalty clauses for lack of
compliance. Line item budgets for compliance
measures are also an option, but were not particularly
successful on the KGA project. For example, there
was no budget allocated to the training and
employment of Project Affected Family (PAF)
members, but this was ultimately carried out fairly
successfully. There was budget for implementation
for the fish trapping and hauling, but this was not
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completed successfully. The project responded to

pressure from the Panel of Experts as well as local
communities who were very much aware of the
mitigation requirements. Still, line item budgets, with
the
provision
that
non-performance
on
environmental contract areas are treated with the
same degree of concern as they are in the traditional
engineering and construction elements, are a
reasonable approach, and are well understood by
multinational corporations.
Simplifying construction contract clauses should
be considered. This was somewhat necessary in the
case of KGA and KK, particularly with regards to
safety. Nepal did not have, at the time, legislation
addressing safety at the work place or agencies to
oversee or enforce safety. Nonetheless, it is better to
have focused clauses that are enforceable than
extensive clauses that are ignored.
Continued Nepal institutional strengthening is
paramount. Nepal should be able to rely on its own
institutions and expertise to ensure that mitigation
and compliance measures integral to the proposed
project are fully carried out. They should not have to
rely on outside experts. Nevertheless, the continued
use of outside experts is probably wise, as outside
experts are not as subject to the financial and political
pressures that local staff and institutions now may
bear. The role of outside experts as a Panel of Experts
in a Quality Assurance/Quality Control (QA/QC) role
is reasonable.
Reporting
The reporting burden related to compliance was large
on both the KGA and KK projects. Since the reports
are typically reviewed by international agencies, they
are written in English. Reporting on compliance with
the environmental and social requirements in large
infrastructure projects is required and important. It
is oftentimes difficult for Nepalese nationals to write
clearly and succinctly in a second language (e.g.,
English). Reporting should not be such a burden such
that it becomes more important than the
implementation of the mitigation.
Monthly Progress Reports should be shortened
and simplified, no longer than 10 pages, with
appended tables and data. Quarterly and Annual
Reports should also be succinct, clear and short.
Required technical studies, plans, etc., should be
appended and briefly summarized in the main body
of the Compliance Report. Sufficient information
should be provided to determine whether the project
is complying with the requirements, and where and
when it is not. Measures taken to alleviate noncompliance or why non-compliance is unattainable
need to be spelled out. Reports should be edited by a

good writer fully fluent in technical English writing.
During project operations, compliance reporting
is also required and necessary. Monthly reporting on
release flows is recommended. This should be a simple
letter report identifying compliance or noncompliance. The Annual report should address
additional mitigation items and tabulate performance
for the year.
A structure should be put into place early on to
identify non-compliance and to ensure that those
issues related to non-compliance are quickly
addressed. Otherwise, reporting becomes formulaic,
rather than an instrument for change and
improvement. A suggested approach is a high-level
monthly meeting addressing outstanding issues and
their resolution. The specific mechanism for resolving
how that process would occur would be dependent
on the contractual and institutional arrangements.
Community relations
Successful implementation of a hydropower scheme
in rural Nepal requires excellent community
relations. Construction projects are often stopped by
local communities for reasonable and sometimes
unreasonable causes. Without local support, orin
extreme casesstrong police power, projects cannot
go forward in the face of local opposition. Local
communities recognize that construction of
hydropower projects is a ready source of revenues
that can be tapped for local projects such as road
building, trail improvements, schools, temples, water
supplies, rural electrification, etc. In some cases, the
demands are rational; but, in some cases, they are
not. Communities are very much aware of the
mitigation requirements spelled out in the various
environmental and social documents and are quick
to point out when they are not receiving what they
interpret are required.
Hydropower development should be structured
so that it contributes to local poverty alleviation as
well as national benefits. Unfortunately, there have
been several instances when early commitments made
by project proponents were not carried out. Affected
communities are quick to point out the cases of
unfulfilled promises and they become a long-term
irritant that results in conflict between the project
proponent and the communities.
taking of land, buildings and other resources, the

following generalized measures are suggested:
Rural electrification: These programs were
implemented in both the KGA and KK projects
and should be implemented in all cases such
that affected communities receive the benefit
of electrification. We recognize that local
electrification does not always meet an
economic test but it should be fully supported
nonetheless.
Local hiring: Both KGA and KK made efforts
to hire locally and had various training
opportunities. Some advanced training in
areas targeted for project development would
be prudent. Job opportunities should
continue through the operations phase. A
cadre of Nepalese nationals is being
developed who now have fairly extensive
experience in working on heavy construction
projects, and these skilled residents should
also be utilized as is reasonable.
Telecommunication: Large hydropower
development requires the establishment of
good telecommunication, and part of the
community program should be to provide
telecommuni-cation accessibility to local
communities.
It is important to present project construction
and operation in terms of how local communities will
benefit. As part of Public Outreach Programs, the
benefits and commitments should be made clear.
Avoiding false promises is paramount. Besides the
standard requirements for just compensation for the
Infrastructure: Some budget allocations

should be provided for local infrastructure
projects that would be prioritized and
documented in advance. Local communities
should be included in developing a list of
projects and their relative priority. These
may include water supply projects, roads,
bridges, trails, toilets, etc.
Community liaison: A well-respected senior
Nepalese citizen needs to be the point person
on community relations on all hydropower
projects. This person would be responsible
for maintaining relations with local
communities and listening to their
grievances. He or she would also need to have
a direct conduit to the highest level of Project
Management so that responses are quick and
definite and have meaningful support.
Scheduled community meetings and an Open
Door policy are recommended.
Language: At least the SEIA and other most
pertinent documents should be available at a
local library and written in Nepali. It would
behoove projects to also produce a low-cost
monthly newsletter written in Nepali that
documents project progress and compliance
with environmental and social programs.
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Compliance: Many of the issues that local

communities have had with hydropower
projects throughout Asia were due to the
project developers not complying or
implementing environmental and social
requirements stipulated in the guiding
documents. These have ranged from
construction contractors camping in
unauthorized areas, to landslides affecting
agricultural areas. These issues can be
resolved through use of consistentlyrequired contract clauses and oversight.
Death: Accidental deaths at large
construction facilities are a matter of fact.
Construction contractors and project
proponents need to have a transparent policy
in place to address this probability.
Summary
The suggestions above are not provided in detail, nor
are they exhaustive, and are for the purposes of
discussion and debate that will hopefully lead to
reasonable policy positions and enactment. However,
they are given with the firm belief that hydropower
provides a reasonable approach to power
development in Nepal.
John C. Garcia is a Systems Ecologist and Principal of

Garcia and Associates (1 Saunders Ave., San Anselmo, CA
94960, USA). Mr. Garcia has consulted on environmental
aspects related to hydropower development in Nepal since
the 1980s. On the Kali Gandaki A project, he was the
principal author of the Environmental Impact Statement,
Environmental Mitigation and Monitoring Plan and the
Acquisition, Compensation and Resettlement Plan. He
also worked in a QA/QC function on the Khimti Khola project
providing independent reporting to the Asian Development
Bank and others. He also oversaw biological work on the
preliminary Arun III studies and earlier studies on the
Pancheswar Multipurpose Project. Mr. Garcia also
completed an audit in 2002 on four large hydropower
facilities in Asia on behalf of the ADB's Operations
Evaluations Office, and was on the Panel of Experts for the
ADB-financed Large Dams and Recommended Practices
Technical Assistance Study.
Corresponding address: jgarcia@garciaandassociates.com
References
Asian Development Bank, 1999, Special Evaluation Study
on the Social and Environmental Impacts of Selected
Hydropower Projects (SST:REG 99033), Manila:
Operations Evaluation Office, Asian Development
Bank.
Garcia, John C. and Garcia, Carole T., 2000, A Review of
Environmental Impacts of Hydroelectric Projects in Asia
HYDRO NEPAL
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(prepared for the HydroVision conference held in

Raleigh, NC, August).
Garcia, John C., 1999, A Regional Review of the
Environmental and Social Impacts of Hydroelectric
Projects: Environmental Component (prepared for the
Operations Evaluation Office, Asian Development
Bank), San Anselmo, CA: Garcia and Associates.
Garcia, John C., Garcia, Carole T., Devkota, Salil and
Thanju, Rajendra P., 2005a, Resettlement: lessons
learned at Kali Gandaki A in Nepal, HRW Magazine,
13(1): 32-37.
2005b, Environmental mitigation: Lessons
learned at Kali Gandaki A, HRW Magazine, 13(3):
20-27.
Onta, I.R., 1998, Large dams and alternatives in Nepal:
Experience and lessons learnt (a paper presented at
the World Commission on Dams Regional
Consultation, Sri Lanka, December), Kathmandu:
East Consult. URL: www.dams.org/submissions/
sub_n2.htm.
Pandey, Bhopal, 2001, Environmental Impacts of Kali
Gandaki A Hydroelectric Project on Vegetation
Resources in the Dam and Reservoir Area, PhD
dissertation, Kathmandu: Central Department of
Botany, Tribhuvan University.
Scudder, Thayer, 1997, Social impacts of large dam
projects, in Large Dams: Learning from the Past;
Looking at the Future (workshop proceedings), Gland,
Switzerland: International Union for Conservation
of Nature (IUCN) and The World Bank Group.
SEATEC (Southeast Asia Technology Co., Ltd.), AITANET Ltd., Lahmeyer International GmbH, and
Schema Konsult, Inc., 2000a, Nam Ngum I Case
Study Report: Lao PDR, Annex I of ADB RETA 5828
Study of Large Dams and Recommended Practices
Technical Assistance Report (prepared for the Asian
Development Bank). Bangkok: SEATEC.
2000b, Lingjintan Case Study Report: Peoples
Republic of China, Annex IV of ADB RETA 5828 Study
of Large Dams and Recommended Practices Technical
Assistance Report, Bangkok: SEATEC.
2000c, Magat Case Study Report: Philippines,
Annex III of ADB RETA 5828 Study of Large Dams and
Recommended Practices Technical Assistance Report
(prepared for the Asian Development Bank),
Bangkok: SEATEC.
2000d, Victoria Case Study Report: Sri Lanka,
Annex II of ADB RETA 5828 Study of Large Dams and
Recommended Practices Technical Assistance Report.
(prepared for the Asian Development Bank),
Bangkok: SEATEC.
2001. Study of Large Dams and Recommended
Practices, Final Report. ADB RETA 5828. Prepared
for the Asian Development Bank. SEATEC: Bangkok.
March 2001.
Upadhaya, K.K. and Shrestha, B.C., 2002, Project
induced impacts on fisheries resource and their
mitigation approach in the Kali Gandaki A
hydroelectric project, Nepal, in Cold Water Fisheries
in the Trans-Himalayan Countries, T. Petr and D.B.

Swar (eds.), FAO Fisheries Technical Paper 431, Rome:
UN Food and Agriculture Organization.
WB (World Bank), 1996, The World Banks Experience
with Large Dams: A Preliminary Review of Impacts.
Profiles of Large Dams (background document),
Washington, DC: Operations Evaluation Office, The
World Bank.
10
WCD (World Commission on Dams), 2000, Dams and

Development: A New Framework for Decision-Making,
The Report of the World Commission on Dams, London,
UK and Sterling, VA: Earthscan Publications. URL:
www.dams.org.
WWF (World Wildlife Fund International), 1999, A Place
for Dams in the 21st Century? Gland, Switzerland:
World Wildlife Fund.
HYDRO NEPAL
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Kali Gandaki A Hydroelectric Project in Environmental Perspectives

Rajendra P. Thanju
Abstract. Hydropower is one of the cleanest, renewable and environmentally benign sources of energy. Nepal is
blessed with immense source of water resources and huge hydropower potential. The Kali Gandaki A (KGA)
Hydroelectric Project is the largest hydropower project constructed so far in Nepal. The project is a daily pondage
type scheme with an installed capacity of 144 MW.
The KGA is one of the first largest hydropower projects that has been well studied environmentally and socially in
the pre-project, construction and operation stages. A full team of multi-disciplinary professionals was involved
during the construction phase to monitor environmental impacts and compliance with contract clauses, and to
implement the mitigation measures.
Implementation of KGA in what was once considered as a remote area, has resulted in multifold beneficial
impacts to the local community. Improvement of public infrastructure, enhanced educational facilities and employment
of local populations, including affected families during project construction and operation phase, have enhanced the
quality of rural lives. The KGA operation has contributed significantly to Nepals power system and has boosted the
economic development of the country.
Key words: Hydropower, environmental monitoring, impacts, mitigation, resettlement, Nepal
ydropower is one of the cleanest,

renewable and environmentally
benign sources of energy. Nepal is blessed
with immense source of water resources
and huge hydropower potential. Kali
Gandaki A Hydroelectric Project is the
largest hydropower project implemented
so far in Nepal. The project is located in
the Western Development Region of
Nepal. The main component of the project
is located at Syangja District in Gandaki
Zone, and other components partially
encompass other districts such as Gulmi,
Palpa, Parbat, Kaski and Rupandehi.
The feasibility study of the project was
carried out in 1979 with the financial
assistance
from
United
Nations
Figure 1. View of Kali Gandaki Dam
Development Program (UNDP) which was
updated in 1991. The detailed engineering design and
(Lot 4); France/Japan JV of Mitsui/Toshiba/Alstom
preparation of tender documents commenced in 1993
(Former CEGELEC), for Electrical Works (Lot 5); Japan
with the financial assistance of Asian Development
joint venture of Mitsui/Toshiba for Mechanical works
Bank (ADB), United Nation Development Program
(Lot 6); and TATA International /Marubeni, Japan,
(UNDP) and Finnish International Development
were the contractors for transmission line and
Agency (FINNIDA) jointly. The preparatory works
substation works (lot7), respectively. The project is
like access road construction was started in 1993 with
owned and operated by the Nepal Electricity
internal resources from Government of Nepal and
Authority (NEA). The project engineers were
Nepal Electricity Authority (NEA).
Morrison Knudsen International Inc., USA, in
The construction works were divided into seven
association with Norconsult International, Norway,
lots. Impregilo SpA (IgL), Italy, was the civil
and IVO International, Finland.
contractor (for lot C1, C2 and C3); Noell Stahl-und
Construction of the hydropower component was
Maschinenbau, Germany, for Hydraulic Steel works
started in 1997 under the loan assistance of Asian
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11
Development Bank (ADB) and Overseas Economic

Corporation Fund (OECF, now known as Japan Bank
for International Cooperation, or JBIC). The project
construction work was completed in 2002. The
generation unit was tested in May 2002 and
commercial production began from August 2002.
Project features
The major project components include hydropower
dam and powerhouse, project access road,
transmission line and substations, as described below.
Hydropower
Kali Gandaki A Hydroelectric Project is a daily
pondage type scheme located on the Kali Gandaki
River with an installed capacity of 144 MW. The
project generates about 842 GWh of electric energy
annually by utilizing a net head of 115m. The main
structures of the project are concrete gravity
diversion dam about 100m long and 43m high, open
surface desander, headrace tunnel of about 6 km in
length and 7.4m diameter, and a surface powerhouse.
The rated discharge of 141 m3/s feeds three Francis
type turbines in the powerhouse. The surface area of
the reservoir is 65 ha, followed by a 5.3 km long back
water level. Permanent camps are located at Beltari
and Mirmi in the Shree Krishna Gandaki Village
Development Committee (VDC) of Syangja District.
Access road
The access road of the project crosses steep and
hilly terrain. Total length of the access roads is about
28.5 km. The access road starts from Batuwa, 82 km
from Pokhara on Siddhartha highway (3.5 south of
Galyang Bazaar) and ends at the left bank of the dam,
which is about 20 km away from the highway. The
access road for the powerhouse branch out from
Figure 2. Boat transportation in project reservoir
12
Jaipate is about 8 km long.

Transmission lines
The power generated from the project by 3 units
of turbines of 48 MW each capacity is evacuated to
the central grid via a 132 kV single circuit, a 66 km
long transmission line to Pokhara and a 44 km double
circuit transmission line to Butwal. A sub-station is
constructed at Lekhnath Municipality of Kaski
District, whereas the pre-existing Jogikuti substation
of Butwal has been upgraded.
Environmental studies
From the initial stage of project, environmental
concerns were the integral part of design optimization.
The environmental studies/activities of the project
during pre-project, construction stage and operation
phase are briefly described below.
Pre-project phase
The Environmental Impact Assessment (EIA)
study was conducted in 1996 according to National
EIA Guidelines of 1993 and Asian Development Bank
Guidelines of 1990. The report was duly approved by
the Asian Development Bank (ADB).
The interaction and consultation programs during
the project preparation stage reflected views of
different stakeholders, which were considered in the
detailed design phase of the project, and possible
adverse environmental impacts were avoided to the
extent possible.
Environmental documents
From the beginning, environmental consideration
was given priority in the project. Various
environmental documents were prepared during
engineering design and tender documents
preparation. The primary documents that
guided environmental activities of the
project are given below. These documents
were used in cross-reference with each
other:
Environmental Impact Assessment
(EIA), Vol. 1-2, 1996.
Mitigation Management and Monitoring Plan (MMMP), 1996.
Acquisition, Compensation and Rehabilitation Plan (ACRP), 1996.
Tender documents with conditions of
particular applications, including social and environmental clauses.
ADB: Summary Environment Impact
Assessment (SEIA), 1996
ADB: Report and Recommendation of
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President to Board of Directors, 1996

RRP-NEP 26362)
Loan Agreement with ADB
The EIA explained the impacts and proposed
mitigation measures as identified during the detail
study of the project and provides justification for the
mitigation. The MMMP described how the mitigation
spelled out in the EIA, ACRP and in Tender Clauses
will be carried out. The MMMP provided a guide to
mitigation management and environmental
monitoring. The main objective of ACRP was to insure
that people affected by project-related property and
land acquisitions would be as well off after the project
as they were before. The Tender Documents specified
what action construction contractors were required
to take to protect the environment.
In addition, the contractors were required to
develop an Environmental Protection Plan, a Health
and Safety Plan and a Waste Management Plan, and
contractors disturbing vegetation were required to
submit a Revegetation Plan. These Plans augmented
the MMMP and specified how the contractors met and
implemented the environmental mitigation
requirements specified in the EIA, ACRP and the
Tender Documents.
The loan document between ADB and NEA defined
the role, responsibility and mandate of Kali Gandaki
Environmental Management Unit (KGEMU). The loan
document included basic provisions in environmental
aspects, which were to be carefully addressed to
comply with ADBs policies and procedures. Included
in this document are: institutional requirement for
monitoring; establishment of the KGEMU; provision
for a construction stage International Panel of Experts
(POE) 1 on environmental and social aspects;
implementation of MMMP; contractors compliance
with tender clauses; compensatory flow of 4 m 3/s;
operation and management of a fish hatchery
program; and clauses regarding minimization of
resettlement, enabling communities to benefit from
the project, preferential hiring, and the need for public
consultation.
Social mitigation policy
The Resettlement Policy defined in project
documents provides that the Government of Nepal
and the NEA shall take or cause to be taken all
necessary measures to ensure that all the population
adversely affected by carrying out the project shall
generally:
improve or at least regain their prior standard
of living;
be relocated, if necessary, in accordance with
their preferences and be fully integrated into
the community in which they move; and
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be provided with appropriate, agreed upon

compensation and required physical
rehabilitation of infrastructures, community
facilities, including rehabilitation grants, skill
training and employment opportunities. All
such measures should at least satisfy the
requirement of the ACRP.
Environmental impacts
Major impacts occurred due to the implementation
of the project on physical, biological and
socioeconomic and cultural environment are
summarized below:
Physical environment
Submergence of forest land and other land
uses due to creation of 5.3 km long (65 ha)
reservoir.
Hydrological changes in the 13 km stretch
downstream between the dam and the
confluence with the major tributary, Badi Gad.
Impacts on hydrology downstream of the
power plant are restricted to the dry season
when the facility is used for peaking. The
changes in flow and stage pose hazards to
water users immediately below the power
plant site.
Generation of 6.2 million tons of muck/spoil.
Biological environment
Removal of 6,093 trees of various species
(khayar, bakaino, ipil-ipil, simal, sissoo and
sal) due to implementation of the project.
Soil erosion and land slides due to project
construction works.
Loss of wildlife habitat around dam,
powerhouse sites and nearby areas.
Impact on migration of long range migratory
fishes due to damming of river.
Social/cultural environment
Loss of approximately 208.68 ha of land due
to placement of project structures and
facilities, including access road.
Altogether 1,468 families lost their land (or
part of it), their houses, or both, out of which
263 families were defined as SPAF2 and 1,205
families as PAF3.
Impacts to indigenous Bote (fisherman)
community. About 21 houses, 5 cowshed and
approximately 13 ropani of land from the
Bote families were acquired.
Impact on Setibeni Sheela, a religious site.
13
Reduction of white water rafting in Kali

Gandaki River from 5 days to 3 days.
Environmental monitoring and mitigation

management
The Nepal Electricity Authority, project engineers
and contractors were responsible for the monitoring
and implementation and management of mitigation
measures. KGEMU was the key unit established under
the consultant umbrella to monitor environmental
mitigation measures carried out by contractors, to
carry out environmental mitigation programs and
conduct environmental monitoring during the
construction phase, as spelled out in EIA, MMMP and
Tender Documents.
The environmental monitoring and mitigation
management activities carried out during the project
construction stage are briefly described below.
Kali Gandaki Environmental Management Unit
(KGEMU)
The KGEMU was formed in January 1997 with the
commencement of project construction. It was the
first organization of its kind in hydropower projects
in Nepal to monitor and mitigate the adverse
environmental impacts due to the project
construction and was established as per the provision
in the loan agreement between NEA and ADB.
Considering multidimensional activities and mandate,
KGEMU was staffed with a diverse group of
environmental professionals. The environmental
advisor and trainer, an expatriate position, was
responsible for reviewing the performance and
manage KGEMU for the first year. Moreover, an
expatriate manager and an International Panel of
Experts (environmental and social) were also engaged
to guide and review the environmental and social
works of the project throughout the project
construction stage.
Monitoring activities were considered an
important aspect. KGEMU staff conducted
compliance monitoring of the international
contractors regarding environmental obligations as
mentioned in the contract documents. About 108
environmental and social clauses were incorporated
in tender documents of the civil contractor (IgL).
Significant shortcomings on the part of
contractors were documented and informed to the
relevant contractors for necessary improvements.
Several engineers instructions were issued to the
contractors to make them comply with their
contractual obligations. However, the contractors
environmental compliance status was satisfactory,
but needs greater enforcement mechanism to achieve
better performance in future projects.
14
Social research and impacts studies

The professional staff of the KGEMU conducted
several impacts monitoring studies among the affected
populace of the project areas during the period of the
project construction. This research effort paid off
handsomely, resulting in about 18-20 studies on
various types of social impacts, a research record
rarely achieved in other hydropower projects (POE
2002). The findings of these researches on impacts
and issues were conveyed to the project director and
the ADB, through POE reports and ADB Supervision
Mission reports.
Mitigation implementation/adaptive management
The project mostly followed the mitigation
approaches proposed by the project environmental
documents. Nevertheless, the project also espouse
to adaptive management approach in order to
minimize and/or mitigate the unforeseen adverse
impacts arises during the course of project
implementation. Resettlement and Rehabilitation
program for affected Bote (Fishermen) families and
implementation of Community Support Program were
good examples of adaptive management of the
project. Some of the major mitigation measures
implemented and/or constructed during construction
stage of the project were as follows;
Physical Environment
Installation of siren warning system in powerhouse and dam site.
Protection measures for water qu-ality at
project areas.
Restoration of the disturbed site using bioengineering measures at head work site, powerhouse site, access road and transmission line
tower locations.
Management and control of 6.2 million tons
excavated materials were carried out as per
the approved plan submitted by the contractor.
Biological environment
Establishment of project central
nursery with production capacity of 60,000
seedlings/year and grass slip production
(150,000-200,000/year)
for
bioengineering and slope stabilization purposes in
project site.
Establishment of satellite nurseries to
provide seedlings to local communities.
Plantation of 319,694 seedlings of different
species at different project components and
community land.
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Resettlement and rehabilitation of Bote

(fisherman) families.
Implementation of community support program, which includes conservation of local
religious and cultural sites, literacy program
to local women, support to local schools,
renovation and construction of drinking
water, etc.
Establishment of a primary school at Andhimuhan Bote village, as an important gesture
of project mitigation attempts for the Bote
community.
The study shows that the empl-oyed SPAF/
PAFs have secured NRs 128,000 average
annual cash income compared to the 22,000
rupees that families earned annually before
the project started. This indicates that the
cash income of the SPAF/PAFs was nearly six
times greater than the previous cash income.
Restriction on hunting and poaching during

construction period of the project.
Construction of fish hatchery.
Implementation of fish trapping and hauling
program.
Construction of trash rack, fish bypass
system and collector channel at headwork
site.
Social/cultural environment
Cash compensation for the loss of land, house
and other assets. The formal tenants of guthi
(communal) land were paid an additional 42%
compensation, totaling 75% vis--vis legal
provision of only 33% compensation.
Compensation also provided for standing
crops and grass damaged during the project
construction.
Provided additional rehabilitat-ion grants
(house rent) to the affected families at the rate
of NRs 1,000 per month for 4 months.
Grant to pay the government la-nd registration
fee provided as an incentive to those affected
families who purchased replacement land.
House loss compensated at repl-acement cost.
Affected households were also provided the
construction materials from their old house
for reuse.
Priority of hiring affected family members including local people. Provided employment
to 2,568 people during construction. More
than three-fourths of the SPAFs/PAFs were
employed and the local-outsider employment
ratio in the project was 50-50% during
construction. Both the families standard of
living and the local economy soon exhibited
the positive impact of these regular cash
inflows during the project construction
period.
Implementation of micro-credit revolving fund
program with an earmarked budget of NRs
2,900,000.
Protection of Setibeni Sheela, a holy stone religious site, by constructing a gabion wall with
height ranging from 2 to 8 m, a walking path
with railing around the sacred stone to
facilitate devotees to worship and encircle the
stone.
Construction of cremation sheds and renovation of temples.
Implementation of skill development
training program.
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Regular celebration of World Environment

Day to enhance environmental awareness
among local public.
Environmental aspects during operation phase

The Kali Gandaki A Hydroelectric Plant has been
under commercial operation since August 2002. The
Environmental and Social Studies Department (ESSD)
of the NEA carried out the post-construction
Environmental Impact Study of the project. ESSD staff
has recently completed operation phase
environmental and social monitoring activities of the
project for two year (2005-2006) and prepared an
Environmental and Social Operation Manual for the
project. These activities have been carried out as per
ADB requirement, with reports submitted regularly
to ADB.
Findings
Major findings of environmental and social
monitoring/studies during operation phase of the
project include;
1.
Release of 4 m3/s minimum of water during

dry season and 6 m3/s on religious days has
been observed.
2. A siren warning system is in operation at the
powerhouse and dam site.
3. Reduction in bed load below the dam after
construction has occurred. However, total
sediment loads downstream has not changed
from the pre-existing conditions.
4. The KGA project has had a positive effect on
forests, with regards to energy consumption,
15
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
16
as the use of alternative sources of energy has

increased,
The post-construction Environmental Impact
Audit study indicates that construction
disturbances have settled down.
The Reservoir Sedimentation Study is being
carried out annually by the KGA department.
A bathymetric survey of project reservoir by
echo sounding technology has been
implemented.
The fish bypass system is under operation.
Fish hatchery operations and management are
being carried out smoothly by the Nepal
Agricultural Research Council (NARC).
Release of different species of fingerling in
Project reservoir has been implemented.
Three has been a decrease in average land
holding size of the affected families in
comparison to pre-project levels.
The quality of reconstructed houses appears
better than old houses. Some of the new
houses are roofed with iron-sheeting and are
cemented, replacing homes that were
previously thatched.
All the newly built houses have been handed
over to the affected Bote (fishermen) families.
The Kali Gandaki Primary School for Bote
children is operating smoothly with classes
up to class 3.
The agricultural occupation of affected
families has declined by about 5% whereas
service category has increased from 6.90%
to 9.58%. Similarly the occupation levels of
labor and wages during pre-project period of
0.54% have also slightly increased to 0.64%
in post-project period.
The intermixing of local and outside laborers
created both positive and negative effects.
The positive effects reported are the exchange
of skills, ideas etc., between groups, while the
negative effects reported are some
unacceptable socio-cultural behaviors such
as theft and disruption in law and order during
the project construction period.
The local economy is now more integrated
with the national economy because of the
project access road and the boat
transportation on the project reservoir.
Implementation of the project has established
and enhanced the local infrastructures in the
project area, specifically at the dam and
powerhouse sites.
18. 225 people were employed during the

operation phase. Local employment in the
operation phase is about 69%.
19. Due to the fluctuation and peaking effects of
the project to the downstream of dam and
below the powerhouse site, the sankhar
(traditional fishing gear) used by the Bote
fisherman to harvest fish has been affected,
causing adverse impact on their income and
livelihood.
20. There seems to be an improvement in the
health status of families, since more houses
now have toilets and separate cowsheds.
Previously, people and livestock shared
common space.
Projects benefits
The implementation of Kali Gandaki A Hydroelectric
Project in the region, once considered as remote area,
has resulted in multiple beneficial impacts to the local
community.
The
improvement
of
public
infrastructure such as access roads, rural
electrification, telecommunications and health
services, enhanced educational facilities and
employment of local population, including projectaffected families during the project construction stage
and operation phase, have benefited local
communities by enhancing their quality of life.
About 4,256 rural households have benefited
from rural electrification in the project areas and
additional new households are being electrified.
The project has also implemented Community
Support Programs (CSPs) to address the local needs
and to build good rapport with local communities,
which was not foreseen during project planning.
However, the project had also faced difficulties in
fulfilling the never-ending demands of the
communities, mainly due to the unavailability of funds
from alternative sources.
The operation of the project has contributed
significantly to Nepals power system, reducing the
need for load shedding, catering to the need of energy
for future electrification and boosting economic
development of the country. The benefits to
government and the local populations include
improved infrastructures and employment
opportunities. The project has contributed in
producing trained and experienced manpower in
various skilled job, including environmental
monitoring and management of large hydropower
projects.
Conclusions
Most of the proposed requirements set forth in the
various projects documents for mitigating adverse
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environmental impacts due to project construction

have been implemented. The impacts of the project
due to the access road, rural electrification and
employment have created a local transformation. The
beneficial impacts of the project have significantly
affected at the local, regional and national levels in
positive ways.
A considerable amount of cash flow to the local
community during project construction ensures at
least the previous living standard of PAFs and SPAFs.
Most of the PAF and SPAFs have managed to achieve
a better standard of living and some have invested
money in modernizing houses and purchasing land.
Local people, including the affected families, are now
more amenable to more commercial activities for
income generation.
The project can be considered as a pioneer in the
field of environmental monitoring and management
of large hydropower project in Nepal.
Rajendra P. Thanju is Deputy Director (Economist) of

the Environmental and Social Studies Department, Nepal
Electricity Authority. He previously served as socioeconomist in the Environmental Management Unit of the
Kali Gandaki A Hydroelectric Project.
Corresponding address: rpthanju@gmail.com
End notes
1 Professor Michael M Cernea and Dr. Donald Graybill

were members of international POE for social and
environmental aspects of the KGA Project,
respectively.
2 SPAF: Seriously Project Affected Family denotes
the affected families who lost their house or more
than 50% of their income or land.
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3 PAF: Project Affected Families denotes the affected

families who lost their assets to the project.
References
ADB (Asian Development Bank), 2004, Completion Report
on the Kali Gandaki A Hydroelectric Project (Loan
1452-Nep[Sf]) in Nepal, Manila: Asian Development
Bank.
ESSD (Environmental and Social Studies Department),
2003, Post Construction Environmental Impact Audit
Study of Kali Gandaki A Hydroelectric Project,
Kathmandu: ESSD, Nepal Electricity Authority.
___, 2005/2006, Environment and Social Monitoring
Report of Kali Gandaki A Hydroelectric Project,
Kathmandu: ESSD, Nepal Electricity Authority.
KGEMU (Kali Gandaki Environmental Management
Unit), 2002, Impoverishment Risks Monitoring and
Management in Kali Gandaki A Hydroelectric Project:
A Social Synthesis Report, Beltari, Syangja District,
Nepal: KGEMU (Kali Gandaki A Hydroelectric
Project) and Morrison Knudsen International.
__, 2002, Environmental Management and Monitoring
in Kali Gandaki A Hydroelectric Project: Environmental
Synthesis Report, Beltari, Syangja District, Nepal:
KGEMU (Kali Gandaki A Hydroelectric Project) and
Morrison Knudsen International.
MKI (Morrison Knudsen International), 1996,
Environmental Impact Assessment, Final Report,
Kathmandu: Kali Gandaki A AssociatesMorrison
Knudsen
Corporation
(USA),
Norconsult
International (Norway) and IVO International, Ltd.
(Finland).
__, 1996, Mitigation Management and Monitoring
Plan, Kathmandu: MKI (Kali Gandaki A
Hydroelectric Project) and Nepal Electricity
Authority.
17
The Dynamics of Social Inequality in the Kali Gandaki A Dam Project in

Nepal: The Politics of Patronage
Kavita Rai
Abstract: This research article utilizes concepts from the Anthropology of Clientelism to explain the dynamics of
social inequality after the construction of the Kali Gandaki A hydroelectric dam project. As Nepals rural societies
are largely agrarian, Scotts (1976) moral economy theory, positioned against Popkins (1979) political economy
approach acts as the basis of argumentation of how patronage politics links the different social strata at the local
level. The access to the KG A project resources (financial in terms of compensation and project employment and
natural in regard to access to land and water) and the acquired outcomes explains the strategies that local actors
took to gain from the project intervention eventually changing the dynamics of social interaction and levels of
inequalities internal and external to their own social groups.
Key words: Dam, clientelism, compensation, Kali Gandaki A, patronage, resettlement, social inequalities, Nepal
Introduction: Dams, development and social

inequalities
ne of the arguments in the implementation of

dam projects is that the benefits will ultimately
lead to a win-win situation for all. Large dams in
particular are viewed as panacea for the pervasive
poverty in the Himalaya-Ganga (Dixit 1994).
Critics of this argument counteract by arguing
that people in rural areas are not winning because
they receive little direct benefits. Displacements of
local families from dam interventions are also
critiqued as a price paid for development. Ethical
questions are often raised because of the inequitable
distribution of benefits and affected people being more
vulnerable or worse off (Cernea 2000). Meanwhile,
hierarchical relationships of patronage between state
bureaucrats and locals, class and other striations also
bring about disputes, unequal resettlement and
compensation provisions and take more time to
negotiate (Gandhi 2003). Within this context, state
policies and laws provide the framework for
compensating the people affected directly and
indirectly. However, the main assumption as taken
here is that the hierarchical structure of the Nepalese
state and society and the ubiquity of patronage
politics will negatively affect even those development
programmes that aim at inclusion and redistribution.
This hierarchical structure emerges out of a complex
social structure where caste, ethnicity and class do
not fit into neatly structured divisions. Baral (2000)
views inequalities to stem from a hierarchical state
that thrived on a system of patronage that has been
historically and socially exploitative in nature with
18
the ruling classes enjoying the benefits.

With social inequalities and patronage inherent
in Nepali society, development processes are,
therefore, apt fields for their manifestation. Dam
interventions are not exempt. Equity issues are
gaining importance. As the World Commission for
Dam report (2000:120) points out, the emergence of
equity as a critical ingredient of development
underlines that this balance sheet approach is
unacceptable as it ignores the typical mismatch
between the distribution of the gains and losses of a
project across different societal groups.
What, then, are the ground realities in the case
of Nepal? What are the outcomes in terms of equality/
inequality when large hydropower plants are
implanted upon local communities vis--vis the
distribution of resourcesfinancial and natural (of
land and water)? This paper attempts to link in answers
to these questions focusing on patronage relations in
the Kali Gandaki (KG) A project area. Before
unfolding the research assumptions to these
questions, the following section will briefly explain
the concepts of patronage.
The anthropology of patronage (clientelism)

The interplay between relational inequalities and
distributional inequalities1 can be studied within the
framework of patron-client relationships. Patronage
(used interchangeably with clientelism, a term used
by anthropologists) is important because it links the
strata based on class, ethnicity and class together,
especially in the political process2. The word patron
is derived from the Spanish patrn, a person of power,
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JUNE 5, 2007
status, authority and influence, while the client is

economically and politically weaker (Hall 1977:510).
Land defines a patron-client relation as a vertical
dyadic alliance; i.e., an alliance between two people
of unequal status, power or resources each of whom
finds it useful to have as an ally someone superior or
inferior to himself (1977:xx). In such a relationship,
the superior member is the patron and the inferior
member his client. In addition to unequal status,
influence and a relationship based on reciprocity,
Powell (1970) adds that patron-client relationship
rests on a face-to-face contact between the two
parties. Significant amount of research on clientelism
were conducted around peasant societies by
anthropologists and political scientists (see Swartz
1968; Lemarchand and Legg 1972; Scott 1976;
Schmidt et al 1977; Popkin 1979). Later works on
patron-client relations focussed on a wider political,
historical and contemporary global coverage (see
Eisenstadt and Lemarchand 1981; Roniger and GnesAyata 1994). Patronage and clientelism existed,
according to these researchers, in the absence of
strong states but then stealthily crept into
development processes. In Nepal, there have been
no specific attempts to study patronage, although
Bista (1991) wrote extensively about chakari, a
manifestation of clientelism. Like Bista, other social
and political scientists often incorporate patronage
and clientelism within a wider work on social or
political development.
In this paper, the politics of patronage in the KG
A site will be explored through the concepts of
patronage used by Scott (1976) and Popkin (1979)
mainly because of the commonality of rural settings,
inclusive of highly structured patronage relations
amongst social groups. John Scott (1976), in the Moral
Economy of the Peasants, captures the dynamics of
motivations of people that sustain relational and
distributive inequalities. Scott argues that peasants
and elites are moral and less calculating in precapitalist settings. He believes that the justification
of any hierarchy of status and power implies the
creation of role obligations that carry moral weight.
The subordinate groups accept inequalities because
their patrons provide social and material guarantees
in return for labour, services and loyalty. Patrons
provide these guarantees under scarcity of labour and
competition from other patrons. Their mutual
interests bind patrons and clients together. They
develop a normative framework on this basis. Patrons
who do not adhere to this subsistence ethic are
exploitative and unjust. When patrons opt out of this
frame, peasants resist and rebel because the moral
contract is broken. For Scott, stratification originates
from capitalism and the entry of markets.
Popkin (1979), on the other hand, made a
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JUNE 5, 2007
competing rational political economy thesis in his

examination of village economy and politics in precolonial Vietnam. He argues that individual choice
and decision-making form the core concepts on why
groups of individuals decide to adopt some norms
while rejecting others. Subordinate groups act in their
individual self-interest even without markets and will
opt out of a clientelistic relationship on assessing their
own individualistic goals. Popkins political economy
approach argues that norms are malleable,
renegotiated and shifted in accordance with
considerations of power and strategic interactions
among individuals. The assumption is that a peasant
is concerned with his/her own and his/her familys
welfare and security, thereby being self-interested
and rational.
In terms of the effects of development projects
on patron-client relations, however, the two
approaches of Scott and Popkin make two different
predictions that are taken into account here. Both
predict different outcomes of miniaturization and
proletarization (the social consequences of the
project). Development projects will benefit patrons
more because these have the political capital
necessary to establish relationships with project staff.
Following Scotts and Popkins approach, it is
hypothesized that there will be a trickle down effect:
the clients will also profit, since the patrons will hand
some of the benefits to their followers. Alternately,
through development intervention, new patronage
relations will form linking the development state and
locals in new ways to create new dependencies.
Taking Popkins rationality argument, it is also
hypothesized that the long term consequences of
project intervention, should ideally, be less social
hierarchy, less reliance on patronage clan and
lineages, less patriarchy, more individual and
geographical space mobility.
Methodology
A brief conceptual framework adapted from Stern,
Ostrom et al (2002:452) to correlate the variables is
put forward to further the hypothesis. Given the
ecological and social complexities of dam
intervention, this framework helps explain and
explore the causality of relationships for meaningful
theoretical propositions. It tries to explain how social
inequalities and patronage politics influence the
individuals access to information and decisionmakers and how the inequality of access determines
the distribution of compensation and other resources
controlled by the dam project.
Dependent variable: Outcomes

Outcomes are the dependent variables, which are of
importance to the resource users who may be affected
19
by interventions and resource conditions and usage.

To examine this variable, inequalities were measured
or observed based on the delivery, benefits and
distribution of financial compensation resulting from
environmental equity of natural resource sharing

(mainly the river), interviews were carried out among
the Bote fishing communities downstream along the
50 km river loop and upstream of the dam.
A major part of fieldwork was
spent conducting qualitative
ethnographic research. The intense
Independent Variable
community antagonism towards
Social Inequality: Patron Client
researchers at this stage did not
relations (moral or rational political
allow for quantitative research.
Dependent Variables
economy, political factions).
They were suffering from a survey
Outcomes: Benefits and
burnout
as
the
project
distribution of resources:
continuously monitored them for
financial, water & land,
about eight years. Therefore, to
employment opportunities
Actors access to information and
attain a true picture of the
decision-makers, networks.
intervention, responses and
outcomes and to build up
confidence with local respondents,
Figure 1. Conceptual Framework (adapted from Stern, Ostrom et
qualitative research became the
al 2002)
key method. In addition, key
loss of land. Additionally, the benefits from project
informants (local people as well as current and former
employment, income generation projects and
project officials) were the major sources of
recruitment of labour in the project site during
information. After some confidence was built up, an
construction and post construction phases were also
eight-page questionnaire was administered to 108
examined.
households that constituted 50% of those most
affected in terms of land loss. These families were
categorized by the project as seriously projectIndependent variables: Social inequality
affected families (SPAFs) and project-affected families
(patron-client relations)
(PAFs).
The hypothesis is concentrated on social structure
variables and the various relationships through
information access and political networks. Patronclient relations and factionalism based on political
patronage were pursued as the independent variable.
Research methods
The research took a case study approach focusing on
the local population affected by the 144 MW Kali
Gandaki A dam project, Nepals largest hydropower
plant (to date). The collection of secondary data and
field research took place between September 2002
and July 2003. Time was allocated to collect projectrelated information, conduct empirical fieldwork,
input data, and write field notes. Semi-structured
interviews were conducted with relevant experts and
personnel from the capital Kathmandu and the Nepal
Electricity Authority (NEA)3, the main implementing
organization. The two most affected villages of Mirmi,
where the dam is located, and Beltari, with the
powerhouse, both in the central Nepal district of
Syangja, were taken as field sites. People who lost a
major share of their land to the project came from
these two villages. Members from the higher Bahun
(Brahmin) caste, the ethnic Magars, and the lower
caste groups of Damai, Sunuwars and Kamis, were all
interviewed as they were all affected by the KG A
project. To gather relevant data on issues of
20
General extent of the Kali Gandaki A dam

intervention
In the case of hydropower intervention in Nepal, the
law assigns the right over water exclusively to the
state. Similarly, in the case of private property, the
law of eminent domain4 allows the state to acquire
private property against compensation only in the
public interest. Both private and guthi 5 lands were
acquired in the case of the KG A project. NEA
acquired about 53.7 ha (1054 ropanis6) of land and
57 houses for the access road to the dam and
powerhouse sites. A further 148.62 ha was acquired
(of which 94.2 ha was private and guthi lands) for the
main facilities that include the dam, the powerhouse
and the project office sites. In addition, 13 houses, 20
cowsheds and one water collection pond were
acquired. Out of the total compensation amount of
NRs 30.43 million (US$ 0.54 million) of
compensation, almost 95% (NRs 30.24 million) had
been disbursed (KGEMU 2002).
In terms of resettlement in the KG A project,
there were no cases of homelessness. Sixteen Bote
(an indigenous fisher community) households whose
lands and houses had been earlier appropriated were
considered for resettlement. Resettlement was novel
to this project, as it did not exist in past hydropower
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Empirical evidence to theoretical

proposition
Patron-client relations commonly
found in the KG A areas manifested
mainly through three patronage
systems: traditional money lending
patronage systems, caste based
patronage and political patronage,
based on political affiliation. In a
nascent democracy, 7 political party
leaders are chosen at ward and regional
levels forming crucial patrons linking
them to the state. According to PfaffCzarnecka (2000), political parties are
Figure 2. Map of the Kali Gandaki A Hydroelectric Project site
often viewed as best suited allies to the
(source: The Nepali Times, Kathmandu, #176, 26 December 2003)
state, which increasingly interferes or
provides
for
the
people. In the KG A areas, political
compensatory packages. Cash compensation was the
leaders
as
well
as
government officialsmembers of
main mode of compensation for land acquired by the
Village
Development
Committees (VDCs) and the
NEA. Land for land was not an option. An acquisition,
District
Development
Committee (DDC) 8 played
compensation and rehabilitation plan (ACRP) was
important roles as intermediaries between their
developed as a pre-project document following the
followers and project interventionists especially
process established in the Land Acquisition Act of
before the dam intervention. However, during the
1977 of Nepal. In accordance with the same Act, the
project construction period, competition, especially
chief district officer led a Rate Fixation Committee.
for employment, grew. Apart from political
Market prices of the area, government rate and
leadership, social and village elders formed the core
gradations of land were the three determining factors
of the hierarchical informal institutional structure
used to set compensation rates (KGEMU 2002). Land
within the village.
compensation rates changed three times because the
Both hypotheses on clientelism were confirmed
existing rules and laws did not match real land
in
the
study as clients benefited mainly through
valuations and negotiations took place between local
patronage
politics. In the case of the Kali Gandaki A
leaders and the compensation committee.
intervention,
as prominent political party and village
Compensation processes required that all those
leaders
lost
the
major share of their land, it made a
whose lands were appropriated had to produce land
crucial
difference
in the determination of outcomes.
title papers to receive the compensation. All
Compensation
was
low in the first acquisition process,
individuals who lost 50% or more of legally registered
that
of
the
access
road.
Once the patrons (high caste
land and/or their living quarters were declared as
or
ethnic
group
leaders)
formed a proper base of
SPAFs (263 families in total) and those losing less than
knowledge
and
with
their
own
interests, they raised
50% of land were categorized as PAFs (1205 families
voices
and
negotiated
with
project
officials, state
in total). The same criteria were applied for land
bureaucrats
and
formed
alliances
to
set a higher
acquisition for both the road access and the main
amount
of
compensation
suited
to
the
changed
land
facilities (dam, powerhouse and offices). The average
economy
after
the
project
intervention.
land-holding size of an affected family was .46 ha to
As for the project officials, they could capture
1.5 ha; often equally divided between irrigated and
the
local
elite. Project officials relied on the influence
non-irrigated land.
of
local
social
and political leaders at the beginning of
As part of the mitigation strategy of the
the
project
period,
particularly to mediate with the
Environmental Impact Assessment Plan, at least one
whole
community.
This
worked for some time. In the
person from the affected families was to be provided
whole
process,
clients
or poorer people benefited
employment in the project. The Kali Gandaki
through
their
leaders
and
patrons, both social and
monitoring unit provided a list of these families to
political.
However,
akin
to
Popkins
assumptions, the
the contractors for job employment. As of May 2001,
slow
invasion
of
a
cash
economy
and
the patronage of
a total of 2,132 persons were employed in the project
influential
officers
started
to
break
this
influence. It
of which 1,012 (47.45%) were from the local area.
was
mostly
through
the
local
VDC
or
DDC
leaders,
Altogether, individuals from 94 SPAFs and 190 PAFs
political
parties
or
elites
that
families
and
individuals
were employed in the project.
started to channel influence to gain employment and
other benefits.
HYDRO NEPAL
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21
One of the first dismantling of local power

channels resulted from the new-found alliance
between local leaders and project officials. The selfinterest of leaders led to the decay of previously
existing loyal relations of political and social
patronage. Clients opted out of their loyalties to their
patrons, especially political leaders, to forge their own
alliances with NEA officials, contractors and state
bureaucrats, thus supporting Scotts moral economy
argument. Alliances with the intervening actors were
built particularly to provide jobs for their family
members. A majority of the respondents (60%) said
that they have a direct relation with project staff
rather than through political or social affiliations.
Project officials and outside contractors often took
over the role of the patrons. With these alliances grew
a new set of relationships, not necessarily fully
reciprocal but nonetheless with some reciprocity in
the form of trust and loyalty to the project itself. While
some respondents who gained fully from the project
emphasized their loyalty and positive attitude to the
dam intervention, others who had not received
continued support, particularly in the form of jobs
from officials, feel a sense of betrayal. Individualistic
gains were found to be more common, supporting
Popkins political economy argument.
The hypothesis that the long-term consequences
of a project intervention would ideally, be less social
hierarchy, less reliance on clan and extended family,
less patriarchal and more individual and geographical
space mobility were also partially confirmed. In the
most affected villages of Beltari and Mirmi, large clans
and patronage systems existed. After the loss of land
in these villages, cooperation and cohesion among
members were found to be weak, as pointed out earlier.
In the presence of scarce resources and with
competition, most of the respondents identified with
their own immediate nucleated family rather than the
larger extended family or clan. The provision of cash
as compensation is one of the main reasons leading to
this fraction. While earlier elder patriarchs had total
control and it was often difficult to divide land easily
between brothers, after land acquisition it was easier
for family members to take their share of the cash and
opt out of the extended family. The situation remained
similar in all Bahun, Magar and Bote families. This
partly supports Scotts thesis that peasants insured
themselves socially through reliance on own kin and
friends rather than the state (for example, DDC/VDC
members).
Similarly, old forms of political control (parties)
and patronages disappeared; individualism was on the
rise. Project officials and contractors weakened the
position of the local social and political leaders
through petty contracting, thus tilting support
towards them as local communities distrusted their
leaders. This led many individuals to develop new

relationships, especially with project officials and
contractors of the project, thus supporting Popkins
rationality argument.
Conclusion
Despite the implementation of policies and laws,
relationships between the local powerful people and
dam project interventionists shaped outcomes
towards the formers favour, especially under scarce
resource constraints. Linkages within and to the
corridors of power (both new and old patronage) were
important to access employment or project benefits.
Participatory and interactive institutional processes
need to be developed further, particularly by the
implementing agency, in order to lower unequal
outcomes.
From the study, it was concluded that the moral
economy approach is well-suited in areas with active
functioning agrarian structures. Scotts moral
economy provides insight into peasant life with strong
land-labour relations and sustenance based on the
subsistence ethic. In the KG A sites, after almost a
decade of project interventions and the entry of a
wider set of national and international actors, new
institutional arrangements had crept up. Markets had
broadened, particularly with the additional road
network, and the cash economy tilted eventually in
favour of Popkins rational economy model. One
lesson is clear: that old forms of patronage will
metamorphose into new ones and power relations will
continue to play a major role especially in
development interventions in rural areas. Developing
transparent policies and programmes are one way of
enhancing equality of outcomes amongst various
social and gender groups. Otherwise, the intricacies
of power within social relationships may hamper
progress and equitable solutions at the local level.
Kavita Rai is an anthropologist working in the area of

energy for sustainable development. The research was
carried out in fulfillment of her PhD dissertation, entitled
Dam Development: The Dynamics of Social Inequality
in a Hydropower Project in Nepal (Rai 2005). The data in
this article are derived from field research carried out in
2002-2003 on the Kali Gandaki A Hydroelectric Project.
The research was funded by the Deutscher Akademischer
Austausch Dienst, Germany, through the Center for
Development Research, in Bonn. The article summarizes
two theoretical concepts and results of the research.
Corresponding address: kavita_rai@yahoo.com
The concept of building a much

controversial and optimistic dam

across the worlds third longest river,
End notes
had its beginnings
in the
earlydifferentiates
1900s.between relational
1. Bteille
(1983:1)
22
and
distributional
HYDRO NEPAL
inequality.
VOL 1
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Relational
JUNE 5, 2007
inequalities are inherent in relations amongst

people. Some are deemed superior, and others
subordinate, with the division of people into
categories along caste, ethnic, class and gender
lines. Distributional inequalities, however, concern
disparities in the distribution of material resources
such as income and wealth.
2. Patron-client studies conducted since the mid-60s
have shown interesting insights into political life in
rural communities.
3. Nepal Electricity Authority (NEA), created on 16
August 16 1985, is responsible for planning,
constructing, operating and maintaining all
generation, transmission and distribution facilities
in Nepals power system both interconnected and
isolated.
4. Eminent domain is defined as the power of a nation
or a sovereign state to take or to authorise the
taking of private property for public use without
the owners consent, conditioned upon the
payment of compensation (Bhattarai 2001:52).
5. Guthi land grants, are religious endowments
(Ramirez 2000a) or for social charity purposes;
e.g. public schools and hospitals (New Era 1988).
6. 1hectare land equals 19.6 ropani.
7. Nepal became a multi-party democracy in 1990.
Cernea, M Michael, 2000, Risks, safeguards, and

reconstruction: A model for population displacement
and resettlement, pp.11-55 in Risks and
Reconstruction: Experiences of Resettlers and Refugees,
M.M. Cernea and C. McDowell (eds.), Washington,
DC: The World Bank.
Dixit, Ajaya, 1994, Water projects in Nepal: Lessons from
displacement and rehabilitation, Water Nepal
(Journal of the Nepal Water Conservation
Foundation), 4(1).
Eisenstadt, Samuel N. and Lemarchand, Rene (eds.),
1981, Political Clientelism, Patronage and
Development, Thousand Oaks, CA: Sage Publications.
Hall, Anthony, 1977, Patron-client relations: Concepts
and terms, pp.510-512 in Friends, Followers and
Factions: A Reader in Political Clientelism, S.W.
Schmidt, J.C. Scott, C. Landed and L. Gusty (eds.),
Berkeley and Los Angeles, CA: University of
California Press.
Unit) and MKI (Morrison Knudsen International),
2002, Impoverishment Risks Monitoring and
Management in Kali Gandaki A Hydroelectric Project:
A Social Synthesis Report, Beltari, Syangja District,
Nepal: Nepal Electricity Authority, Kali Gandaki A
Hydroelectric Project.
Lande, Carl H., 1977, The dyadic basis of clientelism, pp.
xiii-xxxvii in Friends, Followers and Factions: A
Reader in Political Clientelism, S.W. Schmidt, J.C.
Scott, C. Landed and L. Gusty (eds.), Berkeley, CA:
University of California Press, Berkeley and Los
Angeles, CA: University of California Press.
8. The Village Development Committee (VDC) is the

lowest administrative political unit at the village
level, and at the district level is the District
Development Committee (DDC) working between
parliament and local bodies. Committee members
often have an affiliation to a political party.
Lemarchand, Rene and Legg, Keith, 1972, Political

clientelism and development: A preliminary
analysis, Comparative Politics, 4(2):149-178.
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S., 2002, Knowledge and questions after 15 years of
research, pp.443-490 in The Drama of the Commons,
24
E. Ostrom, T. Dietz, N. Dolsak, P. Stern, S. Stonich

and E. Weber (eds.), Washington, DC: National
Academy Press.
Swartz, J Marc (ed.), 1968, Local Level Politics: Social
and Cultural Perspectives, Chicago: Aldine.
World Commission for Dams (WCD), 2000, Dams and
Development: A New Framework for Decision Making
(Report on the World Commission on Dams), London,
UK: Earthscan Publications.
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Maximizing Benefits from Hydropower: A Nepal Case

Janak Lal Karmacharya
Abstract. Hydropower development is the only development activity that yields multiple benefits and, in many
cases, can be an effective agent for poverty alleviation. Apart from being a source of renewable and clean energy, to
stabilize the supply of electricity, it helps provide year round irrigation resulting in the increase in the cropping
intensity and changing cropping pattern, and it reduces both deforestation and greenhouse gas (GHG) emissions.
Nepal has adopted a policy of Integrated Water Resources Management (IWRM), by which hydropower projects are
developed in conjunction with irrigation, flood control, water supply and navigation components whenever feasible.
As an agriculture dependent country, Nepal should maximize the irrigation benefit, by providing year round irrigation
through storage projects developed for peak energy generation. Nepal has planned to provide year round irrigation
to 67% of the total irrigated area by 2027. Electricity from hydropower projects currently contributes only 1% of
energy need, whereas fuelwood contributes 68%, and fossil fuels 8%. Development of hydropower not only helps
reduce deforestation, reported at the rate of 0.7% per annum, but also helps reduce GHG emission by substitution of
imported fossil fuels. The annual fossil fuel import bill for Nepal 2004/05 was about 310 million USD. Nepal could
benefit substantially if consumption of petroleum products were replaced by hydropower. Where the Clean Development Mechanism (CDM) is effectively used to address the impact on climate change, hydropower gains significance
in contributing positively to climate change.
Key words: Hydropower, IWRM, maximization of benefit, poverty alleviation, growth, Nepal
o other source of energy other than

hydropower can deliver multi-pronged benefits.
The development of hydropower can ensure energy
security, provide food security and health security
and, in addition, preserve environment, reduce
greenhouse gas emission and create recreational
facilities. It can also provide access to the sea for a
land-locked country. With the world wide recognition,
from World Summit on Sustainable Development to
Bonn and Beijing Renewable Conferences through
Third World Water Forum, that hydropower is the
clean and renewable source of energy, the
exploitation of hydropower is going to be a major
activity to meet the Millennium Development Goal.
One of the important benefits that come out of the
construction of dams for hydropower generation is
flood control. In many cases, this benefit cannot be
quantified in its totality; it is, however, a significant
one as it saves precious life and resources. The
construction of a storage hydro project, if properly
executed on the basis of mutually agreed concept,
can be instrumental in maintaining peace between
transboundary countries.
Socio-economic set-up of Nepal

Nepal is one of the most populated mountainous
countries in the world with the population density of
167 people per square kilometer. Basically it is a
HYDRO NEPAL
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country based on an agrarian economy with about

80% of population engaged in agriculture. This sector
contributes 38% to the national economy, which
translates into 2.48% in agricultural growth, whereas
non-agricultural growth is registered at 10.44%. The
heavy pressure is on agriculture and natural resources
to support the growing population. The annual per
capita GDP is estimated at USD 248. The human
Development Indicator stands at 0.504. The life
expectancy at birth is reported to be about 61 years
and infant mortality is recorded at 69% in 2001. The
proportion of electrified households is 40%.
The government has set a target of achieving
annual economic growth of 8.3% by 2016/17, out of
which 5% growth is projected in the agriculture sector
and 9.7% in non-agriculture sector. The population
below the poverty line will be reduced to 10%, with
the growth reduced to 1.5%. About 1700 thousand
hectares will be brought under irrigation by the same
year. Nepal is a land locked country, a factor that
dominates the development scenario.
Water resources use in Nepal

Nepal is a land limited but water rich country. Its
6,000 rivers generates 224 billion cubic meter of
surface run-off annually, which translates into more
than 9,000 m3 of water per capita. This is far more
than internationally recognized norm of 1,750 m3 per
25
capita. However, because of the spatial and temporal

variation in the availability of water, a few months
and a few areas of the country are still water deficit.
The uniform distribution of water over its territory is
essential to avoid water stress situation This objective
is met through adoption of Integrated Water
Resources Management. The major components of
integrated use are hydropower, irrigation, water
supply and flood control and, to lesser extent, inland
navigation, recreational use and fisheries.
Hydropower the way to poverty alleviation

The rivers of Nepal with glacier, snow and monsoon
feeding coupled with steep gradient, are estimated to
have the potentiality of generating 83,000 MW of
electricity. With the load factor of 52%, this translates
into 1,500 kWh per capita of electricity for the present
population. If this potentiality is fully exploited and
sold at an average rate of six cents per kWh, the
resulting revenue generated will be to the tune of 23
billion USD per annum. Out of this theoretical
potentiality, 43,000 MW have been proven to be
technically and economically attractive through
sound engineering studies.
In view of the importance of hydropower
development for the overall economic development
of the country, the Nepal Government has put specific
emphasis on the implementation of its National Water
Plan (NWP). This plan envisages generating 2,100 MW
by 2017 and 4,000 MW by 2027. This, however, is a
substantially downgraded target of 4,080 MW in 2017
and 11,568 MW in 2027. This was considered
necessary to meet the value added requirement in
the water and electricity sector to generate 6.5%
economic growth. In the High Growth Scenario, with
the assumption that the load factor will improve by
10% and operational expenses will drop by 10% due
to economy of scale of plants, the projected generation
is envisaged to be 6,275 MW in 2017 and 25,234 MW
in 2027.
In comparison to the identified hydropower
potentiality, the domestic electricity market of Nepal
is very limited. Without entering into the export
market, the benefits from hydro generation cannot
be maximized. In the regional market, hydropower is
going to play a significant role in addressing concern
for energy security. The South Asia region is marching
towards unprecedented economic growth. However,
the supply of energy has been stumbling block. To
face this challenge, Bangladesh, India, Pakistan and
Sri Lanka are vigorously pursuing measures to
diversify their traditional energy supply mix. Because
of the high volatility of the oil market and the
uncertainty associated with it, the role of hydropower
assumes great significance. Hydropower, being
capable of generating cheap and reliable peak energy,
26
contributes to the stability of the system by stabilizing

the supply frequency. This additional advantage of
hydropower has led to the appreciation of the need to
develop a Hydroelectric Master Plan for the South
Asia Region encompassing India, Pakistan, Nepal,
Bangladesh, Bhutan, Sri Lanka, the Maldives and
newly entered Afghanistan. The objective of such a
master plan is to facilitate an integrated planning
mechanism to identify the hydropower sources that
would meet the power needs of the region at an
affordable cost. This will also help maximize the
benefit from hydropower development and
rationalize utilization of hydro resources. It will also
bring hydropower to the center stage of the Regional
Power Pool, envisaged to be created in the South Asia
Association for Regional Cooperation (SAARC)
framework.
Nepal and India have been traditional power
exchange countries. To sustain Indias rate of GDP
growth requires considerable addition of electricity.
The electricity deficit in India, particularly the peak
deficit, is significant at 18%. Hence, the Government
of India has allowed a premium on the peak power in
the vicinity of 50% of base electricity tariff. As
reported earlier out of the 43,000 MW 0f proven
capacity of Nepal, 22,000 MW will come from storage
plants. Development of these schemes will maximize
the benefit of Nepal Hydropower. In view of the
mutual benefits to both Nepal and India and the need
to mobilize private financial resources, India and
Nepal have initialed a bi-national Power Trade
Agreement. The proposed electric power agreement
allows the governmental, semi-governmental and
private enterprises of Nepal and India to enter into
agreements for power trade. Agreeing parties may
determine the terms and conditions of such
agreements, including the quantum and parameters
of supply, point of delivery and the price of supply.
Such wide provisions in power trade agreement will
facilitate the cross border flow of electricity during
periods when each country needs the power. The time,
location and duration of need are different in the two
power systems. This introduces complimentarity in
supply, thus maximizing the use and, therefore, the
benefit of the hydropower.
Hydropower contributes to meeting both water
and energy needs, including water for irrigation and
drinking water. It usually works with a wider group of
disciplines, to maximize hydropowers contribution
to sustainable development.
Irrigation insuring food security

As earlier mentioned, Nepal is basically an agriculture
country with its contribution to the economy
standing at 38% of GDP. Nepal has 2.64 million
hectares of cultivable land, of which only 1.76 million
ha (66%) are irrigable. Irrigation facilities are
HYDRO NEPAL
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available only for 60% of irrigable land, though less

than one third of that land has round-the-year
irrigation facility. This limited facility for irrigation
and resulting unsatisfactory cropping intensity
resulted, in 2003, in the production of 7.2 million
tons of agricultural producthardly sufficient to meet
the minimum requirement of the nation.
The Nepal Government has embarked upon the
plan to increase the total year-round irrigated area
to 49%, the cropping intensity to exceed 140% in yearround irrigated areas, and irrigation efficiency to 35%
by 2007. The corresponding figures for the year 2017
are 64%, 164% and 45%, respectively. By 2027, the
targeted corresponding figures are 67% year-round
irrigated area, an average cropping intensity of 193%
and an irrigation efficiency of 50%.
The cost of implementing the plan, which may
result in achieving the above target, is significant. In
the short term (i.e., by 2007), the investment
requirement is USD 293 million; in the medium term
(2017) USD 1,405 million; and, in long term (2027),
the figure goes up to USD 1,904 million. This totals
USD 3,602 million over the next 20 years (at the
2003/04 price level). Raising this level of financial
resources is a daunting task. The sector cannot
generate enough money itself to finance the
programme. The collection of water tariffs has a very
poor record. Improvement has been envisaged with
the target of achieving irrigation service contribution
to 30% of operation and maintenance cost of the
irrigation system by 2007, with further improvement
in 2017 by increasing the figure to 45%, and eventually
reaching the figure of 75% by 2027. This means that
even for operation and maintenance, the irrigation
system will not be self sustained, not to mention
capital investment. It is here that the necessity to
develop hydropower for multipurpose utilization
assumes significance. Fortunately, the resource
generation capacity of this sector is satisfactory and
if the capital costs are shared between irrigation and
power in a multipurpose development it will not only
help address the problem
of the irrigation sector but
BASIN
will also maximize the
profits from hydropower
development. Nepal has a
Mahakali
number of projects that
can meet this objective,
Karnali
such as Bagmati, Kankai,
Sapt Kosi, Sunkosi,
Gandak
Karnali
Bheri-Babai,
Sapta Kosi
Mahakali, etc.
Southern River
Flood control reducing human suffrage

One of the significant benefits that a dam construction
gives is the flood control. This advantage becomes
more important in the area where flash floods occur
or the rivers are fed with monsoon rain. In Nepal
floods usually occur because of the monsoon
precipitation, glacial lake outbursts, cloud outbursts
and coincidence of monsoon with increased base flow
from snow and glacier melt. The damage and loss of
living beings and assets are tremendous. There are
many trans-boundary rivers that traverse from Nepal
through India to Bangladesh causing extensive
damage in multiple countries. One of Nepals eastern
rivers, the Kosi, is called the sorrow of Bihar, a
populace state in northern India, because of the trail
of devastation it leaves in Bihar every year after
monsoon. The well documented damage caused by
floods in Bangladesh in 1988 presents a grim picture,
where loss of 2 million tons of crops, about 172,000
livestock and destruction of 1,990 kms of
embankment, 283 kms of canals, 3,000 kms of
national roads and 10,000 kms of rural roads were
reported. In Nepal the flood events of 1974, 1978,
1985 and 1987 were significant in terms of damage
inflicted on the national economy. Studies conducted
so far have identified about thirty reservoir sites in
Nepal. The total effective water holding capacity of
these reservoirs created by storage dam has been
estimated to be about 77 billion m.
Nepal is divided into five hydrological regions:
Mahakali River Basin, Karnali River Basin, Gandak
River Basin, Sapt-Kosi River Basin and Southern River
Basin. The holding capacity of each of these basins is
given in Table 1.
3
The storage capacity constitutes
almost 70% of
total monsoon flow. Multipurpose and optimal
utilization of these water resources by constructing
high dams will not only help mitigate floods but also
help augment dry season flow by storing water in the
reservoir to release during the dry season, thus
improving irrigation potentiality and the mitigation
HOLDING CAPACITY OF RESERVOIR
(million cubic meters)
HOLDING POTENTIAL OF
MONSOON RUNOFF
6,040
43.2
34,243
123.7
17,830
55.1
13,760
44.6
5,221
92.9
(%)
Table: 1 Holding capacity of reservoirs in each basin
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27
of floods. However, to ensure the investment to

implement such scheme, hydropower is the one
component that alone can generate revenue. This
kind of multipurpose development helps maximize
the benefits of hydropower.
Drinking water and sanitation insuring health

security
Meanwhile, the importation bill of fossil fuels is

rising, not so much because of an increase in demand
but because of skyrocketing prices. The demand on
petroleum products has remained more or less at the
same level, largely because of political instability,
which has contributed to a slow down in economic
activities and, to some extent, to the increase in
hydropower generation. However, the price of
petroleum products has more than doubled in the past
decade (see Table 2). The costs are given at the price
level of July 2006.
In a small economy such as Nepal, pressure on
the foreign currency reserve, because of the
petroleum products bill, is substantial. It is here that
the importance of hydropower development plays a
vital role not only in terms of lessening the pressure
on foreign currency reserves, but also in ensuring
energy security against uncertainty in supply as well
volatility in oil market prices.
The Nepal Rastra Bank, the central bank of Nepal,
has reported a record foreign currency deposit of
about USD 2 billion this year. The nearly USD 300
Nepal is water rich. However its surface run-off

heavily depends upon the monsoon, which is limited
to four months a year. Although it is a small country
with an area of 144,000 km2, the spatial distribution
of run-off is uneven. Therefore the inter-basin
transfer of water is necessary to meet the water needs
of all regions of the country. Inter-basin transfer
requires construction of dams to divert the water to
water conveyance system.
Drinking water and sanitation services are basic
needs of the population. At present around 50% of
population has access to these services. By 2007,
this service will be extended to 80% of population It
is envisaged that by 2012, 90% population will have
access to water supply and basic sanitation
facilities. 100% of the population will have these
facilities by 2017. However; people will have to
IMPORTED QUANTUM
AMOUNT
YEAR
wait until 2027 to receive high quality services
IN KL
IN USD
in these areas.
121 million
1999/00
877,856
The main source of water supply has been
surface run-off, which either has to be stored
2000/01
941,914
190 million
during the monsoon season and used in dry
season or pump from groundwater. Due to the
896,324
2001/02
241 million
lack of storage hydropower projects,
municipalities are relying heavily on
2002/03
890,609
312 million
groundwater extraction with an adverse impact
2003/04
879,455
313 million
on water table. Provision for drinking water in
the storage hydropower schemes or installation
2004/05
n/a
291 million
of powerhouses in drinking water schemes,
where inter-basin transfer is executed, not only
Table 2: Importation of fuel and fuel bill of Nepal
maximizes the benefit of hydro schemes but also
helps lighten the financial burden of drinking
million fuel importation bill per annum is a substantial
water projects. Provision of safe drinking water also
chunk of the foreign currency saving.
ensures the health security of the population
Topographically, Nepal is brick shaped with eastwest prolongation and north-south width presents a
Hydropower and cost of imported energy
narrow strip with elevation differences of more than
Nepal does not have any fossil fuel reserve nor coal
8,000 m within a narrow width of about 200 kms. If
mining. Technological development of the country
Nepal develops a transportation system run by
does not allow development of nuclear power. The
electricity generated from hydropower, it can save
development of alternative energy such as solar or
substantial portion of petroleum product importation
wind is also limited due to the cost involved in such
bill of USD 138 million. This is 23% of annual export.
development. Hence, for all commercial energy
A transportation system that could bring about this
needs, Nepal has to depend either on imported fossil
benefit could be based on hydroelectricity driven
fuels or indigenous hydropower. The industrial,
east-west railway networks, north-south cable cars
transportation and urban household energy needs
and inter- and intra-city tramways and trolley buses.
are predominantly met by imported fuel.
The introduction of such systems will derive
Hydropower has been exploited only in a limited
maximum benefit from hydropower, and change the
quantity because of the lack of investment.
28
HYDRO NEPAL
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face of nation. As an additional benefit it will also

drastically reduce dependency on the third country,
which Nepal has to rely upon, being a land-locked
country.
Such
a
hydroelectricity
driven
transportation system would also greatly enhance
national security.
Environment and additional benefit from

hydropower
World climate change has been a phenomenon of
global concern. One of the major agents of climate
change has been the greenhouse gas (GHG) emission
by various power generating plants. After the Kyoto
protocol signed by 134 countries, it has been the
obligation of the each signatory country to help
reduce the emission of GHG within a certain period.
Globally it is expected that GHG emissions will be
reduced by 2010 by 10% from the present level. To
meet this international obligation, a new kind of
tradeCarbon Tradehas started through Clean
Development Mechanism (CDM). Hydropower, being
not related with the emissions-related environmental
concerns and being the cleanest source of power
generation, not only helps the environment but also
generates revenue by entering into this trade, thus
maximizing the benefit. Across the southern border,
coal- and gas/diesel-fired thermal plants are the main
sources of power generation. A World Bank study of
the neighboring state of Bihar, India, estimates the
emission at levels of 1.23 kg/kwh of carbon dioxide,
7.2 kg/kHz of nitrogen monoxide, and 8 kg/kwh of
sulphur monoxide. Nepals 10 medium and big
hydropower plants have the generating energy
capacity of about 40,000 GWh. Assuming that these
10 hydropower projects will displace a mix of coalfired and liquid- fuel thermal plants with similar
emission levels, the 40,000 GWh combined annual
generation would reduce GHG emission by 680
million tons. With the prevailing average rate of USD
5, the trade would generate about USD 3.4 billion per
annum. If these developments were translated into
reality, it would not only help meet the global target
of reducing GHG emissions but also contribute to the
national economy, not only of Nepal but also of
neighboring countries.
Hydropower and poverty alleviation

In a country which is hydropower rich, poverty
alleviation hinges on the development of this
resource. The potential impact is astonishing in a
small country with no competitive source on income
generation. In Bhutan, for example, a country of about
half a million population, the development of
hydropower has been dramatically changed by the
construction just two hydropower plants with
combined capacity of 1,380 MW. As a result, it is
HYDRO NEPAL
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expected that the per capita income will go up from

USD 760 to 1,320. In Nepal, the impact of hydropower
development may not be that dramatic, but it has been
established that the hydropower sector is the driving
sector in economic development and a major
resource to alleviate poverty. A macro-economic
study has concluded that in order to eradicate
absolute poverty in households, the country needs
to register 8% economic growth rate. This will help to
bring the level of percentage of population below
poverty line to 10% and by 2027 there will be no
household in absolute poverty. No other sector of
economy other than hydropower is in a position to
help attend to this goal, as the required quantum of
25,000+ MW by 2027 that need to be developed to
achieve this target is ready for exploitation at short
notice, and the market is available. Thus, the solution
of poverty alleviation is closely linked with
hydropower development in Nepal.
Wrappingup
Based on the recommendation and statement of Third
World Water Forum on Water and Energy, some
pertinent observations can be made:
Water and energy must be integrated as far as
possible to maximize the benefit of
hydropower development. Multipurpose
infrastructures offer the advantage of shared
cost and benefit.
Hydropower contributes to meeting both
water and energy needs.
Hydropower with storage reservoir is the
most flexible energy technology in terms of
power generation; it can generate power
exactly when it is needed, providing back-up
for intermittent sources such as wind power
and allowing thermal plants to operate at their
best efficiency, thus further reducing
greenhouse gas emissions.
Janak Lal Karmacharya holds a PhD degree in

hydrology and hydraulics, and has been working in the
power sector, especially in hydropower development, for
more than three and half decades. Dr. Karmacharya has
participated and led studies, design and construction of
hydropower schemes and development of hydropower
policy in Nepal and abroad. He is a past Managing Director
of the Nepal Electricity Authority, and is currently Head/
Hydro Business, Clean Energy Development Bank, a
member of the Steering Committee of the Dams and
Development Project under UNEP, and a board member of
the International Hydropower Association. He has also
served as a consultant to the World Bank and the USAfunded South Asia Regional Initiative/Energy Program.
29
Corresponding address: janak.karmacharya@gmail.com
References
SARI/E (South Asia Regional Initiative/Energy

Program), 2005, Regional Energy Security for South
Asia, New Delhi: SARI/E.
WECS (Water and Energy Commission Secretariat),

1995, Energy Resources Base of Nepal,
Kathmandu: WECS.
MOWR (Ministry of Water Resources/Nepal) and MOI

(Ministry of Irrigation/Bangladesh), 1989, Report
on Flood Mitigation Measures and Multipurpose Use
of Water Resources, Kathmandu: MOWR/Nepal,
and Dhaka: MOI, Water Development and Flood
Control Division.
Kuensel on-line Bhutan Daily, 28 June 2006,

Thimphu, Bhutan. URL: www.kuenselonline.com
TWWF (Third World Water Forum), 2003, The 3rd World

Water Forum Final Report, Kyoto: TWWF Secretariat.
Prabhat (Journal of the Nepal Oil Corporation,

Kathmandu), 2004.

2000, Water Sector Strategy Formulation,
Kathmandu: WECS.
WB (World Bank), 2006, Economic Growth in South

Asia, Washington, DC: The World Bank.

2005, National Water Plan, Kathmandu: WECS.
30
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IRR: An Operational Risks Reduction Model for Population Resettlement

Michael M. Cernea
Abstract. The construction of hydropower dams and of other types of projects must plan also for the relocation of
populations living in the project area, a process fraught with risks and difficulties. This paper describes an analytical,
diagnostic, predictive, and planning tool for such projects, developed by the author, named the Impoverishment
Risks and Reconstruction (IRR) model. Derived from knowledge and lessons of many previous projects, this model
can serve as predictor of risks and problems that will be encountered in forthcoming projects, and be used as guide
in applying strategies to counter, overcome or mitigate these risks. Among these are the eight basic risks of
impoverishment faced during displacement and resettlement, such as: 1) Landlessness; 2) Joblessness; 3)
Homelessness; 4) Marginalization; 5) Food insecurity; 6) Increased morbidity and mortality; 7) Loss of access to
common property resources; and 8) Community Disarticulation. Further, the counter-risks strategies and measures
are modeled, to help early risk-elimination or risk-reduction actions.
The IRR Model is being used internationally. It was applied also in studies for Nepals Kali Gandaki project to
monitor implementation and impacts, to explore what measures and management strategies can be employed against
the common risks in resettlement, and to assist those affected in overcoming land or house loss and in deriving
benefits from the project.
Key words: Risk model, resettlement, displacement, impoverishment, reconstruction
his paper concisely describes a theoretical

model of developmentinduced displacement
and resettlement processes: the Impoverishment
Risks and Reconstruction (IRR) model. This model is
a conceptual and methodological tool apt to perform
several essential functions in support of analytical and
operational development work. This instrument
enables project planners to focus from the outset on
the poverty issues that are at the heart of involuntary
resettlement. It does not add new tasks on top of the
existing ones in preparing projects entailing
resettlement. Instead, it saves efforts and increases
effectiveness by (a) moving risk discovery upstream
in project preparation, and (b) by helping reduce
displacement, guiding early risk-elimination or riskreduction actions.
The main such functions for which the model can
be employed are:
a predictive function, to anticipate the main
impoverishment risks involved in forced
displacement and resettlement;
a diagnostic function, to help assess in the field
the content and the intensity of each major
risk, in a given projects context;
a planning and problem-resolution function,
to guide the design of counter-risk measures
and their incorporation in resettlement
planning, for either preventing or mitigating
risks; and
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a research function, to serve as methodology

in the scholarly analysis of resettlement
impacts and to guide monitoring and
evaluation studies on resettlement processes.
As a theoretical model, the IRR also makes the
linkage between the conceptual apparatus used in the
analysis of displacement processes, on the one hand,
and the theory of poverty, impoverishment
prevention and poverty reduction, on the other side.
Knowledge has forewarning power. The research
utility of the IRR Model results from using the
knowledge about past processes, which is
accumulated, packaged and synthesized in the
model. This research utility also comes from its ability
to guide data collection in the field and to coherently
aggregate disparate empirical findings along key
variables. In the practice of planning or executing
projects, the use of the IRR Model can help prevent,
or at least mitigate and gradually reverse, the
impoverishment risks embedded in development
projects that involve involuntary resettlement.
Theoretical modeling in resettlement research
has been made possible by the vast body of empirical
findings generated worldwide by numerous
researchers about the adverse consequences of forced
displacement. The accumulation of empirical data
enables us to reveal basic regularities within a
multitude of similar and comparable processes. In
forced displacement, the dominant regularity is the
31
impoverishment of most resettlers. This

impoverishment is deconstructed and explained in
the IRR Model, which also outlines the key
reconstruction
strategies
to
counteract
impoverishment.
The IRR Model has been formulated in the early
1990s (Cernea 1990) and has been considerably
refined since (Cernea and McDowell 2000). During
recent years, the model has been widely discussed in
the development literature (e.g., see Mathur and
Marsden 1998; Mahapatra 1999) and has become the
leading conceptual model in resettlement research.
impoverishing the uprooted people, many of who are

very poor even before displacement. Socioanthropological research currently documents that
resettlement operations tend to cause the
decapitalization and pauperization of vast numbers
of resettlers. They lose capital in all its forms: natural
capital, man-made physical capital, human capital and
social capital. Eliminating or mitigating such
impoverishment risks and improving resettlers
livelihoods is incumbent upon governments, agencies
and private-sector corporations responsible for
projects that cause forced-displacement.
Basic concepts
Poverty reduction policies
At the core of the IRR Model are three basic concepts:

risk, impoverishment and reconstruction. The related
aspects of risks in development and risk-related social
behavior can be addressed with a set of more specific,
narrower and focused risk concepts such as: riskexposure, risk aversion, risk prevention, risk taking,
risk reduction, risk reversal, risk coping, and others.
The
theoretical
underpinnings
of
the
Impoverishment Risks and Reconstruction Model are
informed by sociology, economics, anthropology and
ethicsmore specifically by concerns for equity,
human rights and social justice in development,
rather than by economic efficiency alone.
If developments fundamental objective is to reduce

poverty and promote growth, then development
policies must attempt, among other goals, to minimize
resettlement occurrences and (when resettlement is
unavoidable) to carry out impoverishment-free
relocation.
This paper argues that the orientation towards
reducing the existing poverty must go hand in hand
with efforts for preventing the onset of new processes
of impoverishment. Development itself is not free from
risks and adverse impacts. Such risks of potential
impoverishment regularly surface in development
projects that require involuntary resettlement, and
sometimes in other projects as well. If project
planning and execution fail to anticipate the potential
risks, and to prevent them from becoming reality,
severe problems in resettlement operations will
inevitably occur. This is why the socio-economic and
moral principles embedded in poverty reduction
policies must be translated in targeted actions
oriented against adverse impacts and against new
impoverishment processes.
In project practice, resettlement plans (RP) are
required as mandatory in most internationally
assisted projects. However, they are far less
frequently mandated by governments of developing
countries in projects they finance from domestic
sources alone. Therefore, the requirement for
explicit, adequately financed and culturally sensitive
RPs must be generalized in all countries.
The currently used analytical and planning tools
are often not sharp and flexible enough to lead to
differentiated and effective responses to risks.
Improving the analytical methodology for regular risk
assessment is therefore indispensable and should
result in the formulation of specific risks management
actions.
Resettlement needs and trends

Involuntary population displacement results from the
imperative need to build modern industrial and
transportation infrastructure, expand power
generation and irrigation, implement urban renewal
and enhance social servicesschools, hospitals,
water supply. Nonetheless, by its adverse effects,
forced population displacement remains a social
pathology of development, and the first efforts must
always be to avoid displacement wherever possible.
Unfortunately, however, increases in population
density, tight land scarcities and growing socioeconomic needs will maintain resettlement as a
continuous companion of development. During the
last two decades of the twentieth century, the
magnitude of forced population displacements
entailed by development projects was estimated at
about 10 million people annually, or some 200
million people over two decades. Currently, in the
first decade of the new century, the size of
development-caused displacement is estimated at
about 15 million people annually. This clearly
indicates the global dimension of this social
pathology.
Decapitalization of resettlers
In developing countries (to which this article mainly
refers) forced resettlement carries severe risks of
32
Usefulness of IRR in planning

Applying the IRR conceptual template to the
circumstances of each development project has
several advantages:
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it ensuresmost importantlythat no major

risk to resettlers is overlooked during the
feasibility analysis of planned developments;
it prompts planners to distinguish the
different intensity of each risks (high risks
from low or moderate risks, in a given projectcontext), rather than treating all risks
uniformly; and
it demands a pro-active risk-reversal
orientation in project design, planning,
financing and implementation.
The deconstruction of the impoverishment
process into a template of eight basic risks permits
the mobilization of proportionate resources for the
highest risk or against the risks affecting larger
numbers of people, while allocating less to risks with
lower incidence or intensity in a certain context. In
practice, this differential approach may vastly
increase equity by rationalizing resource allocation.
Early risk analysis may also conclude that in some
projects one or another of the IRR Models risks is not
likely to occur. It can also reveal some locally specific
risks that are not part of the template but need to be
addressed.
2.
3.
The major risks of impoverishment

The IRR Model captures impoverishment not only in
terms of income-poverty, but also in terms of losing
employment opportunities, shelter, health, nutrition,
education or community power.
The modeling of main risks results from
deconstructing the multifaceted displacement process
into its essential and most general risks of, namely:
1. Landlessness.
2. Joblessness.
3. Homelessness.
4. Marginalization.
5. Increased morbidity and mortality.
6. Food insecurity.
7. Loss of access to common property.
8. Social (community) disarticulation.
Each of these is briefly presented below. Further,
we will point out how the IRR Model is to be turned on
its head to help derive counter-risk strategies and to
match project measures against each of these eight
basic risks.
1 . Landlessness. Expropriation of land needed
for the projects right of way removes the
main foundation on which many people build
productive systems, commercial activities
and livelihoods. Often land is lost forever,
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4.
5.
6.
sometimes it is partially replaced, and only

seldom fully replaced or fully compensated.
This is the main form of decapitalization and
pauperization of the people who are
displaced. Both natural and man-made capital
are lost.
Joblessness. Loss of wage employment occurs
both in rural and urban displacement. People
losing jobs may be landless agricultural
laborers, service workers or artisans. The
unemployment or underemployment among
resettlers may linger long after physical
relocation. Creating new jobs for them is
difficult and requires substantial investment,
new creative approaches and relying more
on sharing project benefits.
Homelessness. Loss of housing and shelter may
be only temporary for many people, but for
some it remains a chronic condition and is
felt as loss of identity and cultural
impoverishment. Loss of dwelling may have
consequences on family cohesion and mutual
help patterns if neighboring households of the
same kinship group get scattered. Group
relocation of related people and neighbors is
therefore preferable over dispersed
relocation.
Marginalization. Marginalization occurs
when relocated families lose economic power
and slide down towards lesser socioeconomic positions: middle income farmhouseholds become small landholders; small
shopkeepers and craftspeople lose business
and fall below poverty thresholds. Economic
marginalization is often accompanied by
social and psychological marginalization,
expressed in a drop in social status, in
resettlers loss of confidence in themselves
and in society.
Increased morbidity and mortality. The
vulnerability of the poorest people to illness
is increased by forced relocation, as it tends
to be associated with increased stress,
psychological traumas, and the outbreak of
parasitic and vector-born diseases. Serious
decreases in health levels result from unsafe
water supply and sewage systems that
transmit epidemic infections, diarrhea,
dysentery, etc., and may lead to higher
mortality rates among children and the
elderly.
Food insecurity. Forced uprooting diminishes
self-sufficiency,
dismantles
local
arrangements for food supply and, thus,
increases the risk that people will fall into
33
chronic food insecurity. This is defined as

calorie-protein intake levels below the
minimum necessary for normal growth and
work.
7 . Loss of access to common property. Poor
farmers loose access to the common property
assets belonging to communities that are
relocated (e.g., loss of access to forests, water
bodies, grazing lands, etc.). This type of
income loss and livelihood deterioration is
usually overlooked by planners and remains
uncompensated.
8. Social disarticulation. The dismantling of
community
structures
and
social
organization, the dispersation of informal and
formal networks, local associations, etc., is a
massive loss of social capital. Such
disarticulation undermines livelihoods in
ways not recognized and not measured by
planners, and results in disempowerment and
further pauperization.
The risks discussed above affect non-uniformly
various categories of people: rural and urban, tribal
and non-tribal groups, children and the elderly, or,
in river based projects, upstream and downstream
people. Research findings show that women suffer the
impacts of displacement more severely than men.
Host populations are also subjected to new risks,
resulting from increased population densities and
competition for resources
How to reverse risks and reconstruct?

Before displacement actually begins, the social and
economic risks of impoverishment are only potential,
possible risks. But if preventative counteractions are
not initiated, these potential hazards convert into
actual, dire impoverishment processes.
Robert K. Merton has insightfully observed that
the prediction of an undesirable chain of events may
become a self-destroying prophecy (Merton 1979)
if people respond adequately to the prediction. It
follows that a risk prediction model becomes
maximally useful not when it is confirmed by adverse
events, but rather when, as a result of its warnings
being taken seriously and acted upon, the risks are
preempted from becoming reality, or are minimized.
The prophecy destroys itself, and the consequences
announced by the model do not occur or occur in a
limited way.
The internal logic of the IRR Model as a planning
tool suggests that in order to defeat its
impoverishment prediction it is necessary to attack
the looming risks early on during the preparation of a
development project. In the same way in which it
deconstructs the process of displacement into eight
34
major risks of impoverishment, the IRR Model also

deconstructs the process of resettlement and
reconstruction into a set of definable risks-reversal
activities, able to lead:
from landlessness to land-based resettlement,
from joblessness to reemployment,
from homelessness to house reconstruction,
from marginalization to social inclusion,
from increased morbidity to improved health
care,
from food insecurity to adequate nutrition,
from loss of access to restoration of
community assets and services, and
from social disarticulation to rebuilding
networks and communities.
These strategic directions for reconstruction
indicate that the IRR Model is not just a predictor of
inescapable pauperization: on the contrary, it maps
the way to restoring and improving the livelihoods of
the displaced. Like in the case of other models, the
components of the IRR Model can be acted upon and
influenced through planning and resource allocation,
in order to diminish the impact of one or several risks.
Risk-reduction through policy measures

Development knowledge teaches us that measures to
reduce risks can be taken both at the project level,
and at the policy level. For instance, policies that keep
the costs of energy too low tend to encourage
overconsumption and tolerate waste, thus leading to
constructing more dams or thermal plants, with
entailed displacements risks. This suggests that the
risks of resettlement can be diminished also through
better demand-management policies. Ultimately, the
interlocked risks inherent in displacement can be
controlled when governments adopt broad national
policies for safety nets and risk reversals. Single
meansfor instance, cash compensationare
insufficient to alone counterbalance all risks.
Compensation needs to be supplemented with special
investments directed to the resettled communities,
and with sharing with the resettlers a part of the
benefits generated by the project that displaces them.
Without substantial financing, no sound and
sustainable resettlement is possible.1
Maximum safeguarding is achieved when
involuntary displacement is avoided altogether. This
is the response to risks that should be considered first
and foremost. Recognizing risks upfront and their
financial implications is often a powerful stimulus to
search for an alternative that will eliminate the need
for displacement or cut down its size. This is
technically possible in some cases, for instance, by
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changing the site of a dam or by re-routing a highway

around (rather than through) a village. Many other
technical options can be found through creative
search.
Social research on resettlement has indeed
identified specific risk management strategies that can
be employed against the common risks in
resettlement, to prevent landlessness, joblessness,
higher morbidity, etc. In turn, social research on
voluntary settlement schemes and on patterns of selfmanagement after relocation has documented
effective approaches, some replicable in involuntary
resettlement, that can help those resettling to new
lands to overcome the risks and difficulties of
resettlement. 2
Michael M. Cernea is Research Professor of Anthropology

and International Affairs at George Washington University,
Washington DC, and also serves as Senior Social Adviser to
the Evaluation Office of the Global Environmental Facility.
He joined the World Bank as its first sociologist in 1974 and
has developed and led a professional group of sociologists
and anthropologists for over 20 years the Banks Senior
Adviser for Social Policies. Dr. Cernea wrote the policy on
involuntary population resettlement in development
programs of the World Bank (in 1979) and of OECD
countries aid agencies (in 1991). Prof. Cernea contributed
to the construction of the Kali Gandaki Dam in Nepal in his
capacity as Member of the projectsi International Panel of
Experts for Resettlement and Environment, making eight
field-work assessments and advising project management
and the Nepal Electricity Authority. He has published
numerous books and hundreds of articles, taught in
Universities in Europe, Asia and the US, and has served as
advisor on social policy, resettlement, cultural heritage and
poverty issues to many international organizations,
including ADB, CGIAR, UN, FAO and OECD.
End notes
1. For a more detailed argument, see Cernea 2007.
2. For
empirical
documentation
on
the
impoverishment risks and impacts, as well as on
results of risks reduction measures, please consult
the recommended readings (see References).
References
Cernea, Michael M. and McDowell, C. (eds.), 2000,
Risks and Reconstruction: Experiences of
Resettlers and Refugees, Washington, DC: The
World Bank.
Cernea, Michael M., 1991, Involuntary resettlement:
Social research, policy and planning, pp.188-216
in M.M. Cernea (ed.), Putting People First:
Sociological Variables in Development, New York
and London: Oxford University Press.
__, 2007, Financing of development and benefitsharing mechanisms in population resettlement,
Economic and Political Weekly, 42(12):10331046. URL: www.epw.org.in.
Mahapatra,
L.K.,
1998,
Resettlement,
Impoverishment and Reconstruction in India,
New Delhi: Vikas.
Mathur, H.M. and Marsden, David (eds.), 1998,
Development Projects and Impoverishment
Risks: Resettling Projects Affected People,
Oxford, UK: Oxford University Press.
Merton, Robert K., 1979, The Sociology of Science:
Theoretical and Empirical Investigations,
Chicago: University of Chicago Press.
Corresponding address: mcernea@worldbank.org
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35
Legal and Policy Environment for Private Sector Participation

in the Power Sector in Nepal
Anup Kumar Upadhyay
epal is bestowed with immense hydropower

potential. Of the total theoretical potential of
83,000 MW only about 43,000 MW is technoeconomically feasible, out of which storage projects
constitute about 49% and the remaining 51% are runof-river projects. However, with increased demand
for system regulation and new export opportunities
opened, peaking storage plant capacities could be
significantly increased.
Nepalese hydropower projects have mostly been
non-consumptive and are located in the hills. With
the development of hydropower, a few cases of
adverse effects in utilizing water for consumptive
purposes have been documented. To deal with them,
laws and regulations are being constantly updated and
reviewed.
National water resources strategy

Realising that the development and management of
water resources should be undertaken in an holistic
and systematic manner aimed at the sustainable use
of the resources ensuring conservation and
protection of environment, Nepal has adopted the
National Water Resources Strategy. This Strategy
provides the country with a directional guideline of
water resources development over the next 25 years.
In order to translate the key outputs identified by the
Strategy into concrete action plans, a National Water
Plan has recently been adopted by the government.
The Plan has set some targets to be fulfilled in a
stipulated time frame. The main highlights of this Plan
are summarized as follows:
Targets by 2017
Up to 2,035 MW hydropower electricity is
developed to meet the projected domestic
demand at base case scenario, excluding
export;
50% of households are to be supplied with
Integrated Nepal Power System (INPS)
electricity, 12% by isolated (micro and small)
hydro systems, and 3% by alternative energy;
and
Per capita electricity consumption of 160 KWh
will be achieved.
36
Targets by 2027
4,000 MW of hydropower is developed to
meet the projected domestic demand at base
case scenario, excluding export,
75% of the households are to be supplied with
INPS electricity, 20% by isolated (micro and
small) hydro systems and 5% by alternate
energy,
Per capita electricity consumption of over
400 KWh will be achieved, and
Nepal exporting substantial amounts of
electricity to earn national revenue.
Hydropower development policy

The Government is pursuing water resources
development in Nepal from three different
approaches. Firstly, to develop small and
decentralized hydropower projects to meet the local
demands in remote and isolated regions of the country.
Secondly, to develop medium sized power projects
to meet the national demand within the national grid
including surplus for export, and to develop local
capacity. Thirdly, large-scale multi-purpose projects
to meet the regional demand for food, energy and flood
control. With this vision, the Government has adopted
the Hydropower Development Policy of 2001 for
attracting both local and foreign investment. The
following are the main highlights of this Policy:
Objectives
To generate electricity at low cost by utilizing
the water resources available in the country,
To link electrification with the economic
activities,
to render support to the development of rural
economy by extending rural electrification,
and
to develop hydro power as an exportable
commodity.
Management of investment risk
No nationalization of Projects.
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Exchange facility (to repatriate).

Government land on lease.
Water rights.
Government may be a partner in storage
project.
Transfer of project.
Export of electricity.
Provision for internal electricity market
For private sector operated hydropower
projects with capacity up to one MW and not
linked to the grid, the independent power
producer (IPP) may sell and distribute the
electricity by determining the tariff rate of
the electricity on its own.
Provision relating to visa
Non-tourist visa and work permit shall be
provided to the investor of hydropower
project, his/her authorized representative
and necessary foreign experts, skilled
manpower and their families as provided for
in the agreement until the construction and
operation of the project.
Licensing procedures
The Electricity Act of 1992 has set following time
limits for the issuance of licenses:
Survey license issued within 30 days.
Period of such license up to 5 years.
Project license issued within 120 days.
Period of such license up to 35 years.
Public consultation before issuance of
project license.
Application process for generation/

transmission/distribution
Application process for hydropower projects from
100 kW1,000 kW
For a project with capacity in this range no
license is required. However, the proponent
needs to submit project related information
to the MOWR through the DOED. In addition,
he/she has to submit desk study report,
(topographic map, area of distribution,
number of beneficiary, information of other
water use, boundaries of survey area,
recommendation from VDC/municipality/
work schedule; Letter of Interest for the Power
Purchase Agreement, financial evidence).
Government agencies in the power sector

The following are the main agencies for development
in the power sector:
Ministry of Water Resources (MOWR).
Water and Energy Commission Secretariat
(WECS)planning and policy research.
Department of Electricity Development
(DOED)licensing, facilitation, promotion,
compliance monitoring, project study.
Nepal Electricity Authority (NEA)public
utility for generation, transmission and
distribution of electricity.
Electricity Tariff Fixation Commission
(ETFC)tariff setting.
License application process for hydropower

projects>1,000 kW
For the devlopment of projects with the capacity
more than 1000 kW, the proponent has to obtain:
Survey License
Moreover, for the promotion of hydropower

projects, the DOED has been designated as One
Window under the MOWR, with these responsibilities:
Issuance of survey and project licenses,
Providing concessions and incentives,
assistance in importing goods,
assistance in obtaining land, and
assistance in obtaining permits and
approvals.
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To study generation, transmission,

distribution survey of a project.
Operation License
Production License (for construction and
operation of a production facility),
Transmission License(for construction and
operation of a transmission),
Distribution License (for construction and
operation of a distribution facility).
Supporting documents required to obtain

generation/transmission/distribution
license
The proponent will be granted Generation,
Transmission, or Distribution License with the
submission of following documents:
37
Feasibility Study Report,

including:
detailed description of the project,

description of related transmission line to
evacuate power, and
approved IEE/EIA Report from concerned
Ministry.
Detail Financing Plan,

including:
estimated cost of the project,

financial capability of the investors of the
project,
commitment of the financial institutions to
be involved directly in the project,
percentage of liability of investor, and
equity and debt ratio.
Power Purchase Agreement

Other Requirements
Certificate of registration,
memorandum of article,
memorandum of association,
industrial registration certificate,
PAN (permanent account number), and
details of technical capability.
Steps to be taken by the proponent after

obtaining generation/transmission/
distribution license
Once the proponent obtains the Generation,
Transmission, or Distribution License he would have
the following obligations:
Start construction work within 1 year,
Complete financial closure within 1 year of
license issued date,
38
Submit bi-annual progress report until

construction is completed,
Testing and commissioning,
Start commercial operation,
Pay royalty (Production licensee).
Marketing electricity
For the sale of electricity, two types of markets,
domestic and export are available. In order to sell
the electricity, the proponent does it through a Power
Purchase Agreement (PPA) with the NEA.
For the export of electricity, bi-lateral
arrangements exist with the neighboring India. The
following are the provisions of the current power
exchange arrangement:
presently about 50 MW,
agreed in principle to increase to 150 MW,
132 kV links available at two points, and
220 KV additional links identified.
Status of licenses issued

By June 2006, the number of licenses issued to
developers by the Government of Nepal, including
NEA-operated projects, is as follows, by category:
Survey License for Generation
230
Transmission Survey
57
Distribution Survey
12
Generation
19
Transmission
19
Distribution
1
Generation, transmission
and distribution
18
(including NEA old plants)
Anup Kumar Upadhayay is Joint Secretary, Ministry

of Water Resources, Government of Nepal.
Corresponding address: anupupdhyay@yahoo.com
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Underground Space for Infrastructure Development and Engineering

Geological Challenges in Tunneling in the Himalayas
Krishna Kanta Panthi
Abstract: Being topographically steep and consisting of many rivers originating from the glaciers of the Himalaya,
Nepal is gifted in water resources. As a developing country, Nepal needs to accelerate to develop its crucial
infrastructures for the economic prosperity of the nation. This is achievable by developing the enormous hydropower
potential available, making short and efficient roads through the steep mountain topography, extracting mines for
various purposes, and providing cost effective solutions for the storage facilities. These developments are not
possible unless tunnels and underground caverns are used.
Due to tectonic activity, however, the rock mass in Nepal and across the Himalayan region is somewhat different
in their engineering behaviour. These differences in mechanical behaviour are mainly caused by a high degree of
folding, faulting, shearing, fracturing and deep weathering. As a result, severe instability problems associated with
this complex geological setup have to be faced during tunnelling. This is the major challenge to be addressed in a
scientific manner in order to make tunnel option more cost effective, feasible and safer.
This paper delineates the possible areas where tunnels and underground caverns are needed and may play an
important role in the socio-economic development of the nation, discusses the major geological challenges faced
while tunnelling, and briefly describes methodologies to be used for analysing geological uncertainties.
Key words: Himalayan geology, tunnelling, Nepal
he Himalayan region in Asia covers an area of

about 594,400 km 2 , of which Nepal occupies
approximately 25%. Nepal extends east to west about
890 km and has a width ranging from 150 to 250 km.
Within this very short width, the altitude varies
greatly, from about 100 m above sea level at its
southern border to its maximum of 8,848m above
sea level (Mt Everest) at its north, giving a very rough
terrain and steep mountainous topography. Because
of the great elevation difference over a very short
distance, the climatic conditions of the country also
vary greatly. The higher Himalayan range (above
3,500m) in the north has an alpine climate and is
mostly covered by snow and ice. The climate changes
to mild and warm at the Mahabharat range (lesser
Himalayan range) and to sub-tropical hot weather at
the deep valleys, the Siwaliks (Churia) and the
Gangetic plain (Terai).
The increasing population trend and rapid
urbanization is augmenting pressure and is a major
challenge in the economic development of Nepal. The
main economic resources of the country are water
resources (energy, irrigation and drinking water),
agriculture, tourism and agro-tourism based
industries. Maximum utilization of these resources is
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inevitable, and is only possible by developing

infrastructures such as hydropower schemes,
irrigation systems, road networks, drinking water
systems, etc. Development of all these infrastructures
demands the utilization of underground space like
tunnels and underground caverns.
This paper discusses the possible areas where
tunnels and underground caverns are needed and may
play an important role in socio-economic
development of our nation, the major geological
challenges faced while tunnelling, and methodologies
useful for analysing engineering geological
uncertainties.
Need for tunnelling in Nepal

The use of underground space is not new in this
country. The early miners used underground caverns
and tunnels of small dimensions to extract ore and
minerals such as copper, iron, lead, cobalt, nickel and
different types of coloured stones. However, modern
and institutionalized tunnelling started with the
excavation of tunnels and an underground
powerhouse for the Tinau Hydroelectric Project
located near the town Butwal. Since completion of
the Tinau Project in the early 1970s, approximately
39
75 km of tunnels have been excavated.

There are principally four areas where tunnels and
underground caverns are needed in Nepal. They
include: (a) water conveying tunnels, (b) transport
tunnels, (c) mining and (d) food storage facilities
(Panthi 2004). For the time being most of the
tunnelling is focused on hydropower, and to some
extent in mining and irrigation.
Hydropower and tunneling

Being snow fed and very steep in their gradient, most
of the major rivers originating in the Himalaya have
considerable potential in hydropower generation. In
particular, those rivers originating from the elevation
above 3,500m are perennial. For this reason, Nepal
has been gifted with considerable hydropower
potential (see Figure 1).
Nepal has so far managed to develop only about
560 MW hydropower energy, and approximately 40%
of the total population has access to it. Apart from
domestic requirements, fast developing India could
be an important hydropower energy market for Nepal,
since India is experiencing a shortage of energy with
ever increasing energy demand. It is estimated that
by the year 2013 almost 220,000 MW installed
capacity of electrical energy is required in India to
cope with very rapidly growing economy. Today, the
installed capacity of electrical energy in India is
approximately 148,000 MW and hydropower
contributes only 30,000 MW. Moreover, India is one
of the major countries in the world that contributes
considerably to global emissions of carbon dioxide.
Consequently, the hydropower potential that exists
in the Nepal Himalaya could be an environmentally
friendly alternative energy source that could help fulfil
not only the energy demands of India, but also help in
reducing the carbon emission to the world (Panthi
2004).
As can be seen in Figure 1, a number of possible
hydropower projects have already been studied in
different river basins of Nepal and are ready for the
materialization. A study carried out by Nepals Water
and Energy Commission Secretariat (WECS) of the
Ministry of Water Resources (MOWR) indicates that
more than 850 km of tunnelling needs to be done to
develop already planned hydropower potentials in
Nepal. Thus, tunnelling requirements for the
development of Nepals hydropower is enormous.
Transport and tunnelling

A balanced, coordinated, well-managed and efficient
transport system is a precondition for the sustainable
development and economic growth of a country like
Nepal. Except for the southern flatland and some inner
valleys, there are many limitations for the
development of good air and rail transport in Nepal.
40
Thus, the most suitable mode of transport is an

efficient road network. The development of such road
network will make it possible to link different parts of
the country and commercial hubs, contributing
largely to the nations economic and social
development (Panthi 1998).
At present, a total of approximately 20,000 km
of road have been built in Nepal, of which 29% are
blacktopped with fair to good quality, 25% are gravel
surfaced, and the remaining are earthen surfaced. The
present situation of road networking is unsatisfactory
and poses a considerable demand on the need for
improving the existing road system. Connecting the
mountainous part of the country with good quality
roads to the southern flat Gangetic plain (Terai), where
high level of economic activity exists, is very much
needed. Such North-South running highways will play
an important role in linking Nepal with the fast
growing economies of neighbouring India and China.
The Himalayan region as a whole is affected by a
constant tectonic uplifting as well as downcutting
effects by several river systems. The action of tectonic
activity and the monsoon on the predominantly
fragile and deeply weathered rock mass of the Siwaliks
and lesser Himalaya make steep mountain slopes
highly unstable and erosion prone. Many rock and
soil slope failures occur during the monsoon season
along the road cut slopes, not only obstructing the
transport movement, but also creating considerable
human and property damage. Figure 2 shows an
example of the Prithivi Highway, which is the only
reliable gateway to capital city, Kathmandu, from the
rest of the country.
As shown in Figure 2, a major rock/soil slide
started to develop in July 1999 at Krishnabir, located
83 km west of Kathmandu. The slide was further
aggravated during the monsoon of 2000 with a
massive movement of the slope, and is still active in
every monsoon. According to Regmi and Sitaula
(2003) almost 360 hours of complete road closure
occurred during the two monsoon periods in 2000
and 2001 as a result of this slide, and similar closures
are routine in every monsoon period.
Based on the Nepalese Governments Tenth
National Plan (NPC 2003), special attention should
be placed on regional and sub-regional cooperation
for the integrated development of the transport sector
in South Asia. The standard of major east-west and
north-south highways, must, therefore be improved
so that these highways can be converted into regional
commercial routes with high rates of return. The Tenth
Plan also emphasizes the minimization of investment
costs as well as of environmental degradation during
design, construction, maintenance and rehabilitation
of such road systems.
The quality target set by the government for major
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highways is only possible to achieve if road tunnels

are introduced on the highways running through
mountainous parts of the country. The introduction
of such road tunnels will not only reduce the road
length, but also make it possible to avoid the areas
that are very steep and vulnerable to slope failures
and risk of rock falls. An example of such an
undertaking is the planned KathmanduHetauda
direct link, with approximately 60 km road length
including three road tunnels with total length of 8 km.
If this road project is implemented, it will shorten the
existing 224 km long route to only 60 km, making it
the shortest connection from the southern flatland to
Kathmandu and north to Tibet, China (Panthi 1998).
Other infrastructures and tunneling

The other areas of infrastructure development where
tunneling is required in Nepal are irrigation, water
supply, mining and storage facilities. Even though
there are many possibilities for excavation of tunnels
and underground caverns in these areas, very little
has been done so far, excluding a few kilometers of
tunneling for irrigation and mining. The introduction
of underground storage caverns, for example, may
help in the reduction of electrical energy.
Even though the possibilities for the development
of tunnels and underground caverns are great in Nepal,
many uncertainties and challenges exists in this field
due to the complex geological setup of the Himalaya.
Engineering geological challenges in tunneling

For economically viable tunneling, it is crucial to
have a method characterized by cost effectiveness
and flexibility to adopt in changing ground
conditions, and by accuracy in the prediction of rock
mass quality during planning. The design phase
decision in selecting tunnel alignment and predicting
the rock mass quality and rock support requirement
has direct influence on the overall cost and time
requirement of any tunneling project. See Figure 3.
As can be seen in Figure 3, as soon as the rock
mass quality decreases (higher class), there is a
dramatic increase in rock support cost. For example,
for very poor (class 5) and exceptionally poor
(class 7) rock mass quality, the rock support cost can
be more than 250 and 350%, respectively, of the
excavation cost.
The past tunneling experience in Nepal shows that
the accuracy of planning phase geological
investigations for underground works has often been
rather poor. In addition, the compressional tectonic
stress regime in the Himalaya has resulted in intense
deformation of the rock mass, making it highly folded,
faulted, sheared, fractured and deeply weathered. This
complex geological setting has caused considerable
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stability problems (uncertainties) and is a great

challenge for successful tunneling. The geological
uncertainties for underground openings are related
to two major factors: non-geological and geological.
See Figure 4.
The non-geological factors are connected to the
level of skill and expertise gained by experience and
the interpretation and decision making skills during
the planning and construction phases of tunnelling
projects. The ability to evaluate and tackle the stability
issues during planning and construction and the tools,
methods and technologies used in that process have
great significance, since erroneous interpretation may
result in the loss of millions (Panthi 2006).
The geological factors are related to the geological
complexity of the region. As can be seen in Figure 4,
complexity is represented mainly by four engineering
geological characteristics that have caused major
stability problems during tunnelling in Nepal. These
are: (a) weak rock mass quality, (b) high degree of
weathering and fracturing, (c) rock stresses, and (d)
groundwater effect. The major geological
uncertainties and challenges that have been faced in
tunnelling in Nepal are briefly summarized below.
Rock mass quality
Among the most distinct inherent properties of
the rock mass in the Himalaya is the strength
anisotropy (schistocity) caused by the preferred
orientations of mineral grains or directional stress
history. The bedding and foliation that exist in the
sedimentary and metamorphic rocks of Himalaya
have made them highly directional concerning
strength and deformability. As a result of this
directional behavior with respect to strength and
deformability, many rocks in the region are highly
incompetent. This directional behavior leads to a
considerable reduction on the self-supporting
capability of the rock masses while tunneling. Figure
5 is an example of tunnel collapse caused by this
directional anisotropy of a typical Himalayan phyllite.
Many such failures occurred on the recently
constructed headrace tunnels of 144 MW Kali Gandaki
A Hydropower Project and on the 60 MW Khimti-I
Hydropower Project in Nepal. The highly deformable
rocks such as shale, slate, phyllite, schist and
micaceous gneiss show such directional behavior and
are weak bonded along the foliation plane.
Another major feature of the highly deformed rock
mass of the Himalaya is frequent intercalation
between different rocks and shear bands. Such
intercalation is observed at interval of even less than
50 centimetres. See Figure 6.
In many occasions, thin bands of very weak and
highly deformed rocks such as slate, phyllite, schists
and sheared mylonites are intercalated within the
41
bands of relatively strong and brittle rocks such as

gneiss, quartzite and dolomite. These small bands of
weak rock mass are squeezed and highly sheared
within these stronger layers of rock mass (Panthi
2004); i.e., typical mixed face conditions. Being
weaker in their mechanical characteristics and highly
schistose, these shear bands lack sufficient bonding/
friction and have reduced self-supporting capability.
This phenomenon of directional behaviour and
intercalation of the rock mass in the Himalaya has
resulted in severe stability problems during tunnel
excavation.
Weathering and fracturing
In the Himalaya, fracturing is caused either by
active tectonic movement or due to gravity effect.
The combination of active tectonic movement and
the regions complex climatic conditions (dynamic
monsoon) lead to aggravated weathering of the
fractured rock mass. Being formed from the process
of fracturing, shearing and hydrothermal alteration,
the fractured rock mass, weakness zones and fault
zones provide an environment for weathering to
intensify. Accordingly, the weathering effect may
reach more than hundred meters below the surface.
Tunneling in such environment needs to be carefully
addressed concerning rock mass quality evaluation
at the planning and implementation stages.
There are two main effects of rock weathering and
fracturing with respect to tunnel stability in the
Himalaya. The first is the immediate tunnel collapse
during excavation, since the rock mass loses its
cohesion (friction) and is unable to selfsustain even
for a very short period until the temporary support is
placed. Figure 7 shows an example of weatheringinduced tunnel collapse that was triggered due to deep
weathering at the pressure shaft on the Khimti Project.
As shown in Figure 7, a sink hole was formed all
the way to the surface due to the collapse in this
tunnel. Several such collapses were witnessed along
the headrace tunnel and pressure shaft of Khimti
project. The second effect is the condition that is
produced by weathering for water inflow and leakage
from the tunnels, since many open channels may be
formed along the fractures in the rock mass.
Stress induced problems
The third major stability problem faced during
tunneling in the Himalaya is stress anisotropy. Due to
topographic reasons, most of the tunnel projects are
constructed in the Siwaliks and lesser Himalayan
zones, where highly deformed rocks such as shale,
mudstone, siltstone, slate, phyllite, schist, schistose
gneiss and highly sheared fault gouge and mylonites
are present. In general, highly deformed rock mass
have very weak rock mass strength, and tunneling
42
through such rock mass may cause severe squeezing

as soon as the overburden stress exceeds the rock
mass strength. The severe squeezing has been
observed even in relatively low overburden, where
tunnels pass through highly sheared fault zones with
extremely poor rock mass (Panthi and Nilsen 2007).
An example of severe squeezing occurred in the
pressure tunnel of Modi Khola projects and in the
headrace tunnel of Kali Gandaki A. See Figure 8.
The Modi pressure tunnel passes through highly
sheared fault gouge, representing intercalation of
highly sheared and decomposed schist mixed with
completely crushed quartzite at an overburden of
about 75 meters. The squeezing was so severe that
the applied support of steel ribs and shotcrete was
completely buckled and collapsed (HH 2001). In the
case of Kali Gandaki headrace tunnel, squeezing
occurred in many sections. Figure 8 right shows a
section where more than 50 cm of horizontal
convergence occurred at an overburden of
approximately 450 m. In this tunnel that passes
through highly sheared Himalayan phyllite, a
maximum of up to 75 cm of tunnel deformation was
recorded at a section with an overburden of
approximately 600 m (NEA 2002; Panthi and Nilsen
2007).
Severe squeezing in tunnels is extremely difficult
to tackle and is a major challenge in tunneling through
the Himalaya rock mass. In fact, no universal solution
exists that may be used to control instability caused
by tunnel squeezing of such magnitudes. The most
effective solution is to carry out uncertainty analysis
in predicting squeezing in advance and increase the
excavation size for compensating to the predicted
squeezing and install sufficient support.
Inflow and leakage
The fault zones, sheared zones, fractured and
weathered rock mass of the Himalaya are highly
permeable and water bearing. Tunneling through such
permeable zones always represent great difficulties
and considerable challenges. Figure 9 shows
examples of severe water leakage and inflow problems
at the Khimti headrace tunnel and the Modi pressure
tunnel. As can be seen in the Figure, the severity of
the problems caused by inflow and leakage are huge
in the Himalaya. In many occasions several weeks
and months and a huge amount of resources were
spent to control the inflow and leakage problems.
As seen in Figure 9 left, water leakage problems
are not only limited to the excessive inflow during
tunneling, but also are relevant for a tunnel
constructed for conveying water, where there is a high
risk of losing valuable water after the completion due
to leakage (Panthi and Nilsen 2005). It is a great
challenge to establish methods or tools for predicting
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Figure 1. An estimated total hydropower potential

of Nepal covering different river basins of the
country (based on MOWR 2003)
Figure 2. A major slide at Krishnabir along the

Prithvi Highway, A main gateway to Kathmandu
Valley. Slope protection works with gabion (left)
and the extent of slope failure (right)
Figure 3. Approximate rock support cost for

different rock mass classes (minimum and
maximum for small and large section tunnels,
respectively) (Panthi 2006)
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Figure 4. Two types of uncertainties for an

underground opening.
Figure 5. Headrace tunnel collapse at Kali Gandaki

A Hydroelectric Project (left) and tunnel face
showing thin foliation plane with very weak bond
(right) (Panthi 2006)
Figure 6. Intercalation between gneiss and schist at

Khimti headrace tunnel (left) and intercalation
between phyllite and metasandstone at Middle
Marsyangdi headrace tunnel (right) (Panthi 2006)
43
Figure 7. Cross section profile of the upper

pressure shaft (dimension in meters) showing a
tunnel collapse (left) and a sink hole of the same
collapse that reached the surface (right) at Khimti
Hydropower Project (Panthi 2006)
Figure 8. Severe squeezing at Modi pressure tunnel

(left) and Kali Gandaki headrace tunnel (right)
(Photo: Himal Hydro 2001 and Impregilo SpA 1989)
possible water inflow and leakage so that proper steps

for tackling such problems may be considered in
advance.
Methodology for uncertainty analysis

It is a fact that the key to success or failure of any
tunneling project is the quality of the rock mass that
the tunnel passes through and rock support measures
that are applied during tunnel excavation. In this
respect, accurate evaluation, analysis and
interpretation of the rock mass quality play significant
roles.
A major challenge therefore is to address
geological uncertainties so that cost effectiveness and
safer tunneling may be achieved. In this respect, the
engineering geological uncertainty analysis
44
Figure 9. Water leakage from adit 2 of Khimti

headrace tunnel after early water filling (left) and
mass inflow of water mixed with debris from a
shear fault at the pressure tunnel of Modi Khola
(right) (right photo: Himal Hydro 1998)
Figure 10. Principle sketch of Uncertainty and Risk

Analysis Model for a tunnel project (Panthi 2006)
methodology proposed by Panthi (2006) in evaluating

uncertainty and risk associated with the rock mass
quality evaluation, potential tunnel squeezing and
possible inflow and leakage could be an alternative.
The main focus of this methodology is a combined
probabilistic and risk based approach. The main
principle of this methodology is shown in Figure 10.
Instead of single point method of stability analysis
for tunnels and underground caverns that is being
generally used the proposed methodology gives much
more reliable results.
Conclusion
The need for tunneling in Nepal, as in the Himalayan
region in general, is enormous, particularly for
hydropower development. Due to active tectonic
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movement and dynamic monsoon, the rock mass in

the Himalaya is relatively weak and highly deformed,
schistose, weathered and altered. Predicting rock mass
quality, analyzing stress induced problems, in
particular tunnel squeezing, and predicting inflow and
leakage often have been found extremely difficult
during the planning stage. Considerable discrepancies
have been found between predicted and actual rock
mass conditions, resulting in significant cost and time
overrun for most of the tunneling projects. Finding
innovative solutions for quantifying geological
uncertainties and assessing risk are therefore key
factors for cost effective and optimum future
tunneling through Himalayan rock mass.
In this respect, a probabilistic approach of
uncertainty analyses that the author has proposed in
his PhD research (Panthi 2006) is believed will be
appropriate to deal with the most important
geological uncertainties reflecting Himalayan rock
mass conditions. A geological uncertainty analysis
model concept based on the software program @Risk
should be applied for this purpose.
The proposed uncertainty analyses methodology
includes rock mass quality evaluation based on the
Q-system of rock mass classification, tunnel squeezing
based on Hoek and Marinos approach, and analysis of
water leakage through water tunnel. The degree of
correlation between simulated results achieved by
the @Risk model and values actually measured in
the tunnel is discussed and the sensitiveness and
effect of variations in the value of each input
parameter and sensitivity of equations and methods
used to analyze geological uncertainties are evaluated.
The conclusion is that the proposed uncertainty
analysis approach gives very promising results and
has a great potential for analyzing tunnel projects in
the Himalayan rock mass conditions.
Krishna Kanta Panthi holds a PhD degree in rock

mechanics. He is Chief Executive Officer, Hydro-Tunneling
and Research Center, Dhobighat, Lalitpur District, GPO
8975, EPC 1522, Kathmandu, Nepal; tel: (+977.1)621.6596.
References
HH (Himal Hydro), 2001, Construction Report,
Kathmandu: Modi Khola Hydroelectric Project.
NPC (National Planning Commission), 2003, Tenth Plan,
Kathmandu:
Government
of
Nepal.
URL:
www.npc.gov.np (unofficial translation, 4 October
2004).
NEA (Nepal Electricity Authority), 2002, Project
Completion Report: Vol. IV-A, Geology and
Geotechnical Report and Vol. V-C, Geological Drawings
and Exhibits, Kathmandu: Kali Gandaki A
Hydroelectric Project, Nepal Electricity Authority.
Panthi, K.K., 1998, Direct Link between Hetauda and
Kathmandu: Evaluation of Proposed Road Tunnels,
Nepal (MSc thesis), Trondheim, Norway: Department
of Geology and Mineral Resources Engineering,
Norwegian University of Science and Technology.
__ 2004, Tunnelling challenges in Nepal, pp. 4.1
4.15 in Proceeding of the Norwegian National
Tunnelling Conferenc (Fjellsprengningsteknikk
Bergmekanikk/Geoteknikk 2004, Oslo).
__ 2006, Analysis of Engineering Geological
Uncertainties Related to Tunneling in Himalayan Rock
Mass Conditions (PhD dissertation), Trondheim,
Norway: Department of Geology and Mineral
Resources Engineering, Norwegian University of
Science and Technology. URL: www.diva-portal.org/
ntnu/abstract.xsql?dbid=711.
Panthi, K.K. and Nilsen, B., 2005, Significance of grouting
for controlling leakage in water tunnels: A case from
Nepal, pp.931-937 in Proceedings of the ITA-AITES
2005 World Tunnelling Congress and 31st ITA General
Assembly (Istanbul).
__ 2007, Uncertainty analysis of tunnel squeezing
for two tunnel cases from Nepal Himalaya,
International Journal of Rock Mechanics and Mining
Sciences, 44: 67-76.
Regmi, S.K. and Sitaula, T.P., 2003, Krishnabhir slide:
A case study, pp.156-163 in Proceedings of the
International Seminar on Sustainable Slope risk
Management for Roads (Kathmandu, March),
Katmandu: Department of Roads, Government of
Nepal, in association with Permanent International
Association for Road Congress.
Corresponding address: krishnapanthi@gmail.com.
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45
Investment in Hydropower Sector: Opportunities and Risks

Ratna Sansar Shrestha
investment opportunity. In other words, the scope

for investment in hydropower in Nepal is limitless. In
this respect, it needs to be remembered that
ramification of investment in hydropower sector is
equity investment by the entrepreneurs with
complementary debt financing 4 from financial
intermediaries (FIs). It is not possible for an
entrepreneur to implement a hydropower project just
by making an equity investment. From this
perspective, implementation of a hydropower
project also depends on an entrepreneurs ability
Investment MUSD1
to mobilize debt funding. However, there are
International
Local
some major constraints in mobilizing funding
from FIs for investment in a hydropower project,
5.1
134.9
which are detailed below.
t is remarkable that, during past one decade,

domestic investors have invested US$75.5 million
and foreign investors $233.6 million in the electricity
generation business in Nepal. Similarly, $13.5 million
was invested in buying shares in Butwal Power
Company held by the Government of Nepal. Thus, in
a span of one decade, the private sector has succeeded
in mobilizing $322.6 million into the power sector.
The details of the investment are as follows:
Project
Capacity
in MW
Khimti
60
Bhotekoshi2
36
2.5
Syange
0.183
0.3
97.5
Market failure and portfolio mismatch

in FIs
At present, Nepal is facing a market failure

condition in its economy, high liquidity in the
32.9
Chilime
20
system leading to very low interest rates on
deposits offered by FIs, while very few of them
3
4.4
Piluwa
have experience with, or appetite for, long-term
infrastructure projects, which are invariably
2.1
1.5
Chaku
capital-intensive. Projects needing long-term
5.3
Sunkoshi
2.6
financing have been facing problems in securing
finances. There are seven national level
1.0
Rairang
0.5
development banks mandated for long-term
financing while a number of commercial banks
75.8
233.6
Total
131.3
are also financing long-term projects to an
extent. However, the terms of the debt offered
Table 1. Status of private investment in hydropower sectors
by these banks and their capital base are limited.
The market failure condition described
above
is
due
to the fact that their deposit base is of a
Opportunities
short-term
nature
and it will be a portfolio mismatch
According to National Planning Commission, at the
for
them
to
offer
long-term
loans. This condition is
end of 9th Five Year Plan, 40% of the population in
3
inhibiting
FIs
from
assisting
private developers in
Nepal had access to electricity. This means that 60%
participating
in
the
power
sector
development in the
of the population still has no access to electricity,
requisite
way.
indicating that there is a solid market for electricity
in Nepal. Further, it also needs no reminding that most
Lack of project finance instrument
of those who have access to electricity are facing
Project finance is specific mode of financing used
severe load-shedding and the magnitude of which is
by FIs under which the very project for which finance
likely to increase further in the near future. All this
is being sought is accepted by FIs as collateral and no
confirms that an abundant market for electricity
additional or external collateral is required for the
exists within Nepal. If one is to include the potential
purpose, thereby resulting in limited recourse to the
export market of electricity to India then the size of
institutions providing debt financing. This is also
the market increases by a magnitude.
called non-recourse financing. In this kind of
The tremendous market for electricity manifests
Indrawati
46
7.5
22.1
1.2
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financing, the proponent does not need to lodge other

tangible or intangible assets as collateral. However,
FIs in Nepal do not like project finance, and,
therefore, a proponent is required to put a tangible
or intangible assets of value higher than the debt
amount to include a margin as collateral, or to furnish
corporate or personal guarantee or third party
guarantee or parent company guarantee, and so forth.
Throughout the world, investors have not been
financing front loaded projects, like hydropower, fully
with their equity (even if they were capable), nor
would it be prudent for them to be exposed to the
assortments of risks just on their own. Project finance
is a mechanism for sharing the exposure to such risks
in the proportion of debt equity ratio. In order to
encourage developers to participate in the power
sector, FIs need to make available funding on project
finance basis.
Lack of due diligence capability in FIs

Financing hydropower can not be compared to
any other financing. In order for an FI to lend for
hydropower projects, it will have to be able to
understand the project intimately. Uniquely, the
hydropower sector uses a number of disciplines, like
civil, electric, and mechanical engineering,
hydrology, geology, etc. Without contribution from
each of these disciplines, it will not be possible to form
an opinion about a project and to determine whether
it is bankable or not. However, no FI in Nepal
possesses this kind of expertise in house. Because of
this constraint, banks have shown hesitation to invest
in the power sector.
Another facet of the same problem is that FIs do
not like the project finance instrument simply because
they do not have the necessary due diligence
capability.
Central bank guidelines insensitive to power

sector
Nepal Rastra Bank (NRB), the nations central bank,
has certain rules regarding provisioning in its
guidelines to banks in Nepal. The NRB requires banks
to make a 1% provision for good loans; i.e., loans
that are overdue by less than three month. Loans
overdue by three to six months are called
substandard loans, and the provisioning requirement
for such loans is 25%. Loans overdue by six month to
a year are termed doubtful, and 50% is required to
be provisioned for such loans. The provisioning
requirement for loans overdue by more than one year
is 100%.
In the power sector, the time overrun by one year
is held to be normal (the Middle Marsyangdi Project
was scheduled to be commissioned in 2004, but it is
still under construction!). If banks started making
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100% provision for their investments in the

hydropower sector, they would become insolvent and
would also adversely impact the power sector as well
as the economy of the country.
Power development fund

In order to finance local Independent Power
Producer (IPPs), the Government of Nepal established
the Power Development Fund (PDF) with the support
of the World Bank. With a start-up capital of US$35
million, the PDF intends to finance 60% of the cost of
projects up to 10 MW and 40% of the cost of projects
above 10 MW. The fund is administered by the Nepal
Bangladesh Bank Limited, a private commercial bank
in Nepal.
The PDF has yet to finance any project because
the criteria for qualifying for PDF financing are too
rigid for compliance by small IPPs. The criteria
require prior clearance from the environment
department to qualify for a loan. This usually takes
more than two years. Developers cannot wait for such
a long period. The resettlement issues are too
stringent and are more relevant to large projects than
to small projects. The proposal screening criteria are
as per the international development agency
guidelines, which is very time-consuming. The threestage due diligence process of the PDF itself takes over
180 days. The purpose of establishing the PDF to help
finance local IPPs has thus not been met due to the
preconditions set down by the PDF. Recently, adding
to the complications, the administrator (i.e., the bank
appointed to administer the PDF) has been taken over
by the NRB after declaring it troubled.
Risks
Financing a hydropower project is very heavily
dependent on the prudent management of various
types of risks. This involves identification of various
risks associated with a project and assessment
thereof. However, the most important step lies in
arranging measures to mitigate such risks including
an effective insurance program. Let us take a look at
certain important risks from the perspective
mentioned here.
Foreign exchange risk

A developer can borrow locally or from foreign
institutions and the conditions with regard to security
will be same. However, the borrowers exposure to
certain risk will be different if the source of debt is
overseas. There are mainly two types of risks that a
borrower needs to be aware of while borrowing from
a foreign lender.
A foreign exchange risk is inherent in foreign loans
due to the fact that foreign currency tends to be
relatively strong compared to Nepalese currency. This
47
risk materializes with the devaluation if revenue is

denominated in local currency while having to service
the loan denominated in foreign currency. Similarly,
this risk also does manifest in rising cost of imports.
This risks can be mitigated by either (a) having the
loan denominated in local currency, or (b) rate of
revenue denominated in foreign currency. In the case
of increase in the cost of imports an insurance
coverage against cost escalation would mitigate this
risk.
Repatriation risk
Another risk associated with foreign loan is
repatriation risk. This becomes of greater concern
to a lender if it is not able to repatriate the proceeds
of debt servicing. Generally, governments of
development countries, in their quest to attract
foreign investment, have enacted legislation
guaranteeing repatriation. If such a guarantee is not
available, either the lender will not make a loan or
will make it subject to exorbitant rate of interest. In
Nepal repatriation is guaranteed by the Foreign
Investment and Technology Transfer Act of 1992 and
the Electricity Act of 1992 for hydropower projects.
A foreign equity investor is also subject to this risk.
Sovereign risk (country risk)

A foreign entrepreneur investing in Nepal is
exposed to risk such as those associated with the
governments credit worthiness, the possibility of
confiscation, expropriation and nationalization (CEN
Risk), changes in the local political environment and
enforceability of contracts. These types of risk are
known as sovereign and country risk. The Multilateral
Investment Guarantee Association (MIGA), a member
of the World Bank group, ensures against such risk for
a fee. However, the availability of such insurance is
limited only to foreign investors.
Interest rate risk

It is now time we also touched upon the concept
of interest rate risk. Lenders offer two kind of interest:
(a) floating rate and (b) fixed rate. Floating rate entails
changes in the interest rate during the term of the
loan, thereby introducing an element of uncertainty
or risk for the borrower. Banks prefer floating rate as
they need to be able to adapt to changes in financial
market as well as cover their own exposure to the
vagaries of changing interest rates (including bank
rates). For a developer, fixed rate is the best way to
mitigate this risk. However, banks tend to add a
margin to the then prevalent rate to cushion their
own risk.
Inflation rate
The real value of a unit of nominal currency tends
48
to depreciate over time with inflation. Even hard

currency is subject to this risk. Escalation in the rate
of tariff is the only answer, short of trying to hold
down the inflation with ones bare hands!
Legislative change risk

Here we are talking about the risk of changes in
the countrys laws that (a) increase rates and taxes or
other expenses and liabilities, (b) reduce project
revenues, or (c) reduce the value of the assets. Such
changes adversely impact the viability of a project.
Generally, an entrepreneur has to take such risk.
However, it can also be mitigated by passing the
impact through to the utility provided that the utility
is amenable to such a pass through.
Market risk
It is common knowledge amongst engineers that
energy requires a guaranteed market due to the
constraints with regard, primarily, to storage and
transmission. A simple way to mitigate this risk is to
sign a long term Power Purchase Agreement (PPA)
with the utility.
Revenue risk
A developer can have a long term PPA, but such a
PPA may not ensure plant factor at a specific level if
the utility accepts delivery of the energy at its
pleasure, mainly in the case of a run-of-the-river type
project lacking poundage. This means there will not
be a guaranteed stream of revenue to the project in
order for it to meet its financial obligations with regard
to (a) operation, maintenance and repairs, and (b)
debt servicing. A take or pay type of PPA mitigates
this risk.
However, with respect to both market risks and
revenue risk, it needs to be noted that electric energy
is already being traded in spot markets in Western
Europe.
Payment risk
This risk emanates from the lack of
creditworthiness on the part of the utility, the buyer
of the energy. In many developing countries, stateowned utilities do not have established credit
histories and also suffer from records of poor
management, over-employment, high leakage
(technical or otherwise), etc.
Developers are known to ask the government to
issue a counter guarantee to cover the payment risk.
This basically entails a government standing surety
to the fact that the utility pays its dues to the
developer in time, and in the case of a utilitys failure
to meet its obligations the government is required to
promptly make payment to mitigate the delinquency
of the utility. Now-a-days multilateral funding
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agencies like The World Bank take a dim view of a

government issuing a counter guarantee. Having a
letter of credit put in place by the utility with the IPP
as the beneficiary is another way of mitigating this
risk over the short term.
Construction risks
Time and cost overrun risks are one group of
construction risks. Time overrun risk results in loss
of revenue and may also raise the cost due to inflation.
It also raises the total amount of interest during
construction of the debt financing and may even
attract penalties for late delivery of energy. Other
construction risks are force majeure risk,
socioeconomic/environmental risk, geological risk,
performance risk, design risk, etc. One can arrange
insurance coverage against such risk like CAR, TAR,
EAR, professional liability, etc., including advance
loss of profit insurance that can be complemented by
signing a fixed price turnkey contract (or EPC
contract) and incorporating a clause for imposition
of liquidated damages on the contractor for delayed
substantial completion or commissioning of the plant.
Hydrological risk
The take or pay nature of the PPA guarantees
that all energy produced by a plant, depending on the
availability of water, irrespective of whether the
season is dry or wet, shall be turned into cash.
However, if there is no water to generate energy due
to the change in the level of precipitation, climatic
reason or change in the hydrology of the catchments
area, then these projects are on there own. This risk
emanates from the fact that seasonal rainfall patterns
affect the amount of water available to a hydropower
plant and generation may fall below contract levels in
any season, thus threatening the revenue stream of
such projects. Obviously, a dry year will be an
unmitigated disaster for a hydropower plant. The most
effective way to mitigate hydrology risk is to gather
hydrological data for reasonable number of years in
the past and design the project accordingly, after
having selected a project with better hydrological
potential as well as information.
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Conclusion
There is no need to be frightened by the list of risks
dealt with above, as most of the risk can be mitigated
in some way or other. There is an old saying: no risks,
no gain. The entrepreneurship lies in taking risk and
also being able to manage it. If an investor is able to
do so then there is ample opportunity to invest in
hydropower sector in Nepal. However, necessary
measures must be undertaken to mitigate the
constraints in financing power sector, described
above.
Ratna Sansar Shrestha, FCA is a management

professional specializing in financial/economic, legal and managerial aspects of hydropower projects,
renewable energy technologies, environmental enterprises, carbon trading, etc. He is also a Fellow of
the Institute of Chartered Accountants of Nepal and
a corporate lawyer accredited to the Nepal Bar Council. Currently he is a member of board of directors of
Everest Bank Ltd. as well as Butwal Power Company
Ltd. He also worked as a member of board of directors of Nepal Electricity Authority from December
2002 till August 2004. He is also attached to
Kathmandu University School of Engineering as a
visiting faculty in its Master of Engineering program.
End notes
1. As these are ballpark numbers converted into US
Dollars from Nepalese currency, there may be
minor differences.
2. One of the main foreign equity investors in the
Bhotekoshi Project has already sold its shares to
an investor in Nepal.
3. The breakdown of this 40% has been given as: 33%
covered by Nepal Electricity Authority, 2%
covered by alternative modes of electrification,
and 5% electrified in unexplained way(s). But
according to the data published by NEA, its
coverage is less than 25%.
4.
The generally accepted debt equity ratio is 70:30.
49
Three Gorges Dam Project: An Introduction

Pranav Acharya
Abstract. The Three Gorges Dam Project (TGDP) on the Yangtze River in Hubei Province is touted as the long term
solution to Chinas increasing energy and agricultural needs. TGDP, with a 1084 km2 reservoir of 39.3 billion m3
capacity, will be the largest multipurpose water conservancy project ever built in the world. The main structures of
the project are dam, hydropower stations and navigation facilities. After studying fifteen alternative sites and
approval of Environmental Impact Statement (EIS) in February 1992, the construction of the dam began in 1994 with
an expected duration of 17 years.
Annual reduction of 40-50 million tons of coal consumption by providing 85 billion kilowatt hours of electricity,
protection of 1.6 million hectares of agricultural land from floods and considerable improvement of navigation and
tourism sector are the major anticipated benefits of TGDP. However, the proposed benefits put significant pressure
on ecological and socio-cultural environment of the TGDP area. Relocation and resettlement of over 1.3 million local
populations, inundation of several sites of historical importance, deforestation and loss of biodiversity including
several endangered species of flora and fauna across a region of 58,000 km2, increased sedimentation, water
pollution and potential earthquake risks are the major adverse consequences of TGDP.
Key words: Three Gorges Dam Project (TGDP), environmental impacts, alternatives, resettlement, biodiversity,
ecology, China
Project background
nternational advocates of hydropower have

long argued that hydroelectric dams are a perfect
example of renewable or sustainable development,
largely because of the use of water as their fuel and
the fact that dams employ technologies that are nongreenhouse gas emitting ( Sullivan 1999). In China,
the government has adopted the hydropower
development policy, in part, to stem the countrys
enormous dependence on coal and to avoid
substantial increase in oil imports. The Three Gorges
Dam Project (TGDP) is one of the several hydroelectric
projects under construction that are touted as long
term solutions to Chinas increasing energy and
agricultural needs.
The concept of building a much controversial and
optimistic dam across the worlds third longest river,
Yangtze (6300 km) in Chinas Hubei Province had its
beginnings in the early 1900s, when the Chinese
Supreme leader Sun Yat Sen suggested to build a dam
at the Three Gorges in 1919. The advertised objectives
of TGDP, apart from electricity production, is
providing long-term solutions to the perennial
problem of flooding on the Yangtze valley, which has
caused the loss of thousands of lives and property
over the past century and to improve navigation
conditions in Yangtze river. For example, the major
floods in the river in 1931 and 1954 caused 140,000
and 30,000 deaths, respectively, and disrupted the
50
entire economy of the region for some time (ibid.:302303).

The construction of the dam began in 1994, after
the TGDP was voted on and passed by the National
Peoples Congress in April 1992. The government has
planned the construction work in three phases,
starting from 1993 with expected completion in 2009.
After the completion, Three Gorges will be the
worlds largest dam ever built and the project will have
three major components: a dam, a hydropower
station and navigation facilities. The 181m high and
1.9 km long dam will create a reservoir of 1084 km2,
with an average width of 1.1 km expanding over 600
km. The reservoir will contain 39.3 billion cubic meter
water and will be able to generate 18.2 million KW
power. The official estimation of the project cost is
about US$ 24.65 billion, which is debatable because
the unofficial estimates claim that total costs will rise
over US$ 75.0 billion.1
Proposed alternatives
From the 1950s, some alternatives to TGDP were
considered, when the Chinese Government formally
adopted the concept for flood control. Construction
of smaller dams across the river, as an alternative of
such large dam was discussed in the 1950s, arguing
that China could not afford such a large scale and costly
project. A small attempt was also taken to build
smaller dams on Gezhouba, but was stopped because
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of technical problems and cost overruns. In 1980s

also, alternatives of damming upstream and
tributaries and lowering the dam height were proposed
to mitigate the effects of inundation and resettlement
to some extent. Finally, after the study on 15
alternative sites, the dam site for TGDP was finally
determined at Sandouping because of its stable
geologic condition and other favorable factors. 2
However, the tragedy with the alternatives was
that they were never taken seriously nor considered
officially. Instead of looking for viable alternatives,
concerns were raised addressing technical, social and
environmental issues of TGDP.
Baseline studies before the project

The preliminary studies of TGDP started in 1950, when
the Chinese Academy of Science began to study some
of the environmental issues associated with the
project. Preliminary findings were included in The
Report on the Key Points of the Yangtze Valley
Planning and in The Report on the Key Points of the
Preliminary Design of the Three Gorges Project. The
environmental issues began to take on high concern
after the establishment of Yangtze Valley Water
Resources Protection Bureau in 1976, which came up
with an Environmental Impact Statement (EIS) of the
TGDP in the 1980s. In addition, in 1984, the State
Science and Technology Commission formally
commissioned a study called The Studies on the
Environmental Impact of the Three Gorges Project
and Its Countermeasures, as one of the major
components of the projects scientific research
program. The environmental studies continued until
1991 through different agencies and the EIS was
finished in December 1991, and then pre-examined
by the Ministry of Water Resources in January 1991
and finally approved by National Environmental
Protection Agency in February 1992.
In summary, the principal findings of the
feasibility and environmental studies of TGDP
concluded that the project objectives of flood control,
hydroelectric power and navigation were significant
benefits compared to some adverse environmental
and social impacts.
Anticipated benefits
Hydroelectric power, flood control, navigation and
tourism are the major sectors in which TGDP will
benefit China. When completed, the dam will provide
85 billion kilowatt hours of electricity, approximately
10% of the countrys total capacity as of 1993, thereby
eliminating the annual burning of 40-50 million tons
of coal in steam power plants (Sullivan 1999:303).
This will help significantly in reducing the emission of
green house gases like sulpher dioxide (SO 2 ) and
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carbon dioxide (CO2), thus nullifying some effects of

global warming.
It is projected that, normal pool level of dam with
flood storage capacity of 22.1 billion m3, will lessen
the frequency of big downstream floods from once
every 10 years to once every 100 years. This will help
in saving the lives of 15 million people and protecting
1.6 million hectare of agricultural land from flood.4
The navigation capacities on the river will be
improved and the economic benefits will include a
decrease in shipping cost on the river by upwards of
40% and the ability of 10,000 ton ships to ply the
smooth waters of the reservoir to inland cities, most
notably Chongqing, Sichuan (Sullivan 1999:303).
In addition to these, the world largest man made
dam structure, together with its landscape, will
attract more tourists, which will ultimately uplift the
economy of the area. This will also serve as a magnate
for investment, especially in industry, in a region that
has lagged behind the rest of the country.
Adverse consequences
Despite of its several positive impacts on Chinese
economy, the TGDP has significant adverse impacts
on the social and biophysical environments.
The costs of resettlement and environmental
degradation will be enormous. Resettlement of 1.3 to
1.9 million people and the inundation of about 30,000
ha of river valley land in a rich orange growing region
would cost more than one third of the total project
cost. Resettlement will also create social
disintegration and if it fails, many people will become
reservoir refugees. In addition, the TGDP will, either
completely or partially inundate two cities, 11
counties, 140 towns, 326 townships and 1,351 villages,
which will create the huge problem of garbage, raising
serious health concerns. 5 The reservoir will also
submerge many archeological and cultural sites of
national and global importance and valuable
monuments of ancient history will be lost forever.
The dam will alter the natural environment, and
the ecological effects will be devastating, across a
region of about 58,000 km2. Construction of the dam
will affect the riverine ecosystem and the reservoir
will create as many as 100 new islands causing
significant habitat fragmentation, which will seriously
affect many species of flora and fauna. Heavy logging
and deforestation will further complicate the problem
of habitat and biodiversity loss.6
In addition to these, the TGDP will affect
endangered animal species, some of which are native
to Yangtze basin. They include the giant panda,
Chinese tiger, Chinese alligator, the Yangtze dolphin,
the Chinese sturgeon and the Siberian crane.7
Finally, the TGDP will also cause the increase in
local water pollution, increase in sedimentation
51
deposition due to increased deforestation and soil

erosion, and the potential hazards of earthquakes
because of sudden storage of a heavy water load.
Ecological monitoring
Systematic tracing of environmental and ecological
monitoring in the TGDP is required to mitigate the
adverse ecological impacts. A properly implemented
Mitigation Management and Monitoring Plan
(MMMP), also known as an Environmental
Management Plan (EMP), during construction and
operation phase of the project is the backbone of
ecological monitoring. The MMMP should formulate
an authorized and comprehensive monitouring
system for both biotic and abiotic components of
ecology in the area before carrying out the field
monitoring.
Long term ecological monitoring includes
hydrological characteristics of the river (water flow,
period, etc.), sedimentation in the reservoir
(sediment load, deposition, etc.), water quality
(dissolved oxygen), transparency, temperature, etc.),
air quality (temperature, pollutants, etc.), aquatic
biota (richness, migration patterns, adaptation, etc.),
terrestrial flora and fauna (adaptation, effects of
habitat fragmentation, isolation, etc.), and the related
micro-ecosystems of tributaries and watershed.
The monitoring of these parameters is extremely
important for implementing the proposed mitigation
measures in a sustainable way. The ecological
knowledge acquired through systematic monitoring
will provide information for long term analysis and
adaptive mitigation management approach.
and has conducted environmental impact studies and

mitigation management assignments on several
hydropower projects in Nepal. He left the NEA to pursue a
Master of Environmental Management (MEM) degree at
the National University of Singapore. The current study was
done as an assignment to fulfill the requirements of the MEM
course. The author acknowledges the Asian Development
Bank Japan Scholarship Program for financial support to
complete of his studies.
Corresponding address: pranavacharya@gmail.com
End notes
1. URL: www.chinaonline.com/refer/
ministry_profiles/ threegorgesdam.asp
(accessed 20 November 2004).
2. URL: www.chinahighlights.com/ yangtzecruise/
dam_structure.htm (accessed 21 November
2004).
3. URL: www.ywrp.gov.cn/english/sxquestion/2.htm
4. URL: www.chinahighlights.com/yangtzecruise/
2004).
2004).
2004).
7. URL: www.american.edu/ted/THREEDAM.htm
References
Pranav Acharya is a forestry and environmental
professional and associated with Environmental Resources
Group (ERG Nepal). The author has worked as an
environmentalist for the Nepal Electricity Authority (NEA)
52
Sullivan, L.R., 1999, The Three Gorges Dam and the issue of
sustainable development in China, Ch.13 in N.J. Vig and R.S.
Axelrod (eds.), The Global Environment: Institutions, Law,
and Policy, Washington, DC: Congressional Quarterly (CQ)
Press.
HYDRO NEPAL
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Author Guidelines
Publication Dates, Submission Deadlines and Address
Hydro-Nepal is published twice yearly, in June
and December. Submission Deadlines:
Manuscripts (professional and review articles,
research papers, opinion pieces):
March 1 for June issue, September 1 for
December issue.
Shorter items (project updates, news updates and
announcements):
May 1 and November 1.
Send all manuscripts for initial review (to
determine if they are appropriate for the journal)
to Associate Editor, Dr. Rabin Shrestha at
rabin@mos.com.np.
Contribution Categories
Topics: WATER
RESOURCES,
ENERGY,
ENVIRONMENT, HYDROPOWER DEVELOPMENT, and
related fields.
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developmentsfocused and original.
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HYDRO NEPAL
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53
Style Guide
Page 1 (Title Page-): Full title of the manuscript,
author(s) name(s), degree and institutional
affiliation of each author, and contact email
address of the corresponding author.
Page 2: Title, Abstract (200 word limit), Key Words
(limit 5) and Acknowledgments (if any). Keep
Acknowledgements brief: one or two sentences
only. Financial assistance may be stated and/or if
the study was undertaken in partial fulfillment of
a degree or as a specific project activity.
Page 3 onwards: Full text. Put the title of the first
page of text (but not on following pages), and no
Headers or Footers.
Tables and Figures. Separate pages, one to a page.
(Indicate where to place each in the text; do not
place them in the text.)
Text Format: Use A4 paper size, 12 pt Times New
Roman font, 1-inch margins top and bottom, left
and right. Do not right justify the text; keep a
ragged right margin.
Headings and subheadings. Same font as for text.
Do not number headings. Capitalize the first word
only (and no colon). Indent subheadings and subsubheadings, as follows:
Application process for generation/transmission/distribution
[= Main heading: flush left]
License application process for hydropower projects
>1,000 kW [= Subheading: indent]
Survey license [= Sub-subheading: double indent]
Spelling: American spelling preferred, but British
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consistency throughout.
Numbers one through nine are spelled out;
numbers 10 and higher are given in numerals
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so forth).
Costs, if given in Nepalese rupees should be
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equivalent (e.g., either 10,000 USD, or
US$10,000).
No periods in frequently used abbreviations or
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Spell out acronyms at first use: Asian
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Italicize foreign words (e.g., in Nepali, Hindi,
54
French, Latin, etc.). Do not italicize proper nouns

such as names of villages (e.g., Beltari, Mirmi),
rivers (e.g., Modi Khola) or districts (e.g.,
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used in English (e.g., Ganga or Ganges, Himalaya,
NRs [Nepalese rupee], Terai, etc.).
Use Nepali for the language or in reference to
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Quotations: Use single quotation marks (. . .)
for quotations and to highlight special terms, and
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If copied from another source, give source in
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Figure 4. Sketch of Uncertainty and Risk
Analysis Model for a tunnel project (Panthi 2006)
Figure 8. Severe squeezing at Modi pressure
tunnel (left) and Kali Gandaki headrace tunnel
(right) (photo courtesy of Himal Hydro 2001 and
Impregilo SpA 1989)
Table 2. Estimated total hydropower potential of
Nepal (based on MOWR 2003)
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(no comma) or date:page number(s) (no space after

colon), each separated by a semi-colon, and all
within parentheses. Examples: (ADB 2004; Cernea
and McDowell 2000:45-47; Panthi and Nilsen 2005:1213), or (see Swartz 1968; Lemarchand and Legg 1972;
Scott 1976; Schmidt et al 1977; Popkin 1979), or (adapted
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Political clientelism and development: A
preliminary analysis, Comparative Politics,
4(2):149-178.
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Examples of Reference styles by type (for others

refer to the Chicago Manual of Style)
Reports, Policy Statements, Plans, Legal

Papers, Government Documents
ADB (Asian Development Bank), 2004,
Completion Report on the Kali Gandaki A
Hydroelectric Project (Loan 1452-Nep),
Manila, Philippines: ADB.
HH (Himal Hydro), 2001, Construction Report.
Kathmandu: Modi Khola Hydroelectric Project.
Unit), 2002, Impoverishment Risks Monitoring
and Management in Kali Gandaki A
Hydroelectric Project: A Social Synthesis
Report, Beltari, Syangja District, Nepal:
KGEMU, Morrison Knudsen International and
Kali Gandaki A Hydroelectric Project.
MKI (Morrison Knudsen International), 1996,
Mitigation Management and Monitoring
Plan, Kathmandu: Kali Gandaki A
AssociatesMorrison Knudsen (USA),
Norconsult International (Norway) and IVI
International Ltd. (Finland).
NEA (Nepal Electricity Authority), 2002, Project
Completion Report, Vol. IV-A: Geology and
Geotechnical Report, and Vol. V-C: Geological
Drawings and Exhibits, Kathmandu:
Kaligandaki A Hydroelectric Project.
NPC (National Planning Commission), 2003, Tenth
Plan, Kathmandu: Government of Nepal. URL:
www.npc.gov.np (unofficial translation of 4
October 2004).
Books
Cernea, M.M. and McDowell, C. (eds.), 2000,
Risks and Reconstruction: Experiences of
Resettlers and Refugees, Washington, DC:
The World Bank.
Mahapatra, L.K., 1999, Resettlement,
Impoverishment and Reconstruction in
India. New Delhi: Vikas.
Book Reviews
Marsden, Simon, 2004, Book Review,
Environmental Impact Assessment: Law and
Practice by T. Tromans and K. Fuller (London:
LexisNexis Butterworths, 2003), Impact
Assessment and Project Appraisal, 22(1):7981.
Wiener, Jonathan Baert, 2005, Book review,
Catastrophe: Risk and Response by Richard
55
A. Posner (Oxford University Press, 2004), and

Collapse: How Societies Choose to Fail or
Succeed by Jared Diamond (Viking Books,
2005), Journal of Policy Analysis &
Management, 24:885.
Masters Thesis, PhD Dissertation

Panthi, K.K., 1998, Direct Link between Hetauda
and Kathmandu: Evaluation of Proposed
Road Tunnels, Nepal, MSc thesis, Trondheim,
Resources Engineering, Norwegian University
of Science and Technology.
Panthi, K.K., 2006, Analysis of Engineering
Geological Uncertainties Related to
Tunnelling in Himalayan Rock Mass
Conditions, PhD dissertation, Trondheim,
Resources Engineering, Norwegian University
of Science and Technology (ISBN 82-471-78265). URL: www.diva-portal.org/ntnu/
abstract.xsql?dbid=711.
Articles in Journals or Books

Baral, L.R., 2000, Clash of values: Governance,
political elites and democracy in Nepal, pp.5489 in Domestic Conflict and Crisis of
Governability in Nepal, D. Kumar (ed.),
Kathmandu: Tribhuvan University, Centre for
Nepal and Asian Studies.
Cernea, M. Michael, 2007, Financing of
development and benefit-sharing mechanisms
in population resettlement, Economic and
Political Weekly, 42(12):1033-1046. URL:
www.epw.org.in.
Muggah, Robert, 2000, Through the
developmentalists looking Glass: Conflictinduced displacement and involuntary
resettlement in Colombia, Journal of Refugee
Studies 13(2):133-164.
Panthi, K.K. and Nilsen, B., 2007, Uncertainty
analysis of tunnel squeezing for two tunnel
cases from Nepal Himalaya, International
Journal of Rock mechanics and Mining
Sciences, 44:67-76.
Sullivan, L.R., 1999, The Three Gorges Dam and
the issue of sustainable development in China,
Ch.13 in N.J. Vig and R.S. Axelrod (eds.), The
Global Environment: Institutions, Law, and
56
Policy, Washington, DC: Congressional

Quarterly (CQ) Press.
Proceedings, Conference Paper

Panthi, K.K. and Nilsen, B., 2005, Significance of
grouting for controlling leakage in water
tunnels: A case from Nepal, in Proceedings of
the ITA-AITES 2005 World Tunnelling
Congress and 31st ITA General Assembly
(Istanbul), pp.931-937.
Regmi, S.K. and Sitaula, T.P., 2003, Krishnabhir
slide: A case study, in Proceedings of the
International Seminar on Sustainable Slope
Risk Management for Roads (Kathmandu,
March), Kathmandu: Department of Roads
(DOR), Government of Nepal, in association
with the Permanent International Association
for Road Congress.
Internet Journals, Blogs and other

Electronic Material
Caudwell Xtreme Everest (CXE), 2007, Everest:
Science from the Western Cwm, Nature
Newsblog (30 March). URL: http://
blogs.nature.com/news/blog/2007/05/
everest_science_from_the_weste.html#more.
Marsden, Simon, 2004, Response to Dr Stephen
Dover, Policy assessment for sustainability:
Institutional issues and options (position
paper for the Joint Academies Committee on
Sustainability Project on Integrated
Multidisciplinary Approaches to Sustainability
Assessment). URL: www.naf-forum.org.au/
papers/Institutions-Rejoinder-Marsden.pdf.
Rand, C., 2007, Perspectives on our changing
climate, Online Journal (25 April). URL: http:/
/onlinejournal.com/artman/publish/
article_2011.shtml.
Wiener, J.B. and Kornish, L.J., 2004, Stopping the
next flu pandemic: The vaccine shell game
(op-ed essay, November).
URL: www.law.duke.edu.
Offprints
The corresponding author will receive 2 offprints.
Be sure to include your a mailing address in
correspondence.
HYDRO NEPAL
VOL 1
ISSUE 1
JUNE 5, 2007
Briefings
Project Updates
The Bujagali Hydropower Project
Upper Tamakoshi Hydroelectric Project
An acute electricity crisis is impacting the livelihoods

of millions of Ugandans and threatens the countrys
development.
Hospitals, schools, businesses, and residences
suffer dailypower shortages, which have stunted
Ugandas economic growth by an estimated one
percent of the countrys gross domestic product.
The Bank has approved US$360 million in loans
and guarantees for the Bujagali Hydropower Project,
an integral component of Ugandas strategy to close
an energy supply gap that seriously constrains social
and economic development in the country.
(Source: The World Bank)
Upper Tamakoshi Hydroelectric Project is a run-ofriver type power project with daily peaking pondage.
The Norwegian firm of Norconsult AS submitted a
bankable feasibility study report of this project under
the grant assistance of Royal Norwegian Government
in May 2005. The headwork site of this project is
located in Nepals Dolakha District at Lamabagar VDC
(Village Development Committee), with a power house
in Gongar (Ward 5) of Lamabagar VDC.
This project has many attractive features such as:
300m high natural dam,
good geology,
high firm flow,
very low sediment, and
minimum environmental impact.
The project will make use of 820m gross head with
the aim of generating a maximum output of 309 MW
and an average annual energy of 1,737.7 GWh.
According to the NEAs Generation Expansion Plan,
this project should be commissioned by 2012 AD to
meet Nepals future demands for electrical energy.
This project has very low specific energy cost and is
planned to be implemented under a public-private
partnership.
The EIA of this project has been carried out
separately for generation and transmission. The EIA
has identified many beneficial environmental effects
such as fishery resources at intake pond, land
reclamation, flood control at Lamabagar, community
development works, employment opportunities and
improve access etc. The adverse impacts of the
project of this size are minimal and can be
appropriately mitigated.
The estimated cost of this project as per the final
feasibility report is 340 million USD, including access
road and transmission lines. The unit price of energy
is calculated as c. USD 2.6 kWh at present.
Recently Nepal Electricity Authority has made a
contract with Norconsult AS, Norway and Lahmeyer
International GmbH, Gerany (J/V) for detail design
study of the project.
The major hydropower projects of Nepal now

in planning and study phases are briefly
described below.
Chameliya Hydroelectric Project

Chameliya Hydroelectric Project is a six hour daily
peaking run-of-river scheme with an installed
capacity of 30MW and average annual energy
generation of 184.21 GWh. The project is located at
about 950 km west of Kathmandu in Nepals
Chameliya valley of Darchula District in the Far
Western Development Region. Detailed design and
tender document preparation were completed in
December 2001 with grant assistance from the
Korean International Co-operation Agency
(KOICA).
The projects EIA study, as per the Environment
Protection Rules of 1997, and final draft EIA report
of the 132 kV transmission line alignment have been
completed. In addition, the IEE study of the 35 km
long 33 kV transmission lines, from Gothalapani of
Baitadi to Balanch powerhouse site, for the
construction power supply, has also been
completed.
The project cost as per the detailed design
report of December 2000 is 74.90 million USD,
including the cost of constructing the 132 km long
132 kV transmission lines. The project is under
construction with the funding of GoN and NEA.
Issuance of Survey License

The Ministry of Water Resources of GoN has
granted the survey license to Statecraft Norfund (SN
Power) for the proposed Tamakoshi II and
Tamakoshi III.
HYDRO NEPAL
VOL 1
ISSUE 1
JUNE 5, 2007
Tamakoshi II, a run-of-river type project has a

capacity of 203MW and Tamakoshi III, a storage
type, has a capacity of 275MW. SN Power has a plan
to produce electricity from the proposed project
by 2015 and will sell the energy to Nepal and excess
energy to India.
57
West Seti Hydropower Project

The proposed West Seti Hydropower Project of
750 MW capacity is located in Far Western Nepal,
on a loop of the West Seti river, approximately 82
km upstream from its confluence with the Karnali
river. Initial power purchasing agreement has
been made with Power Trading Corporation of
India by Snowy Mountain Engineering
Consultancy (SMEC), West Seti Hydroelectric
Corporation Limited. Asian Development Bank
has shown interest to invest in this roject
The main project features include:
195m high concrete face rock fill storage
da-m and 1,989 ha reservoir,
10m diameter, 6.7 km long headrace tunnel,
power station located 19.2 km downstream
of the dam and 300m underground,
housing five 150 MW rated turbine
generator units, transformers and a
switching station,
620 m long tailrace tunnel,
re-regulation weir located 6 km downstream from the tailrace outlet,
100.3 km long 400 kV double circuit transmission lines, from the power station to
Dhangadhi on the Nepal- India border,
permanent access roads totaling 20.3 km.
Kulekhani III Hydropower Project

Kulekhani III Hydroelectric Project is located about
40 km south east of Kathmandu in Makwanpur district
of Nepal. The proposed headworks site is located at
Bhainse village development committee. The project
will utilize the net head of 107m and a design discharge
of 15 cumecs to generate 14 MW of peak power. A 4.5
km long headrace tunnel, surge tank and surface power
house are the main components of the project. The
generate power will be evacuated to Hetauda through
the second circuit strung on the KL-II Hetauda
existing 132 kV line and a 500 m long new 132 kV
line.
The EIA study of the project has been approved
by the concern ministry. The social and
environmental impacts of the project are minimum
with only 25 ha of agricultural land and a few
households being affected. The project has been found
technically, financially and environmentally viable
NEA is planning to implement the project using its
own financial and human resources.
The project cost is estimated at US $ 27060
million. The project will be commissioned to meet
the peak demand of dry season by 2009 The annual
energy output of the project will be 40.82 GWh. The
detailed design of the access road and the bridge over
the Rapti river is under process.
58
News Update
IHA Blue Planet Prize
The 5 MW Andhikhola Hydel and
Rural Electrification scheme of
Butwal Power Company of Nepal
won the IHA Blue Planet Prize
2005 for excellence in socioeconomic benefits and capacity
buildings. IHA also named 185 MW
Arrow Lakes and 16 MW Sechelt
Creek in Canadas British Columbia
Province for social, environmental and technical
excellence.
ANNOUNCEMENTS
June 421: Training program on Hydropower
Development and Management sponsored by
International Centre for Hydropower. Location:
Trondheim, Norway, Contact Email: mail@ich.no.
More Info: www.ich.no.
July 2326: WaterPower XV Location:
Chattanooga, TN, USA. More Info: www.hcipub.com/
wp/index.asp.
Aug. 1218: World Water Week 2007 sponsored by
Stockholm International Water Institute. Location:
Stockholm,
Sweden.
More
Info:
www.worldwaterweek.org.
From 30 August: The Process of Social Impact
Assessment sponsored by International Centre for
Hydropower, Norway. Location: Internet Online
Training Course. Contact: mailto:lf@ich.no. More
Info: www.ich.no, go to SIA2007.
27 Aug13 Sept.: Training course on Hydropower
and the Environment (HE2007) sponsored by
International Centre for Hydropower. Location:
Trondheim, Norway. Contact Email: lf@ich.no. More
Info: www.ich.no.
Oct. 2224: Hydro Sri Lanka: International
Conference on Small Hydropower. Location: Kandy,
Sri Lanka. Contact Email: lf@ich.no. More Info:
www.hydrosrilanka.org.
Nov. 1923: Training program on Hydropower
Financing and Project Economy (HFPE2007)
sponsored by International Centre for Hydropower.
Location: Oslo, Norway. Contact Email: lf@ich.no.
More Info: www.ich.no.
HYDRO NEPAL
VOL 1
ISSUE 1
JUNE 5, 2007

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Volume 1

Journal of Water, Energy and Environment

Kali Gandaki A Hydroelectric Project in Environmental Perspectives

IRR: An Operational Risks Reduction Model for Population

Legal and Policy Environment for Private Sector Participation in the

Three Gorges Dam Project: An Introducion

Hydro Nepal is published by

Hydropower, a Good Alternative for Nepal: Challenges and Approaches

he adverse impacts of hydropower

hydropower a good alternative for power generation

workers who have worked with international

routes are of paramount importance in successfully

Reasonable and planned sediment loading into the

migration and primary (old growth) forests.

affected fishery resources wherever hydropower

But this should be tempered with more information,

completed successfully. The project responded to

need to be spelled out. Reports should be edited by a

taking of land, buildings and other resources, the

Infrastructure: Some budget allocations

Compliance: Many of the issues that local

John C. Garcia is a Systems Ecologist and Principal of

(prepared for the HydroVision conference held in

in the Trans-Himalayan Countries, T. Petr and D.B.

WCD (World Commission on Dams), 2000, Dams and

Kali Gandaki A Hydroelectric Project in Environmental Perspectives

ydropower is one of the cleanest,

Development Bank (ADB) and Overseas Economic

Figure 2. Boat transportation in project reservoir

Jaipate is about 8 km long.

President to Board of Directors, 1996

be provided with appropriate, agreed upon

Reduction of white water rafting in Kali

Environmental monitoring and mitigation

Social research and impacts studies

Resettlement and rehabilitation of Bote

Restriction on hunting and poaching during

Regular celebration of World Environment

Environmental aspects during operation phase

Release of 4 m3/s minimum of water during

as the use of alternative sources of energy has

18. 225 people were employed during the

environmental impacts due to project construction

Rajendra P. Thanju is Deputy Director (Economist) of

1 Professor Michael M Cernea and Dr. Donald Graybill

3 PAF: Project Affected Families denotes the affected

The Dynamics of Social Inequality in the Kali Gandaki A Dam Project in

Introduction: Dams, development and social

ne of the arguments in the implementation of

the ruling classes enjoying the benefits.

The anthropology of patronage (clientelism)

status, authority and influence, while the client is

competing rational political economy thesis in his

Dependent variable: Outcomes

by interventions and resource conditions and usage.

environmental equity of natural resource sharing

General extent of the Kali Gandaki A dam

Empirical evidence to theoretical

One of the first dismantling of local power