Nepal, a landlocked country between two Asian giants China and India, is one of the richest countries in terms of hydropower potential.
Nepal, a
landlocked country between two Asian giants China and India, is one of the
richest countries in terms of hydropower potential. As fast-growing economies,
it is only natural that both of Nepal’s neighbors have high-energy demands.
This is where Nepal’s huge water resources and immense hydroelectric potential
come into play in the geo-strategic equation between its two neighbors.
Due to
Nepal’s misgivings about Indian intention vis-à-vis its water resources,
hydropower sector remains an extremely sensitive topic in Nepal-India
relations. In the past, hydropower agreements between the two countries have
been a victim of over-politicization. Nepalese leaders especially in the
opposition camp have portrayed Indo-Nepal agreement on water resources as
machinations to ‘sell Nepali rivers to India’. In general, Nepalese public see
India’s involvement in Nepal’s hydropower sector with suspicion. It is
generally believed that, India is “more interested in controlling Nepal’s water
resources” than “in the development of the country’s hydropower potential”.
While it
is generally believed that Nepal’s water resource can go a long way in meeting
growing energy demands in India, Dipendra Bhattarai, an energy expert has a
different perspective. He has argued that Nepal’s hydropower is not price
competitive compared to Indian cost of production of renewable energy from
solar systems and therefore he casts doubt on rationale for India’s purchase of
Nepal’s hydroelectricity. This does raise the pertinent question of what is
that India actually wants out of Nepal’s water sources.
China
meanwhile sees Nepal’s water resources from economic perspective. One Chinese
scholar has maintained that Nepal’s immense hydropower potential provides
opportunities for investment and joint ventures. This can prove to be
beneficial especially for Tibet region which could mobilize its economic, human
and technological resources in harnessing Nepal’s hydro-potential which in turn
will benefit Tibet’s economy.
For
Nepal’s surplus electricity, India is without a doubt a readymade and by far
the biggest market. Bangladesh also presents an accessible option for Nepal’s
energy export in South Asia. In addition, China’s Tibet region can also be a
potential market in the future. While topography presents a significant
challenge for Nepal’s energy trade to China, energy export to Bangladesh not
only requires agreement with India but also use of its transmission line.
Nepal’s
total electricity generation capacity in the last FY 2022/2023 stood at 2,684
MW and has already started exporting 452 MW of surplus energy during wet season
to India. For Nepal to harness its hydropotential, it is imperative that Nepal
attracts big investment in this sector that has the potential to significantly
alter Nepal’s economic landscape. If Nepal can harness even half of its
practically feasible hydroelectric generation capacity of 42,000 MW, not only
can Nepal establish itself as a hydropower hub in South Asia but it could also
use its hydel capacity to wean off imports of petroleum products and use energy
trade to reduce its overwhelming trade deficit with India. Furthermore, the
revenue from sale of hydroelectricity can be used towards Nepal’s economic
development.
In this
light, India is extremely crucial for Nepal’s energy trade. However, India’s
changed policy that it will not purchase electricity generated from any hydel
projects in Nepal that have “Chinese investment or involvement” is a strategic
move with which India aims to tighten its grip over Nepal’s water resources. In
line with this, India is yet to grant approval for export of hydroelectricity
generated by several projects including Nepal’s flagship Upper Tamakoshi
Hydropower Project (456MW) that became operational in July 2021, allegedly on
the grounds of Chinese involvement, as civil work of the project was completed
by China’s state owned Sinohydro Corporation. Such Indian policy is rooted in
geo-strategic calculation that will have several implications on Nepal. For
one, it will significantly discourage Chinese investment in Nepal’s hydel
projects and limit China-Nepal cooperation on water resources. Second, it
forces Nepal to provide construction license to Indian companies and
contractors or else risk losing investment in its water resources. As a result,
more and more hydropower projects in Nepal will see increasing Indian
involvement. In a nutshell, this demonstrates India’s willingness to use
Nepal’s hydel sector as a geopolitical tool to entrench its influence and
monopolize Nepal’s hydropower and in doing so deepen Nepal’s dependency on
India for its power trade.
The
repercussions of India’s changed power purchase policy vis-à-vis Nepal are
already evident. Following India’s policy and an uncertain energy market,
Chinese companies are gradually withdrawing their investment from Nepal’s hydro
sector, whereas Indian companies are aggressively acquiring licenses to
construct hydroelectric projects. For instance, in the recent visit to India,
PM Prachanda awarded India’s SJVN license to construct 669 MW Arun Hydropower
Project. During the same visit, the Nepalese PM also decided to award the
license for the construction of 480 MW Phukot Karnali hydel project, that
the KP Oli government in 2018 had
included among the nine proposed BRI projects, to an Indian company NHPC. The
same company in 2022, had acquired license to develop 750 MW West Seti and 450
MW SR-6 Hydroelectric Project. The trend of increasing Indian involvement in
Nepal’s hydro-sector will only rise in the near future. This demonstrates that
India may have finally outmaneuvered China in Nepal’s hydropower sector.
+++Sirish
Paudel graduated in International Relations from the School of International
and Public Affairs (SIPA), Jilin University. Currently, his research interests
are Indo-Nepal and Sino-Nepal relations and the role of cyber in International
Relations.
https://moderndiplomacy.eu/2023/12/10/geopolitics-of-nepals-hydropower-has-india-outmaneuvered-china/