The Budi Gandaki feeds into the Gandaki, one of Nepal’s four main rivers. It flows into India’s Bihar state and eventually empties into the Ganges.
Nepal and India signed the 1959 Gandak Treaty, which bars Nepal from upstream activities that would impact water flow in Bihar, where millions of hectares of farmland depend on waters from the Gandak (as Gandaki is known in India).
However, China’s growing influence in Nepal as the largest provider of foreign direct investment could lead to geopolitical friction, according to a 2018 report by the Asia Society.
Chinese firms recently built two other hydro projects in Nepal at Upper Marsyangdi A and Upper Madi, with a combined capacity of 75 MW. But both are run-of-the-river schemes, unlike Budi Gandaki which would be a gigantic reservoir.
Indian state owned and private firms have not built a power project in Nepal since the mid-1980s, although one is involved in large projects on the Arun River.
However, India is promoting cross-border trade in electricity as part of the nascent BBNI (Bangladesh, Bhutan, India, Nepal) regional sub-group in its sphere of influence. Both Nepal and Bhutan have objected to the Indian power ministry’s statement in December 2016 that electricity was a ‘strategic commodity’ so non-BBNI foreign powers could not be involved in the supply chain.
Shrestha says India is not concerned about China’s involvement in the Budi Gandaki project, whose power is solely for domestic use, and it views the reservoir positively.
“In general, India is not happy with Chinese companies being involved in Nepal’s hydropower, but in Budi Gandaki they are more than happy as India would get lean-season augmented flow for free,” he added.
India had said it was not interested in investing in or building the Budi Gandaki project, and withdrew from bilateral talks in the late 90s.
Another water expert, Dipak Gyawali says that the irrigation aspect has been completely ignored in designing Budi Gandaki.
Gyawali headed a review committee formed by the government to look at the design, and says: “About 100,000 hectares of land in Nawalparasi and Chitwan districts downstream could have benefitted in Nepal. The water that flows in dry months from the reservoir is not flowing water, it’s produced by submerging our land and through our investment. If India uses this water then we should get financial returns.”
Another problem Gyawali sees in this project is that it is located close to the epicenter of the 2015 earthquake and may not be able to withstand a future megaquake. “For a seismically active region like Nepal, rock filled dams are better than concrete double arch dams as proposed on the design,” he said.
But Laxmi Devkota, the former Chair of the Budi Gandaki Development Committee, claimed that it has been designed with a serious consideration for earthquake impacts and is within international seismic resistance parameters.
The many delays risk making the Budi Gandaki project financially unviable. Costs are plummeting for other renewables, such as solar and wind power, and emerging hydrogen energy technology.
According to the Asia Foundation report, solar electricity tariffs in Rajasthan, India, fell from more than 19 cents per unit in 2010 to 3.6 cents, and wind energy was around 3.7 cents. Nepal’s hydropower costs 7 cents per unit to produce.
India, which is Nepal’s expected energy export market, is ramping up renewable energy capacity fast with 37 gigawatts of solar and 38 gigawatts in wind by 2020.
However, Budi Gandaki’s output is planned for domestic use so need not compete directly in the regional market. Nonetheless, the technical costs are making its value questionable, even for domestic use.
“If we can develop this project within five years then we will definitely save some money, but if it is the next 20 years then it would be a hotpot of corruption for politicians and bureaucrats. It looks like this project is losing its technical strength in terms of cost already,” said Dipendra Bhattarai, an energy expert.
Who will buy Nepal’s hydropower?
Finally, the daily power cuts that drove Nepal’s policymakers to revive the project in 2011 have ceased. Nepal doubled its electricity production from 700MW in 2010 to 1400 MW in 2014. Another 700MW is likely to be added in the next couple of years. However, Nepal has been importing about 600 megawatts from India in the dry, winter months (November to April) to meet peak demand as the smaller run-of-the-river projects struggle when water levels are low– one motivation to build a big reservoir.
The Budi Gandaki hydropower plant should have been completed by 2022. In 2015, the project cost was estimated at 2.5 billion— more than one fourth of Nepal’s total budget that year.
Says Laxmi Devkota of the project: “We have already lost about half a billion dollars in the last four years if we consider just 10% inflation rate. Another one and half billion dollars could have been gained by selling electricity in the four years that were delayed. We are already on loss at total project cost amount.”
The story was first published on The Third Pole. Accompanying video by Nabin Baral.