ENVIRONMENT: Nepal to finalise proposal for controversial dam

By Pratap Chatterjee Reprint | | Print |

Pratap Chatterjee

WASHINGTON, Mar 15 1995 (IPS) - World Bank and Nepali government officials are scheduled to decide this week whether or not to proceed with the controversial Arun III dam as planned or to redesign the project altogether.

“The Nepali government requested a meeting with the Bank to clarify exactly what they want. So far, their requests have been rather ambigious, and we are unsure how to proceed with the loan proposal. That meeting was to begin today in Kathmandu, and we should know the results in a day or two,” Paul Mitchell, a Bank spokesman, told IPS on Tuesday.

The 764-million-dollar, 201-megawatt dam project has sparked debate because of the possible environmental impact of the dam, which is in the Arun river valley, and a 122-kilometre access road. Groups in Nepal and Britain also say there are far cheaper, small-scale alternatives that have been ignored.

A formal complaint last year by local groups that the Bank failed to comply with its own policies in designing the project was sustained by the Bank’s new inspection panel in December. It found that “apparent violations of policy do exist that require further investigation.”

The Bank’s board of directors authorised the panel to go ahead with a limited investigation earlier this year.

The complaints and the investigation have unnerved both Bank and government officials. Over the last few months, both sides have been trying to come up with a face-saving plan.

Complicating the situation further is the fact that the present minority government in Kathmandu was in the opposition when the project was originally negotiated. At the time, its members raised questions about the project.

That has made the project a political football. Members of the old government warn that Nepal risks losing a major source of funding if the Bank turns its back on the project. Japan, Germany and the Asian Development Bank have also pledged money for the project whose total cost is roughly equal to the government’s entire annual budget.

Bharat Mohan Adhikary, Nepal’s finance minister, sent a letter to the Bank Feb 28 to confirm that the new government’s wants to go ahead with the project. But, he added, Kathmandu wants to build an access road less damaging to the environment than that proposed by the original plan. The Bank would not be asked to finance the road under this proposal.

The government says local contractors could build the road at half the price by laying it along a mountain ridge, instead of through the Arun Valley, as originally proposed, according to a January memorandum on Bank-government discussions obtained by IPS.

In the Feb 28 letter the Nepali government also requested that it be allowed to raise power rates to pay off the loans and to build other large power projects if necessary. The Bank loan would require the government to cap rate increases and limit new power projects to a maximum of 10 megawatts.

Bank officials replied immediately to Oathmandu’s letter to say that a different road would require new negotiations and a new appraisal, according to Bank sources knowledgeable about the correspondence.

“This could mean a delay of up to three years while the Nepalis build their road after which we could start to appraise a new project,” Mitchell told IPS.

Some observers consider this position as an effort to press Nepal to keep to the original proposal. “This is a very good example where the Bank is dictating terms to borrowers — which is completely against our mandate,” one Bank staffer told IPS on condition of anonymity. Mitchell says the Bank is merely trying to clarify matters.

The Nepali government wrote back earlier this month to say it would accept the project “your (the Bank’s) way”, according to Mitchell. This week’s meeting is supposed to pin this down.

Joe Manickavasagam, the Bank’s resident representative in Kathmandu, was scheduled to meet with either Adhikari, the finance minister, or Hari Prasas Pande, the minister of water resources or both.

Their decision will have many immediate consequences. If the government requests the project as originally designed, a loan proposal will be submitted to the Bank’s board of directors for approval in the near future.

The inspection panel’s investigation, which has so far focused on questioning Bank personnel here in Washington, will move to Nepal where they will investigate claims by local groups that they have never been sufficiently involved in the planning and design of the project.

Should the project be altered, the inspection panel will have to reconsider whether or not to carry out its investigation in Nepal.

If the project is cancelled, the panel will not go to Nepal, but merely complete its work here in Washington, according to a knowledgeable official.

Groups in Washington continue to maintain that the dam is a mistake. “The dam will spell cultural and environmental disaster to an isolated, biologically rich and ethnically diverse mountain valley in Nepal with high-quality forests,” says Jim Barnes of Friends of the Earth (FOE).

The activists say that the river valley contains one of the few pristine forests left in the Himalayas and is inhabited by 450,000 people from 10 indigenous groups which could be harmed by any in-migration of others made possible by the access road.

Some senior Bank officials have criticised the economics of the project. Martin Karcher, who worked in the Nepal country department before he retired last year, has publicly criticised the project. Richard Stern, the Bank’s director of industry and energy, has also privately expressed reservations about the project, according to knowledgeable Bank sources.