(DRAFT)

Water Resources Development

(A working paper for the Donor Consultation Meeting)
- Shanker Prasad Koirala Secretary Ministry of Water Resources

Background

The expectation that the people and the Government of Nepal alike have continually been showing from the countrys water resources for long as a means of long-term development and national wealth creation has been officially reflected in the national Water Resources Strategy (WRS), which mentions its water sector goal as living conditions of Nepali people are significantly improved in a sustainable manner. The Government has adopted WRS in January 2002 and it has also prepared and adopted a National Water Plan (NWP), which basically contains various sets of action plans that need to be implemented in short-term (2002-2007), mediumterm (2007-2017) and long-term (2017-2027) strategy/plan periods to meet the strategic objectives and achieve outputs within those periods. Nepal is considered to have abundant water resources with an average annual availability of 225 billion cubic metres of water in the form of rain and snow that precipitate in countrys 147,181 square kilometres of area. However, there are great temporal as well as spatial variations in the availability and accessibility of water due to monsoon nature of the climate and also due to rugged topography. With this, the natural resource is bound to require high capital investment so as to be regulated and managed for utilization. The estimated cost of the entire NWP is NRs. 1,200 billions. The WRS/NWP period spans five five-year plan periods, i.e., 10th to 14th plans, however, as the current 11th plan is an interim one covering three years only, there will be a change in the number of periodic plan periods under the perspective water plan. The water resources sector covers various uses of water such as domestic use, sanitation, irrigation, hydropower, industrial use, tourism & recreation, inland navigation, cultural use, environmental conservation, etc. Likewise, the agencies involved in the development and management of water resources sector are also numerous. Since the Ministry of Water Resources (MOWR) is responsible for the development and management of the resource in three sub-sectors namely- irrigation, hydropower and water induced disaster management under the sector, the present working paper focuses on the three only. Besides, NWP, being a reference document covering a 25 years of time span and the countrys current political transition, is likely to undergo modifications. The immediate focus would, therefore, be more relevant to the current three year interim plan (2007-2010); hence, the project/investment portfolio of the three sub sectors in the interim plan is dealt with in detail in the present paper.

History of Water Resources Utilization

Irrigation Annals show that irrigated agriculture was practised in Nepal as early as during the era of Gautam Buddha and he had involved himself in resolving disputes among irrigators. However, considering the vestiges of the irrigation infrastructure and the facilities under operation even at present, irrigation development in Nepal can be put under four phases- a) primary phase or the period prior to planned development, i.e., before 1956; b) infrastructure development phase (1957-1970); c) intensive development phase (1971-1985); and d) integrated development phase (1986-date). Irrigation facilities constructed in the Kathmandu valley during Lichhvi period and Malla period such as Raj Kulos of which the traces are still found are the oldest ones under primary phase. King Ram Shah of Gorkha had special contribution in irrigation management aspect by empowering local people in irrigation related dispute resolution. During the Rana regime, Chandra Shumsher, with the assistance of British engineers, had developed Chandra Canal system in 1928. The other irrigation facilities during primary phase are- Juddha Canal in Sarlahi district, Jagadishpur Irrigation system in Kapilvastu district, Pardi Irrigation system in Pokhara, etc. In addition to these, the irrigation systems developed with the involvement of the State within this period covered 6,228 ha. Irrigation facilities developed in 1st, 2nd and 3rd Plan periods fall under infrastructure development phase. Nepal developed different irrigation facilities with the cooperation from India and USA in this phase. Tika Bhairav, Mahadev Khola and Budhanilkantha irrigation systems in the Kathmandu valley and Vijayapur irrigation system in Pokhara valley were developed. Likewise, Sirsha, Dudhaura and Tilawe irrigation systems were developed by the Indian engineers under the financial aid of the USA. Khageri (Chitwan), Kamala and Hardinath (Dhanusha), Kodku-Godavari (Lalitpur), Pahsupati (Kathmandu), Jhanjh (Rautahat) and Tinau (Rupandehi) are the examples of a few other irrigation systems that can be cited in infrastructure development phase. Apart from these, irrigation systems, which were developed under the Koshi and Gandak treaties with India, were also constructed during those three plan periods. During 4th, 5th and 6th Plan periods, multi lateral donor agencies like the World Bank and the ADB came forward in aid of Nepal in irrigation development. These agencies focussed their assistance to convey irrigation water to farmers fields with the canal network development from the infrastructure already created and to initiate coordination between irrigation and agricultural agencies, hence the name- intensive development phase. Development of Kankai and Mahakali-I Irrigation Projects, initiation of command area development in Narayani Zone Irrigation System, etc., were carried out with these agencies assistance. During these plan periods, CARE Nepal had assisted to develop a number of small irrigation systems covering a total of 10,000 ha. Bhairawa-Lumbini Groundwater, Marchawar Lift and Hill Irrigation Projects were also initiated in this intensive development phase.

From the 7th Plan onward, i.e., since the mid eighties, there has been a major paradigm shift in irrigation development. Construction oriented development has been given less importance and new dimensions- such as farmers participation through organised associations, rehabilitation of farmers canals, management transfer, etc., have been given more and more attention. Leaving Bagmati, Babai, Mahakali-II and the very recent Sikta Irrigation Projects aside, no other major projects were taken up. Rehabilitation of small farmers canals were given high priority under sectoral approach. Irrigation Sector Project, Second Irrigation Sector Project were implemented and the ongoing Community Managed Irrigated Agriculture Project is being implemented in Central and Eastern regions under the assistance of ADB. The World Bank version of these projects implemented (or being implemented) in the remaining three western regions are Irrigation Line of Credit Project, Nepal Irrigation Sector Project and the IWRMP. Hydropower With the commissioning of Pharping hydel plant (500 kW) in 1911, development of hydropower began in Nepal, which was soon followed by Sundarijal hydel plant (600 kW). Khopasi hydel plant (2,400 kW) with the grant assistance of former USSR, and Trishuli hydel plant (21,000 kW) with that of India were then constructed in the sixties. They were followed by the Sunkoshi hydel plant (10,000 kW) with the Chinese grant assistance in the early seventies. Thus till early 1970s hydropower was developed in Nepal solely under bilateral grant in aid. The first hydropower project constructed with the major part of project financing with multilateral loan assistance with that from the World Bank was Kulekhani-I hydel project (60 MW), which was commissioned in 1981. The other two hydropower projects, which were constructed immediately afterwards with the loan assistance were Kulekhani-II (32 MW) and Marsyagdi (69 MW). All of those projects were developed till the end of Panchayat regime. With the formulation of first hydropower development policy and enactment of law to put the policy in effect in 1992, the period of early nineties was an epoch of hydropower development in Nepal, not with major development achievements in the sector, but with a major policy shift to liberalize the economy after the restoration of multi-party democracy. Power generation, which was considered States domain till then, gave plenty of space for private sector participation. Bhote Koshi hydel plant (36 MW) and Khimti hydel plant (60 MW) were commissioned with foreign private sector investment. A number of other small hydropower projects have also been developed with domestic private sector investment. Likewise, Kaligandki-A (144 MW) is the major addition to the power system of Nepal from Nepal Electricity Authority, the public sector electricity utility in 2002.

Policy and Legal Regime

Nepal hasnt so far formulated an integrated water resources policy, however, the strategies stipulated in WRS themselves constitute the policy of the sector as a whole. Besides, there exist policies in all sub sectors of water sector, including irrigation,

hydropower and water induced disaster management. Policy principles adopted by the Water Resources Strategy include the followings: (1) Development and management of water resources shall be undertaken in a holistic and systematic manner, relying on the concept of Integrated Water Resources Management. (2) Water utilization shall be sustainable to ensure conservation of the resource and protection of the environment. Each river basin system shall be managed holistically. (3) Delivery of water services shall be decentralized in a manner that involves autonomous and accountable agencies (e.g. public, private, community and users based agencies). (4) Economic efficiency and social equity shall guide water resource development and management. (5) Participation of and consultation with all the stakeholders shall constitute the basis for mutual benefit. (6) Sharing of water resources benefits among the riparian countries shall be on equitable basis for mutual benefits. (7) Institutional and legal frameworks for coordination and transparency shall be an essential feature of water sector management. (8) Wider adoption of the best existing technologies and practices, and rapid innovation and adaptation of both institutional arrangements and new technologies, shall be ensured. Thus Nepal has adopted IWRM principles as the cardinal ones in the development and management of water sector and the entire effort in the sector is geared towards social and economic development and environmental sustainability. Irrigation Policy The Irrigation Policy was formulated at first in 1992, which was later amended in 1997. It has been reformulated in 2003. The objectives of the prevailing Irrigation Policy are as follows: (1) To make an optimal use of water resources in providing round the year irrigation services to the cultivable areas as far as possible. (2) To encourage and enhance participation of beneficiary farmers in the sustainable management of the irrigation system. (3) To enhance institutional capacity of the government, non-government, farmers and beneficiaries related with development of the irrigation sector.

The major features of the Irrigation Policy, 2003 could be enumerated as follows:
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(1) Declaration of irrigated area so as to protect it from encroachment; (2) Development and management of irrigation systems on the basis of IWRM principles; (3) Use of reservoirs, rain water harvesting and groundwater for year round irrigation; (4) Formulation of master plans for inter-basin transfer of water from surplus to deficit basin; (5) Development of irrigation systems in conjunction with hydropower projects with involvement of both public and private sectors; (6) Transfer of agency managed irrigation systems to users groups; (7) Capacity building of local bodies in planning, development and management of irrigation systems; (8) Quantitative measurement of irrigation water for each crop for evaluating the effectiveness of irrigation and also for determining irrigation service fees (ISF); and (9) Legal and institutional reform, including capacity enhancement of involved personnel. Hydro-power Policy The Hydropower Policy of 1992 was amended in 2001 to update it based on the experience gained. The main objectives of the hydropower development could briefly be enumerated as: (1) To generate electricity at low cost by utilizing water resource in the country; (2) To extend reliable and quality electricity service throughout the country at an affordable price; (3) To tie up electricity with economic activities; (4) To render support to the development of rural economy through rural electrification; and (5) To develop hydropower as an exportable commodity. The major features of the Hydropower Policy, 2001 are as follows: (1) Utilization of hydropower potential to meet the domestic demand; (2) Development of hydropower projects on competitive basis; (3) Involvement of private sector on BOOT concept; (4) Appropriate incentive provisions and simplified and transparent procedure to attract domestic and foreign investors;
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(5) Efforts to implement large multipurpose projects so as to maximize the benefits to the nation including that resulting from the downstream benefits; (6) Public private partnership in hydropower projects including that tied with irrigation use; (7) Development of hydropower projects so as to contribute to environmental conservation with biomass and thermal energy substitution; (8) Appropriate provisions for appropriate resettlement and rehabilitation of displaced people; (9) Mobilization of internal capital market for investment in the hydropower sector; (10) (11) (12) (13) (14) (15) (16) (17) Small and mini hydropower schemes for off-grid supply of electricity to remote areas; Establishment of Rural Electrification Fund; Appropriate technical and legal measures for loss prevention; Mechanism to encourage use of electricity in water supply, irrigation, industries, etc., during off-peak hours; Appropriate provision for providing benefits to people of areas, where hydropower projects are located; Proper provisions to cover risks in hydropower projects; Encouragement to export oriented projects; Restructuring of existing public sector institution to enhance competition and enhanced involvement of local bodies, cooperatives and private sector in generation, transmission and distribution for reliable and quality electricity at reasonable price; Protection of consumers interest; Rational and transparent mechanism for fixation of electricity tariff; Priority of domestic labour and skill use; Establishment of a hydropower development institute for imparting training and conducting research activities; etc.

(18) (19) (20) (21)

The Hydropower Policy is an elaborate document with stipulation of licensing procedure, functions of major government agencies, royalty structure, etc. Water Induced Disaster Management Policy The prevailing Water Induced Disaster Management Policy is a recent one formulated and approved by the Government only in 2006. The objectives of the Water Induced Disaster Management Policy, 2006 could briefly be enumerated as: (1) Prevention of life and property from water induced disasters;
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(2) Enhancement of sustainability of infrastructures and their utility by conserving water resources, watersheds and aquatic life; (3) Reclamation of flood damaged lands so as to use them for resettlement of landless people and other economic activities; (4) Institutional development for water induced disaster management and flood plain management; and (5) Prevention of duplication of efforts and resource use by clearly defining the roles and responsibilities of Government agencies including local bodies, NGOs, CBOs, private sector, etc., in water induced disaster management. The Water Induced Disaster Management Policy, 2006 has specified various policy provisions under five headings: Emergency protection and relief Water induced disaster mitigation Conservation of natural resources Utilization of reclaimed land; and Institutional mechanism and development. The policy provisions include that related to early warning system, mobilization of men and material during emergency, zoning and classification of disaster prone areas depending upon risk, and various structural and non-structural measures of disaster mitigation. The policy has also a provision of involvement of private sector for reclamation and use of flood affected area on commercial basis. Legal Provisions The prevailing Acts, which directly concern water resources sector including irrigation and hydropower sub sectors are Water Resources Act, 1992 and Electricity Act, 1992. The prevailing Water Resources Act is an umbrella Act of water sector and it has given priority order of use of water. The Act states that State has the ownership of water; which is not transferable, but the right to use is conferred by way of licensing while no license is required for individual and collective use of water within the community. Water Resources Rules, 1993 has detailed out most of the procedures required to make the Water Resources Act effective. Likewise, Electricity Act, 1992 and Electricity Rules, 1993 have defined the prevailing legal regime for the development, management and regulation of electricity services in Nepal including hydropower. Electricity Tariff Fixation Rules, 1993 is also an effective legal instrument, which mainly deals with fixation of electricity tariff as the name suggests. In irrigation sub-sector, no Act is in place, however, the sub-sector is regulated by Irrigation Rules, 1997, which has undergone an amendment in 2004. No legal instrument has so far been enacted to put Water Induced Disaster Management Policy, 2006 in effect. The legal instruments are already overdue.

As the legal instruments in electricity sub-sector are older than the prevailing policy and WRS & NWP, the prevailing policy provisions are not effective yet. Hence, a new Electricity Act and the Nepal Electricity Regulatory Commission Act are on the anvil. They are expected to be enacted by the parliament any time. Once these Acts are enacted, an autonomous regulatory commission will be established to regulate generation, transmission and distribution of electricity ensuring quality of service and reasonable pricing for the consumers and at the same time a level playing field will be created for healthy competition for both public sector agencies and private entrepreneurs involved in the sector. Apart from the above policies and legal instruments, which are directly related with the sector, there exist a host of policies and legal instruments which have indirect bearing for the development and management of the water sector. These include, Environmental Protection Act and Rules, Local Self Governance Act and Rules, Forest Act and Rules, National Park and Wildlife Conservation Act and Rules, and so forth.

Institutional Setup
The functions of water related organizations range from policy formulation to the operation level. There are many sector-specific institutions responsible for coordination, regulation, planning, implementation and monitoring of water related activities at the national and district levels. Recognising the multi-sectoral nature of water resources management, there is no single institution to function as an independent decision making body with regard to all aspects of water. The regulatory functions by and large have been implemented through the existing administrative structure at the local level. Presently Water and Energy Commission Secretariat (WECS) is an advisory body on water resources management, but it is not assigned with clear mandate to look after all related issues on water resources. The Secretariat is consulted only when one desires to do so. The prevalent organizations, which are currently in operation and which have direct involvement in the water resources sector are: National Development Council National Planning Commission National Water Resources Development Council Water and Energy Commission Environment Protection Council Water Related Ministries such as-Ministry of Water Resources, Ministry of Physical Planning and Works Ministry of Environment, Science and Technology, Ministry of Local Development, Ministry of Agriculture and Cooperatives, and Ministry of Forest and Soil Conservation

In the present paper, only those institutions, which are directly related to hydropower, irrigation and water induced disaster management under the Ministry of Water Resources are dealt with some details.
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Department of Irrigation (DOI) Under the Ministry of Water Resources, the DOI is responsible for executing irrigation projects- both surface and groundwater, including operation, maintenance and system improvement for better water delivery with reliability, equity and adequacy. In addition to that it is also responsible for planning, and design of major and minor irrigation systems. In the context of describing irrigation related institutions, it is worthwhile to mention the National Irrigation Development Committee also. This has been formed with a view to implement large irrigation programs/projects and to utilize limited resources. The Secretary, Ministry of Water Resources is the Chairperson of the Committee. The Committee includes members from various ministries, departments and related agencies. DOI has regional directorates in all five-development regions. These directorates, as operational-level agencies, exercise basically a coordinating role and have limited authority of a department. These directorates supervise the activities of divisional and sub-divisional offices within the region and serve as intermediate agencies between the departments at the centre and the (sub) divisions. The directorates also coordinate with other regional line agencies in matters related to their activities. Generally, they operate under authority from the Director General. DOI used to have district offices in all the 75 districts until February 2000. According to the revised structure, there are 26 irrigation development divisions covering 51 districts, 20 sub-divisions covering 24 districts, 8 irrigation system management divisions, 8 groundwater field offices and 3 regional mechanical divisions. All the irrigation development activities are implemented through these (sub) divisions. Groundwater Resources Development Board (GWRDB) The GWRDB is chaired by the Secretary of the Ministry of Water Resources with other members from various ministries, departments and related agencies. This is responsible for ground-water management. The groundwater management and management of surface waters must be conceived as a combined system due to interdependence of surface and groundwater. Conjunctive use of surface-and groundwater resource and management are required to improve the reliability and value of both resources. This, however, has not been seriously looked at. The management of water resources needs to be approached not only from the standpoint of quantity and quality, but should also take into account the impact of groundwater exploitation on the natural and social environment, including groundwater, surface water, and riparian ecosystems. This kind of integrated management approach is still lacking in the country. The country has not yet introduced any specific legislation on groundwater and the prevailing Water Resources Act does not address it properly. Large-scale conflict of uses has not arisen yet, because groundwater extraction for irrigation purpose in Terai is still at a low level. With the expected increase in the use of groundwater for irrigation under the Agriculture Perspective Plan (APP), however, this will bound to cause depletion of groundwater table. The degree to which groundwater table will be depleted or even land subsidence will be observed may be known only after a thorough scientific investigation.
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Department of Water Induced Disaster Prevention (DWIDP) The DWIDP was established under the Ministry of Water Resources in February 2000 with upgrading of Water Induced Disaster Prevention Technical Centre, which was established seven and half years earlier with the technical assistance of the Government of Japan. All the functions and responsibilities of the River Training Division of DOI were transferred to DWIDP after the latters establishment. DWIDP implements its plans and programs through its seven division and five sub division offices scattered all over the country. Department of Hydrology and Meteorology (DHM) The DHM has been placed under the Ministry of Science and Technology. In the past it had always been under the MOWR. The structure of the department was revised in 1993 following the recommendation of Administrative Reform Commission, 1991 to cut by thirty three percent of its approved positions. The regional offices hitherto patterned along five development regions of the country were changed to a river basin pattern- Kosi Basin, Narayani Basin and Karnali (including West Rapti) Basin. It also had a separate section on Bagmati Basin. The department provides information on the surface water resources of country. The collection, analysis and publication of hydrological and meteorological data are vital and closely related with the function of MOWR. Department of Electricity Development (DOED) Previously it was named as Electricity Development Center (EDC). The DOED is responsible for assisting the MOWR in the regulation of power sector including licensing, promotion of private sector, inspection and quality control, study of river basins, conduct feasibility studies and help select projects for private sector financing and development. There is a need to strengthen this organization particularly in relation to its role of private sector promotion. Since it is a department level organization, most of the promotional functions including licensing are conducted under the authorisation of the Ministry. The Secretary signs the license for survey or generation of hydropower. Nepal Electricity Authority (NEA) NEA is a vertically integrated public sector utility with the responsibility of generation, transmission and distribution of electricity including the construction and maintenance of necessary infrastructure facilities. NEA also engages itself in power exchange with India. It is now required to work with private sector entities. The Minister of Water Resources chairs the Board of Directors of NEA. The agency has a elaborate institutional network all over the country with nearly 10,000 staff. The utility is the single buyer of the independently produced power and is also the single largest seller. The necessity to introduce changes in the organizational structure of the utility has been felt and stated in various policy documents. NEA has recently intorduced internal unbundling, but full corporate separation of distribution entities from NEA
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was frequently stated as urgently needed. For this purpose, NEA Act also needs appropriate amendments. Regulatory Institutions The Water Resources Act, 2049 stipulates that the ownership of water resources available in the country is vested in the State. By specifically stating this in the said enactment all waters regardless of their form or location are under the strict control and jurisdiction of the State. This virtually means that water is a public property, which every citizen of the country is entitled to use as a resource. As water is owned by the State, the government regulates it on behalf of the State meaning that all water rights are acquired by means of license. Hence a system of license has been introduced. The government had for long assumed the sole responsibility for water resources development. But now it has opted a policy of rather being a facilitator in producing goods and delivery of services. Recognition of the growing unmet demand and the need to meet at an affordable price is a major impetus behind the need for reform and the establishment of strong regulatory institutions for the administration of water resources. Access to affordable services is a critical fact in the economic development of Nepal and in the improvement of living standards of Nepali people. In fact there is a need of certain level of intervention or rather supervisory role in the functioning of the service entities. There are, however, a great deal of functions prescribed for WUAs, CBOs, NGOs and private parties to carry out the operation and maintenance of system in order to provide a sense of ownership to make them sensible for their responsibilities. Against this backdrop, the role of the State will be greatly enhanced as a regulator in the years to come to safeguard the interest of the people in terms of quality and quantity of the goods and services they will be receiving from these entities. Up till now since the Government is excessively involved in development and management of water sector like other infrastructures, there has been virtually no development of regulatory institutions, though, objectives of these institutions have been met to some extent by enforcing related laws and regulations. The District Water Resources Committee (DWRC) in each of the 75 districts is empowered to grant license for the utilization of water. Domestic uses have been put outside the domain of licensing for practical reasons. The Committee is chaired by the Chief District Officer and includes members from various district-level sectoral offices. The Committee also includes representative from the District Development Committee and the Local Development Officer is an ex-officio Member-Secretary. The office of the Local Development Officer is designated as the secretariat of the Committee. The Water Resources Regulations also provide for a joint meeting of two or more district committees if the related use extends beyond the jurisdiction of one district. In the case of hydropower use the DOED processes the application for a request for license and the Secretary of the MOWR issues license for survey, generation, transmission and distribution of hydropower. The WRA and the regulation thereunder provide for dispute resolution mechanisms. A Water Resources Utilization Investigation Committee at the national level has been
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provided for that purpose, the membership of which consists of a representative of the MOWR as chairman and one representative each from the concerned DDC and the regional office of the National Planning Commission Secretariat. If the dispute is related with two or more districts, one representative from each of the concerned DDCs will be the member of the Committee. The Regulations provides the guidance of the Committee and also the detailed factors to be considered while resolving a dispute. The Water Supply Regulations under the WRA, on the other hand, provide for two committees for the resolution of the dispute, one for water users association and the other for individuals. The committee is called Water Dispute Resolution Committee. The Committee for water users association consists of the DDC Chairperson as the Chairperson, and representatives of the District Irrigation Office, Administrative Officer of the District Administration Office as members and the Chief of the District Water supply Office as Member-Secretary. The Committee to decide on the dispute relating to water supply systems operated by individuals consists of a member nominated by the government as Chairperson and one representative each from the MOPPW and the MOWR as members and Chief of the District Water Supply Office as Member-Secretary. The Electricity Tariff Fixation Commission (ETFC) constituted under the Electricity Act, 2049 is responsible mainly to determine electricity tariff and other charges of the electricity distributed to the consumers. It is not empowered, however, to deal with bulk power purchase from independent power producer. The Commission is comprised of a HMG nominee as the Chairperson and the other members include an economist and five others from among the agencies- relating to generation, transmission and distribution and the consumers. The tariff is fixed after consideration of various factors including the rate of depreciation, return from the investment, royalty, operation cost and the consumer price index. With the establishment of Nepal Electricity Regulatory Commission in near future, the functions and responsibilities of ETFC will be transferred to the former.

Current Status
Hydropower In spite of countrys enormous theoretical hydropower potential of 83,000 MW the current installed capacity is only a dismal 556.4 MW of which contribution from the private sector is 148.3 MW as of the end of FY 2006/07 (end of 10th Plan). It is estimated that 48.5 percent of the countrys population currently has access to electricity. At the beginning of 10th Plan 58 municipalities and around 1600 VDCs had access to electricity and 500 VDCs have additionally been electrified and National Grid has extended to 59 districts during the plan period. Presently, per capita electricity consumption is estimated to be 76 kWh. Community Rural Electrification Program through participatory approach has been successful during the 10th Plan period. At the end of the 9th Plan, the peak electricity demand was 426 MW, which has presently increased to 648 MW, however, this scenario is partly due to limitation on the supply side and also partly due to slow economic growth in the years of conflict in the recent past. If normal situation had prevailed, the actual peak demand would have been much higher. As generation could not be augmented to meet even
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the suppressed demand, load shedding has been resorted to cope with the deficit supply for last couple of years ago. The status of power sector at the end of 10th Plan, which is the actual current status also, has been presented in Table 1. Table 1: Current Status of Power Sector including Achievement in 10th Plan
Status till end of FY 2006/07 556 2669 1089 2485 245 49930 2100 1,280,000 48.5

Particulars Installed Hydroelectric Capacity Transmission Line (132 & 66 kV) Substation (132 and 66 kV) Transmission line (33 kV) Substation (33 and 11 kV) Distribution Line(11 kV, 400/230 V) Electrified VDC No. of consumer Benefited People

Unit MW KM MVA KM MVA KM No. %

Target Achievement 315 40 430 47 426 332 865 123 101 112 14917 8672 2600 2100 706,000 417,000 10 8.5

Irrigation The Irrigation Master Plan, 1992 estimates that Nepal has a total agricultural land of 2,641,000 ha of which irrigable land is 1,766,000 ha. Leaving a few irrigation systems constructed during Rana regime aside, irrigation development in Nepal was the results of farmers initiatives until 1950s. Irrigation systems that were developed and managed by the farmers are referred to as Farmer Managed Irrigation Systems (FMISs). It is estimated that about 70% of the country's irrigated area is covered with such systems making a substantial contribution to the national economy. It was only with the start of the planned development in 1957 that the Government agency(ies) started developing irrigation systems in a planned way during different plan periods. The Government developed irrigation systems are referred to as Agency Managed Irrigation Systems (AMISs). Table 2: Ecological Region Wide Distribution of Irrigable/Irrigated Areas
Ecological Overall Total irrigable Total irrigated Irrigated as % Irrigated as Region cultivated Area (ha) Area (ha) of cultivated % of irrigable Area Area (ha) Area Terai 1,360,000 1,338,000 964,082 71% 72% Hill 1,054,000 368,000 178,848 16% 49% Mountain 227,000 60,000 51,698 23% 86% Total 2,641,000 1,766,000 1,194,628 45% 68%

Presently, irrigation water is provided to approximately 45% of the cultivated land, i.e., 68% of net irrigable area. Year round irrigation is available only in 41% of the net irrigated area. Thus, at present, 1,194,628 ha has some kind of irrigation infrastructure either for surface and/or groundwater. Table 2 shows current status of irrigation in different ecological regions. The current total irrigated area comprises 654,749 ha

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under surface irrigation (AMISs and agency assisted FMISs), 253,242 ha under agency constructed groundwater and 286,637 ha under traditional FMISs. Water Induced Disaster Management As stated above, water induced disaster management policy has recently been formulated and a systematic approach to such disaster management has yet to be initiated. Most of the works that are planned and implemented in this sub sector are on as and when necessary basis mainly considering the sensitivity of the problems. Apart from the flood and landslide mitigating works in different parts of the country, there exist a number of inundation problems in several locations along Nepal-India border. Efforts are being made to resolve these problems bilaterally through the joint Standing Committee on Inundation Problems (SCIP). There are some flood embankment projects identified to resolve bilateral inundation issues along Lalbakeya, Bagmati, Kamala and Khando rivers. These are being implemented under grant assistance of India. The main activities currently being implemented to mitigate water induced disasters are listed in Table 3. Table 3: Water Induced Disaster Mitigation Activities Currently Underway
S. No. 1 2 3 Particulars Disaster Mitigation Support Program Disaster Control Programme River Training Projects Lalbakeya Bagmati Kamala and Khando Infrastructure Protection Projects Mugling Narayanghat WISP Project Sindhuli Bardibas WISP Project Expenditure In FY 2006/07 (000,000 NRs.) 38.65 669.40

10.93

68.40 42.41

The Road Ahead

Hydropower The annual energy requirement and the peak load in the Integrated Nepal Power System both are growing on an average by about 8.5 percent every year. About 50-60 MW of power needs to be added to the system every year. As more than half of the population is still without access to electricity, rapid expansion in rural electrification is also a priority of the Government. Accordingly, the transmission network also needs to be developed to evacuate generated power to the load centres. The Government of Nepal has formulated the Interim Plan covering a three year period from FY 2007/08 to FY 2009/10. Generation, transmission and distribution/rural electrification plans and projects that are to be completed/initiated during the three year Interim Plan are described below:

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Electricity Generation An additional total of 105 MW will be generated and supplied during the three year Interim Plan period. The public sector will produce 85 MW and the private sector 20 MW. Projects that are to be completed in the public sector are: 70 MW Middle Marsyangdi and 14 MW Kulekhani-III Hydropower Projects. The private sectors contribution of 20 MW will essentially be from number of small hydropower projects. As stated in the budget speech of FY 2007/08, additional 5000 MW of hydroelectricity will be generated within ten years. As per this commitment construction of hydropower projects totaling a capacity of 2085 MW will be initiated during the interim plan period. The list of projects including their installed capacity is presented in Table 4. Some of these projects will be constructed by the public sector and some with private sector investment. In some of these projects, an approach of public private partnership will also be resorted to. Fairly large hydropower projects such as Arun III, Upper Karnali and West Seti will be developed with foreign investment mainly for the export purpose. Upper Seti Storage Project (127 MW) is to be constructed on public-private partnership mode. The domestic private sector will initiate construction of smaller projects totalling an installed capacity of 45 MW.
Table 4: Hydropower Projects To Be Completed Initiated During Interim Plan Period S.N. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Project Chameliya Upper Tamakoshi Upper Seti Storage Upper Trishuli-3A Upper Trishuli-3B Rhaughat Kabeli-A Mailung Lower Indravati Upper Modi Daramkhola Lower Nyadi Madi-1 Phawa Khola Arun -III Upper Karnali West Seti Total Capacity(kW) Commissioning Year 30,000 2010/11 309,000 2013/14 127,000 2013/14 60,000 2013/14 40,000 2013/14 27,000 2013/14 30,000 (Private sector) 2013/14 5,000 (Private Sector) 2013/14 4,500 Private 14,000 Private 5,000 Private 4,500 Private 10,000 Private 2,079 Private 402,000 Private 300,000 Private 750,000 Private 2,115,079

Electricity Transmission Construction of a total length of 174.5-km transmission lines of various voltage levels will be completed during the three year Interim Plan period in order to evacuate power from the hydro electric projects to be completed during the plan period, to export surplus electricity and to reinforce the system. To increase the volume of
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power exchange between India and Nepal to a substantial quantum three 400 kV cross border links have been planned. They are DhalkebarBhittamod (30 km), Butwal-Sunauli (25 km) and Duhabi-Jogbani (15 km) 400 kV transmission lines. The DhalkebarBhittamod transmission line will be constructed within the Interim Plan period and construction of other two will be initiated in the plan period. Construction of 220 kV Hetauda-Bardaghat transmission will also be started. Apart from constructing new transmission lines, some new substations will also be built and the capacity of some existing substations will be enhanced. Construction of a total of 377 MVA capacity substations of various voltage levels will be completed during the three year interim plan period. Table 5 shows a list of transmission line projects, that are to be completed in the Interim Plan period. Likewise, Table 6 shows a list of transmission line projects, that are to be initiated in the Interim Plan period. Table 5: List of Transmission Line Projects Proposed To Be Completed During Interim Plan Period
S.N. 1 2 3 4 5 Name of Project Kulekhani-3 - Hetauda 132 kV Thankot - Chapagaun - Bhaktapur 132 kV Dhalkebar - Birtamode 400 kV Khimti - Dhalkebar 220 kV Middle Marsyangdi - Marsyangdi 132 kV Total Line Length (KM) 0.5 27 30 75 42 174.5

Table 6: List of Transmission Line Projects To Be Initiated During Interim Plan Period
S.N. 1 2 3 4 5 6 7 8 9 Name of Project Kabeli Coridor 132 kV Hetauda-Bardaghat 220 kV Middle Marsyangdi-Damauli 132 kV Butwal-Kohalpur 132 kV Butwal-Sunauli 400 kV Duhabi-Jogbini 400 kV Upper Modi-Modi 132 kV Madi-1 - Lekhnath 132 kV Mailung - Grang 66 kV Total Line Length (KM) 129 143 43 208 25 15 10 7 3 583

Electricity Distribution and Rural Electrification Special emphasis will be given for expanding electricity services to the rural areas in the three year interim plan. During the plan period, 651 km 33 kV transmission/distribution lines; 3,163 km 11 kV and 5,978 km 400/230 V distribution lines will be constructed. Similarly 33/11 kV distribution substations of capacity totalling 113 MVA will be constructed. This will facilitate electrification to additional 500 VDCs and provide services to 450,000 new consumers. Electricity will be extended to additional 10 districts during this plan period through the national grid.
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Under the Community Rural Electrification Program, 130 km 33 kV; 1,154 km 11 kV and 2,345 km 400/230 V transmission/distribution lines will be constructed. A total of 135,000 households will be benefited by this program. Rural electrification is linked with poverty alleviation. As such rural electrification program will be launched in disadvantaged areas to enhance the living conditions of vulnerable groups, dalits and ethnic groups. Participation of vulnerable groups, so called Dalit, Diabled, Madheshi, Mushlim, Backward Class, Freed Kamaiya, Senior Citizens and Women will be encouraged in community rural electrification program. Investment Required For immediate future, i.e., during the three year Interim Plan period alone, a total investment of NRs. 32.4 billion at FY 2006/07 price level will be required from the public sector in the countrys power sector. Table 7 shows breakdown of this investment sum into different components. Table 7: Required Investment in Power Sector from Public Sector During Interim Plan Period
at FY 2006/07 price level

S.N. 1 2 3 4

Components of Power Sector Generation Transmission Distribution and Rural Electrification Survey, Study and Others Total

NRs(billion) 10.30 11.22 8.95 1.93 32.40

Irrigation In irrigation sub-sector, in accordance with the prevailing irrigation policy, a combined approach has been adopted in development in immediate future. Efforts will be made- to utilize both surface and groundwater resources; to extend facilities to increase irrigation coverage and to maintain and rehabilitate existing facilities; to enhance management capability of agencies and beneficiary farmers; and to bring more hectareage of AMISs under the management of organized associations of users by transferring management of irrigation systems partly or wholly to them. There exist a long list of irrigation projects, which will be under implementation during the three year Interim Plan period. The list of programs under which the projects fall has been presented in Table 8. Investment Required During the three year Interim Plan period alone, a total investment of NRs. 13.25 billion at FY 2006/07 price level will be required from the public sector in irrigation sub sector. Table 9 shows breakdown of this investment sum into different components.

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Table 8: List of Irrigation Development Programs in Interim Plan

S.N. 1 Programs Infrastructure Development for Extensive Irrigation a) Surface Irrigation Projects b) Groundwater Irrigation Projects c) Non-conventional Irrigation Projects Sub Total Farmers Canal Rehabilitation and Extension a) Sustainable Management of Existing Irrigation Systems in 329,720 ha b) Management Transfer in 24,000 ha c) Rehabilitation in Large Irrigation Systems in 27,000 ha d) Rehabilitation of Flood Damaged Irrigation Infrastructure in 50,000 ha Total Irrigation Area (ha) 56,900 37,400 1,600 95,900 23,700

2 3

119,600

Table 9: Required Investment in Irrigation Development in Interim Plan

at FY 2006/07 price level

S.N. 1 2 3 4

Program Irrigation Extension Programmes O&M and Rehabilitation Programmes Institutional Development Studies and R&D Total

NRs(billion) 8.7774 3.8337 0.1518 0.3871 13.1500

Water Induced Disaster Management The long term target of NWP in the aspect of water induced disaster management is to reduce social and economic losses due to such disasters to a level at par with that experienced by developed countries. In immediate term, the targets set are to establish early warning systems and relief centres in all of the five development regions. Apart from this, activities like hazard mapping, river channelization and flood plain management, landslide protection works, awareness raising and capacity building of involved institutions and affected people in emergency flood fighting, etc., are to be implemented. Table 10: Required Investment in Water Induced Disaster Management in Interim Plan
S.N. 1 2 3 4 Program/Projects Disaster Mitigation Support Programme Disaster Control Programme River Training Projects Infrastructure Protection Projects Total 18 NRs(billion) 0.1154 1.8717 0.9562 0.3127 3.2560 Remarks JICA TA Indian grant Japanese grant

at FY 2006/07 price level

Investment Required During the three year Interim Plan period, a total investment of NRs. 3.256 billion at FY 2006/07 price level will be required in water induced disaster management activities. Table 10 shows breakdown of this investment sum into different components.

Challenges in the Sector and Required Measures

Hydropower The constraints in the development of hydropower do not lie in the vision, policy or strategies of the country, but they are in irritatingly slow pace of implementing them. Policies are generally reviewed in five years time, however, the Hydropower Policy, 2001, after seven years of its formulation and approval, has not been effective in want of necessary legal instruments. The constraints and challenges in implementing programs of the current Interim Plan and beyond can be listed as: Maintenance of peace in the country Consensus building at political Mobilization of adequate capital Coordination among agencies, particularly when cross cutting issues like those related to environment need to be resolved Regulation of power sector Institutional reform Global warming threatening the sustenance of snow reservoir in the Himalayas Building transmission lines, etc. Peace is a prerequisite for any kind of economic development. In the situation of conflict of the recent past, not only development works decelerated, infrastructures worth billions of rupees were destroyed. The time and cost overrun of the Middle Marsyangdi Hydel Project is a glaring example of ill effect of conflict in development of economic sector including energy sector. Consensus at political level is essential for the smooth development of power sector, especially when large projects with far reaching consequences have to be implemented. This is all the more necessary when implementation of reservoir projects having significant downstream benefits available in the co-riparian country becomes an issue. An acceptable to all national policy needs to be formulated. As hydropower projects are very capital intensive, it is not always possible to mobilize necessary capital for utilization of water resources. Therefore, investment climate to attract foreign capital has to be created and maintained. Clarity should be maintained in policy and legal regime consisting of water laws, environmental laws, fiscal and taxation related laws, etc., which have direct bearing on
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hydropower development. It would be essential to enhance the predictability in the legal regime and that in the decision making, if investment in the sector were to be attracted. The provisions of the prevailing hydropower policy have to be made effective with enactment of Electricity and Regulatory Commission Acts without delay. Irrigation Irrigation management has these days been overemphasised, whereas converting uplands into watered fields, which is the real meaning of irrigation, has been given low priority. One strategy for irrigation development cannot be uniformly applied everywhere and every country. Cost of irrigation management on the part of irrigators should also be justified by the benefits accrued. To sum up, policy level problems seen in irrigation sub sector can be enumerated as follows: No extensive development in the past two decades; farmers canal rehab emphasized The above stated policy documents emphasize more on rehabilitation of existing irrigation systems rather than adding new irrigated area. The majority of the programs in irrigation sub sector in the past two decades are geared towards improving existing irrigation systems rather than taking up new water diversion projects. Donors not interested in perennial streams and extensive irrigation Donor agencies involved in irrigation sub sector seems to have policies to take up small irrigation projects for which the sources of water are usually periodic and flashy streams, which carry a lot of sediments during monsoon and run dry when water is desperately needed in winter and spring seasons. This is one of the reasons why the area under year round irrigation is only a minor fraction of reported irrigation area in Nepal. APP emphasized groundwater use The Agricultural Perspective Plan (1995-2015) has emphasized use of groundwater as source of irrigation during the plan period. However, more than half of the plan period has already been lapsed with a dismal achievement of the target in tubewell irrigation. Analyses show that a tubewell irrigation project generally becomes economically viable only if the tubewell runs more than 1,800 hours a year, whereas present utilization rate of the tubewells is in the range of 200 to 400 hours per year. It seems that planners have ignored the fact that farmers would run a tubewell only when no alternative were available. Withdrawal of subsidy from the shallow tubwell irrigation has also drastically slowed down the progress of tubewell, though it is another debatable issue as to whether or not subsidy is to be provided. Producers-80%, buyers-20% There should be well-established market with high-income consumers for any irrigation system to be financially viable. In Nepals case, we have traditionally subsistence farming. We cannot yet think of farming of cereal crops to be commercially viable, because 20% of the population consume what 80% produces. Even diversifying crops will not help except in the periphery of big towns and cities like Kathmandu.
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Protection not possible due to low purchasing power and porous border In developed countries or in countries, where State has opulent treasury farming is protected directly or indirectly. In Nepals case, protection policy is not possible due to low purchasing power of the consumers themselves and porous international border. Fragmentation is in the rise Commercialisation of farming and utilization of irrigation water can be effective with large farm size and landholdings. Fragmentation of agricultural land is in rise. Land consolidation is emphasized by the irrigation policy, but there is no sign of its implementation. In fact, land consolidation is costly as well as complicated and it is very difficult in current social and political environment. Besides, we are seeking solution to problems of landless people by providing a fragmented piece of land to already landless people. Agricultural sector is already overcrowded with underemployment of agricultural labourers. Followings are the suggested solutions to above stated problems: Extensive irrigation should be preferred Nepal is not yet at a stage of development in which slogans like more crop per drop of water would have much relevance. Waiting for three decades to initiate Sikta Irrigation Project was lack of foresight. Likewise, projects like Bheri-Babai diversion project in which there can be multiple uses of water within Nepal should be given high priority. Initiate land consolidation program by taking up some pilot projects and prepare necessary legal instruments Although land consolidation is a daunting task, but commercial farming is not possible without consolidating fragmented lands. Cooperative farming could be one way out. Necessary legal instruments should be prepared and some land consolidation pilot projects should be initiated with meticulous planning to demonstrate the benefits from such projects. Pull out underemployed labour from agriculture and create industrial employment for them instead of pushing landless to overcrowded agriculture sector It is high time that underemployed agricultural labourers and landless people be given employment in industrial and service sectors. Seeking solutions to every economic problem in agriculture sector will yield no positive results. The above recommended solutions may not seem entirely related to irrigation sub sector, but a sustained agriculture can only provide sustainability to irrigation systems, and hence, they need to be implemented.

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Water Induced Disaster Prevention The constraints and challenges observed in the water induced disaster mitigation are as follows: No legal instrument to implement policy The prevailing policy is relatively a new one. Non-structural mitigation measures and private sector investment in reclamation works need several legal instruments, which are not yet initiated. Inundation along Nepal-India border, as sores in bilateral relation Inundation problems along Nepal-India border in the terai exist in several places. Some of these are quite natural to occur while some are attributed to human activities on one or the other side of the border. A Standing Committee on Inundation Problems along Nepal India Border (SCIP) exists for past two decades to resolve the inundation issues jointly. However, there is a growing criticism that the joint committee has not been effective. Although in terms of magnitudes, the damage due to inundation may not be very much, but from the perspective of the peoples, who are suffering, the problems need to be given utmost importance. It has been observed that these issues have become sores in otherwise cordial relation between Nepal and India. There are a few other (sub) committees under or related to SCIP to resolve some site-specific inundation issues. There are about two dozens pending inundation issues raised by each side in SCIP. The recommended solutions to resolve the water-induced disasters are as follows: Legal instruments need to be prepared to implement the prevailing Water Induced Disaster Management Policy; Self mobilization of disaster affected people is essential in emergency, hence they need to be trained and mobilized; Diplomatic efforts need to be enhanced to resolve bilateral inundation issues; Inundation problems need to be resolved on technical and social grounds; politicisation has not helped.

Conclusion
Nepal has tremendous potential of hydropower, both to meet the domestic demand of commercial electricity in the foreseeable future and also to revolutionize countrys economy with exporting surplus power to neighbouring countries, especially India. The Government of Nepal has rightly formulated its hydropower policy to create level playing field for both public and private sector participation. Any shortcomings in the legal instruments will soon be overcome with the enactment of new laws and establishment of an autonomous electricity regulatory commission. Capital resource crunch is the major constraint experienced at present, which is expected to wane away gradually, once the country lurches towards lasting peace and political parties build consensus on water sector policy. However, need of the day is to get rid of the present precarious situation of load shedding, which has direct adverse impact on the
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economy as a whole. Generosity is anticipated from the donor community to enable the Government of Nepal to implement programmes/projects in water sector envisaged in the Interim Plan. For the irrigation systems to be reliable and effective, both hardware and software (management) are equally important. Availability of water in the source itself is the prerequisite of any sustainable irrigation system. It is high time that irrigation systems with reservoirs, preferably that tied up with hydropower should be given priority, apart from the groundwater utilization and maintenance of existing systems. To mitigate water induced disasters both structural and non structural measures should go hand in hand. The prevailing water induced disaster has not been effective in want of legal instruments, which otherwise would have streamlined much of our efforts. This, of course, is our responsibility rather than donors.

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