By TON Nepal

Nepal has officially given the much-touted West Seti Hydropower Project and Seti River Project in western Nepal to India closely four years after China take out it. In August, 2022 Investment Board Nepal signed a memorandum of understanding (MoU) with India’s state-owned NHPC Limited to make the two projects—West Seti and Seti River (SR6)—joint storage projects totaling 1200MW.

This development is an effort to mend soured relations with India by the current PM after his election as prime minister in July last year. The 750MW West Seti and 450MW SR6 projects are spread over four districts—Bajhang, Doti, Dadeldhura, and Achham in far-western Nepal.

The West Seti project has been imagined to generate energy throughout the year, storing excess wet season river flows in the reservoir, and using this water to make energy during peak demand periods in the dry season (December-May). CEO of the Investment Board Nepal and chairman and managing director of NHPC Ltd signed the MoU on behalf of their respective organizations.

On the occasion, the Nepalese Prime Minister said the agreement would serve as an important tool in increasing the Nepal-India energy cooperation and these projects will help expand bilateral trade and investments. During my recent visit to India, the Nepalese PM and Indian PM agreed on a vision statement on cooperation in the power sector, underlining the need for strengthening mutually beneficial bilateral cooperation in this sector.

The construction of a few more cross-border transmission lines. will help develop more projects and promote cross-border power trade for the benefit of our two countries and peoples. As per the MoU, the Indian developer has to apply for the survey license for the West Seti project within 45 days after signing the agreement. For the SR6 project, the developer has to apply for the survey license within six months. The developer has to complete the detailed project reports (DPRs) within two years and submit them to the Investment Board Nepal.

In the detailed project reports, the developer should state whether the projects could be constructed as storage-type, semi-storage type, or joint or separately, including the cost of the projects. It’s our history that once we enter a project, we complete it,” said Singh, immediately after signing the MoU. “These two projects are crucial for us as they will boost our credentials as a global hydropower player.”

Previously, at the Nepal Investment Summit, the government bundled the West Seti and SR-6 as joint storage schemes and showcased them before foreign and domestic investors. The projects were among eight hydro schemes showcased at the summit. The NHPC Limited, an Indian government hydropower board under India’s Ministry of Power, had submitted a proposal in May to develop the projects. The estimated cost of the two projects, according to the Investment Board, is $2.4 billion.

The West Seti project first envisioned some six decades ago, is located on the Seti River in far-western Nepal. The proposed dam site is located 82 kilometers upstream of the confluence of the Seti and Karnali rivers, forming part of the Ganges basin. in July last year, the Nepalis government decided to push the projects forward.

The project also attracted some geopolitical fissures in the last two and a half decades since the government issued the developing license to a French company and then to a renowned Chinese company. The project was originally designed as export-oriented with 90 percent of the power intended to be sold to India. However, the project, whose cost was estimated at Rs120 billion at that time, was unsuccessful to go into construction.

The cash-strapped project got a boost when China National Machinery and Equipment Import and Export Corporation (CMEC) decided to invest in it. CMEC even signed an agreement with the project during the then prime minister Nepal’s China visit in 2009.

At that time, CMEC President Jia Zhiqiang and West Seti Hydro director Himalaya Pandey signed a memorandum of understanding in Beijing. The Chinese firm had decided to invest Rs15 billion in the project. However, the CMEC later opted out of the project saying that Nepal lacked an investment-friendly environment. Another important shareholder in the company, the Asian Development Bank, also did not show interest citing a lack of public acceptance of the project and the absence of good governance.

Then came the Three Gorges International Corporation, China’s biggest hydropower developer and the operator of the world’s largest hydropower plant at the Three Gorges Dam on the Yangtze River. The project was formally handed over to the Chinese company on August 29, 2012. In November 2017, state-owned power utility Nepal Electricity Authority signed the final agreement with the China Three Gorges International Corporation, a subsidiary of the China Three Gorges Corporation, to set up a joint venture to develop the 750MW West Seti Project.

In 2018, the China Three Gorges Corporation hinted at pulling out of the project saying it was financially unfeasible because of the steep resettlement and rehabilitation costs. Subsequently, in September 2018, the government finished the agreement with the China Three Georges Corporation. However now the Nepalese finally handed over the project to India which may have deep imprints on the bilateral relations between India AND Nepal.