Dynamics of Hydro-power Development in Nepal: Water-Energy

Master thesis in Sustainable Development

Examensarbete i Hållbar utveckling

Dynamics of Hydro-power Development in Nepal: Water-Energy-

Food Security Prospect

Jaya Lal Neupane

DEPARTMENT OF

EARTH SCIENCES

I N S T I T U T I O N E N F Ö R

G E O V E T E N S K A P E R

Master thesis in Sustainable Development

Examensarbete i Hållbar utveckling

Dynamics of Hydro-power Development in Nepal: Water-Energy-Food Security Prospect

Jaya Lal Neupane

Supervisor: Mine Islar

Subject Reviewer: Thomas Grabs

Content

1. Introduction .................................................................................................................. 1

1.1. Research Aim and Question ..................................................................................... 2

1.1.1. Research Objectives .......................................................................................... 2

1.2. Study Site ................................................................................................................ 2

2. Conceptual Understanding and Analytical Frameworks .............................................. 5

2.1. Water-Energy-Food Nexus ....................................................................................... 5

2.1.1. Water-Energy-Food Nexus Framework .............................................................. 5

2.2. Concept of Benefit-sharing ...................................................................................... 7

2.2.1. Benefit-sharing Framework ............................................................................... 8

3. Methodology ................................................................................................................ 10

3.1. Data Collection ...................................................................................................... 10

3.1.1. Direct Observations ........................................................................................ 11

3.1.2. Key Informant Interviews ............................................................................... 11

3.1.3. Literature Review ........................................................................................... 11

3.2. Reliability and Validity of Information ................................................................... 12

3.3. Data Processing and Data Analysis ......................................................................... 12

3.4. Limitations and Gaps in the Study .......................................................................... 13

4. Literature Review ....................................................................................................... 14

4.1. Political, Economic and Technological Challenges and Opportunities in Hydropower Development .................................................................................................................... 14

4.1.1. Politics of Large-dam Hydropower Development ............................................. 15

4.1.2. Water Cooperation and Benefit-sharing between Nepal and India ..................... 15

4.1.3. Conflict and Control over Water Resource ....................................................... 16

4.1.4. Trade Agreements and Investment Challenges ................................................. 17

4.1.5. Quest for Sustainable Energy Source in Growing Economies ........................... 18

4.1.6. Hydropower Development Trends, Types and Technologies ............................. 18

4.1.7. Energy Cost, Energy Market and Market Reliability ........................................ 19

4.2. Status of WEF Security and Prospects .................................................................... 21

4.2.1. Status of Water Security in Nepal .................................................................... 21

4.2.2. Status of Energy Security in Nepal .................................................................. 24

4.2.3. Status of Food Security in Nepal ..................................................................... 26

4.3. Hydropower Implementation Approaches and Issues of Sustainability ..................... 28

4.3.1. Existing Hydropower Implementation Approaches ........................................... 29

4.3.2. Changed Water Quality from Hydropower Construction .................................. 30

4.3.3. Impacts on Aquatic Biodiversity from Hydropower Construction ..................... 31

4.3.4. Hydro-energy Integration with Agriculture Sector ........................................... 32

5. Empirical Findings and Analysis ................................................................................ 34

5.1. Features of the Studied Hydropower Projects .......................................................... 34

5.1.1. Chatara Hydropower Project (CHP) ................................................................. 34

5.1.2. Khimti Hydropower Project-I (KHP-I) ............................................................ 35

5.1.3. Upper Tamakoshi Hydroelectric Project (UTKHEP) ........................................ 36

5.2. Benefits and Risk-sharing Practices in the Study Sites ............................................ 37

5.2.1. Benefits and Benefit-sharing Practices............................................................. 37

5.2.2. Risks and Mitigation Practices ........................................................................ 43

5.3. Sources of Benefits ................................................................................................ 47

5.4. Hydropower Governance and Practice of Benefit-sharing ........................................ 48

5.4.1. Gaps in Benefit-sharing Practice ..................................................................... 49

5.4.2. Expansion of Benefits from Hydropower Development .................................... 50

5.5. WEF Nexus in the Hydropower Development ......................................................... 51

6. Discussion .................................................................................................................... 53

6.1. Progress in WEF Security ...................................................................................... 53

6.1.1. Nexus and Benefit-sharing Approaches for WEF Security ................................ 54

6.2. Maximizing WEF Security in Hydropower Development ........................................ 55

6.2.1. Prioritising Integrated Approach in Hydropower Development ......................... 55

6.2.2. Promoting Domestic Energy Market ................................................................ 56

6.2.3. Restructuring and Effectuating Benefit-sharing Governance ............................. 57

6.3. Envisioning a Benefit-sharing Framework .............................................................. 59

7. Conclusion ................................................................................................................... 63

8. Acknowledgment ......................................................................................................... 65

9. References ...................................................................................................................... i

10. Annexes ................................................................................................................ xviii

Annex 1. Common risks in Hydropower Sector .............................................................. xviii

Annex 2. Checklist for Interviews .................................................................................... xix

List of Figures

Fig.1. Hydropower Projects under the Study in the Khosi River Basin, Nepal ...................................... 3

Fig.2.Water-Energy-Food Security Nexus Framework .......................................................................... 5

Fig.3.Political, Economic and Technological Factors Affecting Hydropower Development in Nepal 14

Fig.4. Overall Energy Consumption by Fuel Types in Nepal in FY 2014/2015 ................................... 24

Fig.5. Projected Fuel Composition for 2050 at Medium Economic Growth Scenario ......................... 24

Fig.6.Share of Domestic Production (Public and Private) and Import in Electricity Composition ...... 25

Fig.7. Impacts of Hydropower Development and Associated Externalities on WEF Nexus Outcomes .............................................................................................................................................................. 52

Fig.8. Types of Stakeholders and their Respective Responsibilities in Benefit-sharing ....................... 58

Fig.9. Recommended Benefit-sharing Framework for Hydropower Development in Nepal ............... 60

List of Tables

Table 1. Size-based Framework Used for Sampling of Hydropower Projects for the Study ................ 10

Table 2. Trend of Energy Use in Agriculture according to Household Income-Level in General ....... 33

Table 3. Energy Use by Types in Agriculture Activities in the Fiscal Year 2013/14 ........................... 33

Table 4. Key Technical Features and Economic Outcomes of Hydropower Projects under the Study 34

Table 5. Summary of Economic and Environmental Benefits Distributed in the Projects ................... 37

Abbreviations

ADB: Asian Development Bank AEPC: Alternative Energy Promotion Center AIIB: Asian Infrastructure Investment Bank APERC: Asia Pacific Energy Research Centre BAP: Biodiversity Action Plan BCM: Billion Cubic Meters CBS: Central Bureau of Statistics CHP: Chatara Hydropower Project CIDA: Canadian International Development Agency CIT: Citizen Investment Trust COVID: Corona Virus Disease CSR: Corporate Social Responsibility DDP: Dam Development Project (UNEP) DFAT: Department of Foreign Affairs and Trade DHM: Department of Hydrology and Meteorology DoA: Department of Agriculture DoED: Department of Energy Development DTW: Deep Tube Well DWRI: Department of Water Resource and Irrigations EIA: Environment Impact Assessment EIRR: Economic Internal Rate of Return EMMP: Environmental Management Plan ERR: Economic Rate of return FAO: Food & Agricultural Organization FGD: Focused Group Discussion FY: Fiscal Year GDP: Gross Domestic Product GHG: Green House Gas GHI: Global Hunger Index GLOF: Glacial Lake Outburst Flood GOV: Government GW(h): Giga Watt (Hour) GWP: Global Water Partnership Ha (ha): Hectare HH: Household HPL: Himal Power Limited ICIMOD: International Centre for Integrated Mountain Development IEA: International Energy Agency IHA: International Hydropower Association ILO: International Labor Organization IRB: Integrated River Basin IRBM: Integrated River Basin Management IREA: International Renewable Energy Agency IUCN: International Union for Conservation of Nature IWL: International Water Law IWMI: International Water Management Institute IWRM: Integrated Water Resource Management JCWR: Joint Commission on Water Resources JICA: Japan International Cooperation Agency JMCWR: Joint Ministerial Commission on Water Resource JSTC: Joint Standing Technical Committee

KCEU: Khimti Community and Environmental Unit KHP: Khimti Hydropower KII: Key Informant Interview KR: Koshi River KRB: Koshi River Basin KREC Khimti Rural Electric Cooperative KUKL: Kathmandu Upatayaka Khanepani lIMITED KUKLPID: Kathmandu Upatayaka Khanepani Limited Project Implementation Directorate KW: Kilo Watt KWH: Kilo watt Hour MCC: Millennium Challenge Corporation MHP: Micro Hydropower MoAD: Ministry of Agriculture Development MoALD: Ministry of Agriculture and Land Development MoEWRI: Ministry of Energy, Water Resource and Irrigation MoF: Ministry of Finance MoHA: Ministry of Home Affairs MoPE: Ministry of Population and Environment MoWS: Ministry of Water Supply Mt/ha: Metric tons per hectare MW (h): Mega Watt (Hour) NEA: Nepal Electricity Authority NGO: Non-Government Organisation NPC: National Planning Commission PH (ph): Potentials of Hydrogen PPA: Power Purchase Agreement PPM: Part Per Million PPP: Per capita Purchase Parity PTA: Power Trade Agreement PTE: Panel of Technical Expert RKHEP: RolwalingKhola Hydroelectric Project ROR: Run-of-the-river SAARC: South Asian Association for Regional Cooperation SESD: Supplemental Environmental and Social Documentation SMIP: Sunsary Morang Irrigation Project STW: Shallow Tube Well SWECO: Swedish Consultants UN: United Nations UNDP: United Nations Development Programme UNEP: United Nations environment Programme UNICEF: United Nations International Children’s Emergency Fund USAID: United States Agency for International Development USD: United States Dollar UTKHEP: Upper Tamakoshi Hydroelectric Project UTKHPL: Upper Tamakoshi Hydropower Limited UTPCC: Upper Tamakoshi Peoples Concern Committee VAT: Value Added Tax VDC: Village Development Committee WB: World Bank WHO: World Health Organisation WECS: Water and Energy Commission Secretariat WEF: Water, Energy & Food Security WFP: World Food Programme

Dynamics of Hydro-power Development in Nepal: Water-Energy-Food Security Prospect JAYA LAL NEUPANE Neupane, J. L., 2022: Dynamics of Hydro-power Development in Nepal: Water-Energy-Food Security Prospect. “Master Thesis in Sustainable Development at Uppsala University”, No. 2022/06, pp. 65, 30ECTS/hp. Abstract

This thesis concerns with water, energy, and food (WEF) security in Nepal in relation to hydropower development. Hydropower is challenging to WEF security in three ways: First, the focus is only on energy generation which overlooks the impacts on land, forest, water and biodiversity. Second, the hydropower projects are being built in the tributaries of transboundary rivers where local, national and international interests and priorities intersect because these rivers are sources of the economy; water, energy, food commodities; and other ecosystems services. Third, discourses on renewable energy, sustainable development and climate change portray hydropower as a promising renewable energy source as other renewable energy sources hold very less potential in Nepal. In this context, this thesis evaluates if the benefit-sharing approach can be a solution to overcome problems related to the implementation of hydropower which challenges WEF security. Therefore, the study adopts WEF Nexus Framework and Benefit-sharing Framework to evaluate the challenges and possibilities for rising WEF security minimizing the hydropower-induced trade-offs. The study finds hydropower development in Nepal is rapid and haphazard which merely conceives trade -offs between energy production and other benefits. But benefit-sharing practice, though it is still in its nascent phase, has positively impacted WEF security primarily at the local level, mainly by providing irrigation and drinking water facilities, rural electrification, and agriculture-related livelihood training and support. However, a well-planned benefit-sharing approach as an integral part of hydropower development is lacking which foils equitable distribution of benefits among stakeholders across all levels and smooth implementation o f hydropower projects to enhance the sustainability of hydropower.

Keywords: Sustainable Development, Sustainable Hydropower, WEF Security, Benefit-sharing, Trade-offs, Benefits

Jaya Lal Neupane, Department of Earth Sciences, Uppsala University, Villavägen16, SE-75236 Uppsala,

Sweden

Dynamics of Hydro-power Development in Nepal: Water-Energy-Food Security Prospect JAYA LAL NEUPANE Neupane, J. L., 2022: Dynamics of Hydro-power Development in Nepal: Water-Energy-Food Security Prospect. “Master Thesis in Sustainable Development at Uppsala University”, No. 2022/06, pp.65, 30 ECTS/hp Summary

The study adopted an explorative qualitative research method to explore the status of water, energy and food security (WEF security) in Nepal. It further explored the impacts of hydropower development and practices of benefit-sharing in achieving WEF security and promoting sustainability of hydropower development through a case study of three hydropower projects, namely Chatara Hydropower Project (CHP), Khimti Hydropower Project-I (KHP-I) and Upper Tamakoshi Hydroelectric Project (UTKHEP) from the Koshi River Basin (KRB). CHP is a state-built small hydropower project located in plain geographical terrain whereas KHP-I is a privately built medium-scale hydropower project located in the hill region. UTKHEP is a big-sized hydropower project built in a public-private partnership model in the mountain region. To explore the efforts made to maintain healthy interaction among water, energy and food systems and sharing of benefits among stakeholders in these hydropower projects, Water, Energy and Food (WEF) nexus and Benefit-sharing frameworks were applied in this study. In recent years, WEF security is improving at all levels. The physical availability of water and energy is better than food, whereas accessibility is much improved for all commodities. But the quality of all commodities is still substandard. The cost of water is significantly less than energy and food. However, water, energy and food systems are under threat due to frequent natural disasters, and social, political and economic disorders. Also, benefit-sharing in the recently developed hydropower projects, although varied as per types, sizes, and investment modalities, is improving. It has helped to enhance WEF security and increase economic opportunities by providing enhancement benefits such as rural electrification; irrigation, roadways, and bridge infrastructure development; health, education and livelihood improvement programmes; and provisions of equity shares to project-affected people and communities. However, trade-offs are higher as hydropower development is income-driven and benefit-sharing is limited to meeting human needs. Very little attention has been paid towards the improvement of water quality, river flow characteristics and protection of aquatic biodiversity during hydropower development. Consequently, it possesses a serious challenge to the health of the ecosystem which is quintessential for sustainable WEF security. Besides, energy export is perceived as a path to economic prosperity. But it is very challenging in the context of Nepal as electricity generation and energy export are hugely influenced by geopolitical, geological, demographic, trade scenarios, and ecological contexts. For not having fair transboundary water cooperation in practice, the decision to develop hydropower and other water infrastructures depends on the power position and economic interest of non-local and non-national actors. This also challenges the future of hydropower development in Nepal. Inadequate investment is not the major problem now, rather social resistance and political instability fuelled by ulterior motives of investors and non-national actors are serious problems. Therefore, it still seems relevant and desirable to develop hydropower according to local needs, national capacity and interests, and with adequate consideration to environmental sustainability.

Keywords: Hydropower development, Water, energy and food nexus, Import dependency, Benefit -sharing

Jaya Lal Neupane, Department of Earth Sciences, Uppsala University, Villavägen16, SE-75236 Uppsala,

Sweden

1. Introduction Nepal is a landlocked country between India and China, both of which require tremendous amounts of energy for their growing economies (Alam et al., 2017; Shrestha et al., 2018). More than 60 percent of the 29 million people in Nepal are relying on agriculture for their living (DoA, 2018; World Population Review, 2020). Although the country occupies a mere 0.1 percent of the earth's surface, it has a diverse climate and topography and rich biodiversity. It hosts 112 forests, 4 agriculture, 1 river, 1 glacier and rock ecosystems (Gurung et al., 2016; ADB, 2018). It provides a habitat for 2 percent of flowering plants, 4 percent of mammals, and 8 percent of avian available in the world (Crootof, 2019). Nepal is well known as a Himalayan country. It is also a country of river basins as most of the country’s area is covered by i) perennial rivers originating from the Himalayas, ii) medium-sized perennial rivers originating from Mahabharat Range, and iii) seasonal rivers originating from Churiya Range (WESC, 2005). Nepal has about 6,000 different rivers and rivulets with a runoff capacity of about 7,200 cubic meters per second (m3/sec) or 224 billion m3 per annum (WESC, 2005; Karmacharya, 2007; Koirala et al., 2020). In other words, Nepal is a reservoir of freshwater which accounts for 2.27 percent of the global freshwater (Koirala et al., 2020). The challenges associated with rivers increase further along rivers as they traverse across downstream countries (Amjath-Babu et al., 2019; Rasul et al, 2019). Almost all the rivers, mainly Mahakali, Karnali, Gandaki, and Koshi Rivers from Nepal traverse through Northern India and reach to Ganges basin contributing 200x109 billion m3 of water annually (Bhusal cited in Rai et al., 2017). The issues of Transboundary Rivers are complex as many human, economic, and environmental factors intercept. And their management gets greater importance when water, energy and food security issues enter the policy debate (Ganoulis et al., 2013). These rivers are not merely supplying water inputs for agriculture and energy in the downstream countries but also disasters. Consequently, benefit-sharing associated with water has become a matter of transboundary issues. On top of that, the region is “energy-poor, water-stressed, and food deficient [...] the potentials of water resources are underdeveloped and synergies between water, energy, and food are not fully harnessed” (Rasul et al., 2019, p.1). Among them, downstream countries, India and Bangladesh are rapidly growing economies with high demand for energy and water (World Bank, 2018). Water has been used for irrigation and food processing for centuries. Thousands of traditional water mills and farmer-managed irrigation systems are widely used across the country (Agrawala et al., 2003; Department of Water Resource and Irrigations (DWRI), 2020). Now, improvement in the irrigation sector is also noticeable- scores of modern irrigation systems are under operation (Thapa, 2017). About 1.5 million hectares out of 1.8 million hectares of irrigable land has come under the coverage of irrigation (DWRI, 2020). Mostly, surface water and groundwater irrigation systems are common in Nepal contributing 67 percent and 33 percent to the total available irrigation respectively, where the share of farmer-managed irrigation systems is 10 percent (ibid). Similarly, water is being used for generating electricity for more than a century in Nepal (Shrestha et al., 2018; International Hydropower Association (IHA), 2019). The hydropower sector holds high economic potential since the rivers of Nepal have an estimated hydropower potential of 83,000 MW (World Bank, 2015). It is economically viable to generate 43,000 MW of electricity (ibid). In recent years, hydro-energy has been viewed as a main source of energy in the country mainly for two reasons; one is water abundance and the other is not having economically feasible fossil fuel reserves (Bergner, 2013; WECS, 2014; Fast, 2015). It has been perceived as an alternative to biomass energy, a dominant energy source in the country (WECS, 2014). Also, it has been taken as an exportable commodity that can drive economic growth in the country (NPC, 2007; Dixit, 2008). Therefore, the hydropower sector has become a priority sector in the country. Hydro-energy is massively being produced; there are 84 hydropower projects above 1 MW and 15 mini hydropower (below 1 MW) projects are under operation and generating 1,116 MW and 12 MW respectively (DoED, 2020a, 2020b). Similarly, there are 3300 micro and

mini-hydropower projects producing above 32 MW across the country (AEPC, 2019). From the generated electricity, Nepal Electricity Authority (NEA) supplies electricity to 78 percent of the total households in the country (NEA, 2019) while AEPC supplies electricity to about 10 percent (AEPC, 2019). Only about 12 percent of the total households in the country do not have access to electricity (NEA, 2019). Likewise, 216 licenses for various differently sized projects for about 7,680MW have been issued until the end of 2016 for construction (DoED, 2020c). Also, 264 projects with above17,000 MW capacities are being surveyed (ibid) that ushers the possibility of a hydropower boom soon in Nepal. Finding a sustainable energy source is primary for the economic development of a country. On top of that, building hydrological infrastructure is critical in Nepal because of its geopolitical situation, diverse use and potential threats to vast bio-diversity (Crootof, 2019). Besides, most of the hydropower projects in Nepal are run-of-the-river types producing below 55 percent of their actual capacity in the dry season (Crootof, 2019; IHA, 2019; NEA, 2019). As a result, industries and 78 percent of the electrified households have to rely on intermittent elect ricity supply from India during the season (NEA, 2019). Moreover, hydropower development is driven by a sectoral approach that merely focuses on electricity generation compromising many co-benefits such as irrigation, flood control, and waterways development (Rasul et al., 2019). Water, energy and food sectors are developed in isolation for not knowing intricate relationships among these equally essential elements or undermining one for another (Rasul, 2014). So, it becomes difficult to supply quality water, energy, and food in a consistent, sufficient and associated benefits in an equitable manner (ibid). Further, challenges arise when the same water source has to meet water demand for agriculture, drinking water and other socio-economic needs. Furthermore, land-based agriculture systems, farmer-managed seasonable irrigation systems; and inadequate water infrastructure add challenges (Thapa, 2017; Trading, 2019). Although the physical availability of water accounts for 8000 m3 per capita per annum (Thapa, 2017), people living in hills and mountains lack access to water due to inadequate and inefficient infrastructures. Contrarily, about 1.26 million people in the plain area suffer from flooding and inundation every year in the monsoon (United Nations Nepal, 2020) and reversely, water scarcity in winter when the rivers dry up. In this context, the development of hydropower receives greater significance in Nepal (IWMI, 2016). 1.1. Research Aim and Question The research primarily aims to explore how hydropower development can be implemented for water, energy and food (WEF) security in Nepal setting a research question that ‘to what extent does the benefit-sharing in hydropower implementation help ensure WEF security in Nepal?’

1.1.1. Research Objectives The study has the following three objectives:

i. Analyse political, economic and technical challenges and opportunities in hydropower development;

ii. Evaluate the contribution of hydropower to water-energy-food security and prospects;

iii. Evaluate existing hydropower implementation approaches and explore a sustainable approach for water-energy-food security.

1.2. Study Site The Koshi River Basin has been selected for the study. From the basin, three hydropower projects; namely, Chatara Hydropower Project (CHP), Khimti Hydropower Project-I (KHP-I), and Upper Tamakoshi Hydroelectric Project (UTKHEP) are purposively selected for the study. The locations of these

hydropower projects are indicated with triangular legends in different colours as shown in (Fig.1).

Fig.1. Hydropower Projects under the Study in the Khosi River Basin, Nepal Source: Prepared by the author using ArcMap 10.7 Province 1, province 2 and province 5 are not named until the map was generated, so these are marked by numbers.

Kathmandu has been taken as a reference point to show the distance of hydropower projects. The map simply shows

the location of hydropower projects but does not depict the border of the rivers and the basin.

The project sites from the different ecological regions of the Koshi River Basin constructed for electricity generation have been selected based on differences in the period of construction, size, and investment modality to evaluate the practice of benefit-sharing and the impacts of hydropower development on WEF security. The frame used for the selection of these sites has been included in section 3. The Koshi basin comes in selection because of the history of hydropower and geopolitical importance. The basin spreads over three countries, China, Nepal and India from North to South. It is the largest tributary of the Ganges Basin that ends in the Bay of Bengal (Chinnasamy et al., 2015, Gautam, 2017). Also, the river is the largest in terms of surface water availability which holds 12 percent of the total river water availability in Nepal (Bhattarai, 2009). Since the study is limited to Nepalese territory, this section describes the basin, particularly in Nepal. The basin spreads over Bagmati Province and Province 1 (not named yet), the central and eastern part of Nepal; that is 270 06’ 23” to 280 09’50” North latitude and 880 22’ 36” to 880 23’ 37” South longitude. 27,863 km2 out of 61,000 km2 area which is 46 percent of the total area of the basin lies within Nepal (WECS, 2005; Gautam, 2016, p.189). The basin covers the different elevations that range from the highest 8,848 m of Mt. Everest to the lowest height of 140 m at Chatara, Sunsari. It consists of seven major tributaries; namely, Tamur, Arun, Likhu, Dudhkoshi, Tamakoshi, Bhotekoshi, and Indrawati forming three confluences; Sunkoshi, Arun and Tamur from west to east (Gautam, 2017). The confluences of the above-mentioned rivers meet at the outlet, Chatara, where the river is known as Saptakoshi. The river has rocky bedrock and banks in the mountains and hills whereas alluvial soil in the plain. The basin area consists of 37 percent agricultural land, 6 percent snow and glacier-covered land, 33 percent for grass and shrubland, and the rest is covered by forest (ICIMOD, 2015).

The basin shapes the landscape, ecosystem and socio-economic aspects of the region (Khatri et al., 2010). 17 water discharging districts (5 mountain districts, 9 hill districts, and 3 terai districts) to Koshi Basin within Nepalese territory are projected to have about 5.5 million population by 2021 at an annual growth rate of 2 percent (CBS cited in NDRI, 2013). Population in Terai districts (plain land with alluvial soil) is dense compared to mountain and hill districts (ibid). Majorly, advantaged castes like Brahmin, Chhetri and Newar are dwelling in the basin area. However, the population of indigenous castes like Tamang, Thami, Rai, Sherpa, Limbu, Gurung, and Magar holds a sizable chunk in Hill and Mountain districts. Ethnic minorities and disadvantaged castes like Bhujel, Damai-Kami, Sanyasi, and Majhi are also dwelling on marginal lands of hill and mountain districts making their living on forest and river resources. Similarly, marginalized castes like Tharu, Musalman and Musahar in the plain make their living from agriculture and river-based resources (ibid). In the basin, above 80 percent of the population is involved in subsistence agriculture and livestock (Chinnasamy et al., 2015; Hussain et al., 2018). The basin is suitable for crops like Paddy, wheat, maize, grains, vegetables, oils, sugarcane, and jute (ibid). However, about 40 percent of the population is relying on imported food: spending 58 percent of their total income on it. Moreover, about 14 percent of the population does not have a fixed source of income. In recent years, access to communication, education, electricity, and water has increased, yet the quality is still an issue. Poverty, food insecurity, inadequate and poor infrastructures and higher transportation costs are some of the major problems in the basin area. However, the basin has immense potential for irrigation downstream and hydropower development upstream (ICIMOD, 2015). The basin has 22,000 MW hydropower potential and an irrigation capacity of 500,000ha (ICIMOD, 2015; Bhatta & Ranabhat, 2019). There are about 112 hydropower projects with about 3,684 MW installed capacity (Niti Foundation, 2020). Traditional farmer-developed micro-irrigation systems are dominant in the basin. In recent years, modern surface irrigation systems are also increasing along the basin (SMIP, 2014; Shrestha, 2016).

2. Conceptual Understanding and Analytical Frameworks Hydropower development is an intervention that tends to impact the interaction among the water, energy, and food systems while meeting water, energy, and food-related human needs. To know how water, energy and food securities are met or challenged, understanding hydropower implementation approaches becomes significant. ‘Water-Energy-Food Nexus’ and ‘Benefit-Sharing’ are considered sustainable approaches in hydropower development. So, the Water-Energy-Food Nexus and Benefit-sharing approaches and frameworks are adopted for the study.

2.1. Water-Energy-Food Nexus Water-Energy-Food (WEF) Nexus approach is a scientific investigation of synergies, conflicts and trade-offs resulting from interaction among water, energy, and food sectors at the biophysical, socio-economic, and governance level (van den Heuvel et al., 2020). Ecosystem functions and services are results of bio-physical interaction among these sectors, which get affected by socio-economic and policy interventions. So, the WEF nexus understanding becomes useful in generating interdisciplinary knowledge and cross-sectoral governance giving equal importance to the water, energy and food sectors (Albrecht et al., 2018; van den Heuvel et al., 2020). The healthy interaction among these three (sectors) systems is essential for resource governance (World Economic Forum, 2011). Emphasizing one particular system may hamper the healthy interaction among them. Moreover, emphasizing all three systems in isolation neither can ensure the nexus approach since they adopt disciplinary tools ignoring nexus interactions and feedback. Therefore, FAO (2020a) defines the nexus as an understanding and act of ensuring the integrity of ecosystems by managing frequently competing interests. Managing water, energy and food systems with nexus understanding, therefore, helps to foster water, energy and food security maintaining the healthy interaction among them (Scott et al., 2016).

2.1.1. Water-Energy-Food Nexus Framework The Water-Energy-Food Nexus framework is considered effective for analysis of cross-sectoral integration among water, energy and food sectors as the nexus relies on their mutual interaction. Integration plays a crucial role in enriching synergy by minimizing possible trade-offs and improving human and environmental relationships (Biggs et al., 2015). Furthermore, the framework is used to analyse the WEF nexus at different scales considering social, environmental, and technical challenges (Smajgl et al., 2016). It is because the interaction among water, energy and food sectors is further influenced by external factors (Fig.2) such as population, economic growth as well as environmental pressures (World Economic Forum, 2011) .

Fig.2.Water-Energy-Food Security Nexus Framework (Source: World Economic Forum, 2011)

In the nexus framework, water, energy, and food securities get equal emphasis for being mutually dependent sectors. Global Water Partnership (GWP) (2000) states that “water security, at any level from the household to the global means that every person has access to enough safe water at an affordable cost to lead a clean, healthy and productive life while ensuring that the natural environment is protected and enhanced” (p.12). In Cook and Bakker's (2012) words Water security means availability, accessibility, evasion of human vulnerability from hazards, and sustainability of the water system. Water ‘availability’ refers to water sufficiency for drinking, washing, and livelihood (Rijsberman, 2006). ‘Accessibility’ refers to access to safe water, water functions and services for humans and eco-systems (Cook & Bakker, 2012). Water security also includes protecting society and water infrastructures from risks, hazards and hydrological variability (ibid). Likewise, the sustainability of water resources and water ecosystems emphasizes water safety and utilization of water resources thinking beyond present needs (Cook & Bakker, 2012; Leck et al., 2015). Physical availability, affordability, quality of water, water resource-induced risks, and challenges associated with water-related infrastructures are viewed to water security in Nepal. Energy security has been defined as a condition of availability, accessibility, affordability and acceptability of energy (APERC, 2007; Bridge, 2014; Cherp & Jewell, 2014). Generally “the uninterrupted provision of vital energy services” is energy security (Johansson et al., 2012, p. 37). ‘Availability’ refers to the physical adequacy of energy, energy services, diversity of energy types and systems, and availability of facilities (APERC, 2007). ‘Accessibility’ refers to a reliable supply of energy that depends on equitable access to energy sources, geophysical and geopolitical challenges, and technological and infrastructural advancement. ‘Affordability’ indicates reduced price volatility and a reasonable price at which consumers can use energy (ibid). And ‘acceptability’ refers to the sustainability aspects of energy production and consumption. An energy type with low risks towards human, social and environmental health gets higher acceptability (Bridge, 2014). Import dependency, energy production and electrification, price of electricity, diversity of energy types, and integration of energy with other productive sectors, the safety of vital energy systems, environmental consequences, and political stability are some of the indices used to evaluate the situation of energy security in Nepal. Likewise, FAO (2001) defines food security as “physical and economic access to sufficient, safe and nutritious food for all people at all times to meet their dietary needs and food preferences for an active and healthy life”. Further, food security is a state of food availability, food access, utilization, and stability (FAO, 2009; Godfray et al., 2010). ‘Availability’ means the sufficiency of food items and their consistent availability. The availability of food can be determined by domestic production, food imports, food stocks, and food aid. ‘Access’ refers to the physical and economic capacity to obtain sufficient nutritious diets. It is determined by purchasing power of people, income level, presence of quality transportation, and market infrastructures. ‘Utilisation’ is about the intake of food in a healthy and balanced way so that nutritional requirements are met. It includes food safety, hygiene, food quality (nutritional requirements) and food diversity across the food chain. And ‘stability’ is about sustaining infrastructures and supply chains that keep users' access to nutritious foods stable (ibid). Using natural resources at a large scale can result in depletion of natural capital, loss of ecosystem services, inequitable sharing of the benefits, and increased climate risk (Rockström et al., 2009; Hoff, 2011). It is because the focus on attaining provisioning services such as water, energy, and food may impact other-non provisioning ecosystem services (van den Heuvel et al., 2020). It tends to compromise ecosystem health. Yet, it is not certain that provisioning services are equitably distributed among stakeholders. So, the WEF Nexus approach in this study assesses the effects of hydropower development on ecosystem services such as availability of water, energy and food; land and water-based production systems, and regulating functions for example sedimentation and flood regulation, and coherence of water, energy and food-related policies and governance.

2.2. Concept of Benefit-sharing Benefit-sharing intends “to maximize and distribute benefits across stakeholders, through relevant spatial and temporal scales by use of various mechanisms, and consistent with the principle of sustainability” (Lillehammer et al., 2011, p. 11). In the standard, benefit -sharing is set as a component of sustainability to implement hydropower and water infrastructures, and an approach to supplement compensatory and mitigation acts (ibid). In other words, it is an act of providing some kinds of advantages or profits to resource providers as justice in exchange for resources (Dauda & Diericks, 2013). This is guided by an ethos of equitable sharing of resources to reduce disparities between resource providers and users favouring disadvantaged groups while distributing benefits (ibid). Benefit-sharing is not a one-time solution- it is an evolutionary process or an outcome of negotiation among stakeholders, interactions of multiple policies, and a diversity of perspectives (Shrestha et al., 2016). Initially, benefit-sharing was perceived as a trickle-down effect of development; secondly, it was mitigation of socio-environmental losses and paying compensation to project-affected people and communities, and by now, it is an element of sustainable development (IHA, 2018). It transgressed from notifying and compensating before 1980 to inclusive partnership for long-term benefit-sharing in the post-2000s (Shrestha et al., 2016). Even in present days, mostly in low-income countries, benefit-sharing is not performing well as compensation, benefit-sharing, and corporate social responsibility are jumbled together (Wang, 2012; Shrestha et al., 2016). Moreover, hydropower developers are unwilling to share the benefit as local people do not possess the power to negotiate with the government and foreign investors (Wang, 2012; Crootof, 2019). Long-term benefit-sharing becomes viable only when local communities' participation is equitably ensured in decision-making and benefits-sharing. Enablers like “Relevant government policies, the legal and regulatory frameworks, corporate social responsibility of companies, the capacity of local communities, and stakeholder engagement” are essential for effective benefit-sharing (Wang, 2012, p.v). Therefore, benefit-sharing lies in the domain of many policies (Rai & Neupane, 2017) and benefits are delivered well when they receive binding status by policies. Benefits that are generally shared among stakeholders in development interventions are classified into two broad categories; namely, monetary benefits and non-monetary benefits. For monetary benefits, some part of the money generated by development intervention is shared with stakeholders. Whereas, various supports to improve life, livelihood, public services, and ecosystem services are known as non-monetary benefits (Wang, 2012; Shrestha et al., 2016; IHA, 2018). This categorization helps in knowing the kinds of benefits provisioned and delivered in a particular project. However, the effectiveness of benefit-sharing cannot merely be measured from the monetary support given but also from local people’s satisfaction and environmental health (Wang, 2012). Therefore, benefit-sharing should be based on social and environmental impact assessment, socio-economic studies, resettlement action plan, and environmental management plan (ibid). It has to be planned as part of the project investment with clear objectives, a well-defined target population, an agreed benefit-sharing mechanism, and an institutional arrangement. Beyond, the return amassed from operational benefits, benefits have to be designed considering environmental and social sustainability. Equitably designed benefits become instrumental in creating synergies and resolving possible conflicts. Furthermore, benefits designed considering various Spatio-temporal scales help combat unexpected events holistically (Lillehammer et al., 2011). Benefit-sharing in hydropower is defined as “the systematic efforts by project proponents to sustainably benefit local communities affected by hydropower investments” (Wang, 2012, p.v). Therefore, it is unjust to leave the social and environmental losses on the communities’ side and overlook the indirect effects of hydropower development. This consideration helps to gain support from local people, govern natural resources and hydropower assets in the participation

of local communities, develop community with social and environmental sustainability, and avoid possible investors’ risk (ibid). In hydropower development sustainability standards emerged mainly when the World Commission on Dams was convened in 2000 (Shrestha et al., 2016). Further, the Hydropower Sustainability Assessment Protocol 2010 and the emergence of Integrated Water Resource Management ascertained the idea of sustainability (ibid).

2.2.1. Benefit-sharing Framework The Benefit-sharing framework is used to analyse sustainability standards in hydropower development. The framework has been developed from various sources, which includes i) associated benefits with hydropower development mainly in transboundary rivers, ii) governance of benefit-sharing and iii) utilization of benefits (Sadoff & Grey, 2002; Skinner et al., 2014; Shrestha et al., 2016). These components are elaborated further and used to analyse the practice of benefit-sharing in the hydropower projects under this study. i) Benefits associated with hydropower development

Sadoff and Grey (2002) mentions the following four types of benefits in the Transboundary Rivers:

Benefits to the river- resulting from better ecosystem management such as improving water quality and river flow characteristics, land and diversity.

Benefits from the river- through social and economic gains such as increased food and energy production, flood and drought management.

Reducing costs because of the river- through reduced tension among co-riparian states, and maintaining food and energy security as far as possible self–sufficiency.

Benefits beyond the river- through better regional and economic integration; integration of infrastructure, agribusiness and market (p.92-93).

These four types of monetary and non-monetary benefits indicate mainly the source of benefits and ways to generate benefits, yet these do not describe who beneficiaries are and the size of benefits they should be given. So it is essential to identify the right beneficiaries and the benefits they would receive. ii) Governance of benefit-sharing

Governance mechanism is indispensable to delivering the identified benefits to the right beneficiaries. It includes:

Identification of project-impacted people at different scales- people living in the upstream, downstream, river basin, project influence area, local community and project district according to the sustained impacts and levels (Shrestha et al., 2016, p.37).

Institutionalization of the process- includes institutional arrangement, ensuring a

stake of local people and determining the source of fund, size and flow mechanism (Skinner et al., 2014, p.10).

Consideration of long-term issues- includes shifting time value of benefits, investment

over time, and stakeholders’ changing benefits and expectations at different stages of project development (Shrestha et al., 2016).

iii) Utilisation of benefits Benefit-sharing has certain intentions or purposes while providing monetary and non-monetary benefits to the beneficiaries. These intentions are categorized into four types as Skinner et al. (2014, p.17) put it:

Compensation –it is especially carried out for restoring assets and environmental losses to the state prior to the project. Benefits like cash compensation for lost assets, relocation cost and support, livelihood restoration support, land for land loss, and compensatory tree plantation are some (Wang, 2012; Skinner et al. 2014; Shrestha et al., 2016; IHA, 2018).

Enhancement- it refers to funding local development and infrastructures for the creation of jobs, improving livelihoods, and social services. Ancillary investment in infrastructure and public service improvements such as irrigation and drinking water, roadways and bridge development, and support for health and education are some. Similarly, capacity building through training and skill development, institutional array and technological supports; supports for improvement of ecosystem services such as watershed management, flood control, improved access to natural services and protection of resources are also parts of enhancement (ibid).

Redistribution-it is about sharing project revenues or royalties to government institutions, communities, and individuals. It includes benefits like community development fund, cash in kind, upfront payments, sales of electricity, preferential electricity rate and priority, property tax exemption, venture capital funds, payment for ecosystem services, and interest-free credits (ibid).

Partnership- it refers to the equity stake of local people as a development partner where

they share risk and benefits based on their equity investment (ibid).

3. Methodology The study adopts a Multiple-case Study design, a qualitative research method to study the phenomenon of hydropower development. A case study is a naturalistic approach to exploring a critical phenomenon in its context in association with some events and their relationships from the perspective of research participants (Zainal, 2007; Ritchie et al., 2013; Patton, 2014). Further, Miller et al. (2008) put that an issue or event, particularly from socio-ecological systems has to be perceived through pluralistic perspectives. Aligning with the criticality of the cases, Islar et al (2017) say that the hydropower projects in Nepal provide important cases for an energy transition due to critical geophysical and geopolitical settings. As the case study requires a broad set of data from various sources of evidence including contextual characteristics, few cases are empirically studied in their natural settings in a concentrated manner (Patton, 2014; Robson & McCartan, 2016). It can follow a pre-structured research design, yet flexibility is equally desirable to capture emergent insights during the study (Maxwell, 2012; Robson & McCartan 2016). Therefore, a multi-case study becomes useful for comparison, complementing ideas, testing of theories set for the study, and theoretical generalization (Maxwell, 2012). So, three hydropower projects from Koshi River Basin were chosen for an in-depth case study to draw a holistic picture of benefit-sharing for WEF security. In qualitative research, purposive sampling is common where “particular settings, persons, or activities are selected deliberately to provide information that is particularly relevant to your questions and goals, and that can’t be gotten as well from other choices” (Maxwell, 2012, p.99). So, the three study sites as mentioned in section 1.2 were purposively selected after consulting experts working in the sector of hydropower development. These projects are exemplary concerning the benefit-sharing approach and impacts on certain groups in the project site. For example, the Majhi community, a marginalized community-dwelling downstream of Khimti River, depends on fish and river resources to sustain their livelihood. Moreover, these cases have vast differences in features. So a list of the small, medium and big (big/large) hydropower projects (table 1) built after the 1990s were selected assuming the reinstatement of democracy in the 1990s and the emergence of rights-based approaches after the 2000s might have influenced hydropower development for WEF securities. Table 1. Size-based Framework Used for Sampling of Hydropower Projects for the Study

Investors International National

Public Private

Hydropower by size

Small (<25MW)

Medium (>25-100MW) Big/Large (>100 MW)

(Source: WECS, 2010)

3.1. Data Collection Different kinds of data are required to capture the accuracy of information (Fisher, 2010). Multi methods such as observation, interviews, personal notes, and review of project documents are used for data collection in qualitative research (Ritchie et al., 2013; Patton, 2014). As a result, the gap created by the weakness of one method is fulfilled by the strength of another method (Gillham, 2000). So to capture the components of WEF securities and benefit -sharing, both primary and secondary data are used. Primary data has been collected from direct observation of study sites and interviews with key informants whereas a wide range of literature has been reviewed for secondary data.

3.1.1. Direct Observations Robson and McCartan (2016) state that observations are generally explorative and carried out in unstructured form to find out what is happening in the context. “Observation provides the details of the setting, the people and the events” (Robson & McCartan, 2016, p.328). Here, settings, actors, objects, events, purpose and views are described, analysed, and interpreted to generate meaning (Gillham, 2008; Robson & McCartan, 2016). Mostly, informal observations allow freedom for the observer in collecting information they like (Gillham, 2008). Moreover, observation of sites, as Maxwell (2012) puts it, provides a real model of implementation that hints about the perspective used while developing a project. For the study, Chatara Hydropower Project, Khimiti Hydropower Project-I, and Upper Tamakoshi Hydroelectric Project and their immediate influence areas were directly observed. The first two projects were already in operation and the last one was on the verge of completion. Unstructured informal observations were carried out in presence of project officials. Technical performance and physical changes such as the impact on agricultural land, settlement, river courses, forest area, and other infrastructures associated with the project interventions were observed and recorded. During observations, project staff were asked about the project details, changes and challenges that appeared over the periods. Recorded information was further used to generate new information, complement the interviews, and triangulate the secondary data. 3.1.2. Key Informant Interviews Informants for interviews are selected based on their relevant role, knowledge in the sector, readiness to provide information, ability to communicate, and neutrality in providing information (Burgess, 2003). Maximum variation in sample units is maintained for representativeness so that the participants can meet the purpose (Maxwell, 2012; Patton, 2014). These notions were followed while selecting research participants in the study. The researcher personally conducted 11 Key Informant Interviews (KIIs) with 1- hydropower and policy expert, 3-project beneficiaries, and 7- project officials in three different periods; 22-25 March 2020; 17-20 August 2020, and 10-11 May 2021Sampling in qualitative research plays a crucial role; so, in the study, the best possible informants who had a good grasp of the projects and issues related to hydropower development were selected that increased data validity, authenticity, and reliability. Key informants were identified with a snowballing method. In a snowballing method, an identified individual is asked to identify other members from hard-to-

reach populations who have particular characteristics and experiences (Handcock & Gile, 2011). These informants were approached at their workplace as far as possible and interviewed individually except for a telephonic interview with a hydropower and policy expert . Approximately one-hour-long open-ended interviews were conducted with the help of checklists (Annex-2). These checklists were devised based on thematic areas maintaining flexibility to dig deep into the issues. Interviews were recorded with the help of a recorder and transcribed by the researcher after the field study. Informants’ perspectives about the benefit -sharing mechanism, scope of benefits, their impacts on water, energy and food securities at the project level, and implicit information on political and technical dimensions of the project were captured by the interviews. The results were further compared with the findings of the literature review and verified with a hydropower expert and synthesized in different thematic contents for analysis. 3.1.3. Literature Review The secondary data in research have a significant role in shaping the research questions, developing a theoretical perspective, selecting sampling units, and validating primary data (Maxwell, 2012). Thereby, it also reduces the time required to conduct a primary study and helps

make research rigorous (ibid). Besides that, the extensive review of literature, about the same issue, from the different perspectives of various stakeholders, unravels intricate relationships among variables and makes comparison feasible (Gillham, 2000). Literature like books, periodicals, journals, articles, conference papers, research papers, academic dissertations, websites and e-readings, project documents, and policy documents produced by different national and international agencies were reviewed. These pieces of literature were accessed from various databases like ProQuest, Google Scholar, ResearchGate, Uppsala University Library, and websites of research institutes. Keywords like hydropower, food-water-energy nexus and security, land-use impact, irrigation, flood damage, and benefit-sharing were used to search the literature. In addition, libraries of the concerned projects, implementing agencies, and line agencies were visited to collect project-specific documents. Further, to make the study rigorous literature published after 2000 and written in English mostly in the Nepalese and Asian contexts were reviewed as far as possible. The data from reviews were used as a direct quotation, paraphrase, summary, and evaluation with necessary modifications.

3.2. Reliability and Validity of Information Methodological and technical propriety only cannot determine the reliability and validity of the data in qualitative research as much as it does in quantitative (Robson & McCartan, 2016). Qualitative research is mainly blamed for lacking rigor, objectivity, transparency and validity (Maxwell, 2012; Noble & Smith, 2015). However, the use of appropriate methods; conscious selection of questions; evasion of biases; data triangulation and data comparison from various sources; elimination of discrepancies by participant validation; time and resource -intensive techniques; and data verification can enhance validity in qualitative research (Bashir et al., 2008; Curry et al., 2009; Maxwell, 2012; Yin, 2018). In this case, critical reasoning plays a crucial role during the process of inquiry by ruling out plausible alternatives that make a case study scientific (Bashir et al., 2008; Robson & McCartan, 2016). The study undertook multiple-case studies applying multiple research methods to construct the validity of the research. It became useful in collecting a large number of data and helpful in triangulating data from one source to the other. Further, synthesized results of one case study were compared to the other two cases. To prevent the study from possible deviation from the scope, checklists were prepared according to the informants’ qualifications, pattern finding questions were used, and questions were based on a literature review. To collect proper and valid data, the researcher built a rapport with informants by using his professional contact. Moreover, the studies were conducted after informed consent from the informants and assurance of confidentiality. Further, to maintain the credibility of the description, interpretation and conclusion in the study, the researcher personally and with the help of a trained research assistant collected information by allowing sufficient time for each respondent. Native language was used, in which the respondent feel comfortable, to collect accurate information. In addition, details of information and implied meanings were duly recorded in personal notes and well described after the field study.

3.3. Data Processing and Data Analysis Qualitative analyses such as content analysis and d cross-case analysis were used for data analysis. Content analysis is a reanalysis of readily available qualitative data or text or artifacts categorized into themes or concepts (Robson & McCartan, 2016). In a multiple-case study, every case is synthesized individually on a case basis and compared or synthesized in a certain pattern across the cases (Yin, 2018). Data collected in the form of audiotapes, photographs, and personal notes were compiled and collated to remove data discrepancies. These data were immediately transcribed, synthesized,

reanalysed and segregated into different thematic contents aligned with themes covered in the interview questions. Further, the themes and categories were analysed according to the frameworks set in this study. The policy and project documents were compared to the findings of the case study to analyse gaps between policies and practice in achieving sustainability in hydropower development. Similarly, benefits shared in the projects and their contribution to WEF security was separately synthesized and compared among one another to develop a poten tial benefit-sharing framework suitable in the Nepalese context.

3.4. Limitations and Gaps in the Study A basinwide study is considered ideal for studying WEF security issues (WESC, 2005; IHA, 2018), but because of time and budgetary constraints, the study remained limited to three cases from the Koshi River Basin within the territory of Nepal. Further, the Coronavirus Disease (COVID-2019), an infectious disease outbreak that spread at the pandemic scale (WHO, 2020) limited the sample units and its coverage. The originally planned 3 small focused Group Discussions (FGDs) were canceled considering the communicability of the disease. Also, it was not possible to revisit the site for getting informants' feedback and correct possible variations in the information collected from interviews in physical presence. So, the information discrepancies were addressed through telephonic conversation and email correspondence with the research participants. The study lacks data from informants from India, Bangladesh, and funding agencies like Asian Development Bank and World Bank would have given a broad perspective and helped validate the information covered in the literature and perspectives of informants from Nepal. Further, the study remained short in presenting basin-level data due to the limitation of scope and unavailability of secondary information. Similarly, the study also could not produce an appropriate budget size for benefit-sharing for Nepal based on the size of projects and the local context of the basin. Likewise, the study remained unable to provide measurable impacts on WEF security due to ecosystem changes and macro-drivers like climate change mainly due to inadequate data and limitations of this study. These gaps in the study can become areas for further exploration.

4. Literature Review

4.1. Political, Economic and Technological Challenges and Opportunities in Hydropower Development

This section is based on a literature review and forms a background drawing on political, economic and technological challenges and opportunities in hydropower development in Nepal. These aspects are important not only to know the growth ladder of hydropower development but also to indicate factors that impact benefit generation and distribution in the hydropower sector as shown in (Fig.3).

Fig.3.Political, Economic and Technological Factors Affecting Hydropower Development in Nepal Source: Developed by Author

The figure shows a general outlook of hydropower development in Nepal. There are various actors from community to non-state level and factors from technological to political domain interacting in hydropower development. Factors with positive impacts are highlighted in green whereas factors with negative impacts are in red. Factors in yellow represent contexts that are affected by actors and their actions. These factors affect each other in a non-linear way where arrows indicate the influence of one factor on the other. The basin-sharing countries have different priorities. Nepal and Bangladesh prioritise energy while India irrigation. Despite technological improvements in the hydropower sector, due to unfair geopolitical interference, the potential for multiple benefits from water resources is compromised. Consequently, it results in the denial of adoption of water cooperation mechanism, unfair trade agreements, and withdrawal of investments in the sector. As the result, non-state stakeholders hold control over water resources where either energy generation or irrigation projects are implemented from a sectoral perspective. Thereby these projects tend to overlook benefit -sharing, environmental health, and other potential benefits from hydropower development. It leads to resistance from communities, diminished trust among stakeholders, and subsequently, retarded hydropower development.

Denial to develop transboundary water cooperation mechanism

Biased power trade agreements

Withdrawal of investments

Geopolitical

interference

Political instability

Government changes

Economic blockades

Control over use of water resources by non-state stakeholders

Technological Improvements

Production capacity increased

Unjust benefit-sharing

Loss of multiple-benefits

Higher environmental loss

Uncertain energy market

Continuous

Resistance from

community

Erosion of trust

stakeholders

Retarded

hydropower

Development

Focus on sectoral approach for hydro- infrastructure (focus on electricity generation or irrigation)

Transboundary

Rivers

Abundant water holding high potentials for energy and irrigation

Different priorities

of basin sharing

countries

Nepal (energy and irrigation) India (irrigation and flood control) Bangladesh (Energy)

4.1.1. Politics of Large-dam Hydropower Development Geo-political and geophysical settings, the transboundary nature of rivers, and the hydro -hegemony of India brought the construction of large dams under the domain of politics (Hanasz, 2014; Rai et al., 2017; Crootof, 2019). Rivers from Nepal are Transboundary Rivers that have immense potential for hydropower, irrigation, navigation, transportation, fisheries, tourism, and ecosystems (Rasul et al., 2019). Therefore, any intervention in those rivers in Nepal falls in the interest of downstream countries like India and Bangladesh (Amjath-Babu et al., 2019). Moreover, the hydro-hegemonic position of India is not only impacting water, energy and food security of upstream and downstream countries like Nepal and Bangladesh but also the supply of goods and foods from India (Hanasz, 2014; Rai et al., 2017; Pant, 2018; Crootof, 2019). Mostly the Koshi River is under constant political pressure since the 19 th century. Mainly after the Koshi River Agreement of 1954, India has been unilaterally enjoying its benefits while Nepal is suffering a lot of economic and physical displacements from the Koshi Barrage (Shrestha et al., 2010). People underwent impoverishment when they were not compensated for the loss of their land and properties. The multiple benefits are frequently brought forth in discussion to get public support; however, the impacts on society, the environment, and local people especially from hills are hardly made public (Bhattarai, 2009). In the face of water and energy insecurity, the construction of large dams seems desirable. A large dam for irrigation is not required for Nepal- rather it is to meet the irrigation need of India. Instead of building the dam in Indian territory, dam construction has always been emphas ized in Nepalese territory leaving impacts on the Nepalese side (Dixit, 2009). Currently, 28 out of 31 identified reservoirs are planned for construction. These sites hold about 138 billion m3 of water that will submerge about 1,878 km2 of land within Nepalese territory (Shrestha cited in Bhattarai, 2009). It would mainly submerge fertile arable land available along the river valley. In this regard, studies show that 11,777 hectares of land at Arun Valley would submerge and more than10,000 people would be displaced if the project is built according to the given project design (Rai & Linkha, 2020). Therefore, dam construction in Nepal is an exclusionary development process that causes broad damage at the local level (Oza, 2014). Similarly, it is experienced that embankments as the structure to control flood is a mere sense of false security because the earthen embankments are not strong enough to cope with the flood (Dixit, 2009). So, people are still doubtful if it is implemented in the same fashion, flood control would be merely a desire. As World Commission on Dams says that it is difficult to control floods with a reservoir made for hydropower and irrigation because of their varied requirement for space to hold water (Bisht, 2008). Moreover, benefits are also asymmetrical because a high dam may benefit some parts of the country putting local communities at loss (Oza, 2014). 4.1.2. Water Cooperation and Benefit-sharing between Nepal and India Most of the large rivers of Nepal traverse through the Ganges basin in India to Bangladesh. These river basins are not only the source of natural capital but also habitats for animals and humans. In Nepal, nearly 41 percent of the total population dwells along the minor river basins as surface water is essential for their living (Dhungel & Pun, 2009). So is the case in India. Nepal and India formally entered into water cooperation after the Sarada Barrage Treaty in 1920. It continued with the Koshi River Agreement 1954, Gandak 1959, and Mahakali 1996 (Dhungel & Pun, 2009). These agreements were signed just after the pro-Indian governments came into power, thus one-sidedly preventing Nepal from just benefiting from its resources (Dhungel & Pun, 2009; GWP, 2017). Moreover, many major rivers, as Dhungel and Pun (2009) state, are already kept on hold by India either in the name of hydropower development or irrigation. Most interestingly these agreements coincide with major historical or political changes in Nepal. The Sarada Barrage agreement was done in the 1920s just after the First World War. There was no agreement between 1966 and 1990 as Nepal spoke louder about equal benefit-sharing- as a result,

major multipurpose projects such as Karnali, Pancheshwor, and West- Rapti multi-purpose projects were kept in limbo (Bhasin, 2005; Dhungel & Pun, 2009). Similarly, coinciding with these political changes and water treaties, three blockades; 1969, 1989, and 2015 were imposed by India until the interests of the imposer were fulfilled (Chanda, 2018). These embargos were political, born from India’s will to have control of the natural resources of Nepal, but the impacts were political and economic both (ibid). It makes Nepali feel that the water cooperation is unjust and that national independence is under threat (Dhungel & Pun, 2009). Despite revisions of the Koshi River Agreement in 1965, 1991 and 2006 and many institutional setups at the government and minister-level, no tangible benefits have been realized for 45,000 people affected by Koshi Barrage construction (Bisht, 2008; IWL, 2020). Territory and raw materials from Nepal were used, but benefits were minimal to the Nepalese side. Although the sovereignty of land and water is with Nepal, land and water use rights are entitled to the Government of India for 199 years in return for compensation (unfulfilled by the Government of India) for the losses incurred by Nepalese citizens. However, the Government of India always refrained from fulfilling its liabilities for compensation. Also, the provision to supply free electricity of 20 MW to Nepal has been reduced to 13.6 MW (ibid). Furthermore, information regarding the meeting of various joint committees and operation are not timely updated in the public domain keeping some major issues away from public notice (IWL, 2020). Although i t has often been stated by Indian politicians and bureaucrats that rivers from Nepal are God’s gifts common to Nepal and India, in reality, India has total control over the barrage and its operation (Mirumachi, 2015). Moreover, India seems reluctant to correct unjust water benefit-sharing to establish real water cooperation (Bisht, 2008). Already 50,000 lives have been claimed by this barrage, but India has shown no commitment to its liability to repair the damage (ibid). Amidst the context, local people in Nepal are actively demanding to secure their rights. Referring to water cooperation between Nepal and India, Qaddumi (2008) asserts that though there is not much conflict among riparian countries, views of the affected population and stakeholders’ interests have not been recognized. Most of the water agreements lack clear identification and quantification of benefits. Neither do these agreements mentions who would get what benefits and in what amount (ibid). Though there are certainly some benefits shared by Nepal and India, evidence shows that the water relation between Nepal and India is dominated by political power relations where India is dominating the use of resources (Ranjan, 2016). In all major rivers, water sharing has always been stressful because in the past Nepalese felt that they have not been treated fairly and equitably. The controversy is the outcome of India’s direct involvement in the river resource and its water hunger has aroused anxiety among all neighbouring nations (Rotberg & Swain, 2007). 4.1.3. Conflict and Control over Water Resource Institutions involved in hydropower development are underdeveloped mostly because Nepalese hydropower development is entrapped in a vicious circle (Ogino et al, 2019a). As inefficient sectoral planning leads to inefficient operation and maintenance the cost of operation and maintenance increases which outweighs the revenue derailing the demand and supply of energy. These institutions are not capable to manage various interests interacting in hydropower development. Similarly, hydropower has experienced frequent protests from local people when the benefits of local people are compromised (ibid). Moreover, due to the varied interests of stakeholders, larger major projects are cocooned in the gestation period and some are delayed such as Arun-III and Koshi Dam Project in the Koshi River Basin (Koirala et al., 2020). Political interest, discrimination in benefit-sharing among stakeholders, power relations, and values and perceptions associated with development are the major reasons for disputes and delays in hydropower development in Nepal (ibid). Also, disputes are different according to level and location. At the local level, impacts and benefits get priority

whereas at the national level, cost, and benefit to the country. Similarly, investors step into hydropower development with various interests such as profit -making, supporting the development process, and implementing economic and political agendas (Nepal River Conservation Trust, 2019). Larger hydropower projects are being enforced for some political and economic gains, but they are not as profitable as thought. So, for energy security, it is not necessary to build a dam everywhere disturbing the flow of the main channel. It is because power from tributaries is sufficient to meet energy security and energy sovereignty (ibid). Also, hydropower developers are procured according to the discretion of ruling parties or who have financial control. This has been the case in most of the large hydropower projects; for example, Upper Karnali, West Seti, and Arun-III (Koirala et al., 2020). Arun-III was canceled by World Bank in 1994 when the project was planned for 201 MW stating social and environmental concerns. But the same project was revived in 2008 with a 900MW capacity (ibid) when Nepal was in political transition and the condition that would be built by an Indian company, Satluj Jal Vidyut Nigam (SJVN). It was approved by saying that more benefits to the project affected people and area would be offered no matter what effects would be on the environment and resources. 4.1.4. Trade Agreements and Investment Challenges Nepal has general trade agreements and power agreements solely with India except for one uncompleted agreement with China in 2016 (Chanda, 2018). Power Exchange and Trade Agreement 1971 between Nepal and India opened the use of transmission lines to each other and further, the Power Trade Agreement (PTA) 1997 opened the Indian government’s investment in Nepalese hydropower. It is only the PTA 2014 that allowed purchasing electricity in high amounts from India. PTA 2014 treats electricity as free trade good which talks about free access to each other markets (Government of Nepal, 2014). But the prejudiced Power Trade Guideline 2016 subverted the PTA 2014’s provision. It prohibited the private sector power producers from Nepal and other countries to trade energy with India unless they allow a 51 percent share of the Indian government in the company (Chanda, 2018). This new guideline discouraged foreign investors to invest in Nepal and selling the produced electricity to India. Rather it attempts to establish an Indian monopoly in hydropower development in Nepal. In this regard, Ogino et al (2019a) agree that hydropower development in Nepal is being influenced by neighbouring countries. Also, Nepal can suffer from electricity scarcity in the coming years as the export of energy is prioritised over the domestic supply (ibid). Again, Nepal has been facing investment challenges not only in large projects but also in small and medium-sized projects across the country. The multi-lateral investment banks such as Asian Development Bank (ADB) and World Bank have already withdrawn their investments from dozens of projects. ADB withdrew funds from the Kankai Multi-project and Mulghat Hydropower project one after another saying that India is using the water of these rivers downstream (Verghese cited in Dhungel, 2009). Similarly, World Bank denied investment in the Babai Irrigation Project in 1980, though there was no significant impact downstream (Pun cited in Dhungel, 2009) because India wanted a reservoir in the Babai River within Nepalese territory. Likewise, the West Rapti Multi-purpose project, Bagmati Multi-purpose project, Arun-III hydropower project, and West Seti are some projects where funding agencies withdrew their fund (Dhungel, 2009; Ogino et al., 2019a). Diversion projects are obstructed by India stating that these impact water flow downstream. India blocks them by claiming prior appropriation of the resources downstream (Verghese cited in Dhungel, 2009) because Dam projects are in India’s preference. But the latter cost a lot for Nepal as scarce fertile land and rich biodiversity gets impacted (ibid). This shows that the development of the hydropower sector is largely affected by the decision of non-national actors.

4.1.5. Quest for Sustainable Energy Source in Growing Economies Nepal is a low-income country with about 19 percent of the total population below the poverty line (NPC cited in MoF, 2019). Also, it opts to graduate to a lower-middle-income country by 2022 and middle income by 2030 (MoF, 2019). Similar is the case of the entire South Asia, where nearly half of the world’s population is poor and more than one-third of the world’s population is undernourished (Rasul, 2016). A quarter of the population does not have access to electricity and more than a quarter use traditional biomass for cooking (World Bank, 2018). More than 12 percent of the population lack access to safe drinking water; and chronic food shortages and sanitation are serious problems (WHO & UNICEF, 2014). Even the human development index and infrastructure index are very poor in the region (World Bank, 2018). Amidst such a situation, demands for water, energy, and food are constantly surging in the entire region. This scenario eventually seeks a sustainable energy source like hydropower electricity that is primary for the economic development of a country (Rasul, 2014). Presently, the demand for renewable energy and water is very high in Nepal, India and Bangladesh because the latter two economies are rapidly growing (Rasul et al., 2019). These countries are attracted to the water resources which have the potential for multiple benefits at multiple scales (ADB, 2019: Amjath-Babu et al., 2019; Rasul et al., 2019). On top of that, it has become clear to every country that an energy deficit country is economically poor compared to any energy-abundant country (Stern & Cleavland, 2004). Evidence shows that the world’s larger economies have proportional relation to energy consumption (ibid). Therefore, hydropower receives greater importance because it is useful for many purposes and has no harm to human and environmental health (Rasul et al., 2019). 4.1.6. Hydropower Development Trends, Types and Technologies The hydropower development began with a mini-hydropower, Pharping 0.5MW, a British Government-funded project in 1911constructed to feed electricity in Kathmandu valley (Dhungel, 2016; IHA, 2019). Bilateral investment from Britain, India, USSR, and China in micro and small hydropower projects was common before the1960s (Gyawali & Dixit, 2008; Shrestha et al., 2018). After the 1960s especially after the construction of 50 KW’s Tinau Hydropower project, international NGOs and consultancies came into existence to enhance the technical capacity of Nepalese companies in power generation, transmission, and distribution. In this period, Nepal started investing in small hydropower (Shrestha et al., 2018). It is only after the reinstatement of democracy in 1990 and the adoption of economic liberalization that the privatization of hydropower accelerated in Nepal (Dhungel, 2016). Further, the Hydropower Development Policy, 1992 and Electricity Act, 1992 encouraged private sectors to work in the ‘build, own, operate and transfer (BOOT) approach (Shrestha et al., 2018). Recently, big projects like Upper Tamakoshi 456 MW are being constructed from the public investment (equity shares of local people and citizens) (Mathema et al., 2013; Khan et al., 2015). Moreover, many big projects such as the 6,480 MW Pancheshwar project, 900MW Upper Karnali, and 900 MW Arun III have attracted investment mostly from Indian and Chinese hydropower companies (GWP Nepal/JVS, 2018; Shrestha et al., 2018). There are various debates ongoing regarding the suitable size of hydropower in Nepal. Often the cost of hydropower correlates with the size- cost decreases when size increases. But for Nepal, it is not the case, as construction cost, socio-environmental cost, and time overrun are high due to various political, natural, and economic externalities (Ogino et al., 2019). Mostly, in the wake of the 2000s, small-sized run-of-the-river hydropower projects came in priority because of low investment cost, technical capacity in the country, a short period of construction, low environmental cost and adaption capacity. However, the run-of-the-river types and their uncertainty of meeting the energy demand in case of climate change are under question (Agrawala et al., 2003). A study by Singh and Nachtnebel (2014) shows that a medium-scale hydropower

project is appropriate for the country’s present needs. It says that the country does not have the economic and technical capacity for big-scale hydropower whereas small-scale hydropower projects are unreliable in meeting energy demand as the river discharge and flow are uncertain (International Energy Agency (IEA), 2011; Kumar et al., 2012). But a study by International Renewable Energy Agency (IREA) affirms that the cost for small hydropower projects in developing countries ranges between USD 0.02 to 0.10/kWh which is a “very cost-competitive option to supply electricity to the grid, or to supply off-grid rural electrification schemes” (IREA, 2012, p.i). Unlike small-scale projects, big and large hydropower projects are suitable for energy export reasons; however, these are not promising in terms of economic contribution to Nepal, resource capacity, and associated risks (Singh & Nachtnebel, 2014). When it comes to micro hydropower, these have been popular and effective in addressing rural energy demand, reducing deforestation, and promoting rural development due to local governance mechanisms in it (Agrawala et al., 2003); however, these micro-hydropower projects have not received the status of mainstream energy systems rather considered alternative energy sources. Besides size, technology is another factor influencing hydropower development. In Nepal, mainly two types of hydropower projects are popular; 1) run-of-the-river and 2) storage projects. The majority of hydropower projects are run-off-the-river types. In these projects, the generation of electricity is dependent on the river discharge and water flow conditions. So, power generation varies over different time scales (IEA, 2011; Kumar et al., 2012). But this type of project demands a low investment; has very few impacts on people’s livelihoods and the river ecosystem compared to storage power projects of the same size (Kumar et al., 2012; Bergner, 2013). However, these projects are inefficient in meeting electricity needs during the dry season and compromise other benefits like irrigation, flood control, and waterways (Crootof, 2019; Rasul et al., 2019). Moreover, these projects also impact water availability especially for irrigation because of water diversion. So, these are not impact-free in the case of Nepal (Crootof, 2019). Whereas the storage projects are consistent and reliable in power generation throughout the year. However, these demand high investment, a long time, and a larger area for construction of storage, and also social and environmental impacts are wider (IEA, 2011; Bergner, 2013). Recently, pumped technology in reservoir projects is becoming popular where water from the lower reservoir is supplied through water pumping to higher storage, especially during low demand for electricity (Sørnes, 2010). In Nepal, the potential for storage projects is good because of good water discharge and short head height as project areas are located in flat valleys, but these projects can become challenging for the multi-purpose projects if design perfection is not met because of the fragile geological structure (Ogino et al., 2019). However, there will remain trade-offs in power production and water demand and even higher in an export-oriented reservoir as the water supply is reduced for irrigation and ecosystem functioning (Dhaubanjar et al., 2017).

4.1.7. Energy Cost, Energy Market and Market Reliability It is necessary to look into energy security and the sharing of hydropower among the upstream riparian countries, Bhutan and Nepal and downstream countries, India and Bangladesh to know the energy market and its reliability. Nepal, Bhutan and India have very high economically viable hydropower potential of 43GW, 26.76GW and above 148.7MW respectively whereas Bangladesh has insignificant hydro potential (Ogino et al., 2019a; IEA, 2020). Also, they have varied production costs, cost recovery rates, electricity demand, and electricity coverage. Despite the immense potential, Nepalese hydropower is undeveloped and still, more than 12 percent of households are out of coverage (NEA, 2019). On top of that, electricity cost in Nepal is higher compared to Bhutan and India because of its higher production cost, system loss in transmission, and distribution systems (Ogino et al., 2019a). It is above USD 3000/kWh which is three times higher than that of India (Ogino et al., 2019). The electricity tariff in Nepal is US cents 8.1/kWh and cost recovery is quite low (71 percent). Bhutan, a smaller country than Nepal,

is fully electrified and - has been producing cheaper hydroelectricity and providing electricity for US cents 3.7/kWh and cost recovery is 122 percent (ibid). Generally, larger hydropower per unit cost is lower because of the economy of scale, but in Nepal, it is costlier due to higher construction costs, and environmental and social costs (Ogino et al., 2019). Therefore, private sector investors wish to invest in small hydropower about 6.5 MW on average because civil work for the larger size of the dam and reservoir, and the total concrete lining of the headrace cost high (ibid). Similarly, contractor procurement, rate of government re-lending to NEA; financing; and social and environmental risk management cost are high; time overrun induced cost overrun because of design change during the implementation and other socio-political issues are also very common (ibid). Moreover, Nepal lacks roadway infrastructure connecting to a project site which causes more than a 5 percent financial burden to the project developers (WESC, 2005). Amidst such a situation, hydropower is still making an EIRR of 16 percent (ibid). Even though knowing all this, larger hydropower projects are overemphasized which in Dixit's (2008) words a syndrome of semi-colonial political economy where instead of developing hydropower to increase national productivity and self -reliance energy export is prioritized at the cost of social and environmental health. Therefore, to minimize the hydropower cost it is critical to find the project area with a high headrace, develop an optimal size with less social and environmental cost, reduce project management cost and cost overrun, and determine the project based on sound benefit and risk analysis (ibid). India is energy abundant country that is fully electrified (IEA, 2020). It is the third-largest energy consumer in the world with immense hydropower potential. However, coal holds about 56 percent of the total available energy whereas hydro-energy holds the second position (almost 14 percent) and it is followed by wind and solar energy. India’s energy demand is soaring by 7 percent on average in the last two decades. Recently, India is focusing on developing renewable energy systems to curb higher emissions from fossil-based energy production. It has an immense renewable energy potential of 1097.5 GW, of which Solar and Wind energy hold above 95 percent. So, India opts to develop 175GW by 2022 and 430 GW of renewable energy by 2030. The 175 GW grid's connected electricity will comprise 100 GW of solar, 60 GW of wind, 10GW of bio-energy, and 5GW of hydro energy (IEA, 2020, p.111). In the past, hydropower developed at a 10 percent growth rate. Currently, there is a 50 GW installed capacity and additional 21GW hydropower will be added by 2030 and it will reach 110GW by 2040. India is a large country with different electricity tariffs according to the class of people and states. It has subsidized electricity to low-income people and the agriculture sector but charges a higher tariff for commercial use of energy. But electricity costs in the states of India bordering Nepal, Bihar, Uttar Pradesh and Uttarakhand have higher electricity tariffs than elsewhere in the country. The tariff ranges from US cent 4 to 9 (Jain, 2020). Similarly, hydropower cost is about US cent 9/unit in India. But the cost of coal and solar is quite cheaper (US cents 4.6 /unit) which is almost half the cost of hydro-energy (Bhattarai, 2019). In terms of the cost of production of energy, it is cheaper in India compared to Nepal and Bangladesh. Therefore, India has developed an interconnection with Nepal, Bangladesh and Myanmar and exports energy to them. So, it is very less likely that India would purchase power from Nepal at a higher price. Instead, Bhutan provides a cheaper power supply to India, but the surplus hydropower of about 25GW from Bhutan is mere a piecemeal in the Indian energy system. Bangladesh is going to be fully electrified in one or two years with installed energy of 24,000MW. Bangladesh's energy system is solely natural gas-based which holds about two-thirds of total energy. Moreover, Bangladesh imports about 10 percent of electricity from India. But the share of renewable energy is very less, which constitutes 1 percent hydropower, 0.1 percent solar power, and no wind power. Electricity tariff, in Bangladesh, ranges from US cent 6 to 9/unit in 2020 (Nicholas & Ahmed, 2020). But the solar electricity costs US cents 17/unit while coal-based energy costs US cent 7/unit which is still higher than the cost in India (Bhattarai, 2019). So, instead of focusing on renewable energy Bangladesh wishes to fulfill its energy lack from coal plants (Nicholas & Ahmed, 2020). It depicts that Bangladesh has a market possibility for energy

export from Nepal, but it is very difficult to sell energy directly to Bangladesh because of trade agreements with India. And India would not allow it without any benefit to it (Bhattarai, 2019). Nepalese hydroelectricity seems less competitive in front of India’s low-cost renewable power. Moreover, the cost will increase while exporting to India because it requires mega -sized power transmission infrastructures. On the other hand, the cost of solar technology and wind power is going down- a study shows that the cost of solar and wind power will range from US cent 2.5 to 3.1/kWh and US cent 3.1 to 3.5 /kWh soon in India (ETEnergy World, 2019). So, it is doubtful that Nepal can take benefit from large-scale hydropower projects by exporting energy to India unless the price is competitive and until India becomes ready to buy electricity at commercial rates (WESC, 2005).

4.2. Status of WEF Security and Prospects

4.2.1. Status of Water Security in Nepal Water security varies at different levels. Although the physical availability of water for an individual is four times larger than the national threshold, the water supply is in crisis (Regmi, 2007; FAO, 2016). Beyond physical availability and fulfilling human water requirements, water security includes safeguarding life and livelihood from water-induced diseases and disasters, preventing water-use driven ecological damages and political instability, and protect ing water resources and supply systems (Cook & Bakker, 2012; UN Water, 2013). 4.2.1.1. Physical Availability of Water The Himalaya system is the primary source of freshwater which feeds water to rivers, lakes, glaciers, wetlands, and ponds (Ghimire, 2012). These sources of surface water cover 745,000 hectares of land which is about 2 to 3 percent of the total land area (Shah, 2016). Among all water bodies, rivers in Nepal cover about 94 percent of the total water area in which share of large perennial rivers cover is about 72 percent (Shah, 2016; ADB, 2018). Annually, 172 billion cubic meters (BCM) out of 225 BCM surface runoff originates from the rivers of Nepal (Regmi, 2007; WECS, 2007). The Koshi River is one of them with an average of 45 BCM annual surface runoff and it swells up in the rainy season (Regmi, 2007). Despite water abundance in the Koshi River Basin, the water poverty index (WPI) is at a medium-low degree (Koirala et al., 2020). The surface runoff fluctuates heavily as precipitation from June to September contributes more than 80 percent of the annual precipitation (Regmi, 2007). The surface runoff capacity of Nepal can provide 24 times more than the national irrigation requirement of 9.32 BCM (Regmi, 2007; Dhaubanjar et al., 2017). This shows the plentitude of the physical availability of water in Nepal. Groundwater is another promising water source in Nepal due to its large volume and potential for multiple usages. It is available in different depths and volumes across the country. There is a good groundwater reserve in the Terai with a recharge capacity of about 8.8BCM/year. However, merely 1.9BCM water is used for various purposes such as drinking, irrigation, and industrial use (Nepal et al., 2019). The available groundwater is sufficient to provide pump irrigation to 613,000 ha of arable land in Terai which is rain-fed so far. The economic benefit becomes above USD 1 billion per annum. In addition, other benefits like the promotion of energy-based industries, employment generation, and improved food security are associated with water supply (ibid). The physical availability of water is sufficient, but the water security varies according to seasons and geographical regions (WESC, 2005). Further, increased water demand for increasing human population, agriculture and livestock, and industrial purposes have been coupled with water pollution. Moreover, degrading water resources, farming of water-intensive crops, increased crop intensity and extreme rainfall variation pose a threat to water security in Nepal. Precipitation has

gone down in the basin (van Oort et al., 2015); moreover, demand for water has increased in the area along the Koshi River Basin resulting in ecosystem services being challenged (ibid). 4.2.1.2. Access to Water Services The access side is weaker for not having adequate infrastructure (ADB, 2019) which has been complicated by inadequate investment capacity and difficult geographical terrain. Therefore, Nepal depends on surface water and rainwater for irrigation (Nepal, 2018). Surface and rainwater cover 80 percent of the total water used for irrigation while groundwater covers only 20 percent. Moreover, 96 percent of surface water is being used mainly for agriculture. One-fourth of arable land has year-round irrigation in Nepal (Nepal, 2018). Among three ecological regions, Terai has a comparatively better irrigation system, though it is under-served. Only 2,300 m3/ha/annum of water is available for year-round irrigation in Terai while the requirement is more than two times (Haavisto et al., 2018; DWRI, 2019). As a result, only 1.5 crop types on average are cultivated in a year, subsequently impacting the yield gain (Nepal et al., 2019). This water deficit for irrigation can be fulfilled by a groundwater irrigation system. It requires 0.25kWh/ha of energy every day (Nepal et al., 2019). Due to the absence of a sustainable energy system, in the region, more than 100,000 shallow tube wells are underutilized. The proper utilization of groundwater especially in Terai can contribute to controlling flood intensity and meeting irrigation and industrial water needs. Utilization of groundwater in large amount in winter and summer help reduce the flood intensity allowing monsoon water to infiltrate the aquifers. Similarly, irrigation in hills and mountains is respectively below 20 percent and 5 percent of total available irrigation (ibid). Moreover, farmers without land titles are not allowed to use water from farmer-managed irrigation systems (Regmi, 2007) indicating poor water access. Piped water, private wells, tanker supply, stone tap, bottled water, surface water, and spring water are major sources of drinking water in Nepal (Raina, 2017). Only 20 out of 77 districts are partially connected with piped drinking water (Shrestha, 2020). About 13 million people depend on spring water for drinking (Central Bureau of Statistics, 2012). However, the availability of spring water is diminishing due to increasing built-up land (Nepal et al., 2019). The water supply is unreliable, irregular and inadequate- as a result ‘water supply crisis’, the highest societal risk will possibly occur in the coming decades (Raina, 2017), although drinking water and sanitation are inscribed as fundamental rights in the Constitution of Nepal 2015. In response, the government of Nepal has set targets to provide access to sustainable drinking water and sanitation services for all by 2030 (MoWS, 2016). Remarkably, 95 percent of households have access to basic drinking water resources, yet hardly 15 percent get safe drinking water (UNICEF, 2020). About 3.5 million people mainly rural and urban poor lack access to basic water services (ibid). Infrastructure development is moving at a snail 's pace. For example, the Melamchi drinking water supply project-it was started in 2000 to provide water to Kathmandu valley and it took 20 years to complete (KUKLPID, 2020). Moreover, water requirements are not met both in the urban and rural contexts. In Kathmandu despite multiple water sources, median water consumption is 41 liters/capita/day (lcd) in the dry season and 48 lcd in the rainy season (ibid). It is below the required level set by WHO- for basic sufficiency 50 lcd is necessary (Raina, 2017). Similarly, rural areas are bound to rely on a single source of water supply. Moreover, availability varies according to season and geographical region. Water availability on average is 56 lcd at the national level, but the supply is available for 6.5 hours/day on average (MoWS, 2016). As per FAO (2013), water requirement is above 150 lcd for all domestic purposes from drinking to livestock; however, it is 135lcd in the low-income population in the Kathmandu valley (Udmale et al., 2016) but the supply is below the required level. Similarly, the water demand for the industrial sector is likely to increase as predicted that the industry sector will thrive along with an increased and uninterrupted supply of electricity in the future (Nepal et al., 2019).

4.2.1.3. Affordability of Water Services The average production cost of drinking water is US cents 10 /m3 (MoWS, 2016) whereas the economic internal rate of return (EIRR) is just 5 percent. Moreover, water has been subsidized 50 percent. On top of that, higher leakage and inadequate fee collection have posed threats to the sustainability of water supply systems. Therefore, community people are supposed to bear 20 percent of the total capital cost and full cost for operation and management for social equity and economic efficiency (ibid). Normally, water-cost less than 3 percent of total household income is considered affordable (WESC, 2005). A household consisting of 5 members , if consumes 150 lcd of water as per FAO requirement, the household spends USD 5/month which is about 1.1 percent of total household income (Calculated based on the tariff by Kathmandu Upatyaka Khanepani Limited (KUKL) in 2020 on the minimum side and 1085 GDP per capita (MoF, 2020). It means water is affordable. However, access to water is much skewed. The urban poor do not receive adequate water as they cannot afford the higher cost of the water meter and connection. Further, landlessness has complicated getting water access (GWP Nepal/JVS, 2018). In Nepal, Surface Irrigation, Deep Tube Wells (DTWs) and Shallow Tube Wells (STWs) are common types of irrigation systems. These are respectively considered public, semi-public, and private goods. The cost borne by farmers for the surface scheme is 3 to 5 percent, for DTW s up to 15 percent, and 100 percent for STWs and so is the maintenance cost. The fee for the surface scheme is USD 2-4/ha/year and the collection system is quite poor-which is merely a10 percent of the cost required for operation and management. Moreover, surface irrigation has an economic internal rate of return (EIRR) comparatively 3 times less than STW, and 4 times less than the micro-irrigation system (WESC, 2005, p.77). On top of that, the private sector does not wish to invest in irrigation system development other than hydropower and fishery. In Nepal, two-thirds of the population has landholding up to 1 ha (MoAD, 2014) which means the cost per hectare is about USD4 which is below one percent of the household income. Thus, irrigation is affordable as it costs less than 5 percent of the total household income (WESC, 2005).

4.2.1.4. Vulnerability Associated with Water System Water-induced disasters are wide and frequent in Nepal. Nepal ranks 30th position in terms of water disaster and 4th in climate-change vulnerability (MoHA, 2017). More than 80 percent of the total population of Nepal is exposed to disaster events such as flood and glacial lake outbursts, windstorms, hailstorms, earthquakes etceteras (ibid). These events threaten water infrastructure affecting overall water availability for drinking and irrigation purposes. According to ICIMOD (2011), glacial lake outburst floods (GLOFs) in the mountain have affected small hydropower. Flooding is a frequent phenomenon-every year on average 269 lives are claimed by 10 large river basins in Nepal mostly in downstream areas (Dhaubanjar et al., 2017; Nepal et al., 2019). The water-driven vulnerability may soar along with rising climate change impacts because precipitation and glacier melting are very sensitive to increasing temperature. In the last four decades and more temperature has ramped up by 2.4o c (DoHM, 2017); side by side glaciers have shrunk; and precipitation volume, quality and timing are changing (Nepal et al., 2019). The rising temperature would cause a rise in precipitation which eventually would affect crop production, consistency of water flow, increase disaster events, degrade biodiversity and hamper livelihood (ibid). Although National Water Plan 2002-2027 opts to reduce disaster-induced social and economic loss to the level of developed countries and also aims to ensure adequate water quality for aquatic habitat, human consumption and recreation in all rivers and lakes by 2027 (WESC, 2005), there is not much effort made in this regards. It seems very difficult to meet these targets as the piped water supply is 125 years old (MoWS, 2020). Moreover, about 70 percent of water resources are of poor quality with the higher presence of e-coli, arsenic, iron, manganese, and calcium (GWP Nepal/JVS, 2018; UNICEF, 2020). And 91 percent of the population from poor segments is relying on these water sources (UNICEF, 2020).

4.2.2. Status of Energy Security in Nepal

4.2.2.1. Energy Consumption and Demand Projection

Largely energy sources are categorized into 3 types in Nepal: i) traditional (biomass: fuelwood, agriculture residue, and dry dung), ii) commercial (fossil-based energy and hydro-electricity), and iii) alternative (solar, wind power, micro-hydro, biogas, and briquettes) (MoF, 2019). The share of electricity consumption is only 3.4 percent which is significantly low (Fig.4).

Fig.4. Overall Energy Consumption by Fuel Types in Nepal in FY 2014/2015 According to the figure from 2014/15, the share of biomass energy is around 78 percent of the total energy whereas renewables share merely 2.5 percent. However, biomass has decreased to 69 percent whilst commercial and alternative energy sources have increased to 28 and 3 percent respectively in FY 2018/19 (MoF, 2019). Moreover, many projections of the demand side are made in the energy market. In this respect, Nepal Electricity Authority (NEA) projects 4,280MW while the National Planning Commission (NPC) has 10,092 MW of energy production by 2030 (NEA, 2019; Koirala et al., 2020). But Shrestha et al (2018) believe that the energy demand can only be fulfilled by complementing biomass and fossil fuel. Similarly, the Water and Energy Commission Secretariat (WECS) (2013) projects that the installed capacity should be 1,900MW, 3,900MW, and 11,000MW in 2020, 2030, and 2050 respectively to meet the electricity demand (p. XIV). Moreover, WECS makes a long-term projection of energy composition in a medium economic growth scenario for 2050 in Nepal as depicted in (Fig.5).

Fig.5. Projected Fuel Composition for 2050 at Medium Economic Growth Scenario

4.8 5.1 617

4.7 3.5

3.5 3.7 412

3.4 2.50

fuel wood agricultureresidue

animal dung coal petroleum electricity renewable

Total: 139 ('000 GWh)

6%4% 3%0.02% Fuelwood

Diesel

Agri Residue

Fossil and others

BioGas and Dung

(source:WECS, 2013, p.XIV)352,550 GWh

(Source: WECS, 2017, p.4)

Although hydropower energy is anticipated to reach about 9 percent of the total energy in 2050, the portion is quite insignificant in comparison to other dirty fuels. The sufficiency of hydro-energy relies on the extent to which economic sectors are energized. National Water Plan seeks to enhance domestic consumption cottage industries and agri-industries by integrating with rural electrification and strengthening institutionalizing rural electrifications and redistribution of 1 percent of royalty to the community people (WESC, 2005).

4.2.2.2. Electricity Production and Consumption

In 2015/16, the electricity demand was about 1,385 MW against the supply of 856 MW (Shrestha et al., 2018). The supply went down by two-thirds in the dry season (ibid). But the year 2017 became a turning point for the hydropower sector as independent power producers thrived along with reduced government regulation; provision of flexible environment assessment; and fund arrangement assurance from the government (Crootof, 2019). By now there is a 1,159MW installed capacity which provides electricity to 88 percent of households in the country while the current electricity demand is about 1,500 MW (AEPC, 2019; NEA, 2019). Also, increased energy demand during peak hours is 1.7 times of usual supply which is another challenge (Crootof, 2019). The demand gap is shrinking every year; however, it persists as energy consumption is on the rise. A 14 percent rise was observed in the fiscal year 2018/19 (NEA, 2019). It increased from 5,615 GWh in FY 2017/18 to 6,394GWh in FY 2018/19. And this gap will be easily addressed by Trishuli 3A second unit-30 MW, Kulekhali III-14 MW, Rashuwagadhi-111MW, Upper Sanjen-14.8 MW, and Upper Tamkoshi-456 MW which are going to be commissioned in FY 2019/20 (ibid). Generated electricity by 2020 would meet the demand, however, for sufficiency, it will take a few years more (GWP Nepal/JVS, 2018). In the long run, the Nepalese hydropower sector is expected to grow by 7.4 percent (WESC, 2005). Per capita, energy consumption is very low in Nepal (Sovacool et al., 2011). So, NEA is working out to increase consumption to 700 kWh in the next five years (NEA, 2019). It is too high compared to the target current consumption level 267kWh/per capita/year. Though the previous target 145kWh by 2020 has been met (WECS, 2013; My Republica, 2020). Nevertheless, the demand gap during the dry season is difficult to fulfill with a hydropower efficiency between 35 to 60 percent on average of their capacity (Crootof, 2019; IHA, 2019). Therefore, in this season, the portion of imported electricity is quite high as shown in (Fig.6)

Fig.6.Share of Domestic Production (Public and Private) and Import in Electricity Composition Yet the availability of hydroelectricity has to be perceived in the long-term to evaluate energy security in Nepal. The total hydro potential in the dry season is estimated to be about 11,300MW (Shrestha, 2016). It may suffice for the next two decades. It will further be impacted by the widening dry season as a result of climate change impact (ibid).

NEA34%

IPP29%

Import from India

(Source: NEA, 2019)

Similarly, Nepal went through more than10-16 hours of load shedding a day during the dry season and happened to declare an energy emergency in 2016 for the second time (Shrestha et al., 2016; Shrestha et al., 2018). Still in terms of quality of electricity Nepal holds 137 th position out of 147 countries (Koirala et al., 2020). To have self-reliance on hydro-energy was a farfetched idea during the time- even entrepreneurs like grinders, sawmills owners, and oil expellers denied switching to unreliable NEA grid supply (Kumar et al., 2015). But NEA started increasing energy imports from India to meet the demand gap and combat load shedding. The import has increased approximately by 9 percent in FY 2018/19 (NEA, 2019). As a result, NEA claims that a decade-long problem of load shedding has come to an “end by May 2018” and it strives to provide “electricity for all by 2023” (NEA, 2019, p.11). Therefore, NEA is investing in the reservoir and peaking-run-of-the-river (PROR) hydropower projects such as Kulekhani III, a reservoir project, which is already in operation (Rijal, 2019) and other storage projects like Dudhkoshi 635MW and Upper Arun HEP 1,060 MW projects are planned ( NEA, 2019).

4.2.2.3. Access to Hydropower Energy and Affordability

Many improvements are underway for the availability and accessibility of energy, for example, the reduction of system loss went down close to 15 percent in FY 2018/19 from 26 percent in FY 2015/16 (NEA, 2019, p.12). Similarly, transmission lines and power stations are being constructed across the country and even large-scale transmission lines are planned for extension across the borders of India and China. Likewise, IPPs are encouraged for the production and operation of hydropower. So far, they have developed 83 projects with 560.78 MW installed capacity (NEA, 2019, p.16). Additional 216 projects of about 7,680MW are under construction and 264 projects with 17,055.29MW are being surveyed (DoED, 2020c). Moreover, 340 Power Purchase Agreements (PPAs) are signed with various IPPs for an installed capacity of 6,044 MW as of 2018/19 (NEA, 2019). Further, to reduce system loss and make the services accessible, digitization of all associated services is taking place (ibid). It is estimated that electricity consumption in a normal household is about 103 kWh/month calculated based on 267kWh per capita consumption. It cost about USD 9/month. It is about 2 percent of the total household income based on UDS 1085 per capita (MoF, 2020). If the cost of consumed electricity is less than 5 percent of the total household income in Urban, it is considered to be affordable (WESC, 2005). For the high-income household, this is affordable in the city, but for the income poor who earn almost 4 times less than the high-income family-it is unaffordable. The electricity tariff ranges from US cents 5 to 13 (Nepal Energy Forum, 2017). Electricity tariff is higher in Nepal because of higher construction cost, higher purchase cost, higher system leakage, cost overrun, and higher interest rate during construction, not using local experts and appropriate financial mechanisms, and not selecting proper sized low-cost scheme (WESC, 2005). Similarly, rural electrification faces challenges because of increasing tariffs. It seems impossible to supply electricity at an affordable cost until a certain amount of royalty and revenue is allocated, and NEA receives a soft loan in producing low-cost electricity.

4.2.3. Status of Food Security in Nepal 4.2.3.1. Food Availability: Production and Import Trends

Food sovereignty has been articulated as a fundamental right in the Constitution of Nepal (Law Commission, 2018). In the same array, Nepal opts to be self -dependent on food by 2035 (NPC, 2018). The crops like rice, maize, wheat, millets, and barley are among the most popular cereals whereas legumes and potatoes in protective foods are widely produced in the country (FAO, 2020). The productivity for paddy, maize, wheat, barley, and millet is 3.24mt/ha, 2.45mt/ha, 2.48mt/ha, 1.15mt/ha, and 1.14mt/ha respectively (MoF, 2019). Mainly, reduced rice production has significantly impacted food availability and agriculture GDP. The production of pulses is not enough to meet the demand. The availability of pulses drastically drops when the production of

lentils shrinks because it shares 50 percent of total pulses production (DoA, 2018; MoF, 2019). But the production of cash crops and vegetables is increasing as people are planting in the larger area as the improved market is giving good returns compared to the previous years (MoF, 2019). Among cash crops, potato and ginger are produced to a self-sufficiency level whereas fruit production is still low to fulfill the current demand as fruit intake has increased in recent years (ibid). Similarly, tea, coffee, and cardamom-like industrial crop productions are at a self-sufficiency level and even they are considered lucrative for an export reason. The productions of dairy and meat products and eggs are on the rise; milk and meat have increased by 6.5 percent in 2019 (ibid). Yet, the agriculture industry largely relies on imported raw materials from India (DoA, 2018). The irony is that despite having a larger chunk of the population in agriculture Nepal is bound to import foods for daily consumption (Simkhada, 2019). Cereals worth USD 518 million and fodder of USD 166.4 million worth were imported from India in the FY 2018/19 (Prasain, 2019; Simkhada, 2019). Agriculture import in mid-2019 was above15 percent of total imports. It ranged from 14 to 19 percent and the reliance on the foreign market soared five times in this decade (Prasain, 2019; Trading Economics, 2020). Among the imports “cereals, edible oil, vegetables, animal feeds and fodder, fruits, and nuts” (Simkhada, 2019, p.77) hold a major portion. Further, agriculture goods worth USD 2.73 billion were domestically produced whereas the import was about $2.20 billion in the FY 2018/2019 (MoF, 2019; Prasain, 2019). It shows that the agriculture import is about 80.5 percent of the total domestic agriculture production. This indicates that Nepalese food import has reached an alarming level (ibid). However, the country has consistently developed agriculture plans, formulated policies, and adopted reforms to combat food insecurity. Currently, Agriculture Development Strategy 2015-2035, a long-term strategy, is in implementation aiming to increase food production from 3 percent to 5 percent by increasing return from USD 1,804/ha to USD 4787/ha (BK, 2017). It also aims to reduce food poverty from 24 percent to 5 percent in these 20 years amid 25 percent of landlessness by emphasizing access to land and food and promoting the value chain for commercialization of the agriculture sector (BK, 2017; Dumre et al., 2020). 4.2.3.2. Access to Food Accessibility of food differs according to the differences in food production due to varied topography and climate conditions in regions (Bhandari, 2018; DoA, 2018). The plain area, commonly known as Terai, is the granary of Nepal where 57 percent of the total national cereals are produced (NPC, 2018). Province 5 is the only province that produces food in surplus (DoA, 2018). Bagmati province despite good production capacity is bound to face food deficiency as the major cities receive a huge human influx. Province 1, Province 2, Province 5, and Sudurpaschim produce rice and wheat in good amounts and supply to Bagmati, Gandaki, and Karnali-where large area is occupied by hills and mountains (Bhandari, 2018; DoA, 2018). Market liberalization has cut down export and import tariff which eventually encouraged the private sector to supply the food. Consequently, the per capita availability of food has increased. However, the performance of public institutions is restrained and regional distribution is distorted (Pyakuryal et al., 2010). Improved market, connectivity, and access to finance have not only opened the possibility to get food supply from outside but also increased access to food, and the production of food (Regmi et al., 2019; Dumre et al., 2020). It is found that the road connectivity developed within the travel time of 30 minutes has helped reduce food insecurity by 2 to 3 percent in Nepal (Regmi et al., 2019). But it will be merely a quixotic effort trying to achieve food security with the target of 5 percent agriculture growth amid 10 percent food inflation and an 8 percent rise in food demand every year (World Bank, 2018; Trading Economics, 2020) without developing infrastructure and mechanism that increases access to food equitably.

4.2.3.3. Food Utilization and Stability

The Nepalese agriculture sector has a good potential to drive 10 percent GDP growth with a 6.7 percent growth in agriculture (DoA, 2018). But the agriculture growth was limited to 2.9 percent in this decade as the agriculture production and productivity diminished ( ibid). Overall crop production has decreased by 0.9 percent in 2019 (MoF, 2019). Grain is the major source of food in Nepal and the production is 206kg/capita on average (MoAD, 2017). The availability of nationally produced cereals and pulses is not sufficient to meet the current demand. So, the country has to rely on foreign agricultural goods. Yet increased self-sufficiency on cash crops, industrial crops, and increased supply of dairy, meat, and egg products have played a crucial role in supplementing the nutrition level (MoF, 2019). The existing per capita consumption of milk, meat and egg is 71.7 liters, 12.4 kg, and 50 pieces while the actual requirement per capita is 91 liters, 14 kg, and 48 pieces respectively (DoA, 2018). This indicates an improvement in protein intake. However, more than half of the total population has chronic food insecurity (MoAD/FAO, 2016). At present, 4.6 million people are food insecure, 1.4 million pregnant and lactating mothers are malnourished, and millions of children are underfed (WFP Nepal, 2020). In the last two decades, significant progress has been achieved in reducing wasting and mortality in under 5 children; however, stunting did not change much (GHI, 2019). The stability of food production and food supply is critical for food security. Despite being the agriculture sector as the largest contributor (27 percent) to GDP, food stability is always uncertain. As a result, the country has faced food inflation of 10 percent in early 2020 and food import is increasing by 10 percent every year (Trading Economics, 2020, 2020b). Accordin g to the Global Hunger Index (2019), Nepal is in the 73 rd position with a 20.8 score among 117 countries on the list. A score between 20 to 34.9 scales indicates serious food insecurity. The food security trend seems improving which was in an alarming situation with 36.8 scores in 2000. Mainly increased access to food and increased knowledge of having balanced food (utili zation) due to crop diversity is responsible for this improvement. Yet, import-based food security may not be a lasting solution. Moreover, food stability varies according to geography and economic status across the country. Largely speaking; it is severe in rural households especially those in Karnali and Sudurpaschim provinces (Bhandari, 2018). Likewise, food supply was a problem for households in the mountains and hills where the quantity of the food mattered, but on the national scale, the quality of the food remained the major issue for food insecurity (ibid). Food insecurity in the country remained a problem for quite a long due to various reasons such as poor agricultural growth, increasing population, skewed land holdings, landlessness, inadequate irrigation and energy infrastructures (Bista et al., 2013; Shrestha, 2018; Pandey & Bardsley, 2019; Simkhada, 2019). At the national level, food security has always been threatened by extreme climate events of flooding, earthquake, drought, and disease outbreaks (WFP, 2020).

4.3. Hydropower Implementation Approaches and Issues of Sustainability

This section includes information from both literature review and interviews to validate or counter ideas from either source of information. The section encompasses the concept of sectoral hydropower development; its impacts on water regime and river ecosystem and their subsequent impacts on agricultural land, agriculture production and aquatic biodiversity including fishery. Further, the situation and possibility of hydro-energy integration in productive sectors like agriculture have been analysed considering the expansion of benefits from hydropower development. And the possibility of adopting Integrated Water Resource Management (IWRM) and Integrated River Basin Management (IRBM) for sustainable water resources management in the Nepalese context is highlighted.

4.3.1. Existing Hydropower Implementation Approaches The hydropower sector has transgressed a long path– it started from state-dominated implementation to the private sector to equity-driven implementation. Hydropower before the reinstatement of democracy was state-dominated. But the Electricity Act 1992 opened up space for national and private sectors and Hydropower Development Policy 2001 ensured the sharing of benefits to local people and stakeholders (Dixit, 2008). Further, the policy asserts the need for multi-purpose projects to maximize national profits by harnessing downstream benefits. These projects if developed sustainably can drive local to regional development and enable communities in meeting sustainability goals (Dixit, 2008; IHA, 2018). To promote sustainability, Nepal’s Water Resource Strategy-2002 and National Water Plan 2005 included Integrated Water Resource Management (IWRM) for the development of hydro-infrastructure and protection of water resources (WECS cited in Nepal et al., 2019). It gave birth to the River Basin approach for integrated water resource planning and activities. The approach was introduced by the Canadian International Development Agency (CIDA), adopted by USAID, ADB, and DFAT and also postulated as a flagship by the Global Water Partnership (Suhardiman et al., 2018). By now, all ministries in Nepal, intersecting on water resources, are in favour of the River Basin approach and opting to establish basin offices to manage water resources at every level. Like other developing countries, the water resources of Nepal are yet to be fully harnessed for economic growth and sustainability. Until the last decade, the sectoral approach was at the centre preventing benefits on all fronts while utilizing water resources. Therefore, the multi -sectoral approach was conceived in 2007 to bring different actors and perspectives together (Schumann et al., 2010). This approach takes water, energy and food nexus as well as environmental, social, technical and economic/financial aspects into consideration while developing hydropower. The integrated approach is considered suitable for IWRM for achieving sustainability in water management also by National Water Plan 2002-2027, Nepal. Similarly, Integrated River Basin Management (IRBM), a part of IWRM also has emerged as an approach for water resource management and “optimum utilization of water for all stakeholders in a particular river basin” (WESC, 2005, p.23). Therefore, Water Sector Policy emphasizes decentralised water services and equitable benefit-sharing among riparians by involving user groups, community people, public and private entities, and other stakeholders in the utilization of water resources (ibid). Managing water resources extends further to addressing energy and food security in Nepal. IRBM is considered effective for environmental reasons because resources can be planned more sustainably distributing risks and benefits more equitably. It helps depoliticise river issues by prioritizing ecological dimensions (Suhardiman et al., 2018). But river basins are the political arena where states exercise their economic, technical or military power. Many can argue Nepal, India and Bangladesh can develop river basin cooperation and deal with issues like hydropower development, irrigation, flood control, cross-border food security, water and livelihood security, and inter-state conflict holistically. But in South Asia Hydropower development is perceived in engineering terms and it is driven by India-centric neo-liberal approach (Hill, 2017). Moreover, agencies advocating for transboundary water cooperation have failed to correct existing unjust benefits sharing practices and discriminatory treaties in the region (Nepal et al., 2019). The river basin is also a ‘territorial frontier’ for many ‘inter’ and ‘intra’ government agencies within a country. For example, ten different ministries associated with energy, irrigation, drinking water supply, agriculture, forest and soil, urban development, environment, infrastructure and transportation, and local development struggle for their hold over river basin resources (Suhardiman et al., 2018). Nepalese hydropower projects are driven by the sectoral perspective of energy generation. The sectoral approach is more linear and hierarchical which aims to exploit resources and achieve the maximum output at cost of other equally important benefit dimensions (Dixit, 2008). By producing plenty of electricity, the country intends to fulfill domestic needs as well as export

energy for economic reasons (Dixit, 2008). Sectoral planning does not take account of social and environmental costs along the basin. It provides benefits at one spot for certain actors while the integrated approach keeps safeguarding the environment and placing people at the forefront (Bao et al., 2017). Successful implementation of an integrated approach in hydropower development is always frustrated by geographic, bureaucratic and geopolitical problems in Nepal (Lord, 2016). Many people living and working along hydropower frontiers are affected by hydropower development and they like to be identified as project-affected to claim their share of benefit or compensation. The shareholder model and benefit-sharing approaches are useful tools to conceive ‘constructive dialogue on dams’ and ‘protect economic and environmental damages’ in hydropower development. These are also part of the integrated approach. Lord (2016) argues that becoming a hydropower nation is not a problem, but what kind of hydropower future we want, and who has to be benefitted from it are the most important things. In this milieu, an integrated approach can be useful to equitably distribute the risks and benefits of the hydropower project. Poor water governance has added challenges to the development of hydropower, irrigation system and the adoption of an integrated approach. Consequently, the potentiality, economic benefits, time efficiency, and sustainability of irrigation systems are undermined. Moreover, about two-thirds of water supply systems are non-functional. At the community level, there are about 42,000 water user groups across the country; despite the legal provision and recognition of users’ groups, they are not assured of benefits from working together by government authorities (Regmi, 2007). Also in the future, problems related to governance may increase as the federal transition of the country has divided the country into 7 provinces and 753 local level municipalities (Nepal et al. 2019; Shrestha, 2020). Therefore, it becomes quintessential to develop effective coordination and benefit-sharing mechanism to avoid possible conflicts (Nepal et al. 2019).

4.3.2. Changed Water Quality from Hydropower Construction The construction of hydropower projects depending on their design alter the river ecosystem, river flow pattern, water quality, riverscape, land cover, and land-use pattern both in upstream and downstream areas (Amjath-Babu et al., 2019). Further, changed biological, hydro-chemical, and hydro-morphological quality tends to affect not only the biodiversity of the river but also the productivity of land (Bunn & Arthington, 2002; Ryo et al., 2015). Generally, hydropower directly impacts agricultural land coverage and use patterns due to land acquisition at construction sites, water impoundment in the upstream, and altered flow of water downstream (Zhao et al., 2013). Sometimes, it helps recover agricultural land from river submerged areas by reducing the flooded area (Amjath-Babu et al., 2019). Also, the diversion of water from the major river course leaves some of the arable land unirrigated, this phenomenon is very common in Nepalese hydropower development (Crootof, 2019). Eventually, it impacts water availability and agriculture production (ibid). Moreover, river flow varies according to the seasons and so does the sedimentation load in Nepal (Thapa et al., 2005; World Bank, 2013). Also, the flow of sedimentation has been altered by hydropower intervention (ibid). Further water quality is impacted by deforestation, reckless dumping of soils, spoils into rivers, garbage disposal, erosion, increased sedimentation runoff, and land-use change (World Bank, 2013) which ultimately impacts agriculture productivity. Similarly, ongoing concentrated and cascading hydropower development and associated construction for connectivity and transmission lines would significantly alter the pristine landscape and water quality (Crootof, 2019; World Bank, 2013). There is almost no study on hydropower's impact on river ecology, aquatic ecosystem, and the subsequent impact on agriculture productivity in the context of Nepal (ADB, 2019; ICIMOD, 2019). There is a general understanding that maintaining the flow level is to protect the river ecosystems and ecology, but Crootof (2019) argues that it is quite static which does not serve the purpose. Moreover, hydropower projects are being developed in a concentrated manner that does

not protect river ecology even if the flow level is maintained. It is visible in the Koshi river basin too as the projects are being built such as Tamakoshi-III, Tamakoshi V, Upper Tamakoshi, Khimti-I, Khimti-II, Upper Khimti, Upper Khimit-II, and so on (Niti Foundation, 2020). Moreover, China, Nepal, India, and Bangladesh do not have the practice of sharing information on hydro regime change in river basins (World Bank, 2015). So, examples from the Mekong River can be suitable to reckon possible impacts of altered water flow. Zhao et al. (2013) assert that the intensity of hydropower impacts is found in declining order with increasing distance from the project and becomes stable beyond the buffer zone of 5-6 km distance. Moreover, the impacts differ according to the project types; for instance, the runoff projects have larger impacts downstream while reservoir projects upstream (ibid). Similarly, the impacts are greater in the 0-1,000m distance upstream whereas 0-400m downstream. As a result of hydropower dams more than half of the population in the Lower Mekong region experienced changes in household food and income from the resulting impacts on fish, crops, vegetables, wetlands, and non-timber forest products (Bouapao, 2012). These studies imply that similar impacts are possible in the Nepalese context too. However, topographical and design differences may have different levels of impact on agricultural land and productivity in the Nepalese context.

4.3.3. Impacts on Aquatic Biodiversity from Hydropower Construction Aquatic biodiversity possesses a good potential for food security at a low cost. The Koshi River Basin, despite its other benefits, is a treasure for Nepal and neighbouring countries for its value for wetland biodiversity and fisheries (Gurung, 2017). It has the largest inland capture fisheries (ADB, 2018). A study that looked into fish diversity in 2015/16 showed that at the Koshi Barrage “species diversity was found to be higher in winter (1.47) than in rainy season (1.18) (Shah, 2016). From the past studies about 134 indigenous fish of 25 families and 6 exotic species exist in the Koshi River. 80 percent of species are under-protected categories. Mostly, Erethistoides

Ascita, Cyprinidae, Sisoridae, Cobitidae, Ophiocephalidae, and Schilbeidae are the dominant species (Gurung, 2017). It also has large marine mammals like Dolphins, in the upstream and downstream of the Koshi Barrage (Khatri et al., 2010). Fish diversity is dependent on temperature and discharge flow- in Nepal, fish species are higher in temperatures above 160 C and discharge above 150 m3/sec (Bhatta et al, 2012). In Nepal, the fishery contributes almost 1.22 percent to the total GDP (Gurung, 2016) and supports the livelihoods of more than 462,000 fishers (Directorate of Fisheries Development cited in ADB, 2018). Fishes are not merely elements of sustenance but also part of the culture, recreation and economy (Gurung et al., 2016; ADB, 2018). Not only fishes, but frogs are also eaten in hill and mountain communities, but no consideration has been given to frog cultivation. At the southern end of the hills, 16 kinds of turtles are available in the river, which is being used for food. Other aquatic animals like bivalves, gastropods, shrimp, and crabs are also famous food sources among people, especially people living in the southern belt (Subba, 2012). Changing water regime is exerting negative impacts on the population of aquatic biodiversity; for instance, increasing threat to indigenous species of fishes and the disappearance of are indigenous edible plants along with shrinking wetland (ibid). In the next 30 years, changing hydrological regimes and fragmentation of river connectivity would increase habitat loss, air -breathing, the arrival of predators, and an increase in forage fishes (Gurung et al., 2016). Hydrological change due to the dam is largely responsible for changes in 1‘environmental flow’ and the loss of the riverine fisheries in Nepal (Gurung, 2017; ADB, 2018). Mainly cold water fishes are diminishing due to obstruction of flow, habitat loss, water quality degradation, physical injuries and predation (ibid). Dam construction is one of the reasons that cause a change in the hydrological regime. 223 river dams are at various stages of construction across Nepal including

1 Brisbane Declaration 2007 defines environmental flow as the quantity, timing and quality of water required to sustain freshwater and estuarine ecosystems-the human livelihoods and well-being that depend on these ecosystems.

13 different-sized dam irrigation systems. These rivers contain fish species such as Tor Putitora and Bagarius sp. that are listed as endangered and near threatened in the IUCN list and Schizothroax Richardsonii is recorded as vulnerable. It is expected to rise in the future as demand for energy and irrigation at all scales is ascending (ADB, 2018). These dammed rivers host various types of fish and aquatic animals- Some of them are endemic, indigenous, endangered, threatened, and vulnerable. Inadequate technological support for fish migration compels them to pass through the turbine and get killed and collision with other infrastructure is common (ibid). Other than traditional knowledge of these aquatic animals, not many studies are carried out to know the life cycle of these animals including fishes. Therefore, it has become difficult to select sites for such dams (ibid). 16 endemic fish species are in such places that are identified as suitable locations for hydropower. Therefore, it is important to take greater consideration for the fish population while constructing these sites where the involvement of biologists can be helpful to close the knowledge gap (Gurung et al., 2016). Inadequate fish protection measures, concentrated hydropower, and cross dam projects are major threats to the fishery. Although high dam projects with high energy capacity are thought to be harmful to biodiversity, this is good for fish biodiversity than having many small projects disturbing at various locations (Gurung et al., 2016). Small numbers of fish ladders and hatcheries are designed. Moreover, these systems are not performing well in the absence of inadequate discharge. Besides, inadequate knowledge of the characteristics of different species, mishandling of dewatering and desanding have immensely disturbed breeding, spawning, and migration activities. Also, the use of destructive fishing techniques and natural hazards biodiversity including fishery is facing threats (ibid). These have caused the loss of aquatic animals eventually impacting overall food security (ibid). Some common factors that are impacting river aquatic biodiversity (JICA/NEA, 2014) including fishery in Nepal are noted here:

Static parameter of 10 percent flow discharge in the river Inadequate practices to promote the number of animal species, their habitat and

movements Inadequate knowledge of temporal and spatial impacts on river ecology and fisheries Policy inadequacy and flexibility such as no provision of Cumulative Impact Assessment

and Strategic Environment Assessment; EIA flexibility to hydropower up to 50 MW Inadequate provision of institutional mechanism for stakeholder coordination, policy

formulation and compliance monitoring at the project level

4.3.4. Hydro-energy Integration with Agriculture Sector Hydro-energy can be used for supporting irrigation to produce fertilizers to process food waste and agri-residue into energy (FAO, 2000; Villamayor-Tomas, 2015). In this respect, Amjath-Babu et al. (2019) express that hydroelectricity can be useful in pumping groundwater for irrigation and creating space for floodwater storage. For this purpose, less than 1 percent of total dam-generated electricity from the Koshi River of Nepal is sufficient (ibid). But, FAO (2000) puts an empirical finding that the use of energy in agriculture is the third stage of agriculture's evolution trajectory. In the first stage, human power is used for the entire agriculture activities where irrigation is dependent on rain. In the second stage, animal power is used to perform agricultural activities. Only, in the third stage various energy sources for example; wind pumps, water wheels, solar dryers, and fossil fuel-based technologies are used for irrigation and processing (ibid). So is the case with using energy sources, first biomass is used for domestic activities, second kerosene and LPG, and the third renewable energy, electricity (ibid). This trajectory is the outcome of the interaction between the energy system and the economy of a particular context. Hence, it can be understood that the energy ladder and economic

ladder influence each other. The household economy is one of the determinants of what energy type people tend to use- in a better economy people prefer a better source of energy or vice versa

(World Bank cited in FAO, 2000). Moreover, the study shows that only high-income people tend to use electricity for cooking, lighting, electronic appliance, irrigation, post-harvesting processing, and mechanical tools. The relationship between income and energy use in agriculture activities at the household level becomes vivid in Table 2. Table 2. Trend of Energy Use in Agriculture according to Household Income-Level in General

Agriculture Use Household Income

Low Medium High

Tilling Human Animal Animal, gasoline, diesel

Irrigation Human Animal, windpumps Diesel, electricity

Post-harvest processing

Human, sundry

Animal, water mills, sun drying

Diesel, electricity, solar drying

(Source: FAO, 2002, p.14)

From the table, it can be inferred that small and medium-income households never used fossil fuel or electricity for agriculture whereas high-income households do. So, it signifies that it is essential for low and middle-income households to have a higher income to use electricity or electricity has to be cheaper (FAO, 2000). Moreover, the agriculture sector in Nepal consumes an insignificant portion of electricity that is 1.17 percent (1231MWh) of the total energy consumed in the fiscal year 2013/14 (WECS, 2014) as shown in Table 3. Table 3. Energy Use by Types in Agriculture Activities in the Fiscal Year 2013/14

Energy type Energy Use (MWh) Grand

Percentage

(%) Irrigation Threshing Tillage

Diesel 321 151 677 1149 93

Motor spirit 16 1 - 18 2

Electricity 60 5 - 65 5

Grand total 398 157 677 1231 100%

(Source: WECS, 2014, p.13)

Merely 5 percent of the total energy is used only for irrigation and threshing purpose. But the use of diesel is 93. It depicts that agriculture technology is still fossil-fuel based and the majority of farmers are poor or lack access to electricity. But the demand for electricity in agro-based industries is growing (Bhattarai & Bajracharya, 2015). The energy industry is receiving 54 percent of the total allocated budget for the industrial sector which may further stimulate the industrial sector (Nepal et al., 2019). And along with increased energy supply, food processing and feed companies are also rapidly thriving in Nepal (Prasain, 2019; Simkhada, 2019). It indicates the importance of linking the energy system with agribusinesses for food security.

5. Empirical Findings and Analysis

5.1. Features of the Studied Hydropower Projects Chatara Hydropower Project (CHP) (small scale), Khimti Hydropower Project (KHP-I) (medium scale), and Upper Tamakoshi Hydroelectric Project (UTKHEP) (big scale) are run-of-river projects located respectively in Terai, Hill and Mountain region. CHP was constructed by India (state) whereas KHP-I was constructed by national and international private companies. UTKHEP was constructed by public and private companies in the public-private partnership (PPP) modal. The size of the projects and economic returns were found correlated; however, the beneficiaries’ number varies according to the associated benefits from the projects. The key technical features of these projects and their economic outcomes are summarized in Table 4.

Table 4. Key Technical Features and Economic Outcomes of Hydropower Projects under the Study

S.N Features CHP KHP-I UTKHEP

1 Commissioned date AD 1996 AD 2000 AD 2020

2 Project Validity (years) 50 50 35 3 Financial Support Government of

India (State) Statkraft Norway (Private Company)

(NEA Subsidiary) Public company

4 Current No. of Employee 24 64 216

5 Investment ( USD in Millions)

3 (@ Nrs.60/USD) 142(@ NRs. 76/ USD)

474(@NRs 104/USD)

6 Average annual revenue (USD in Millions)

0.27 37 90

7 Economic Rate of Return 10.3 22 24.5

8 Owner & (Type of ownership)

NEA since 1999 By 2020 (HP Ltd 50% and NEA 50%)

UTKHPL (NEA)

9 Project Purpose Irrigation & energy Energy Energy

10 Local beneficiary (Households)

228,000 (SMIP and CHP combined)

9500(electricity connected)

8000 (benefited from project activities)

11 Installed Units 2 units × 1.6 MW 5 units× 12.5 MW 6units× 79.5MW

12 Installed capacity (MW) 3.20 60 456

13 Design Capacity (MWh) 6,000 350,000 2,281,000

14 Actual Generation (MWh) 2,698 370,000 -

15 Contribution to national production as of 2019/20(%)

0.04 6 36 (based on design capacity)

(Source: NPC, 2012; Dhungel, 2014; NEA, 2019; NEA, 2019a; HPL, 2020)

5.1.1. Chatara Hydropower Project (CHP) The hydropower is the Canal Drop Scheme project (constructed on an existing irrigation canal) located at Chatara, Sunsari in province-1. It is the place where major rivers of the Koshi Basin flow in a confluence and pass through the southern region which is commonly known as Terai (plain alluvial arable land) in Nepal. The plant was built to supply electricity to canal dredgers in the Chatara canal with the help of the Government of India in 1996. The plant has an installed capacity of 3.2 MW consisting of two 1.6 MW capacity Kaplan turbines (NEA, 2019). Although the design capacity is 6,000 MWh the plant hardly generates 2698 MW which is about 45 percent of the design capacity (ibid). The project has never run to its full capacity. In 2006/07 generation reached a record of about 5,220 MW. Out of available 4,117 MW energy to NEA, 2,638 MW is

transferred to a national grid with a 33kV transmission line of 14 km (NEA, 2019a). The power station is supplying about 1,370 MWh of electricity in the local area through a newly installed feeder at Chatara (ibid). A very minimal amount of 15.22 MWh is internally consumed at the station whereas loss at the station is about 1.68 percent of the total available energy to NEA (NEA, 2019). The project self-sufficiency ratio is about 98 percent (ibid). The power generated from this plant contributes to about 0.04 percent of the total national production in 2020. To understand how this project is contributing to WEF nexus and benefit-sharing, an understanding of the Sunsari-Morang Irrigation Project (SMIP) on which the hydropower project is built is necessary. SMIP is an irrigation project constructed with assistance from the Government of India between 1964 and 1972 following the Koshi Barrage treaty in 1954. Initially, it was known as the Chatra Canal project. It was built under regular aid support from India to Nepal (NPC, 2012). 2Sah stated, “All expenses from land acquisition to development were funded by the Government of India. This was built to tranquilize the agitation on Nepal’s side after the Koshi River Agreement India used all water unilaterally. However, the project contributed to controlling the inundation caused by barrage during monsoon and providing irrigation to the districts on the eastern bank of the river”. The channel is about 53 km long with 12 major branches and hundreds of small branches making it a total length of 332 km. It supplies water to 40,000 hectares in Sunsari and 28000 hectares in Morang districts. About one million people from nearly 228,000 households in these districts directly benefitted from this project (SMIP, 2014). Also, it aims to extend irrigation to an additional 30,000 hectares of both the districts in the future (NPC, 2012). Despite the higher cost of sedimentation removal and frequent repair and maintenance, a full-fledged SMIP would have an economic internal rate of return (EIRR) of around 18 percent and would increase cropping intensity by 225 percent (SMIP, 2014). 5.1.2. Khimti Hydropower Project-I (KHP-I) KHP-1 is located at the border of Ramechhap and Dolakha Districts in Bagmati Province. KHP-I is built in Khimti River, a tributary of Tamakoshi River that comes from Jata Pokhari Lake in Himalaya (Himal Power Limited (HPL), 2020; Sharma et al, 2007). Headwork is located just below the confluence of Palati and Khimti Khola and the powerhouse at Kirne valley. The river has a 358 km2 catchment area that experiences torrential rainfall from June to August with an average rainfall of about 2,200 mm/year. Daily average flow discharge is about 31.5 m3/sec at the intake; however, it varies from 3.5 m3/s to 3,900m3/s (HPL, 2020). The watershed area and intake are located on a high elevation and surrounded by rocks, forests, terraced land, and eroded slopes and hills (Sharma et al, 2007). The river contains a rocky bed, flood plain, and larger rocks and boulders which provide good habitat for fish (ibid). As the river traverses through mountains and mid-hill areas, the basin faces heavy rockfall, landslides, and sedimentation due to highly sloping terrain, heavy rain, and excessive deforestation. Sedimentation is higher in the rainy season at times causing serious damage to the turbine reducing the performance by 1 percent on an annual average and rising maintenance costs (Thapa et al., 2005; NEA, 2019). It is the first private project built on the ‘Build, Own, Operate, and Transfer’ approach (HPL, 2020). 90 Km away from Kirne power station, a 132 kV line is connected to the national grid at Bhaktpur substation whereas, for local supply, a small line of 33 kV is arranged (NEA, 2019). International Finance Corporation (IFC), ADB, Exsportfinans AS, NORAD, and Nordic Development Fund funded the project. Contractually, in 2020, after 20 years of the contract, 50 percent of shares are going to be transferred to NEA and the project will be handed over to the Government of Nepal in 50 years period. Initially, Butawal Hydropower Company Ltd began constructing the project in 1993 (HPL, 2020). After financial closure in 1996, the Himal Hydropower and a Norwegian company, Statkraft Anlegg, ABB Kraft and Kvarner Energy (Norwegian) and Nepal Hydropower & electric Pvt. Ltd took over the project and timely completed it in 2000. The project was completed for a total cost of about USD 142 million amidst 2 Ashok Sah, Information Officer, SMIP, Interview 2020-03-23

difficult construction sites and social challenges. Shareholders financed 25 percent while 75 percent was loaned from the Government of Nepal (ibid). Currently, four Norwegian companies own above 85 percent including 50.4 percent of SN Power while Nepalese company, Butwal Power owns merely 14.9 percent (Colley et al., 2011, p.9). 5.1.3. Upper Tamakoshi Hydroelectric Project (UTKHEP) UTKHEP is a peaking run-of-river project with live storage of 4 hours. UTKHEP is located in Dolakha District in Bagmati Province just 6 km South of Tibet in Tamakoshi River, a perennial glacier river that originates from the Tibetan Himalayas (Upper Tamakoshi Hydropower Limited (UTKHPL), 2011). JICA studied the possibility of the project in 1985 after the preparation of the Koshi Basin Master Plan (Energy Information Center, 2018). It has been built on national investment, technology, and management in a public-private partnership model (Energy Information Center, 2018). Earlier in 2005, Norconsult, a Norwegian company conducted a Bankable Detailed Design Feasibility which showed the feasibility of 309 MW with 1737 GWh annual capacity (UTKHPL, 2020). However, the study carried out by NEA showed a larger possibility. UTKHPL was established as an autonomous company in 2007 by NEA and arranged domestic investors for the construction and operation of the project. Construction began after signing a Power Purchase Agreement (PPA) and Financial Arrangement with NEA in 2010.

A special purpose vehicle (SPV), a unit to support construction-related decision-making was formed. Similarly, to facilitate benefit-sharing-related activities, a multi-stakeholder district-level coordination committee was formed (Energy Information Center, 2018). For construction, NEA procured four international engineering companies: 1) Sinohydro Corporation Ltd, a Chinese company, for civil works, 2) Texmaco Rail & Engineering Ltd, an Indian company for hydro-mechanical works 3) Andritz Hydro GmbH, an Austrian company for mechanical and electrical work, and 4) KEC International Ltd, an India company for transmission line and substation work. 47 km long transmission lines with 127 towers will be developed (NEA, 2019). A joint venture of Norwegian consultant, Norconsult AS, and German consultant, Lahmeyer International GmbH provided engineering consultancy and supervision services (ibid).

Due to time overrun the initial cost estimation of USD 441 Million (at the rate of NRs 80/USD) excluding the interest rate in 2011 (NEA, 2019) increased to USD 730 million including the interest (The Kathmandu Post, 2020a). So was the unit cost from US cent 3.5/unit to 5.3/unit. It is the first hydropower project invested by national institutions and equity share. The equity share holds about 30 percent whereas 70 percent is the loan from the Government of Nepal (NEA, 2019). This equity shares-based investment modality helped foster benefit-sharing practice. Besides, the project is technically considered promising for its special features such as 3000m’ natural high dam, good geology for the tunnel and powerhouse, 100MW mean flow power

generation, low flood discharge during monsoon, low sedimentation at the intake site , and minimum environmental impacts (UTKHPL, 2011).

Rolwaling Khola Hydroelectric Project (RKHEP) 22 MW, a diversion project and Tamakoshi V Hydroelectric Project 99.8MW, a cascade project are being constructed to complement the performance of the UTKHEP. 3Neupane, “The first project will generate 100GWh. Moreover, the diversion will add water in UTKHEP’s head for additional two hours that would contribute to generating an additional 200 GWh energy from UTKHEP in the dry season”. Besides policy enforcement for social and environmental safeguards, general people are encouraged to invest in hydropower development, with a slogan (Nepalko Pani Janatako Lagani –it means People’s investment for Nepal’s hydro) to promote benefit-sharing among stakeholders (ibid).

3Ganesh P. Neupane, Deputy Manager, UTKHEP, Dolakha, Interview 2020-08-20

5.2. Benefits and Risk-sharing Practices in the Study Sites

5.2.1. Benefits and Benefit-sharing Practices From sustainable hydropower, economic, social and environmental benefits are available in a balanced manner (IHA, 2004). Different forms of benefits have resulted in different phases of hydropower construction. Society tends to benefit when local people are capacitated, public infrastructures and services are set up, and livelihood is supported. Royalty, equity share, community development fund, local livelihoods program, electricity support, and water and environmental benefits are commonly noted in the projects as mentioned in Table 5. Table 5. Summary of Economic and Environmental Benefits Distributed in the Projects

S.N. Benefits CHP KHP-I UTKHEP 1 Royalty (%) Pays Pays Pays 2 Project share for local

people (%) N/A N/A 10

3 Community development fund

N/A Yes (short-term) Yes (short-term)

4 Local livelihoods programmes

N/A Jobs, skill development and agriculture-related training

Jobs, skill development and agriculture-related training

5 Electricity support To some households initially

9,500 HHs connected to rural electricity

Infrastructure provided

6 Water and environmental benefits

-Irrigation services -No measures to protect river biodiversity

-Drinking water, irrigation and sanitation programmes -Very limited measures to protect river biodiversity

-Drinking water and environmental protection -Very limited measures to protect river biodiversity

7 Benefit(s) share of the total project cost (%)

N/A 1 1.1

Source: Prepared by the Author

5.2.1.1. Compensation

It is immediate support given to restore assets and environmental losses to the state prior to the project. Cash compensation for lost assets, relocation cost and support, livelihood restoration support, land for land loss, and compensatory tree plantation are commonly used compensatory benefits (Wang, 2012; Skinner et al. 2014; IHA, 2018). In all three projects, compensation seems to have taken place with different levels of focus and priority. In CHP compensation was not a major focus since the major part of the infrastructure (irrigation canal) was built much earlier on public land. There was no such impact by CHP as it has been constructed on an irrigation canal. However, the development of the canal required the acquisition of land. Regarding complaints about land compensation, 2Sah said, “Compensation for acquired land was given, but people kept on complaining of not getting compensation. Irrigation was a critical need, but the land had a very low value and so it was not a problem then. Moreover, most of the settlers do not have registered land. Settlers affected by canal development were resettled in the area called Punarbas, they were provided with land for their acquired land”. Furthermore, the irrigation canal was constructed before the Land Acquisition Act-1977 came into force in Nepal. Thus, it can be assumed that compensation benefits were not a major focus of the project.

But compensation for land acquisition and resettlement was better in KHP-I. The project impacted 77 hectares (ha) of land including 24 ha of 154 individuals and their property (GWP, 2013). 4Phuyal stated that three households out of them were fully displaced. Losses were

4 Kumar Phuyal, Executive Officer, KREC, Ramechhap, Interview 2020-03-24

compensated, but the compensation for a Ropani (74 ft2) of land was merely USD150 (ibid). Regarding compensation, GWP (2013) stated that compensation was determined by the ‘Land Rate Fixing Committee’ at the district level but Colley et al. (2011) claimed that HPL had no resettlement plan and planned monitoring mechanism to restore livelihoods. The Environmental Impact Assessment (EIA) of KHP-I broadly recorded the socio-economic and biophysical impacts of the project and recommended short-term (construction phase) and long-term (operational phase) monitoring and mitigation measures (GWP, 2013). To offset the loss for the construction phase, an Environmental Mitigation and Monitoring Plan (EMMP) was adopted (ibid).

Similarly, in the UTKHEP project-affected people were compensated. “To improve compensation distribution process, a compensation determination committee was formed in participation of representatives of the project affected people and the committee determined land value based on the current market price and updated government rate, and distributed to the affected households”, highlighted 3Neupane. In this process, the UTKHEP acquired 182 ha of land including 66 ha of arable land and 116 ha of public land comprising forest and barren land (Koirala et al., 2020). “21 out of 278 affected households were seriously affected. 14 of them were relocated along with compensation for other impacted assets”, stated 3Neupane.

5.2.1.2. Enhancement

Benefits are provided to improve the situation of the project-affected people and communities through local development such as infrastructure development and improving livelihoods (Wang, 2012; Skinner et al. 2014; Shrestha et al., 2016). Proving support for irrigation and drinking water, roadways and bridge development, health and education help to improve public services. Similarly, skill development training and institutional and technological supports help enhance capacity. Moreover, supports for the improvement of watershed management, flood control, and improved access to natural resources help to improve overall ecosystem services (ibid).

Socio-economic Improvement

In CHP, no direct enhancement benefits were given except irrigation and access road along the canal. But, UTKHEP supported education, infrastructure development, health and safety, agriculture and forestry, and build temples and shrines in the affected areas (Energy Information Center, 2018). Whilst KHP-I brought exemplary community development projects to improve low health and education, drinking water, and irrigation facilities (GWP, 2013).

CHP did not provide any direct benefits to the project-affected household. However, overall socio-economic figures changed in Sunsari and Morang districts due to Sunsari-Morang Irrigation Project (SMIP) where CHP contributed to operationalising the irrigation system. In this respect, 2Sah said, “The project played a crucial role to uplift both income and food poor ethnic minorities such as Tharu, and Muslim in the region”. Food security improved once irrigation started, he claimed, “Production and productivity of rice, wheat and vegetables had tremendously increased after a reliable irrigation system”. New crops such as bananas, sunflowers, and vegetables were introduced into the region (NPC, 2012). Similarly, crop intensity increased from 184 percent to 210 percent. About 80 percent of the population had year-round food sufficiency while the rest 20 percent had a normal food security state. Nevertheless, about 3 percent of children are malnourished due to the low intake of balanced food (ibid). Adding to this point 5Shrestha stated, “In these days, changes are visible, we can see people investing in the education of their children, household amenities and even started doing business. However, farmers’ economic progress is very slow”. Technical knowledge and technological intervention are inadequate among these farmers (NPC, 2012). Also, the Government of Nepal is investing about USD 30 million to reach an additional 30,000 ha of land by 2023. This will cause a 25 5 Suresh Shrestha, Ward Chair, Braha Municipality-01, Interview 2020-03-23

percent increase in vegetables, 60 percent in pulses, and about 100 percent in cereal crops (SMIP, 2014). Besides, “The road along the canal has increased movement of people and developed small market areas along the canal”, stated 5Shrestha. Although the area is a business transit point for many people from hills and mountains for ages, the roadway was not much improved (Neupane, 2018). But now the road has eased transportation of produce to the market and agri -inputs to the field from the market saving a considerable amount of time and money (NPC, 2012).

Himal Power Limited (HPL) carried out ‘rural development’ activities under its Corporate Social Responsibility (CSR) for KHP-I where ‘mitigation of project induced losses’ and ‘social contribution’ were major CSR delivery approaches (HPL, 2020). The project supported 35,000 local people through rural electricity, education, healthcare, sanitation, drinking water and irrigation, and agriculture support programmes (ibid). In this respect, 6Bhatta stated that the project provided USD10,000 for the then 10 affected Village Development Committees (VDCs) from 2010 to 2018 to support the Community Self-development Programme. It was followed by NORAD and HPL financed USD 400,000 for ‘Sustainable Poverty Reduction Nepal Programme until 2020. Social and environmental dimensions got space in the project as International Finance Corporation (IFC) and Multilateral Investment Guarantee Agency (MIGA) funded the project (Colley et al., 2011). But 7Shrestha countered, “KHP-I took grants from NORAD and used them in the name of CSR in the project area escaping from its responsibility and depriving other parts of the country of the grant benefit”. The overall situation of irrigation, drinking water and sanitation improved in the project area. Along with the existing Khimti Besi Irrigation canal, five small piped water supply systems were constructed for 3,000 households (GWP, 2013). Likewise, Haluwa Khola irrigation, a gravity project with two feeding canals feeding on either side of the Khimti River, was constructed to supply 55 liters/second of water to 100 ha (ibid). The project seemed to have no impact on the canals’ natural flow as many tributaries were adequately supplying water for the system (ibid).

Livelihood has improved significantly as 8Basnet, a hotelier since 2000, narrated, “The place was a transit point of trekkers from Ramechhap and Solukhumbu. There were no other business opportunities than tourism. Improved infrastructure, skill development in agriculture and expansion of market area changed the overall livelihood of the community people”. He continued, “The local market thrived as access roads were constructed from each side; Manthali-Khimti 13 km and Jiri-Khimti 22 Km which eased the movement of people. Initially, business was good around Khimti as there were no feeder roads to village areas, people used to come and buy goods from there, but now either they go to large markets, or big shopkeepers directly supply goods to those villages on their vehicles. Further, owing to road access people from other village areas of Ramechhap and Dolakha migrated to the location to become traders. According to him, the business is competitive but he is able to meet household and education expenses for four children. Livelihood from agriculture is partial for most people since they have very small landholdings where they barely produce enough food for six months.

Education also seemed to have progressed due to the KHP-I support. The project started an English medium primary school, called Khimti Project School with 300 students on the premise of the powerhouse (GWP, 2013). Now, it has become a secondary school with more than 500 students (HPL, 2020). The school is being operated by Jhankre Rural Electrification and Development Project (ibid). In this regard, 6Bhatta told, “The project manages the school and it has employed 26 teaching and non-teaching staff. The school receives 85 percent of the total financial support from HPL and generates 15 percent from school annually”. However, 4Phuyal asserted that the tuition fee was unaffordable for low-income households, yet school employees had been given a handsome amount of salary. But the majority of school staff were from outside whereas local people worked as low-ranking staff. Also, 8Basnet said, “the project also supported

6 Shyam Bhatta, Office Manager, HPL, Ramechhap, Interview 2020-08-17 7 Ratna Sansar Shrestha, hydropower expert, Kathmandu, Interview 2020-08-25 8 Kumar Basnet, Project Benficiary, Ramechhap, Interview 2020-03-24

five primary and one secondary school by improving school building, furniture, and teaching-learning materials”. The project provided informal literacy programmes to uneducated adults and women (HPL, 2020). 4Phuyal also stated that the project school would be handed over to the local government under a trust, but many people were skeptical of their ability to manage the school.

KHP-I also helped to establish five medical facilities in the area. The facility located at the project headquarter had medical doctors assisted by health personnel and paramedics (GWP, 2013). 6Bhatta informed, “It has 10 regular staff”. Moreover, four small-sized service centers established at the periphery of the project area were removed after the project. However, the facility at headquarter is still providing medical service 24/7 even specialist services, along with other pathological, radiological, and dispensary services (GWP, 2013). It provides ambulance service as well. About the services, 4Phuyal said, “OPD ticket cost merely US cent 50 and doctors consultation is free but we have to pay for the rest of other services”. He further added, “The center is managed by Dhulikhel Hospital and almost all technical staff are from outside. Only non-technical staffs are from the local area”. Although HPL (2020) claims that financially weak patients are supported for medical expenses and ambulance charges by the medical care fund in this project. 4Phuyal argued that only some concession was available.

Similarly, regarding enhancement benefits in UTKHEP, 3Neupane stressed that the project made a noteworthy contribution to developing local roadways. It constructed a 68 km access road from Charikot to Lamabagar establishing market access for almost one-third of the total population in Dolakha district. Along with the road, 7 motorable bridges, 1 suspended bridge, and many agriculture roads and foot trails were also constructed that contribute to the overall socio-economy of the project area. Besides, the provision of free electricity for local people has significantly contributed to the standard of living.

Capacity Improvement

“CHP delivered no benefits for capacity development. Neither was any record of employment generated during the construction of CHP except 24 technical and non-technical staff at the moment”, stated 9Pandey. “But the construction of SMIP has been significantly contributing to employment generation as the project expansion is still underway”, added 2Sah.

Whereas, in KHP-I, ‘training’ and ‘employment’ were provided to the affected people. These affected people were categorized as i) directly affected families, ii) people residing in affected VDCs, iii) people from the affected district, and iv) people beyond these districts (GWP, 2013). The first three categories were given priority for employment in the project (ibid). As Colley et al. (2011) write about 2,300 people including 150 locals were annually employed. Although they were trained one year before the employment, 4Phuyal argued that the employment was not sustainable as people were employed as a labourer only for 5 years and finally migrated from the place in search of a living. Similarly, income generation training were delivered; consequently, an NGO called, Janaki Janaprava Mahila Samuha was established involving trained women to start up self-employment among women (GWP, 2013). Mostly, people near the plant benefitted from development activities. “Initially about 80 percent of employees in KHP-I hailed from Ramechhap and Dolakha, but by now the percentage has gone down”, stated 6Bhatta. Moreover, during the construction phase, above 4,600 farmers were counselled on the use of improved seeds and fertilizers, and supported with fruits and vegetable seedlings (GWP, 2013). Also, 66 SMEs, 151 women and 47 youth received entrepreneurship development training (HPL, 2020).

Similarly, UTKHEP significantly created employment in the project, 3Neupane stated, “1,800 people including 1,220 Nepali, 380 Indian, and 200 Chinese were employed as construction workers”. He added, “The project supported skill development training like electrical house wiring, plumbing and carpentry to affected families by Jiri Technical Institute and Training Center of NEA at Khariparti”. Moreover, he continued, “Different programmes like agricultural

9 Binod Prashad Pandey, Residential Engineer, Generation Directorate, NEA, Interview 2020 -03-22

intensification and market management, off-season vegetable production, goat farming, distribution of agricultural seed, plastic tunnel for vegetable farming, and irrigation pipes, water tanks and canal construction have taken place. This increased supply of agri-inputs has supported diversifying crops in the area”. He further stressed, “The project has considerably supported the development of tourism in the area. So, people are benefitting from their economic activities like pottering, working as a tourist guide and opening new hotel business”.

Ecosystem Service Improvement

Although CHP does not directly contribute to promoting ecosystem services, however, due to the irrigation project, SMIP, 2Sah opined, “Groundwater recharge has increased, so is the quality of soil and productivity. Consequently, the moisture generated from the recharge is positively impacting crops even in the absence of irrigation”. Further, as NPC (2012) puts the increased groundwater recharge in the region buffers from Global climate change impact. Not much action was noticed in KHP-I too. “KHP-I lacked a long-term mitigation plan; except nursery development and seedling plantation, the project remained unprogressive”, stated 4Phuyal. However, he further added, “Water 500 liters/second is released in the dry season and also perennial stream sprout just below 200 m downstream of the weir are connected with a stream to protect river ecology. Besides this, once a short-term fishery support programme was conducted, but it could not restore the fishery”. Similar were actions in UTKHEP, 3Neupane stressed, “Nursery establishment for afforestation and distribution of seedlings were carried out in all affected community forest user's groups as per EIA’s recommendation”.

5.2.1.3. Redistribution

Benefits like project revenues and royalties were common in all projects. CHP, KHP-I and UTKHEP are providing USD 0.27, 37, and 90 million in average annual revenue respectively. Incurred royalties are being paid as per policy and redistributed. Monetary benefits like construction of rural electricity, sales of electricity, preferential electricity rate, property tax exemption, and tax exemption were found in these projects. Affected people who received compensation were exempted from tax for deed transfer. Similarly, investors of KHP-1 were exempted from tax and banking fees. The Government of Nepal also benefitted from handing over of CHP and transfer of 50 percent of shares of KHP-I in 2020.

In CHP, 9Pandey explained, “The surplus energy left from power supply to dredgers has been connected to the national grid. There are no other privileges for local people except the supply of full energy voltage. However, the economic feasibility of the project is always questioned as the plant cannot produce energy at its full capacity since water flow in the canal is being controlled by farmers downstream and production is shut down for one month to remove sand from the canal”. 2Sah stating about the use and benefits of the hydropower project said, “Since there was no NEA transmission line in the period, it was necessary to develop hydropower to run dredgers in the canal. Moreover, the removal of excessive sandy silt results in increased agriculture productivity downstream as the silt destroys land productivity”.

Rural Electrification was one most cherished redistributive benefits both in KHP-I and UTKHEP. Jhankre Rural Electrification Project in KHP-I is a mini-hydropower with 630 KW capacity, initially was constructed in 1996 on a tributary of Khimti River to lower the diesel dependence of the project and was later used for rural electrification (GWP, 2013; HPL, 2020). A users’ committee including project-affected people and the local elected representatives was set up to convene an awareness programme on the utilization of electricity mainly for enterprise development. Successively, with the support of KHP-I, Khimti Rural Electric Cooperative (KREC) was formed by the Users’ Group to take care of the rural electrification project. Further, along with the increasing demand for electricity during peak times, Haluwa Khola 400 KW was constructed and handed over to KREC (HPL, 2020). 4Phuyal narrated, “KREC received international exposure to managing these projects and support for making the rural electrification

programme financially, technically and socially sustainable (ibid). Currently, KREC provides electricity and services to about 9,500 households including 6,500 members from 11 villages of Ramechhap and Dolakha districts with the help of 35 employees in the area. It costs merely USD1 for membership. KREC provides electricity at the rate of US cent 5/unit for household and industrial use whereas US cent 3/unit for irrigation. Also, more than 200 low-income households are enjoying free electricity below 10 units per month”. Moreover, he continued, “It provides meter reading and tariff collection services and operation and maintenance services to the members. Currently, the annual turnover of KREC is about USD 1.7 million. People complained of load shedding in the past but after PPA with NEA the problem has been resolved. Either party buys and sells electricity at the cost of US cents 4.8/unit for the six months of monsoon and US cents 8.4/unit for the six months of the dry season. Before the agreement, KREC purchased electricity at the rate of US cents 10.8/unit from NEA. Further, considering the growing electricity demand, KREC has planned to construct Jhankre-2 (384 KW) project with the financial support of AEPC”.

However, in general, people are not satisfied with KREC leadership as 8Basnet told, “There is too much politics in KREC: procurements are not transparent and services are slow. They just bring some meter-boxes, wires, and electric poles and say money is over”. Countering the blame, 4Phuyal argued, “The expectation of community is high compared to the revenue and the cost of maintenance is increasing as infrastructures are getting old”. Rural electrification was also prioritized in UTKHEP. 3Neupane explained, “More than 5,000 households of three Rural Municipalities (Lamidanda of Kalinchok RM; Gaurishankar, Khare and Suri (partly) of Gaurishankar RM; and Lamabagar, Orang, Bulung and Laduk of Bigu RM are electrified by the UTKHEP. Due to electrification, almost 22,000 people are benefitting as the project is providing electricity free of cost. Impacts of the rural electrification are becoming visible in agriculture, tourism development and market development” .

5.2.1.4. Partnership

The partnership as benefit-sharing was insignificant in CHP whereas the other two were in a much better position. In mobilization and providing responsibilities to community people, KHP-I showed a good performance; however, it had to face a lot of friction for not providing equity shares for longer-term benefit. In this regard, UTKHEP remained way ahead in partnership building through sharing of responsibilities and equity shares.

Community participation and institutionalisation of activities got priority in KHP-I. Khimti Community and Environmental Unit (KCEU) was formed in a participatory manner to monitor project-induced environmental impacts, EMMP implementation, and look after mitigation measures. KCEU convened public hearings on progress and issues that emerged; administered non-formal education for illiterate adults and women with plenty of follow up courses; agriculture and nutrition, awareness-raising on preventive health education and sanitation, support for toilet construction, training on the development of smokeless stoves, and forest conservation-related activities (GWP, 2013). Other institutions were also set up such as the ‘Janaki Janaprava Mahila Samuha (an NGO), 12 Forest Users’ Groups, and KREC to carry out community development activities. However, as, 4Phuyal reported, “The project did not prioritise equity share despite consistent demand from project-affected people and communities rather project put forward short-term benefit to avoid community pressure”. In the same line, 7Shrestha added, “Since people around the project are deprived of opportunities to invest and own hydropower, they protest when somebody else comes and takes benefit from their resources”. He continued, “There is no point in getting equity share from KHP-I in the future as all benefits are already taken away by the foreign companies. Rather an old project will be transferred to NEA and then to the Gov. of Nepal which will merely add a burden to maintain, mitigate impacts and decommission. Therefore, it is necessary to do the due diligence before handing over the project, and maintenance and operation cost for the future has to be given to the Government of Nepal”.

But UTKHEP showed comparatively good progress in ensuring public investment and providing equity share. The investment was arranged including NEA with a major stake of 41 percent, followed by Nepal Telecom-6 percent, Citizen Investment Trust (CIT)-2 percent, Rastriya Beema Sansthan (RBS)-2 percent, and a loan from the Government of Nepal (NEA, 2019). Equity share was issued not only for employees of debtors, Provident Fund and NEA but also for the general public and residents of the Dolakha district. Employees’ Provident Fund, NEA and staff, staff of debtor institutions, the general public, and residents of Dolakha received 17.28 percent, 3.84 percent, 2.88 percent, 15 percent and 10 percent of equity share respectively. “About 278,000 people from Dolakha district are benefited from the equity share. It is noteworthy participation of local people”, stated 3Neupane. The share worth USD 150 million was distributed to citizens as per their eligibility for the base amount, next 1.4 times, and the highest 3 times is 34, 48, and 102 shares in number (Business Plus Television, 2018).

5.2.2. Risks and Mitigation Practices In Nepal, mostly social, political, construction-related, disaster and environment-related risks are very common and severe in the hydropower sector (Gurung, 2020). In social risks; land acquisition, resettlement and rehabilitation problems are common whilst public disorder and labour disputes are common political risks. The construction is always challenging due to geological adversity and fragile topography. Further, the majority of hydropower sites are prone to hazards like flooding and earthquake. Also, there are many other risks in the Nepalese hydropower sector which are detailed in annex-1.

5.2.2.1. Higher Sedimentation

CHP and KHP-I have severe siltation problems but it is not in UTKHEP. In this regard, 10Adhikari said, “Sedimentation is especially high in monsoon in CHP. Every year approximately 400,000 m3 of silt is removed with the help of two dredgers and silt is sent back to one of the major branches of the river. But since the last four years, one dredge is down; therefore, it is difficult to get rid of the sedimentation load”. Consequently, 9Pandey stated, “Turbines wear and hydropower is not fully performing. Moreover, the power generation went complete shutdown in 2013. After overhauling, unit-2 resumed production at its capacity in October 2018 whereas unit-1 is being refurbished. It leads to higher operation and maintenance cost that is about USD 0.2 million per year almost equal to the revenue”. Similarly, he added that the problem of underproduction by sedimentation removal and water flow controlled by farmers downstream during monsoon are long-term challenges. Consequently, only after the monsoon from October to November and before the monsoon from April to May the hydropower generates energy at its peak. 2Sah stated, “We are not being able to supply water in required amount mostly to the farmers at the tail because of weak drainage and the inability to clear the silt properly. The demand is 60 cusec which is way over the current supply of 20 cusecs”.

Similarly, KHP-I has high sedimentation problem because of rockfall and landslides during the monsoon. Sometimes, the sedimentation load reaches 8,536 ppm/day in the rainy season (NEA, 2019). To overcome the problem, two sediment settling basins are designed. 80 percent of which is flushed into the river each year. However, it is causing significant damage to the turbines reducing 1 percent of efficiency per year resulting in low revenue generation and high maintenance costs (Thapa et al., 2005). In this respect, 11HSE Engineer added, “the plant runs 5,835 hours to generate 350GWh, but it generates about 20GWh more than the design capacity”. Furthermore, not having appropriate sediment management technology is losing possible wealth generation (NEA, 2019). However, an actual case of siltation is yet to be experienced in UTKHEP since the operation has not begun.

10 Ramesh Adhikari, Senior Dredger Operator, SMIP, Interview 2020-03-22 11 HSE Engineer, Himal Hydropower Ltd, Ramechhape, Interview 2020-03-24

5.2.2.2. Old Infrastructure and Poor Management

A lot of breaches and leakages along the SMIP canal are experienced as the canal is getting older (NPC, 2012). 2Sah agreeing with these problems stated that SMIP is joining some rivulets to supply water to those affected areas as a short-term solution and regularly maintaining the breaches and other infrastructures. He further stated, “On top of that, water volume is getting lowered in Koshi causing the inadequate supply of water to the irrigation canal since the existing small diverting weir structures at the intake are not sufficient to divert the required water to the intake. It demands a big weir in the river stream so that the water level will go up and get diverted towards the intake. The plan is underway”. He agreed that the infrastructure extension and maintenance of the system are not taking place effectively as the collection of the water service fee is poor and the Water Users Agencies are not that active. NPC (2012) also agrees that the operating cost was about USD 0.5 million a year whereas the irrigation service fee was about USD 5.85/ha/year which indicates that it is hard to maintain infrastructure from the collected fee. This indicates weaker water governance which eventually will impact the generation of electricity from CHP and other associated benefits from SMIP. While KHP-I and UTKHEP did not have any obvious problems due to aging infrastructure. However, the former is getting old, but timely maintenance has protected the performance of the project.

5.2.2.3. Construction-related Risks

Construction-related risks are high in hydropower development because of difficult geographical locations and fragile topography. 11HSE Engineer added, “KHP-I experienced a lot of problems during underground constructions like collapsing of the structure due to weak geological conditions and lack of mitigation measures”. Moreover, construction activities were hampered by the suboptimal performance of contractors. This was noted in UTKHEP where Texmaco, an Indian engineering company failed to install hydro-mechanical work and the project was delayed. The Project Head stated that the Indian engineering company lacked management ability in ‘design and build’ concepts. But the lagging was addressed with the help of the Austrian company, Andritz (Business Plus Television, 2018).

5.2.2.4. Unjust Benefit Distribution and Poor Safeguarding

In CHP, “About 600 households from three settlements near the head of the irrigation canal are deprived of drinking water and irrigation facilities. Even during the construction phase, about 40 households were displaced from the area and they were not given compensation or any benefit from the project”, stated 5Shrestha. Regarding the unavailability of water for people on the eastern bank of the canal near the intake, 2Sah asserted, “There is always an ideal length for irrigation so it was impossible to supply water from this ideal length. Moreover, the settlement was non-existent during the construction phase. Also, we had to consider the low land area downstream”. Irrigation could have been provided to the settlement with tube wells and lift irrigation. Many highland areas in the Koshi River Basin (KRB) can be reached by lift irrigation for which electricity should be in place. On the one side, these settlements are deprived of benefits, on the other are succumbed to the loss of livestock and lives. In this respect, 9Pandey stated, “In the past, two or three children drowning and death cases in the channel were reported. Similarly, at times goats and cows fell in the settling basin we rescued them”.

5.2.2.5. Public Disorder

Public disorder was also a very common risk in all projects. Although public protests were not much reported in CHP, “Staff of the project was attacked a couple of times for not providing electricity (during the load-shedding era) and sometimes, for not providing just compensation for land and assets”, added 9Pandey. KHP-1 faced hurdles from local people for equity shares for many years. In this respect, 11HSE Engineer stated, “During construction, the project experienced road blockage and threatening of manhandling for not fulfilling their demand. Also, many

structures were burnt to ashes during the insurgency”. “Contrary to the engineer's viewpoint people kept on doing strikes hoping that their demands will be answered” expressed 7Shrestha.

Similarly, “People affected in UTKHEP protested citing subpar compensation for acquired lands, changed road alignment, and shares of hydropower”, reported 3Neupane. The alignment was supposed to go through Shanti Bazaar, but it was taken away from it, so people living in the area protested for not getting the road into the settlement. In this process, Upper Tamakoshi Peoples Concern Committee (UTPCC) played a remarkable role in consensus building among people and contractors. In this project, local people played the mediators’ role to bring all parties together (Koirala et al., 2020). Further, construction workers demanding 500 shares of hydropower for each, in the initial phase, frequently halted construction work (Manandhar, 2015). Furthermore, the project-affected people also asked for additional shares from public shares and the distribution of shares according to the severity of their impact on them. As a result, the impacted area was further categorized as severely affected area, affected area, and rest of the district, and distributed shares accordingly (Koirala et al., 2020).

5.2.2.6. Economic and Financial Risks

Higher maintenance cost was one of the economic and financial risks common both in CHP and KHP-I. At the same time, it has reduced the efficiency of the turbine which impacts the generation of electricity that ultimately hits revenue. Besides, exorbitant tariff agreement in KHP-I and cost overrun due to the inability to construct UTKHEP in time were two serious risks.

Exorbitant Tariff Agreement

In KHP-I, the power purchase agreement (PPA) signed by NEA and the project developer in 1994 remained highly criticized (NEWS24 Nepal, 2014; 2014a). It was charged with being exorbitant because the agreement was done in Dollars, and the provision to pay royalty, VAT, and banking costs incurred in the project by NEA. Every year prices increased by three percent and the exchange rate of the US Dollar against Nepalese Rupees (NRs) just soared. In the first year, the dollar exchange rate was about NRs 50/USD, but by now it is about NRs 120/USD. In this regard, 7Shrestha stated, “The agreement of US cent 5.2/Unit in the contract of 1994 was revised and increased to US cent 5.9/unit. The first-rate itself was high because it had included insurance costs for project risk too. It is because the government of Nepal did not go for competitive bidding. The developers just distributed the contract among them and decided the cost on their own. They just took a large sum of money”. He further stated that neither did Statkraft invest its profit from the project in other projects nor became ready to revise the tariff. So, this ‘exorbitant tariff’ is an ‘extortion of money’ by a developed country.

A former Director of NEA expressed that due to PPA, NEA paid 40 percent of its total benefit (Nepal Forum of Environmental Journalists, 2015). Moreover, the provision of the extra hour of energy or energy produced more than the contract, the government would pay 1.5 times the normal purchase contract. With the motive to claim more money, the owner extends the dry season for six months to exceed the purchase agreement so that the additional amount can be extorted from NEA (ibid). As a result, NEA is paying 17 cents in the name of excess energy produced during the dry season (ibid). In this regard, 7Shrestha stressed, “This unfair PPA can be named as ‘financial crime’ which violates ILO 169 article on justifiable benef its from natural resources”. Many experts believe that for some ulterior motive politicians and officials knowingly pushed the country into a trap. In this project, Ministers of Water Resources of three consecutively governments worked in favour of the owner (NEWS 24 Nepal, 2014a). These officials defended themselves by saying that they signed the contract because they wanted to bring the private sector into the investment market and transfer their technology to Nepal (ibid). 7Shrestha made an analogy that KHP-I is a ‘trophy wife’ that the project attracted and gave rise to numerous private hydropower producers, but at a large cost on the country’s side.

Cost Overrun

UTKHEP was planned to complete in 2016. But after 5 years, the project is expected to come into operation only by mid-2021. Due to time overrun initial cost estimation of USD 441 Million (at the rate of NRs 80/USD) excluding the interest rate in 2011 (NEA, 2019) rose to USD 730 million including the interest (The Kathmandu Post, 2020a). Besides, changes in the exchange rate and increased interest rates were also major factors behind the cost overrun. Accordingly, the unit cost increased from US cent 3.5/unit to 5.3/unit. Furthermore, the project faced a trade embargo imposed by the Gov. of India which resulted in the disruption of basic supplies like fuels and construction materials. The mobility of the construction workers was also disrupted which deprived them of employment that ultimately hit on the project cost. 7Shrestha asserted, “Since the 1950s onwards, using its all means to influence political leaders, political systems, multi-national funding agencies, and diplomatic instruments, India is striving to exert control over mainly water resources. As the result, many large projects are kept in limbo that has deprived Nepal of benefits from its water resources”.

5.2.2.7. Loss of Biodiversity and Fishery

Biodiversity was at risk in CHP and KHP-I compared to UTKHEP. 9Pandey related about the biodiversity loss in CHP that there were no measures adopted to protect aquatic animals including fishes from being injured by the turbine. Also, it blocks the free movement of these aquatic lives. Concerning the possibility of impacts on bio-diversity by UTKHEP, 3Neupane said, “Aquatic bio-diversity is not rich at the dam site of UTKHEP, but very fewer numbers of aquatic species are found near powerhouse site. However, the project has planned to release fingerlings in the reservoir itself, but we cannot say now how successful this approach will be as actual impacts on the environment and biodiversity will be seen once the project commences”.

Like other studies, 4Phuyal also reported, “impact on biodiversity and ‘river ecosystem’ by KHP-I has resulted into reduction in the number of fishes below the plant”. The study by Sharma et al. (2007) also found that habitats for aquatic animals including fish were degrading despite fishery promotion activities. Further, 11HSE Engineer mentioned, “500 liters/second of water is being released in the dry season in the channel to protect the river ecosystem downstream. The discharge has further been boosted due to a natural and perennial stream sprout just below 200 m downstream of the weir”. “Despite these kinds of efforts to maintain minimum water discharge, not only fishery but also hectares of arable land are impacted at the river diverted section in many hydropower projects which indicates inadequate technical knowledge and capacity to address this issue in the hydropower sector, stated 7Shrestha. Sharma et al. (2007) argue that biodiversity in the river ecosystem is under threat because of the changing chemical composition, PH scale and temperature. Similarly, the changed velocity of water, impoundment, and siltation had harmed the habitat of biota downstream mainly immediately after the abstraction site (ibid).

The fishery is mostly affected. 7 out of 45 fish species are threatened and vulnerable species which would potentially be at risk due to significant loss of habitat (Sharma et al, 2007; ADB, 2018). Impacts are not completely known in absence of studies on temporal and spatial impacts. One of these impacts befalls on the livelihood of the Majhi community, an indigenous and marginalized community residing downstream. The community relies on farming and fishing for livelihood. “It is being about 20 years and so especially after the construction of Khimiti hydropower, the fish population has considerably diminished downstream. We hardly go fishing nowadays as there is almost no chance of getting fish in the river. Rather we are involved in farming and wage labour”, narrated 12Majhi. Besides impacts from hydropower, in line with Majhi, 4Phuyal reported that behind the reduced fish population abuse of electric appliances, detonators and poison are the major causes. He also argued that there was no longer-term fishery restoration effort in place, only once the fishery support program was conducted which did not 12 Gore Majhi, Project Benficiary, Ramechhap, Interview 2021-05-10

produce good results. As a result, the source of protein and livelihood for the Majhi community is disappearing. But he related that due to the associated benefits of hydropower projects, the livelihood has been positively changed in the area, but not the biodiversity. This troubled biodiversity, in the future, is likely to be impacted by changing precipitation, snow melting and landslides resulting from rising temperatures (Colley et al., 2011). 5.2.2.8. Disasters Hydropower development has frequently sustained bouts of disasters flooding, landslides and earthquakes. An immediate example is the mega-earthquake of 25 April 2015. It damaged the access road and 8 project buildings in UTKHEP. Also, employees’ safety was at risk due to the rockfall during aftershocks. Many of them migrated to a safe place, so it was hard to get employees to resume work. Moreover, the post-earthquake flash flood swept away some of the containers and electro-mechanical equipment which disrupted the work from 25 April 2015 to January 2016 (NEA, 2019). Further, “the project was accelerating with its final works; the unexpected COVID-19 induced lockdowns pushed the project back”, stated 3Neupane. However, the other two projects did not suffer much from the earthquake. Yet, infrastructures like siphons and bridges are being impacted by floods every monsoon in CHP (NPC, 2012; SMIP, 2020).

5.3. Sources of Benefits “The river is also an actor to receive benefits from hydropower development. Improved water quality, river flow characteristics and biodiversity of rivers also help improve ecosystem services. But, efforts are very minimal in this respect as the benefit -sharing practice is anthropocentric. Similarly, a dearth of studies is noted on river ecosystems and services. However, there is the practice of doing site-specific EIA which has a very little reflection of reality”, stated 7Shrestha. 9Pandey stated that CHP even lacks an EIA. He added that biodiversity has suffered a lot in the turbine in absence of safe passage. But indirectly the project became impactful in groundwater recharging which supported land productivity. 7Shrestha asserted that the EIA report in KHP-I identified many environmental and social impacts where social impacts received greater priority. However, 4Phuyal affirmed, “Most of the environmental impact remained unaddressed except for some nursery support, seedling plantation, one-time fishery promotion activities, and some efforts to keep river flow going by connecting some natural sprouts”. Contrarily, benefits like water for irrigation, drinking, industrial use, drought control, generation of electricity, aquatic food components, and other economic benefits are harnessed from water resources. However, access to these benefits or distribution of benefits among stakeholders is skewed, somehow benefits are enjoyed by stakeholders along the basin. Furthermore, a river can be a cost reducer for basic means of subsistence such as food, water, and energy. In the past, 7Shrestha narrated, “When fishery and biodiversity were good in the river - it was a good source of protein supplement, but it is declining at present. Availability of water at a low cost for irrigation has minimized the cost of production of food. Even it has the potential to replace food imports. But the installation of traditional irrigation technology could not contribute much to cost reduction”. Electricity generation from rivers with good potential has substantially reduced electricity import from India. Furthermore, he asserted that increasing ability to manage rivers and benefits from rivers are gradually leading the country towards a state of energy, water and food security, but the milestone for self-sufficiency is still afar.

“Benefits of river resources through regional and economic integration; for example, integration of infrastructure, agribusiness and market are not much realized at the people level,” argued 7Shrestha. However, partnership with international actors, private sector, community and government is growing. This ushers progressive steps in resource-sharing for harnessing the benefits from rivers. Increasing energy security at the national level is a positive outcome. Yet,

there is much to do in cross-border integration as there lacks fair transboundary river management and benefit-sharing practice for regional and economic cooperation.

5.4. Hydropower Governance and Practice of Benefit-sharing Food, water and energy are recognized as human rights by national and international conventions, policies and legal documents. Investments are higher in those sectors where profit is high such as hydropower development, but irrigation and environmental sectors are handled by the public sector (Magar, 2005; WESC, 2005). Yet, management skills in the public sector are suboptimal; for example, water pricing is still based on the traditional cost accounting approach where the price is set to recover the cost for operation and management (WESC, 2005). Moreover, social, economic and environmental risks are high in the projects.

Overall investment in the infrastructure sector is on the rise. Funding from development banks is on the top followed by the national private sector and then the public sector. However, the implementation of locally funded projects is quicker and the distribution of benefits is fairer than internationally funded projects. The latter ones are often disputed due to ill-willed procurements (Ogino et al., 2019a; Koirala et al., 2020). It fosters distrust toward project developers, government institutions, and infrastructures (ibid). Adding on 7Shrestha affirmed, “Dispute is high in the project especially executed by Indian companies than nationally-funded ones”. He continued that the reason can be ensuing nationalistic feelings among people, lower community benefits, or ill-will to control all benefits. It has been complicated for lack of a guiding document for benefit-sharing”. In the same line, 3Neupane said, “There is no practice of developing a project-specific benefit-sharing plan developed from an in-depth discussion of stakeholders and community needs”. He further expressed, “benefits are always underserved; for example, although policy says that hydropower has to generate employment equivalent to 5 percent of the total project budget prioritizing the project-affected people, but it hardly happens as outside workers are prioritized”.

Explaining the benefit-sharing in CHP 9Pandey said, “The Gov. of India constructed CHP as a token of appreciation for the Koshi Barrage. So, benefit-sharing in CHP never existed”. However, voices of dissatisfaction for compensation of land, demand for electricity and irrigation from the people near the head of the project were heard. Further, 2Sah asserts that benefits are being compromised when water governance performs low to maintain frequent breaches on the irrigation system, address the inadequate water flow to the tail area, and improve the collection of water fees. Also, the centralized operational approaches overshadow the role of local Water Users Groups in improving water governance.

KHP-I is the first private sector project resulting from the neoliberal market economy. Not only the construction, since foreign private companies hold the major stake, but also operations are handled by them. It delivered noticeable socio-economic benefits to communities. Although it is difficult to measure who benefited how much in quantifiable terms, change in the standard of living is noticeable. “Both the parties; the community and the project engaged in constant negotiation. Through the provision of a series of benefits, the project became able to resolve community-level disputes”, said 4Phuyal. The project ran most of the development activities with the help of the Khimti Community and Environmental Unit (KCEU), a community-led unit, for less than one (1) percent of the entire project cost. The project remained successful in fulfilling development needs for drinking water, irrigation, electricity, education, healthcare, and institutionalising them, but displayed little interest in restoring lost aquatic biodiversity and forest ecosystem. Moreover, the project always remained reluctant in providing an equity share of the hydropower for project-affected people and the local communities despite their incessant demand. Similarly, 7Shrestha stressed, “The project never became ready to revise the PPA to adjust the electricity price according to the market price to avoid further losses to NEA”. Also, further, 4Phuyal related, “The project was reluctant to set up a long-term community development

fund, though it provided them with a one-time operation and maintenance fund”. Thus, the project aimed to maximize benefit at the cost of the environment and minimal support to the community.

UTKHEP was expected to complete in 2016 but completed only in 2021. There were many causes such as the mega-earthquake of 2015, economic blockade from India, and weaker governance in hydropower development behind this delay. Like many other projects such as Kulekhani III, Chameliya, Rahughat, UTKHEP and many projects experienced time overrun. Highlighting the weaker governance Giri (2015) affirms that the lengthy procurement process, hiring of incompetent contractors, delayed land acquisition, and poor project management are the major factors behind the time overrun. Moreover, due to the socio-political context in the decade 2010s, voices for human rights, inclusive development, equitable benefits and services were loud. Even investment modality turned into public-private partnership (PPP) model where national public and private entities and the Gov. of Nepal invested together. Similarly, the role of the project-level stakeholders' committee, the Special Purpose Vehicle (SPV) played a crucial role in decisions making and building consensus among stakeholders. Also, the Upper Tamakoshi Peoples Concern Committee (UTPCC) played the role of a mediator in resolving disputes relat ed to land acquisition, road alignment and equity share. These efforts helped not only mitigate social impacts but also decentralize the implementation approach. However, 7Shrestha argued, “Giving equity share is one step forward in terms of benefit-sharing, but it is not adequately given. The project affected people, who are the custodian of water resources, should be given 49 percent of the total shares because they hold the first right over the water source. Rather, they are deprived of using upstream water showing possible reduction of water availability for hydropower”.

In the projects, one can decipher that benefits were provided on an ad-hoc basis. There was no long-term plan and calculation of the amount suitable for particular activities to generate a lasting benefit to the individuals and communities in the project area. Moreover, benefits were limited to certain project-affected communities for not having a Spatio-temporal analysis of impacts. All these benefits were anthropocentric and full of gaps. Expect some short-term rudimentary mitigation measures, no such emphasis had been given to improving river ecology.

5.4.1. Gaps in Benefit-sharing Practice Conceptual clarity on benefit-sharing was lacking among stakeholders. Thus, they were in discord with one another and unable to develop a planned benefit-sharing approach. The Constitution of Nepal has made benefit-sharing with locals mandatory while using all-natural resources (Government of Nepal, 2015). Nevertheless, the hydropower sector in Nepal, although being an economically viable sustainable energy option, has faced obstruction and disputes for not having a clear benefit-sharing framework (Bhandari, 2015). In Lillehammer et al (2011)’s words, it is a failure (be unable) to receive a ‘social license’ from the local community to operate the project and promote cooperation among differently positioned stakeholders. Moreover, as hydropower projects are going beyond national and regional economic priorities, it is necessary to widen the scope of benefit-sharing. Therefore, benefit-sharing has to go beyond the mitigation approach to promote social inclusion and maximize dividends of development by justly sharing risk and benefits among stakeholders (Wang, 2012).

There lacks a clear division of responsibilities among stakeholders that overburdened a contractor. In this regard, 7Shrestha argued, “Liability for community development such as rural electrification, preferential tariffs, local infrastructures, and many more have added financial and implementation burden to investors and contractors”. Demand for equity share from project-affected people and communities is accentuating in recent years, but investors are reluctant. Public companies are ready to provide equity shares but are not committed to setting up a community development fund whereas private entities are not ready for either (Rai & Neupane, 2017). Equity share has been perceived as a tool to increase investment for projects and conflict reduction strategy through increased community ownership that eventually effectuates benefit-sharing (ibid). 7Shrestha stated on policy provision for an equity share in the hydropower, “Only

a 10 percent equity share for locals has been provisioned. On top of that, it lacks the parameters required to determine, who will receive and how much? Also, there is no institutional provision about who will take charge of it now and when the license period is over”. He further continued, “The practice of giving the license for the entire life span of 50 years is also faulty which has been changed now limiting it to 25 to 30 years. It caused a huge economic loss to the country rather added financial burden for repair and maintenance and decommissioning of the project”.

Royalty distribution is exclusionary that lacks a mechanism to share royalty to the most project -affected VDCs or municipalities. As per the Electricity Act, 2049 (1992) two royalty ceilings are set: i) up to 15 years- NRs. 100/kW (USD 1/kW) annual capacity royalty and 2 percent/ kWh energy royalty, and ii) after 15 years – NRs. 1,000/kW (USD 10/kW) annual capacity royalty and 10 percent/kWh energy royalty (Rai & Neupane, 2017). Further, the Local Self Governance Act and Regulation 1999 provisions 50 percent, 38 percent, and 12 percent of the royalty to the central government, affected-development region(s), and affected district (s) respectively (ibid) but excludes the most affected VDCs/Municipalities. Moreover, the duration gap between the royalty paid by the developers and the budget released by the government is more than eighteen months (Bhandari, 2015). As the result, allocated royalty fails to provide timely benefit to intended areas. Instead, 7Shrestha asserted, “the royalty should be diverted to the affected community and it has to be used as a community development fund by local governments. The governments should take the responsibility of poverty reduction, not the hydropower”.

The hydropower sector lacks a framework or mechanism for quantification of risks and benefits and benefit calculation. As the result, the debate over how much has to be allocated for benefit-sharing in Nepal is pervasive. In this regard, Bhandari (2015) makes some calculations that i t is feasible to spend 0.5 to 2 percent of the total project cost for benefit -sharing in small and medium hydropower projects. This amount includes ‘direct cost that goes to the local’, ‘amount equivalent to foregone revenue due to halt’, and ‘remobilization cost to meet the schedules’. Here benefits are calculated as means to prevent conflicts in the project. But hydropower producers doubt it would stop all kinds of obstruction from the community. Still, there is a conceptual lack on how to determine and allocate different kinds of benefits, for example, royalty distribution can be executed until the hydropower life span, but how long equity investment, local livelihood support, community development fund, local infrastructure development, and payments for ecosystem services (PES) are to be made is still a matter of debate among stakeholders of hydropower development (Rai & Neupane, 2017). In the case of Nepal, ADB (2019) proposes 10 percent of the project cost or more so that trade-offs of hydropower generation over water and food securities can be addressed. It can be used to develop infrastructure for irrigation and the capacity of the local people to adopt new farm technology, startup agriculture activities, and scale up water management (ibid). These gaps indicate that the benefit-sharing has a long way to come to the full-fledged stage. As Wang (2012) perceived benefit-sharing is not much developed in the least developed and developing countries for a lack of developed institutional mechanisms, inadequate policies and law enforcement, and the absence of an effective implementation approach. Similarly, faulty information sharing mechanism, institutional arrangement with low coordination, inefficient funding mechanism, low execution capacity of stakeholders, inefficient monitoring and evaluation of implementing agency, and unfair grievances redressing mechanism are major causes for ineffective benefit-sharing (ibid). Besides existing policies on Human Rights, and Gender and Social Inclusion; Climate Action also affects the implementation of benefit-sharing in the hydropower project (Shrestha et al., 2016).

5.4.2. Expansion of Benefits from Hydropower Development To expand the benefit of hydropower, it is essential to integrate the energy system with local and national productive sectors that have economic viability and competitive advantage, instead of energy export. 7Shrestha claimed, “Emphasizing export is harmful in every aspect for Nepal. The use of 1 unit of electricity adds a value of US cent 85 to the economy. So, if Nepal sells electricity

to India at the rate of US cent 5/unit, Nepal is losing US cent 80. Therefore, exporting energy from poor countries like Nepal is an injustice towards its people”. Moreover, he continued, “This narrative of energy export has emphasized mere energy production which denies multiple benefits from water resource”. He added that instead, Nepal can achieve WEF securities if it prioritizes hydropower energy for irrigation, food processing, food storage, and cooking and transportation systems. Regarding the challenges of integrating energy with other productive sectors, he cited an example that the groundwater project failed in Nepal because of poor policy provision and enforcement capacity. People misused roads and electricity infrastructures developed to support groundwater projects by converting agricultural land around the projects into housing plots.

“It is necessary to think about how benefits of water resources can be maximized in the changing context of hydropower energy”, said 9Pandey. He continued, that in the past when the national grid system was not developed, the construction of micro-hydropower was a boon for the local economy. But now, it is redundant to develop mini and micro-projects unless it is used to power the major hydropower construction as people can enjoy electricity from the national grid. He further added that it is essential to prioritise medium and big-sized storage projects built by national developers. By now human resource is ready for that. In parallel, 9Pandey added that the promotion of the industrial sector is essential for energy consumption at the local level. Besides, he emphasized that ‘innovation’ could be supportive in utilizing water resources, reducing environmental harm, and expanding benefits. For example; generating micro-scale electricity at the local level to support hydropower development instead of relying on fossil fuels can be a better approach to reduce the financial burden and environmental impacts, and support rural electrification. KHP-I is an example of it. Similarly, lakes could be used as water reservoirs to generate electricity and reduce reducing the impact on river ecology due to lessened ecological flow in the lean season. These approaches can be replicated in other viable sites for environmental reasons and foster the sustainability of hydropower development.

5.5. WEF Nexus in the Hydropower Development The nexus links among Water, Energy and Food systems are depicted with red dotted lines as possible synergies for water, energy and food securities are compromised in hydropower development in Nepal. Rivers are being largely exploited either for energy generation or irrigation development. While generating hydropower energy, very little attention has been paid to possible negative impacts on irrigation downstream and river ecology. Similarly, while constructing an irrigation system, the possibility of energy generation from the syste m has not been considered. Besides, while constructing hydropower projects the possibilities of harnessing multiple benefits from water such as drinking water, flood control, and benefits from river biodiversity are undermined. Also, possible benefits from the integration of hydroelectricity in the agriculture and water sectors are largely compromised. Similarly, the energy attribute of food has been overlooked in the absence of nexus understanding.

The external factors (shown in light-red boxes) such as governance failure, economic disparities fostered by unjust benefit-sharing, and geopolitical conflicts driven by different priorities and motives are affecting potential benefits from hydropower projects. Likewise, population growth along the basin and environmental pressure have complicated hydropower development, benefit -sharing and sustainability of hydropower. Also, these external factors get nurtured due to resulted trade-offs from unjust benefit-sharing and sectoral approaches; for example, the economic disparity widens at the project level when benefits are not fairly distributed to project -affected people and communities. It also fuels conflict between project developers and affected communities. Influences are noted in either direction; external factors to hydropower development and backward have been depicted with two-sided pointed arrows. Besides indirect impacts of these factors on WEF security through their influence on hydropower development, they have direct impacts on WEF security across different levels. As their impacts on the WEF security are not positive, the links showing influences are depicted in yellow. However, overall

Hydropower development driven

by sectoral approach (focused

on energy generation)

Water use for food production is

increasing, but water-efficient

crops are not prioritized

n is m

issing

Environmental Pressure Changed water flow and quality, threatened aquatic biodiversity, disaster prone areas, high sedimentation, degrading water sources, extreme rainfall variation, plantation of water intensive crops

Population & economic growth Large population along the basin, migration to the project area, increment in economic activities, promotion of Cascade projects for economic reason

Energy Security Abundant potentials but inconsistent electricity production especially in dry season making rely on import from India.

Improving access though supply infrastructures are inadequate, higher system leakage, inconsistent supply and low per capita consumption.

Unaffordable at national level, but affordable due to subsidized rural electrification in study area.

Resistance from project affected people and communities for fair compensation and right share of benefits.

litica

Different priorities and interests of stakeholders

along the basin, Influences of private investors, conflict betw

een developers and project-affected people and com

munities; high interference from

non-state actors

Food Security Import based availability- lower production at national level, but improved food production due to improved irrigation in study area

Improving food access due to improved connectivity and market

Improved utilization due to increased food diversity

Unstable production due to lack of year-round irrigation and supply disruption due cross-border disputes

(Global) Governance Failure Weaker resource governance, ad-hoc benefit planning, inadequate resource knowledge, lack of guiding documents for benefit-sharing, weak policy enforcement, regulation and monitoring; delinked coordination among stakeholders & agencies for integrated approach

Economic disparity

Skewed landholding, high landlessness, poverty among smallholders, high interest rate, rising exchange rate with US Dollar; Unjust benefit-sharing at project level and no royalty provision for project-affected communities

Water Security Abundant physical availability but greater dependence on surface water

Supply crisis, due to inadequate infrastructures for drinking water and irrigation

Affordable to large population except urban poor

Increased vulnerability due to poor water quality & increasing water-related hazards

increa

use fo

r river eco

system

tection

is missin

WEF security (shown in light-green boxes) has improved at the project level since some short-term benefits are provided by hydropower projects. But the possibility of achieving sustainable WEF security remains at stake when synergies from the nexus among water, energy and food systems are not realized in hydropower development in the Nepalese context (Fig.7).

Fig.7. Impacts of Hydropower Development and Associated Externalities on WEF Nexus Outcomes

Source: Developed by Author

6. Discussion

6.1. Progress in WEF Security Water, Energy and Food securities are improving in recent years in Nepal. But increasing energy and food securities are import-based. The share of energy import is in a declining trend- it is approaching one-third of the total energy composition whilst food import is on the rise. If the curve of food imports continues it will reach one-quarter of the total imports. The physical availability of water is not a problem; however, achieving water security has become a challenge due to the low capacity to manage water resources and slow infrastructure development. The availability of energy is increasing rapidly in the last two decades, yet poor accessibility persists due to inadequate distribution infrastructures (Gunatilake et al., 2020). Currently, about 3.6 million population are yet to access electricity, to do so requires about 970GWh of electricity and this state can be achieved in 2 to 3 years as planned. Therefore, it requires a major focus on developing distribution infrastructure. Moreover, the energy tariff is about USD 9/month which is not affordable for everyone especially the population below the poverty line. On top of that, the energy sector is trapped in the indecision of whether to export or use in the domestic market impacting the future of hydropower development in Nepal. The effects of indecision are noticeable- many large projects are kept in limbo for decades (Dhungel, 2009). As the result, the growth of the energy system is retarded. Consequently, productive sectors like industry and agriculture are deprived of energy. So, to have an energy-secured future, it would be necessary to prioritize domestic consumption over export, establish a reliable mechanism of benefit-sharing, and expand rural electrification. Over the years, per capita, food availability has increased due to imports, but domestic production has diminished. In this context, it would be hard to meet the current demand as about a quarter of the population is in food poverty. Accessibility to food is also improving due to improved connectivity to market areas, though it is not sufficient until now. Food quantity is still a problem in hard-to-reach areas in the country. However, nutritional intake has improved along with an increased supply of dairy, meat, egg products, vegetables, and fruits (MoF, 2019). It has helped reduce malnourishment, wasting and under-five mortality, but the stunting is still high. The stability of food is always uncertain as production is inconsistent due to unreliable supply of agri-inputs, uncertain climate conditions, rain-fed agriculture, and frequently disrupted imports. These indicate that food security is not self-reliant and hard to attain at the national level. The physical availability of water is more than seven times of per capita water consumption. But inadequate infrastructures both for irrigation and drinking water are the reason for poor access to the water resources. The problem has been compounded by inadequate planning, failure in selecting appropriate water supply systems, poor water governance, and outside influence on water resources. Access to irrigation is still a problem. Irrigation has reached half of the total arable land where only about one-fourth of land has year-round irrigation; mainly because surface irrigation is emphasized (GWP Nepal, 2018). It is a most costly and time-consuming system than other alternatives. Rather adoption of mix-irrigation systems and multi-purpose use of water infrastructure could have been instrumental in achieving water security. Access to safe and adequate drinking water is as much a problem as irrigation. Until now even one-fourth of the total households have not received safe drinking water. As the result, vulnerability due to water-borne diseases is high across the country, especially in poor populations. However, water is affordable at the national level as more than 13 million people use free sprout water and enjoy subsidies for drinking water (Nepal et al., 2019). But it is costlier for the urban poor as the upfront cost is higher to get water connection in urban areas. Furthermore, the water supply system is highly vulnerable due to frequent flooding, earthquake, and landslides. The contribution of hydropower development to WEF securities is better at the project level compared to the regional and national levels due to the associated benefits of hydropower development. The progress in WEF securities has become beneficial to improving the quality of life in Nepal. But the

progress does not seem sustainable as hydropower development lacks a reliable benefits distribution mechanism and systemic approach for promoting synergies from the nexus among water, energy and food systems.

6.1.1. Nexus and Benefit-sharing Approaches for WEF Security

In the majority of the hydropower projects, social and environmental impact mitigation measures are compulsorily included. However, almost no measures are integrated into the design to have a long-term solution for the impacts. In most cases, these impacts are addressed on an ad hoc basis mainly because these are included in the bill of quality (BoQ). There is an understanding that maintaining the flow level can protect the river ecosystems and ecology. Drawing on this understanding, many hydropower projects are being constructed in a concentrated manner that does not protect river ecology even if the flow level is maintained (Crootof, 2019). In the future, similarly, more hydropower will be constructed along the same river because the cost required for access roads, bridges, and transmission lines will drastically go down. It is also reflected in the understanding of government officers that there is plenty of water in the Koshi River Basin. 2Sah argued that even if many hydropower projects are built, the amount of water for irrigation will not be less, nor will the quality of water change. Rather reduced sandy sedimentation would help crop productivity downstream. This kind of rudimentary understanding will encourage hydropower construction in a concentrated manner no matter what environmental cost it will cause. Moreover, not having policy provisions for Cumulative Impact Assessment and Strategic Environment Assessment for constructing hydropower in critical river basins like Koshi River undermines the environmental value of river ecosystems. Similarly, EIA policy flexibility for projects under 50 MW frees contractors from taking the issue of mitigation seriously and planning and adopting the nexus approach in hydropower development (JICA/NEA, 2014). CHP was constructed to supply electricity to dredgers in the main canal. So, there were no obvious additional benefits except hydropower and irrigation systems complementing each other. The SMIP was solely driven by a sectoral perspective, but adding hydropower plants to it bolstered the performance of the irrigation system. Hydropower is contributing about 0.04 percent of the actual power supply and the irrigation project is contributing about 4.6 percent of total irrigated land in the country. Together these projects are contributing a lot to energy and water security at the local level and food security up to the sub-national level. However, conservation of the environment, protection of biodiversity, and consideration of local needs and interests are undermined as benefit-sharing does not prevail in the project. Had it prevailed in the project, the water need of people near the head would have been addressed in some or other ways despite geophysical challenges. Similarly, KHP-I was also developed with a sectoral perspective to generate electricity and earn profit. Although the project catered to various social needs through benefit-sharing, it lacked a nexus perspective to address the issues of WEF security. Most of the social and economic needs were catered once demanded by the affected communities. Rural electrification, free electricity to poor households, training on the use of improved agriculture inputs, and irrigation to hectares of land have contributed to strengthening water, energy and food security at the local level. However, except for the flow of water discharge very little importance had been given to environmental issues. As the result, the fishery-dependent livelihood and food security of the Majhi community dwindled due to degraded biodiversity including fishery downstream. Likewise, UTKHEP was built to fulfill the energy demand of the country. The nexus perspective does not prevail in this project. However, the benefit-sharing in UTKHEP is considered better than that of CHP and KHP-I as the project provided project-affected people, communities and project workers with equity shares as a longer-term benefit. Besides, compensation for acquired land, agriculture-related income generation training and forest promotion to support the livelihood restoration of project-affected people were other benefits. Similarly, people also benefited from the access road built by the project and rural electrification support. These benefits have indirectly but positively supported the food and energy security in the project. However, the project does not have a direct and noticeable positive impact

on water security. The state of no benefit-sharing in CHP to some short-term benefits in KHP-I to longer-term benefit-sharing like equity share in UTKHEP suggest progress in benefit-sharing practice. This changed practice has positively impacted the WEF security in the project-affected communities. These benefits are still human-centric. Also, the nexus approach at a systemic level does not prevail in any of the projects. It suggests that issues of sustainability in hydropower are relentlessly compromised.

6.2. Maximizing WEF Security in Hydropower Development

Hydropower development in Nepal remained unable to positively impact WEF security mainly because implementation failed to recognize the nexus between water, energy and food systems. It remained centered on energy production undermining other important associated benefits. Also, no efforts were made to integrate hydro-energy with agriculture and agribusinesses. In this context, an integrated approach would have a positive impact on water, energy and food security. 6.2.1. Prioritising Integrated Approach in Hydropower Development

The sole focus of hydropower development on electricity generation is noted to have undermined food and water security and the significance of biodiversity including fishery. This can be economically beneficial for a short span, but in the long run, river-based livelihood and river biodiversity are lost. Further, the trade-offs become high when hydropower projects and irrigation systems, driven by a sectoral perspective, share the same river (Crootof, 2019).

However, the Hydropower Policy 2001 emphasizes the development of large storage multi-purpose projects in a participatory way to maximize national benefit. The policy also encompasses a wide range of issues, from agricultural production for food security to the generation of hydropower to satisfy national energy requirements and export surplus energy. Contrary to the policy emphasis, hydropower development is exploitative, concentrated, and haphazard that derails the local landscape, the river, and the adjacent forest ecosystem (Crootof, 2019). It is mainly due to weak governance, flexible policies and institutional inaction in monitoring and regulation. Although the country prioritises drinking water, irrigation and then hydro-energy in an order to fulfill the citizens’ needs and the country’s economic growth. But in practice investment pattern is in reverse order. Hydropower as being more lucrative falls within the interest of many, but not irrigation that subsequently affects water and food securities. Since the mechanism to minimize the trade-offs is not reliable, issues of water and food insecurities in hydropower development become critical. In this regard, ADB (2019) proposes 10 percent of the project cost or more for adequate investment in irrigation infrastructure, adoption of new technology, increase capacity to start up agriculture activities and scale up water management. However, this effort may not be adequate to ensure system-level change to address the trade-offs.

On the other side, benefit-sharing is still in a rudimentary stage. Hydropower generation massively thrived in the last decade but not the benefit-sharing. Benefit-sharing is still being confused with mitigation measures in the project. Moreover, the concept of compensation, benefit-sharing and corporate social responsibility has been mixed up creating further confusion among beneficiaries (Shrestha et al., 2016). On top of that low negotiation capacity of local people with the government and foreign investors usually prevents them from receiving the right share of benefits. In other words, hydropower developers are unwilling to share the benefit. The opportunity for water, energy and food security for local people are lost due to the voluntary inaction of hydropower developers.

Both food and energy securities are reliant on water resources, therefore harnessing water for short-term benefits may lose long-term benefits. Driven by short-term benefits rivers are being dammed and facing pressure from water extraction leading to stress on biodiversity. It eventually hits the food security of those relying on river biodiversity. Hence to protect river biodiversity, free-flowing rivers are necessary. This helps not only protect aquatic biodiversity but also other ecosystem services like

groundwater recharge, flood control, nutrient balancing, and purification. Therefore, the protection of water resources is critical for WEF security. The conflict over water resources for various uses can be minimized by an integrated practice where surface water, groundwater, and rainwater are used to complement each other. As 7Shrestha believes the year-round irrigation mostly in the Terai region would help increase crop intensity by three-fold which can contribute about 300 percent to the existing food production level. As he argued, strong policy provision and enforcement capacity are paramount regarding groundwater projects as in the past people misused roads and electricity infrastructures developed to support groundwater projects by converting agricultural land around the projects into housing plots. This suggests developing multi-purpose projects or mixed irrigation or energy system may not necessarily provide a lasting solution for water, energy, and food security. It requires an integrated approach with adequate consideration to social issues and local livelihood of upstream and downstream people, technological innovation, nexus among water, energy, food and ecosystems, fair benefit-sharing, and environmental health. The integrated approach is not purely a technical solution, it also needs to encompass local knowledge, perception and perceived values towards ecosystem services (Hill, 2017) which are partially met in the projects under this study. Moreover, the success of the integrated approach largely relies on the capacity of involved institutions to adopt the approach with a minimal social and environmental cost and the ability to meet the national interest. It is noticeably low in the present institutional structures.

6.2.2. Promoting Domestic Energy Market

Over 110 years of hydropower development, different investment modalities from bilateral investment to public-private partnership have been adopted where energy generation remained the major goal. It started with mini-hydropower and now the momentum is progressing towards building large-sized projects with a utopia to prosper from energy export to India and Bangladesh. But the production seems very slow and inadequate compared to the trajectory of hydropower development. This sluggish progress in energy production is not just an outcome of geographical challenges and the inadequate capacity of hydropower developers in Nepal. There are a bunch of factors such as the absence of fair water cooperation and benefit-sharing between India and Nepal, unjust power trade agreements, and resistance from local people for a fair share of benefits (Bisht, 2008). Nepal is not in the state to develop strategically important hydropower projects at its discretion because of political and economic interferences from India. Even many investment efforts from worldly renowned multilateral banks are withdrawn due to pressure from India (Dhungel, 2009). Neither would India invest much to develop hydropower in Nepal because of the higher production cost of electricity compared to India. On top of that India is already enjoying cheaper electricity from Bhutan. Rather, India holds a higher interest in water resources in Nepal as water need is critical for the booming population and economy of India. It depicts the hegemony of India in water resources in Nepal. As the result, Nepal has not been able to produce enough electricity even to meet domestic needs. Consequently, a country with a huge hydropower potential is relying on energy import; above 37 percent of total energy is imported from India during the dry season (NEA, 2019). Even about 12 percent of the total population does not have electricity connections despite very low per capita electricity consumption.

Investing in a large hydropower project not only ensures energy security at the national level but also drives economic prosperity from energy export (Amjath-Babu et al., 2019; Gunatilake et al., 2020). The idea of economic prosperity from energy export seems exaggerated in the context of Nepal, as the benefit from energy export is very low compared to energy consumption in the domestic market. According to 7Shrestha use of 1 unit of electricity adds a value of US cent 85 to the national economy whereas Nepal can earn hardly US cent 5/unit from energy export to India. This shows a loss of US cent 80/unit. So economic prosperity from energy export is an outcome of ignorance of the energy economy and its political dimensions. However, the overhyping of the idea has driven the country towards investment on the production side with very little attention to high social and environmental costs. On top of that international energy market does not seem ready for energy export. Moreover, slow progress of the distribution side in the domestic market will lead to waste of produced energy as per capita energy consumption is merely 267/kWh per annum (NEA, 2019, Shrestha, 2021). Therefore, a few years down the line, due to the low absorption capacity of the domestic market and uncertain

energy market beyond the border, Nepal will possibly lose investment from international investors. It portrays two possible future pathways for the hydropower sector. One either Nepal needs to invest in small or medium-size projects as per the country’s requirement and capacity or increase the consumption capacity of the domestic market.

The country opts to increase per capita consumption to 700 kWh in the next five years (NEA, 2019). Also, the national water plan aims to enhance electricity consumption in cottage and agricultural industries. However, the process to upscale the consumption capacity of the domestic market is very slow. Integrating electricity into transportation, agriculture, irrigation, cooking system, and heating and cooling system can rapidly enhance absorption capacity. Since the agriculture sector as being the largest contributor to the economy, energizing the sector can be a game-changer to foster WEF security at every level.

6.2.2.1. Energizing Agriculture and Agribusiness

Agriculture is the largest contributor to the national GDP. However, it is practised at the subsistence level and operated with the traditional model of farming using mostly human and animal power. The use of energy in agriculture is negligible which is slightly above 1 percent of total energy consumed in a year. About 5 percent of electricity has been used for irrigation and threshing while above 90 percent of total energy consumed is covered by fossil fuels is being used for tillage, irrigation and threshing. It depicts the domination of fossil-based energy in the agriculture sector (WECS, 2014).

In this context, access to hydro-energy can have a positive impact on overall food security because a sustainable supply of energy and innovation help increase the productivity of agribusinesses. So, linking hydroelectricity with the agriculture value chain such as the production of agri-inputs; fertilizer, pesticides, herbicides, and food waste management would positively influence energy and food security. Although the pace of linking hydro-energy and agriculture is quite slow in Nepal, in recent years, good numbers of food processing and feed companies are commencing to meet feed demand for livestock, poultry, and fisheries; though a large chunk of cereal and fodder are imported as raw materials from India (Prasain, 2019; Simkhada, 2019). It ushers the need of increasing domestic production through increased agri-inputs including reliable irrigation.

Agriculture production can be increased by providing year-round irrigation to almost half of the total arable land which has not come under irrigation coverage. Here, the integration of hydroelectricity can play a crucial role to operationalize irrigation systems. Study shows that the remaining unirrigated land can be irrigated with about 105GWh electricity which is 0.25kWh/ha/day (Nepal et al., 2019). The country can harness potential agriculture benefits by using surplus energy in the sector, not only in irrigation but also in food processing, food storage, food transportation and cooking. It will, to large extent, play a significant role in commercializing the sector. The pace of commercialization is very slow in Nepal; only one out of four farmers is practicing commercialized agriculture. Hence, an affordable and sustainable energy source like hydroelectricity can stimulate the process. As per FAO (2000), it normally requires 4 to 8 percent of electricity in developing countries for achieving food security. Nepal is on the path to generating many folds of energy than the requirement. However, Nepal lacks sufficient infrastructure for coupling energy with the agriculture value chain and new irrigation systems, which can be a major stumbling block in the process of integration of hydroelectricity.

6.2.3. Restructuring and Effectuating Benefit-sharing Governance

Understanding of benefit-sharing is not so well developed among institutions and stakeholders. Even some policies and mitigation measures for offsetting the loss are often perceived as a benefit to the community. Further, people with customary rights and access rights based on prior use are deprived of compensation and other benefits (Magar, 2005). Generally, as 7Shrestha stated that the public interest needs to prevail over individual interest while implementing a project, but in absence of strong monitoring and regulatory bodies, the principle of benefit-sharing is violated. Moreover, the use-rights of the community people adjacent to the resources are not recognized as the owner or guardians of the

resources because these resources are Common Property. This shows that the domain of benefit-sharing is uncared for as no particular institution is responsible. As the result, in the current benefit-sharing scenario, central and local governments and other regulating bodies are completely delinked from the chain leaving benefit-sharing to rely on the power struggle between contractors and communities. Outcomes result in the form of conflict or in the favour of who dominates power. Therefore, it requires an organisation with strong authority, a sound capacity to tackle social, economic and environmental issues, and the capacity to execute benefit-sharing. As benefit-sharing is a collaborative approach, all stakeholders bear some specific responsibilities to get the benefit-sharing executed and governed in proper order. It demands an array of responsibilities and positions in a horizontal order as shown in (Fig.8) for better coordination and to keep the stakeholders accountable to one another.

Fig.8. Types of Stakeholders and their Respective Responsibilities in Benefit -sharing Source: Developed by Author It is difficult for hydropower developers to get involved in every benefit-sharing activity. Diverting resources to these activities demands additional time and effort. Therefore, the division of responsibility is paramount to allowing benefit-sharing activities and project-related activities to proceed in parallel. Demarcation of responsibilities not only divides the role but also ensures the involvement of all stakeholders. It helps to execute benefit-sharing in a participatory manner and strengthens the institutionalisation of benefit-sharing that sets a permanent structure to carry out benefit-sharing-related activities in a sustainable manner. In this respect, the central government can play the role of policy formulator which devises and amends frameworks and laws to smoothen implementation. Further, project developers can play the role of designers or planners. They can design benefit-sharing plans according to the project implementation plan and arrange budgets in line with local needs and national goals. Similarly, contractors can build the necessary foundation to get benefits utilized in the project. Instead of keeping all responsibilities of execution of benefit-sharing on them, they just provide technical support to get benefits utilized by communities and end-users. Rather, the local government has to be liable for the execution of benefit-sharing and its regulation. Local governments can also integrate benefit-sharing activities with local development plans so that they can enlarge the benefits of the project. In the past, communities are perceived as passive recipients of benefits. But successful implementation of benefit-sharing largely relies on community people and their active participation. So, they can contribute to the process of benefit-sharing by providing labour and other resources to get the activities implemented on time. Getting them involved in the process is to gain their consent and increase cooperation which makes implementation feasible. It is also paramount to have a conceptual clarity of benefit-sharing without which allocation of resources and responsibilities is difficult. The idea may become clear when benefits and loss offsetting are analysed mathematically. It can be assumed that benefits are zero when the project becomes able to offset the project-induced loss only (Case-I: Benefits=0, if only losses are mitigated). If it fails to mitigate the loss itself then it is the condition of no benefit (Case-II: Benefits< 0, if losses are not mitigated). So, to realize the benefits the project has to give more than the loss (Case-III: Benefits> 0 if losses are mitigated and something more given). Therefore, benefits in the project always exceed the amount equivalent to the loss incurred. There can be another case where losses are not mitigated, but other benefits are delivered in a considerable amount (Case-IV: Benefits ≯ 0, if losses are not mitigated). It is because in the concept of sustainability any abnormal disorder in social, economic, and

Communities Local Government Contractor Developer Central

Government

• Formulation of policies, frameworks & laws

• Design, plan, and integrate budget in line with local & national plans

• Regulate and execute benefit-sharing & can integrate with local development plans to enlarge the benefits

• Contribute the process/ flow of benefits (labour or resource may help expand benefits)

• Build necessary foundation to get events executed

environmental systems is a threat to existing resilience. Furthermore, it is mandatory to explain how long the benefits have to be distributed. For this, it is essential to understand different levels of impact across various groups living in areas such as project impacted areas, project influenced areas, the community and beyond. Therefore, the amount and span of benefit distribution have to take place accordingly. The concept of social justice may provide some insights into it. Social justice extends beyond compensatory support. The benefit-sharing has to take into consideration the population below the poverty line and focus to bring them up above the line, but leaving it solely on hydropower development is not justifiable. It can be combined with other poverty elimination and well-being development programmes at the local level. The benefit-sharing cannot be effective and sustainable unless the obligations of benefit receivers are well defined in the process. Moreover, it is also essential to define who owns how much of the common resources and how much share of local can be claimed on natural capital for fair allocation of benefits and equity shares. Also, it is quintessential to distribute benefits as per environmental impacts and the period it takes to restore or improve it because the environment is also a subject that gets impacted more than a human being. Moreover, in most cases, impacts are not well measured. These impacts have to be measured and classified based on ‘scar effects’ that the environment heals like an injury: either it heals immediately or heals over a period or stays deformed. In the same fashion, some of the environmental damages are immediately reversible, some are reversible over the period and some are irreversible. Mitigation and benefits need to be extended as long as restoration activities are required. In the case of irreversible damage, mitigation and benefit-sharing need to continue until a new resilience is developed. To optimize benefit-sharing, environmental mitigation and environmental management practices have to be effective. In this regard, the adoption of pragmatic-river flow standards, improved compensatory afforestation, and compensatory biodiversity measures are paramount to mitigating the losses. For the execution, an intuitional arrangement with strong knowledge and resource capacity is desirable, but this lacks in existing institutions. Moreover, the centralized implementation approach in the current environmental management practice seems to have failed in making people realize the importance of why it is necessary to protect nature for them and enable them to manage their resources, not just guard the resources. Restrictive measures merely led to the destruction of the resources, so people’s needs have to be acknowledged, prioritized and respected by conservation as well as development efforts.

6.3. Envisioning a Benefit-sharing Framework This benefit-sharing framework is an outcome of this study. It has been prepared for the Nepalese context, but it is equally applicable in other contexts too since components of benefit-sharing are broadly covered. However, it requires necessary changes according to the context because impacts, people’s needs, socio-cultural practices, and geophysical settings vary from place to place. So, it is a dynamic framework. It consists of a due process from identifying impacts of a project to an evaluation of distributed benefits to retrospective supports based on the evaluation. It includes seven sets of activities i) identification: identification of project impacts, risks, impacted people and areas, people’s needs, local development plans, mapping of stakeholders and their responsibilities, and identification of benefits; ii) review of plans and policies; iii) negotiation with stakeholders on their stake; iv) institutionalisation of benefit-sharing, v) renegotiation on benefits; vi) benefit utilization, and v) evaluation. The first three sets of ground-making activities are carried out in the pre-project stage whereas institutionalisation of benefit-sharing, renegotiation on benefits and benefit utilization take place during the project stage. However, the utilization of benefits begins from the pre-project stage to the post-project stage as some of the compensatory benefits like land acquisition and relocation activities are supposed to be executed before the project. Most of the enhancement benefits are provided during project implementation. But redistributive benefits are outcomes of the project these are possible only when the project comes into operation. Similarly, redistributive benefits are also provided after evaluation of distributed benefits and project completion including any missed out benefits and mitigation of impacts after project implementation as mentioned in (Fig.9).

Pre-project

A. Identify

I. Risks associated with the project

Disasters, Construction-related risks, Contractual and legal risks, Environmental risks, Financial and economic, Management risks, Social risks, Political risks, and Technical risks are recorded (for details refer to Annex-A)

IV. Impacted people & Area

Area: Upstream, Downstream, River basin, Project influence area, Local community, Project district Level of Impact: i) Severely affected, ii) Affected, & iii) Rest

II. People’s need Food, water, electricity, roads, bridge, schools, healthcare, employment opportunities, environmental, cultural and other infrastructures

V. Local development plans and projects around

Local plans and find the possibility of integrating with project benefit plans

III. Stakeholders, their capacity and responsibility

Central and Provincial Governments and their agencies, Project Developer(s), Contractor (s), Local governments, Community Organisations, Project Affected People, Service Users Responsibilities: Central government: policy formulator Developer(s): Planner, Contractor(s): Foundation maker, Local Government(s): regulators and executor, and Communities: supportive

VI. Identify Benefits

-In Financial terms: Monetary & Non-Monetary -Sources-based benefits: i) Benefits from resources ii) Benefits to resources iii) Benefit from cooperation among people iv) Benefits from sub-national economic integration -Temporal dimensions: i) Short-term, ii) medium-term and iii) long-term

B. Review of policies and plans: i)Resettlement and Rehabilitation Plan, ii) Environment Management Plan, iii) Stakeholder Engagement Plan, iv) Corporate Social Responsibility of investors/contractors’ Company, v) Policies (water, energy, food, land acquisition, compensation, environment, trade, etcetera)

C. Negotiate with stakeholders: to balance interests, finalize benefits and design a benefit-sharing programme

Pre-project During Project Post project

-Identification of risks and benefits, -Review of policies and plans, -Negotiation with stakeholders

D. Institutionalize:

Institutional arrangement, ii) Intuitional capacity development, iii) Information sharing mechanism, iv) Establish M &E system, v) Establish grievance redress and conflict resolution mechanism

E. Renegotiate:

With parties claiming benefits. Adjustments of benefits & addressing changed claims

H. Evaluate: outreach and effectiveness of the adopted/ distributed benefits

F. Benefits sharing arrangement and interventions:

-Implementing actors: Local Governments, Community groups, Contractors, & line agencies -Methods: Participatory

G. Utilize Benefits

i) Compensatory Benefits

Mitigation of risks and damages; Restoration of lost access to services; Relocation and rehabilitation of displaced people and assets at replacement cost

ii) Enhancement Benefits: Creation of jobs, improving livelihoods, social services, and capacity development; adoption of cross-cutting issues and ecosystem management; improving water quality, river flow characteristics, land and diversity

iii) Redistributive

Benefits: Revenues or royalties to government, institutions, and communities

iv) Benefits from Partnership: Equity stake for risk and benefit-sharing, coordination and collaboration

v) Retrospective Supports (Supplement missed benefits and mitigate impacts appeared after project implementation)

Fig.9. Recommended Benefit-sharing Framework for Hydropower Development in Nepal Source: Developed by Author

Project induced various risks such as political, social, environmental, economic, technical, and management risks are identified and analysed through social impact assessment, environmental impacts assessments, cumulative and strategic impact assessment, and other studies and further prioritized for mitigation. Further, impacted people from different locations such as upstream, downstream, river basin, project influence area, local communities, and project districts are categorized based on the level of impact. Also, it is essential to map the needs (physical, environmental and cultural) of the project affected people and communities before determining benefits. In addition, knowledge of local development plans and activities helps to channelise benefits and multiply benefits integrating with these plans. Similarly, there are layers of stakeholders across the chain of benefit-sharing from central government to end-users. They have different levels of involvement and responsibilities throughout the benefit-sharing process. The central government can play the role of policy formulator; developers as a planner of risks and benefits sharing; contractors act as foundation makers; local governments as regulator and executor; communities can undertake a supportive role in the entire distribution process. Thus, the identification of benefits becomes feasible once impacts, impacted areas, stakeholders and their needs are identified. Further, these benefits can be categorized in different ways. In financial terms benefits can be categorized into two broad groups; i) monetary and ii) non-monetary. Compensation amount and royalties are examples of monetary benefits while capacity development training and ecosystem management support are non-monetary benefits. Similarly, based on the sources (natural capitals) benefits can be categorized into i) benefits from resources, ii) benefits to resources, iii) benefits from cooperation, and iv) benefits from economic integration at different levels. In the same array, based on temporal dimensions benefits can be categorized into short-term, medium-term and longer-term benefits. This process helps to define the boundary of benefit-sharing and prepare a ground for the justifiable distribution of benefits. Generally, resettlement and rehabilitation plan, environment management plan, stakeholder engagement plan, corporate social responsibility strategies, and compensation policy provisions prevail in every project. So, before entering into negotiations with beneficiaries, it is important to review these existing plans and policy guidelines. It helps to align benefits-sharing with people’s needs and comply with provisioned laws. Moreover, negotiation is essential to balance interests among stakeholders, determine the size of benefits and set up a mechanism to share benefits. Eventually, it helps to avoid possible disputes among stakeholders and establish a ground for collaboration. Institutionalization of the benefit-sharing process is one of the most crucial steps to set up a reliable channel for benefit distribution. Setting up a unit consisting of relevant stakeholders and entrusting them with responsibilities are initial tasks. Further, the unit and stakeholders need specific capacity for the successful implementation of activities. So, they need to be provided with capacity development training and essential resources for operation. The establishment of an information-sharing mechanism, monitoring and evaluation system, and grievance handling and conflict resolution mechanism are some of the essential areas that need support for successful institutionalization. Also, over the period, the needs, interests, claims and situations of stakeholders or beneficiaries change. This changed situation and claims need to be adjusted and addressed through renegotiation with them. It makes benefits-sharing more participatory. Benefits are shared for various intentions; to offset the loss, enhance stakeholders' capacity, develop a partnership, and readdress missing benefits or mitigate impacts that emerged after the project. So, benefits are categorized into five groups: i) compensatory, ii) enhancement, iii) redistributive, iv) benefits of partnership, and v) retrospective benefits. Activities are carried out to mitigate risks and damages such as compensation for acquired assets, restoration of lost access to resources/services, and relocation and rehabilitation of displaced populations are compensatory benefits. The majority of these benefits are determined at replacement cost. Enhancement benefits go beyond compensation which basically focuses on improving the quality of services, construction of infrastructure, and capacity development of stakeholders. But redistributive benefits are revenues and royalties generated from the project that are distributed among central to local governments to communities. Benefits of partnership is a new type of benefit-sharing in which the project-affected people, workers and stakeholders are

given ownership of the project through equity shares. As a result, they tend to share both risks and benefits and coordinate and collaborate for long-term mutual benefits. Generally, the practice of retrospective benefit-sharing is not common. This type of benefit-sharing becomes useful in meeting the gaps in the project and addressing the impacts that emerged after project completion. It becomes useful in avoiding resistance from unjustly treated project-affected people. It implies that mitigation is essential in different time scales. In the past, benefit-sharing was limited to short-term and medium-term. But to ensure the sustainability of hydropower, focusing on long-term benefit-sharing is essential. Equity share benefits and the provision of community development funds are long-term benefits to the community. Equity-share is an appropriate benefit-sharing in terms of risk and benefit-sharing and making people responsible for protecting the environment and hydropower system as they are getting longer-term benefits. Also, a community development fund can be an effective mechanism for establishing a long-term relationship between the project and its beneficiaries. Implementation of benefit-sharing has always become a problem in absence of a fully responsible institution. In this milieu, the role of local government can be instrumental in executing and monitoring benefit-sharing. If local government (s)/agencies take charge of community development activities can play an effective role in the mobilization of community development funds and community people. Participation of locally formed inclusive coordination committees or user groups can play a vital role in the implementation of community development. Further, local governments/agencies can carry out these activities according to their local priority and needs. In addition, the local governments can integrate their plan and budget with project activities to widen the scope of services and developments. As the development of access roads or mini-hydropower has a wider impact in relation to community development, having these infrastructures developed in collaboration with local government (s) or its agencies and hydropower developer can proliferate other benefits as well. While mitigations need to be continued by hydropower developers and operators until the license validity period. The liability for maintenance in the post-license period still has to be on the developer’s side if the project is handed over to the government in a ready-to decommission state. In the context of poor governance, not only the determination of benefits become faulty but also the distribution of benefits. The distribution of benefits for people living around the project or source, who in principle have the first right to use the resources, seems unjust as their stake in the project is not acknowledged. Justifiable benefits to them can help reduce conflicts, protect resources, and maintain social justice.

7. Conclusion Hydropower implementation approaches, benefit-sharing mechanisms, and integration of hydroelectricity in productive sectors like agri-business directly or indirectly influence WEF security. Also, these approaches are largely impacted by geophysical setting, geopolitical context, investment and trade policies and agreements, technical knowledge and capacity of involved institutions, benefit-governance practices, and adopted technologies. The study shows that WEF security is improving both at the project and national levels but at a slow pace. Though the effects of benefit-sharing are at a rudimentary stage, these are noticeable at the project level to the national level. But the achievements do not seem sustainable and adequate. The physical availability of water is above the requirement level; however, the supply side is still a challenge due to inadequate infrastructures. The availability of hydropower energy is also about to meet the demand, but the availability of food still relies on imports and it will continue for some years. Accessibility of all commodities is improving, but the quality is still substandard and coverage is inadequate. Water is cheaper compared to energy and food; however, all these commodities are not affordable for the poor. Moreover, the systems supplying these commodities are under threat of natural disasters, and social, political, and economic disorders that can disrupt or reverse the progress at any time. Amidst this context, it seems a daunting task to meet the current irrigation demand with the traditional surface irrigation system which is not viable concerning cost and time efficiency. So, water resources need to be utilized in an integrated manner as per the availability and potential. Moreover, sustainability of water, energy and food securities is not limited to a consistent supply of water, energy and food. It is also about the protection of water resources, energy system, agricultural land and biodiversity. In the current context, fulfilling water demand for agriculture from surface irrigation and economic prosperity from investment in large hydropower does not seem viable. It is because the viability and appropriateness of these schemes largely depend on geopolitical, geological, ecological, demographic, and trade contexts. These development interventions up to now faced a lot of interference from external actors hampering WEF security within Nepal. It has often been stated that political instability discourages investment in hydropower development, but the reviews reveal that the ulterior interests of stakeholders rather cause political instability. So, it is deemed quintessential for Nepal to have a self-reliant decision-making position while using its resources to prevent undue outside interferences in hydropower development. Concentrated hydropower development along the basin without much knowledge of the impact on river ecology, river biodiversity, agricultural land, wetland, and forest areas will possibly induce adverse impacts on household food security and livelihood, especially on indigenous communities depending on river resources. This will not only lead to the extinction of scores of endangered fish species from the basin but also irreversible loss in environmental health along the basin. Adopting an integrated approach with fair benefit-sharing in hydropower development and pairing hydroelectricity with the agriculture value chain are crucial for food security. These approaches were not systematically adopted as the projects under study were driven by the sectoral approach. The nexus perspective seems functional in the CHP as hydropower and irrigation project are complementing each other and mutually supporting WEF security. But benefit-sharing practice does not exist in the CHP. Similarly, KHP-I, a project built on the Build, Own, Operate and Transfer (BOOT) model and UTKHEP, a project developed on the Public and Private Partnership (PPP) model both do not adopt the nexus approach in their design. These projects did not have any planned benefit-sharing approach and prior budgeting to ensure the benefits and certain outcomes from distribution; however, these projects provided a good share of benefits to the project-affected people and the communities. UTKHEP is one step ahead of

KHP-I in providing equity shares. Most of the benefits distributed were short-term benefits and determined by power position. Here, benefit distribution was used as a tool to avoid obstruction from the communities rather than with a vision to support the development of the communities. Benefit-sharing, for the sustainability of hydropower, needs to continue throughout the project life with a major priority to project-affected people and communities, and environmental health. Also, it needs to address missed out and emerging problems simultaneously to minimize the impacts of hydropower development. The pairing of hydroelectricity with productive sectors such as transportation systems, industries, and agriculture not only increases domestic consumption of electricity but also helps thrive agriculture and agri-based industries. However, the pairing of electricity with the agriculture value chain is challenging as the agriculture technology that feeds on electricity is not much developed. Moreover, farmers are unable to afford electricity for their argi-business which prevents agriculture from commercialisation. To increase the production of agri-inputs like fertilizer, pesticide, and herbicide, the integration of energy with these industries is essential. In the last decade, food processing and feed companies are growing due to the consistent availability of electricity. But the production line is still underdeveloped because a larger chunk of arable land is deprived of year-round irrigation in the absence right technology. This poverty of irrigation can be overcome by diversifying irrigation systems and adopting new water -efficient technologies that feed on electricity. This can substantially contribute to not only ensuring water and energy security but also food security through the commercialisation of agriculture. Benefit-sharing in hydropower development is directly associated with WEF security at the project level. Fair and inclusive benefit-sharing increases community participation, cooperation and trust among stakeholders. For example, the involvement of community-based facilitating units such as Khimti Community and Environment Unit (KCEU) in Khimti and Upper Tamakoshi Peoples’ Concern Committee (UTPCC) in UTKHEP can be taken. Their involvement in the determination, distribution, maintenance of benefit-sharing, and conflict resolution turns out to be effective. It suggests the effectiveness of the participatory approach in benefit -sharing. But the benefits are being distributed unjustly and inequitably for a lack of a benefit-sharing policy, framework and project-level benefit-sharing plan. This is one of the major reasons for conflict among stakeholders and the conflict between humans and nature. Until now benefit-sharing is human-centric where benefits for environments (river and river ecosystems) are compromised . This context calls for an integrated approach with a well-developed benefit-sharing framework to balance system dynamics and synergize the nexus properties while developing hydropower. It also needs a strong institutional arrangement with adequate contextual information on interacting systems and the capacity to enforce a nexus approach with benefit-sharing. Maintaining food security and universal access to freshwater and energy at all levels without destroying livelihood, economic growth, and environmental functionality is a daunting task. However, it would be still possible to attain local and national energy security in Nepal from small and medium hydropower projects for a couple of decades considering the cost, energy demand, energy market, and institutional capacity. By now, national institutions and hydropower developers are capable to invest, construct, operate, maintain, and manage the associated risks from externalities for small and medium-sized projects. So, it is better to shift to big and large projects when institutions are capable of producing low-cost energy, creating a profitable market, and addressing the impacts of uncertain political, economic and demographic externalities including environmental dimensions.

8. Acknowledgment First and foremost, I extend my sincere gratitude to my Thesis Supervisor, Ass. Prof. Mine Islar at Lund University, Sweden for her scholarly guidance, research insights and constant supervision during this research work. Also, I am extremely grateful to my subject reviewer, Ass. Prof. Thomas Grabs at Uppsala University for his comprehensive comments and intellectual insights which became instrumental in finalizing the study. I must say I am highly thankful and indebted to my professor and lecturers for teaching that equipped me with the required knowledge and skills throughout this Master's Programme. My special thanks go to Programme Directors; Ass. Prof. Magdalena Kuchler and Ass. Prof. Karin Gerhardt; Director for Studies, Ass. Prof. Mikael Hook; and Course Director, Ass. Prof. Malgorzata Blicharska for their consistent guidance, without which this accomplishment was not possible. Similarly, the Study Counselors; Ms. Amanda Johnson and Ms. Jenny Thor are at the core of my appreciation for their constant administrative support throughout this academic programme. I sincerely thank my friend, Mr. Prashant Thapa for his continued support during the field study. My special appreciation goes to all key informants for their valuable time and information to produce this study. The critical comments from my research opponent, Mr. Sajid Karim remained valuable to bring this research in the final shape. The scholarly and insightful comments from the thesis evaluator Ass. Prof. Claudia Teutschbein remained highly important to finalize this thesis. My overall stay and study in Sweden would not have been possible without the Swedish Institute Study Scholarships offered by the Swedish Government. I am immensely grateful to my scholarship sponsor - Swedish Institute and the Swedish Government and thank you for this great opportunity that helped me complete my Master Programme in Sustainable Development. Finally, I am extremely grateful to my parents and dear friend, Ms. Nisha Singh for her never-ending support. I would like to thank them wholeheartedly for inspiring me in my academic pursuance and being there every moment to support me in pursuing my dreams.

Jaya Lal Neupane

June 2022

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10. Annexes

Annex 1. Common risks in Hydropower Sector

S.N. Risks Types 1 Disasters Earthquakes, flood events, landslides, adverse weather

conditions, monsoon and drought, 2 Construction-related

risks Damage of structure, damage of equipment, workplace injuries, workplace disputes and conflict, availability of labour, safety of the workplace, the safety of equipment, geological adversity

3 Contractual and legal risk

Variation order negotiation, delayed payment, delayed dispute resolution, insolvency of the contractor, non-compliance, no/ delayed enforcement of the law, change in taxation law

4 Environmental risk Loss of forest, habitat loss, wetland loss, disturbance of fish and fauna migratory activities, air pollution (GHG emission), Reduced water flow downstream, inundation of upland fields, reduced water availability and pollution, soil quality degradation, Noise pollution, threats on Wildlife, Sedimentation, cumulative impacts

5 Financial and economic Inadequate funding, Inflation, fluctuating interest rate, fluctuating exchange rate, over-indebtedness, cost overrun, market instability, inadequate access to renewable incentives, regional pricing pressure, loss of employment opportunity

6 Management risk High employee turnover, inadequate skills and experience, workplace conflict and disputes, inadequate resources, inappropriate institutional structure and mechanism, inadequate institutional capacity, failed coordination among political parties, line agencies, civil society, privates sector organisation, local governments, lack of transparency etcetera

7 Social risk Land acquisition, Resettlement and rehabilitation, loss of fertile land and property, loss of public and religious structures, impact on livelihoods, impact on indigenous people and minority, corruption, disease and health hazards, land and water use conflict, livelihood impacts, gender and social exclusions, cultural resistance

8 Political risk Change in law and regulations, change policies and plans, political strikes, disruption of goods flow/ blockade, public disorder, war and conflict, permit and acceptance, assets confiscation,

9 Technical risk Design incompleteness, design defects, design omission, inadequate specification, inappropriate site, wrong construction methods, inadequate technical instruments, resource stress, seismic instability, safety problem of assets and instruments

(Source: Gurung, 2020, p.3-4; IHA, 2018; WESC, 2005)

Annex 2. Checklist for Interviews

i) Questions for Law Maker and Water/energy/food Experts/regulatory body

What are the national interests in hydropower development? Does current procurement practice serve the national interest?

Large hydropower projects such as Upper Karnali, Arun-III, West Seti, Koshi High Dam, Pancheshwor, all of them went through a lot of friction and some of them are still uncertain. What are the major reasons? Do you think these kinds of projects can ensure energy security? Fulfill our aspiration to prosper by exporting energy? Do you think we sell such high-cost energy in India? How can Bangladesh be a market for electricity produced in Nepal amidst challenging trade agreements between Nepal and India?

What risk do you perceive with developing hydropower, in terms of WEF security, and environmental resilience?

What are the policy challenges related to hydropower, water, energy, food, forest, and resettlement policies?

What obstructs or ease hydropower project being built for WEF security in the above policies?

How do you think the country can develop the capacity to manage the resources needed for hydropower development? When?

How do you weigh economic progress and environmental and social impacts? How far do you think surface irrigation is the solution to the irrigation problem in Nepal?

There is a lot of potential for groundwater irrigation in Terai and we still focus on surface irrigation- which is not cost and time-efficient compared to groundwater irrigation?

Dozens of projects are withdrawn from WB and ADB in the past showing concern from India or some basin level impacts, how do you take these incidences for the future of hydropower development in Nepal?

The then government did PPA at way over the market rate in Khimti Hydropower Project-I and the government requested to revise the rate but Statkraft and HPL never showed the interest to do so how do take this incidence?

Government officials argued that they did so to attract the private sector in hydropower development and enhance national capacity by knowledge and technology transfer. Do you think this happened in reality?

For example, KHP-I will be handed over to the Gov of Nepal somewhere in 2045? How do you think the government would benefit from this ready-to-decommission project? Do not you think this is an additional burden to the Gov of Nepal?

Benefit-sharing is considered a major component in sustainable hydropower development why this practice is still in a rudimentary state in Nepal?

What approach do you suggest for benefit-sharing so that community, hydropower developers and even nature can benefit?

How can we use the benefit-sharing practice so that Water, Energy and Food Security, as well as self-reliance, would be met in Nepal?

ii) Questions for Community leaders, farmers & water managers

What are the benefits and losses you faced and how do perceive them in the medium and long-run?

Associated subsidiary benefits and their contribution to social and economic benefits?

Employment benefits at what level; individual, family and community? Major environmental impacts felt by the community? Impacted area of water security: Quality, availability or water hazards and its impact on

human health and environment, water system, water infrastructure, sustainable water resource development, access to water services, and capture.

How has water availability (quantity, time, location) for different purposes changed downstream and upstream?

Have you experienced any changes in food production during and after project construction? Any changes in farming practice due to changes in the hydrological pattern? Do you have experienced any changes in energy availability, use, and consumption after

hydropower development? What level of information have you received prior and during project development? Did you participate in any negotiation process with hydropower developers? How did you contribute to the project development? What kinds of activities were you involved in and why? Any conflicts with other stakeholders prior, during and after project construction? What are the changes have you felt in economic activities and how does access to energy

contributes to this? Any impact on migration patterns? Changes felt on land use? Fair treatment in terms of benefit sharing?

iii) Hydropower developers/Representative

What is the condition of water availability for energy production and another purpose? How much fluctuation have you faced in energy production? How do you think hydropower design and infrastructure are supportive to WEF security? How friendly are the infrastructures for domestic, wild animals and aquatic creatures? Do you think any other appropriate design could be implemented for this? Any changes in the economy and lifestyle of the population dependent on river resources? What negative impacts have been perceived on WEF security and what are the causes, how it

could be solved? How was the biomass/fossil fuel consumption over the project period? How do you think this project can be affected by low precipitation, climate change and

disasters? What is the water flow pattern for the dewatered section? How is water Flow change impact tributaries and downstream? How do you ensure fertile sedimentation is released from the pond? How is irrigation support given to project-affected people (PAPs) and neighborhoods? What has been done to compensate for the loss, restore livelihood, and restore damaged

natural capital? Effectiveness? Major constraints and challenges faced at different stages of the project.

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