The Nepal Digest - Jan 17, 1995 (3 Magh 2051 BkSm)

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The Nepal Digest Tuesday 17 Jan 95: Magh 3 2051 BkSm Volume 35 Issue 10

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*************************************************************************** From: (Purushottam Subedi (CS 555)) Subject: Information on Arun III project To: Date: Sun, 15 Jan 1995 00:35:08 -0500 (EST)

  (Following information is supplied by Nepal Human Rights Committee-USA. The information is also in The Nepali Literature Home Page on WWW at the following http address: You need to follow the hot links
"NepalHuman Rights Committee-USA" then "Arun III". The latest copy of Nepal Today published by NHRC-USA can also be found there.)
                                ARUN III:
                           (unedited version)
                              July 31, 1994
                             Washington, DC

     The following information on the World-Bank supported mega hydro-el-ectric project in Nepal has been compiled by Gopal Siwakoti, Executive Director of Kathmandu-based International Institute for Human Rights, Environment and Development (INHURED INTERNATIONAL) and a founding member of the Arun Concerned Group, with the main objective of providing detailed information about Nepal's most controversial "development" project in history for the benefit of those who have access to e-mail as well as to those who would like to participate in the debate.

     On the basis of the following information and your own independent sources, we would like to request you to:

1. Express your concerns in writing to the government of Nepal, World Bank, Asian Development Bank and other bilateral donors
(Finland, France, Germany, Japan, Sweden); 2. Urge the donors not to reach into any final decision on Arun III before it is fully debated in and approved by the new Parliament to be elected in November 1994; 3. Publicize Arun III issues in your network, e.g. your own E- Mail network, and publications.

     We appreciate very much if you could send us a copy of your appeal or publications on Arun III, if any, at Arun Concerned Group, P.O. Box 2125, Kathmandu, Nepal.

More information can be obtained by contacting in the following addresses:
                             Gopal Siwakoti
                          INHURED International
                     P.O. Box 2125, Kathmandu, Nepal
                Tel: (977-1) 419610, Fax: (977-1) 412538
                          Arun Concerned Group
                (c/o INHURED International, Secretariat)
                            Purushottam Subedi
                     Nepal Human Rights Committee-USA
                              Bikash Pandey
                           Alliance for Energy
                              P.O. Box 2772
                       Baluwatar, Kathmandu, Nepal
                           Fax: (977-1) 220161
                               Lori Udall
                      International Rivers Network
                       1025 Vermont Ave., NW #300
                          Washington, DC 20005
                Tel: (202) 783-7400, Fax: (202) 879-4293
                      e-mail: irndc @


Section 1 Arun III: An Introduction and Issues of Concern
        Arun Concerned Group

Section 2 NGO Presentation at the World Bank Consultation
     (a) Issues Regarding Access to Information and Public Participation
         on Arun III
        Gopal Siwakoti, Arun Concerned Group
     (b) Arun III and Alternatives of Energy Development in Nepal
        Bikash Pandey, Alliance for Energy & ITDG
     (c) Arun III and Its Environmental and Social Impacts
        Ganesh Ghimire, Arun Concerned Group

Section 3 Joint Appeal to the Executive Director of the World Bank

Section 4 Joint Appeal to the Bilateral Donors (Finland, France, Japan, Sweden)

Section 5 Memorandum Submitted to Executive Directors and bilateral donors on Arun III Hydroelectric Project in Nepal Regarding Access to Information and Parliamentary Discussion
        Gopal Siwakoti, INHURED International

Section 6 Supporters of Proposed World Bank Hydroelectric Dam Threaten Lives of Objectors, Nepalese Government Encourages Attacks on Citizen Activists
        Press Release of the Friends of the Earth-USA

Section 7 The Historic Decision of the Supreme Court in favor of the Right to Information on Arun III Hydroelectric Project

Section 8 International Solidarity on Arun III Campaign
     A. Letter of GLOBE to the World Bank
     B. International Non-Governmental Organizations
     C. US Congressman

Section 9 Nepal Government's Position on Arun III

Section 10 Miscellaneous
     Major Hydroelectric Projects Identified by the Government
     What Prime Minister GP Koirala Said about World Bank Two Years Ago
     Important Notice


     The World Bank has postponed the July 26 vote on the controversial Arun III Hydroelectric Project in Nepal up to October 1994. Reportedly this is because the Japanese Government is reluctant to be listed as a donor until it is fully satisfied with the project. Japanese government's study mission is already in Nepal during the week of this compilation (July 31, 1994)

     Other reasons may be that Nepal is facing a political crisis due to the resignation of its elected Prime Minister and dissolution of the Parliament and the preparation of mid-term elections on November 13, 1994. There is widespread concern both inside and outside the World Bank that the project should be fully debated in and has to be approved by the Parliament.

     Recently, NGOs from Nepal and others have raised series of issues and concerns at the World Bank. They include: the denial of basic project information, violations of the Bank's operational standards and policies, and lack of study on alternatives to Arun III.

     NGOs say that since the release of information process has just began after the Supreme Court of May 8, 1994, there can be several issues to be taken to the Court in future for review and consideration according to the Constitution and laws of Nepal.
                                Section 1
    (The following is the text of the first campaign booklet prepared
                      by the Arun Concerned Group)

                                                                  Arun-III hydro electric project will have tremendous long-term impacts on the socio-economic life of the Nepalese people. In view of the effect that such an undertaking may have on national development needs, environment, realization of human rights and promotion of participatory democracy, the Arun Concerned Group
(ACG) has evolved from among citizens' groups and individuals to raise concerns. ACG is an open participatory platform of individuals and organizations for equitable and participatory development approaches, environmental conservation, sustainable development and the realization of human rights. This Group advocates that Nepal needs adequate infrastructures and local capabilities to pursue the path of sustainable and people-centred development. ACG firmly believes that creating huge superstructures like Arun III shall not meet any worthwhile cause of the Nepali nation and its people.

This document has been prepared by a group of professionals, namely Bikash Panday, Ganesh Ghimire, Gopal Siwakoti, Gopi Upreti and Pitambar Chhetri, for the Arun Concerned Group.
                            Contact Address:
                        c/o INHURED INTERNATIONAL
        International Institute for Human Rights, Environment and
                             P. O. Box 2125
                      Putalisadak, Kathmandu, Nepal
                          Tel: (0977-1) 419610
                          Fax: (0977-1) 412538


According to the Koshi basin study undertaken by the Japan International Cooperation Agency (JICA) in 1985, six sites of the Arun river were identified as attractive for further studies with a view to generate electricity. The third hydro-power site among the six as counted from the north was named as Arun III. The study also concluded that altogether 3 projects Arun III, Arun II which is called upper Arun and Arun IV which is called lower Arun could also be financially competitive. On the basis of this conclusion, the pre-feasibility study of Arun III was immediately undertaken in 1985 and was completed by 1987. Based on the conclusion and suggestions of these study reports prepared by foreign consultants with foreign aid, efforts were made to acquire financial assistance for this 402 MW project with their cooperation. A comparative study of other candidate Hydro Electric Projects was undertaken in 1988
(Least Cost Expansion Generation Plan LCGEP) wherein manipulations were made to justify Arun III project as the least expensive by arbitrarily padding the costs of other attractive candidate projects. With that objective achieved, Arun III was treated as a priority project and a detailed engineering study was undertaken with financial assistance from foreign donors and lending agencies
(hereinafter "donors"). In the meeting held in Paris in May 1988, the donors and countries including the World Bank, Asian Development Bank and Germany assured US $ 550 million as assistance for the project. A reconfirmation study or Arun III with commencement in 1990 was then made, wherein manipulations were again made which projected Arun III as the least cost sequence. Though the initial LCGEP looked at the 402 MW development and envisaged construction beginning in 1990 and completion of works by fiscal year 1996/1997, the reconfirmation study considered the implementation of 402 MW single phase alternative and the 268 MW and 134 MW two staged development alternative with all infrastructures needed for the 402 MW to be constructed in the first phase itself. The revised implementation schedule targeted commissioning in 2001. One of the major assumptions in justifying Arun III was the expected export of all surplus power, more than half the installed capacity, to India.

Following the World Bank's loan of about US $ 34 million to construct the access road, the Department of Roads His Majesty's Government of Nepal (HMG/N) invited bids for the roads in 1989. Though the lowest bid received was nearly double this amount, due to reasons proven only to the World Bank and the authorities, the bids were rejected and the access road construction was integrated with the Hydroelectric Project activities to be undertaken under the Ministry of Water Resources, HMG/N responsibility. The present estimated financial cost of the access road is said to be US $ 149 million, twice the initial bid amount.

                         DETAILS OF THE PROJECT

For the run of river hydroelectric scheme a 68 meter tall and 155 meter long concrete dam will be constructed at Num Fyaksinda in the northern part of Sankhuwasabha district to divert the waters of the Arun river through two 11.5 kilometer long tunnels of 5.6 meters diameter to the underground power house at Pikhuwa of Diding Danda Village. Six units of 67 MW capacity will produce 402 MW of electricity to be transmitted to Duhabi in Sunsari district by a 220 kilovolt transmission line, 120 km long. The construction of a 117 km. long access road from Hile of Dhankuta district to the power station and the dam is also considered to be an integral part of this project. Though the full capability of 402 MW will generate 2885 GWh of energy, the first phase of 201 MW will generate average energy of 1744 GWh out of which 1513 GWh will be firm energy. The first phase will have only one tunnel and power house for 3 generating units only. The total cost for 201 MW first phase is estimated at US $ 764 million. As a result, the 4.5 meter wide access road will become a very costly road (1.25 million US $ per km as compared to the average US $ 0.2 million per km), in fact, the costliest road built in Nepal to date. In the construction program of the project, powerful Chenuk helicopters are to be regularly used and the simultaneous construction of the entry road and the dam are to be done by the same foreign contractor. During the construction period, the number of people to be employed for daily work will vary from 3,000 to 10,000. To complete the construction work as early as possible, sophisticated machines and latest technologies are to be used with minimal use of local manpower and resources. The dam, tunnel and access road components have been combined into a single package and contracted to a foreign contracting joint venture depriving the local and international contractors of bidding for the access road only .

As the financial viability of Arun III is contingent on export of electricity to India over and above the committed exchange of 50 MW currently agreed upon with India, the donors insisted initially on an agreement to be in place for the export of power. However, this has yet to materialize. The huge financial resources necessary for project implementation and the funding constraints necessitated the postponement of project construction. This was one of the major reasons, for changing the project site and the implementation schedule for the installation of the 402 MW single stage and the 268 MW, and 134 MW two staged construction to be completed by 1996/1997 and 2000/2001 respectively. The 201 MW Baby Arun has been tailored to meet the financial requirements and fit inside the macroeconomic resource affordability envelope of the poor country. It must be noted that no unbiased LCGEP has been conducted to justify the project as being in the least cost generation sequence in the changed context of delay, revised load demand, export constraints and availability of latest feasibility reports of other attractive projects suited to the country's current development needs. (In the LCGEP study Arun III was included as a project to be constructed by 1997 at a cost of 720 million US Dollars with a capacity of 402 MW in a single phase.)


 - Water is considered to be the most dependable factor in the natural resources of Nepal. There is a necessity of proper development and multipurpose use of water resources in Nepal where available resources for modernization and development are scarce. This is an indisputable fact.
- If any other small, medium or big projects are really less expensive, have multiple usage and are conducive to national and local welfare, such projects should be implemented in a proper cost effective and timely manner. In reality, a national concensus is needed in determining water resource management as part of a well- planned national development agenda.
- From the long term perspective, the implementation of Arun III in its present form may not be justified to increase electricity consumption and generation in the country. It would therefore be proper to develop the necessary infrastructure in a less expensive manner and with public participation at different levels.
                                                                                                                              In a poor country like ours, it is a well known fact that development with the help of external agencies is largely decided by commission agents, corrupt decision-makers and businessmen and biased international interests. These selfish elements are always interested in big projects that involve only few people. For them, many small projects and the involvement of many people in the decision-making process is problematic and not profitable. According to our experience, large numbers of small and medium projects can be conducive to national interest and helpful to the people.

                         1. The proposed implementation of Arun III project in the present
   changed context will push the country to a great risk. The
   addition of 402 MW of electricity by a single project like Arun
   III will increase the total generation capacity of the country
   from about 250 MW at present to about 700 MW by 2005. In the
   future all aspects of national life such as development works,
   industries, transport, commerce, health, education and
   administration sectors as well as the individual and domestic
   life of many Nepalese will be dependent on the supply of
   electricity. In this situation, the electricity supply system
   of the country will be highly dependent on Arun III. If there
   are any big problems in this risky project or if the electricity
   cannot be supplied due to hitches it will be difficult for the
   country to get over the subsequent negative impacts. Although
   Arun III is now claimed to be a 'safe' project, the 'safe'
   project Kulekhani HEP was damaged considerably by the recent
   floods and the country is still suffering from load-shedding.
   The big question is whether the country can withstand this
   particular risk and its potential impact. In view of the low
   risk bearing capacity of the country, it is reasonable to
   broaden the base of its electricity supply system, i.e. the
   national capacity should be increased through the construction
   of many medium-sized hydro-electric projects spread throughout
   different geographic regions of the country. In such a manner
   the element of risk will be reduced. Serious thought towards
   constructing Arun III should be given at a more appropriate time
   when the country has attained sufficient capacity and

2. In a country like Nepal, the annual budget is about US Dollar
   400 million inclusive of all development expenditures for the
   year (including salaries, allowances, graft, the profit of
   contractors and the contribution of poor Nepalese). There has
   been no specific discussion in the parliament before the final
   decision on Arun III (US Dollar 764 million) implementation is
   taken. If the country is committing itself now to this project
   with the help of commission agents and corrupt and vested
   interests, this commitment needs to be fulfilled by any party
   which forms the government in the future and the country cannot
   retract or escape from the adverse effects. A national debate
   is necessary on Arun III before any further commitments are made
   and it is imperative for all to work towards a national

   All the agreements and accords to be concluded or commitments
   to be fulfilled regarding Arun III should be postponed for the
   time being to enable wide national debate. There is a provision
   of about 10% local investment (about US $ 142 million) to be
   made by the government and the Nepal Electricity Authority (NEA)
   for the Arun III project. This is a huge amount and it will have
   to be diverted from many priority social sector programs needed
   to uplift the people from poverty.

3. In a developing country like ours where the rate of growth is
   minimal, the adoption of sophisticated technologies and the use
   of expensive international contractors without proper attention
   to local resources and capacity has been proven wrong.
   Development does not mean a combination of activities to be
   carried out only on the strength of external resources and
   capability. Quite contrarily, it is an internal process to make
   the Nepalese society more self-reliant, to increase the standard
   of living of Nepali people and in totality to transform Nepali
   society to a higher economic and social dimension. In our
   country where a new political system based on the participation
   of the people has just been initiated, the future of the country
   can not be bright unless development and politics are
   complementary. In such a context, the lack of clear direction
   regarding the available resources to be mobilized for
   development will lead to a bleak future. The popular slogan few
   years ago, "Green Forest is the Wealth of Nepal" has now become
   senseless. Our forests instead of being assets for development
   have become a liability for the country as they are to be
   protected with loans and assistance from other countries. It is
   necessary for all to be conscious about the process of gradually
   developing water resources, the only remaining resource in
   Nepal, in a least cost optimum manner. Otherwise, like the
   forest resources, water resources will prove to be a burden to
   the country. If we go on undertaking hydro-electric projects
   beyond our capacity, depend only on foreign consultant services
   and contractors and focus our attention only on big projects,
   the time will come when we have to be fully dependent for the
   maintenance of such hydro-electric projects. Arun III and its
   presentation in the present shape and form has ignored the
   present and future need of the country and it is to push the
   country further towards the brink of national disaster.

4. Although Arun III may be projected as an attractive project by
   its proponents, this project can only be beneficial to the
   country when we can sell the electricity produced to the
   northern parts of India (Bihar UP and West Bengal). In the
   absence of the commitment of the buyer (such as a guarantee that
   India will buy the electricity generated from Arun project at
   a market rate) and other congenital conditions prior to
   implementation. The future holds enormous uncertainties with
   bleak prospects. Infrastructures must first be developed, since
   it takes considerable time for the completion of attractive
   projects, especially big projects. It is an established fact
   that donors propose a hike in electricity tariffs as a pre-
   condition for loan negotiations. The construction of roads, the
   development of local capacity, mitigation measures for
   deteriorating environmental and social balance, the
   infrastructure for housing in areas with high population
   density, community and local development (agriculture, health
   etc.) are things which must be given top priority and developed
   first. These preconditions will determine and create necessary
   infrastructures for a huge project like Arun III, to be
   implemented. In the present situation, when attention needs to
   be primarily focused on developing these preconditions, it will
   not be in the interest of Nepal to decide on the construction
   of the project while completely ignoring the development of
   basic infrastructures.

5. Arun III, which is supposed to supply electricity after 2000
   cannot be the solution for the present scarcity of power load
   shedding. We must look for other alternatives such as Khimti,
   Bhotekoshi and Modi Khola project to supply electricity before
   that period. The electricity rate is expected to reach US $ 12
   cents/KWh or Rs. 6.20 per unit, a very high price even by the
   standards of a developed country. The implementation of Arun III
   will further burden the people with more rate increases during
   the course of implementation (10 years), possibly forcing the
   people of one of the five poorest countries of the world to
   revert back to other cheaper, depletable and environmentally
   unfriendly energy sources. Instead of a hasty decision on the
   construction of Arun III, we should think of taking up small and
   medium size hydro-electric projects immediately which can supply
   electricity before the year 2000 cheaply and with lower
   investments by using available financial resources and local
   capabilities. Otherwise, it is difficult to imagine how the
   Nepalese will use electricity at such alarmingly high prices.

6. The Arun valley comprising the whole of Sankhuwasabha, many
   areas of Bhojpur and a large area of Dhankuta districts, is
   considered to be rich in natural resources. The bio-diversity
   in its Northern parts as a result of variation in altitude, its
   micro-climatic zones, its still intact plistine forest in the
   valley with rare wildlife and valuable medicinal plants, its
   greenery, river and streams are unique and they need to be
   protected. These cannot be protected by simply giving directives
   to the contractors who are to do the construction work of the
   project. For about 450,000 people living in this valley these
   environmental resources are factors closely linked to their
   livelihood. A proper way of mobilizing these resources in a
   sustainable way should be developed with the participation of
   the local people. A basic framework can be created within a few
   years by conducting programs for environmental protection and
   the use of resources with the participation of local people.
   Without a sound basis for environmental protection (mechanism
   and with only a window dressing in saying that attention shall
   be given to such things during the period of the construction
   of the project), the construction of Arun III project can create
   long term and permanent negative effects on the environment.

7. It is widely known that a large part of the waters to be used
   for Arun-III flows down from the Chinese autonomous region of
   Tibet and that 80% of this river basin lies in Tibet. It has
   been widely discussed that there are several projects
   (irrigation and hydro-electricity) in operation in Tibet to use
   the water of the Arun river. It has also been proven by
   international experience that the agreements and goodwill of
   both countries are necessary for hydro-electric development
   projects on a common river. In this context of Arun III,
   adequate homework needs to be done in this regard and HMG of
   Nepal has not made any efforts to secure the agreement of the
   Chinese government. At present there are no big projects in
   Tibet utilizing the water of the Arun river. However, we can not
   say with certainty that such big projects will not be initiated
   within a period of 40-50 years in the future. So, it is
   necessary to secure the agreement of the Chinese government in
   advance. For such long term agreement, the parliament must play
   a significant role.

8. In spite of many arguments of safety against geographical risks
   like Glacier Lake Outburst Flow (GLOF) and earthquakes by the
   project authority, experts are not satisfied with the
   information and studies available and they say that the studies
   and research done so far are incomplete and unsound. No project
   can be fully free of risks and there is always a room for
   additional study and research. From the technical point of view,
   there can only be assumptions about GLOF and the floods caused
   by the stoppage of river as a result of landslide. Such a risk
   can be avoided if a regular study is made about the level of
   water in such glacial lakes and arrangements made for the flow
   of water at an appropriate time. The country lacks the capacity
   for such works at present. Such studies have so far been
   prepared only on the initiative of foreigners. So the question
   of follow-up and detailed examination and control are beyond our
   reach. In this sense, the first condition for the constriction
   of Arun III is to develop our own capability.

9. The present cost estimate for the project is only for the first
   phase. It includes the dam, one tunnel, a power house with the
   capacity of 201 MW, the transmission line up to Duhabi and the
   access road. There is still no idea about financing the second
   phase of the project. There is a lesser possibility of acquiring
   a soft loan for the second phase of the project. Several donors
   are talking about the completion of the second phase of the
   construction only by commercial loans. It is also said that the
   second phase of the project is not attractive for such loans.
   If the second phase of the project can not be completed for any
   reasons, the rushed construction of the first phase of the
   project will only mean the destruction of the landscape of the

   Similarly, the double circuit 220 kilovolt transmission line up
   to Duhabi is not sufficient. Such transmission lines are
   required up to the east and west of Duhabi. The necessary
   expenditure for this purpose is still unaccounted for. On the
   other hand, the international financial institutions like the
   World Bank are to make their final decisions in March 1994 in
   such a unclear state of things while other efforts are underway
   to conclude an agreement with international contractors forcing
   the country towards an unbearable commitment.

10. At the moment, Nepal has foreign loans of US$ 1,800,000,000.
   Arun-III will add 540 million more on this amount. If we
   estimate the loans to be acquired for other projects by the year
   2000 the total foreign debt of Nepal will reach US$
   24,00,000,000 easily. Even if the whole revenue of 300 million
   a year is used for debt services, the country can only be free
   of debt after eight years only. By the year 2000, the per
   capita national debt burden will be 36,000 rupees which includes
   every Nepali, those enjoying electricity and those deprived of
   it. At that time, Nepal is certain to be ahead of Brazil in
   terms of hydroelectric resources and the highest per capita
   level of foreign debt. Is it proper to add foreign debt in the
   name of development? It is a matter of grave concerns to all
   of us.

                                                          OUR CONCERNS

1. The country should not make a hasty decision on Arun-III which
   requires a big amount of investment. The final decision should
   be made after a national debate. We appeal to all concerned
   groups to expose the scheme of making the country committed to
   such an high sounding project, which if implemented in its
   present form, is going to result in unforeseen economic, social
   and developmental consequences.

2. We appeal to the Honorable Members of the Parliament, the
   political parties and all other people concerned to initiate a
   wide debate on this issue in the forthcoming session of the

3. All the information regarding the different aspects of the
   Project should be made public by the government without further
   delay and discussion should start at national and local levels
   (Sankhuwasabha, Bhojpur and Dhankuta districts) immediately by
   involving the local bodies. A national consensus can be made
   only after such debate with effective public participation.

4. A decision has to be made regarding regional and national level
   benefits from the Project. Such concerns and benefits should
   not be imposed either from above or from foreign countries.
   Programs should be formulated and developed immediately for
   local benefits and infrastructure development before the
   inception of the Project. It is important for the people of
   Arun valley to know by what mechanisms they can be involved in
   the decision-making process. It is also important for them to
   know what developmental benefits and necessary infrastructures
   are they entitled to and how?

5. Arun-III is an attractive Project from the technical point of
   view. So necessary preparations like road construction, local
   development and the search for international understanding on
   financial resources and other necessary studies should be
   undertaken before implementing it.
************************************************************************************************** **************************************************************************************************

                                     SOME BITTER FACTS ABOUT ARUN III

The average cost for 1 kilowatt of hydroelectricity is US$ 2,000. In the case of Arun III, the cost is about US$ 4,000 and it is US$ 1,500 in India and China.

According to the estimated cost of Arun-III, 10 million Nepali rupees shall be spent every day for 10 years.

In general, there is a 10 per cent loss of electricity produced in its transmission. In Nepal, the loss of transmission and leakage- amount to 30 per cent.

It is generally assumed that in the international aid business, the commission cost in different ways can be up to 15 per cent. In case of Arun-III, the Commission cost of 10 per cent of the official cost estimates amounts to 3,800 million Nepali rupees. If the decision-makers are purchased at the cost of 10 million rupees each, it can purchase 380 decision-makers of this country.

The proposed 117 kilometer road for Arun-III will be the costliest road in Nepal (50 million rupees per kilometer).


Nepal is considered to be rich in water resources. The waters of our rivers which flow from the altitude of the Himalayas to the Terai (lowlands) which is slightly higher than the sea level. The total hydroelectric potential of Nepal is 83,000 MW. The hydroelectric potential which is technically and economically feasible is put at 24 to 42,000 megawatts.

The existing installed hydroelectric capacity in the country
(including small, big, government and individual plants) is about 250 megawatts.

Hydroelectric Projects Already Constructed:

Name District Capacity Production Year Pharping Kathmandu 500 KW 1911 Sundarijal Kathmandu 640 KW 1936 Panouti Kavrepalanchowk 2,400 KW 1965 Pokhara Kaski 1,020 KW 1967 Trishuli Nuwakot 21,000 KW 1972
 Sunkoshi Sindhupalchowk 10,050 KW 1973 Tinau Rupandehi 1,020 KW 1974 Gandak Nawalparashi 15,000 KW 1979 Kulekhani-1 Makawanpur 60,000 KW 1982 Devighat Dhading 14,100 KW 1983 Seti Kaski 1,500 KW -

Kulekhani-2 Makawanpur32,000 KW 1986 Marsyandi Tanahu 69,000 KW 1990 Andhikhola Syangja 5,100 KW 1991 Tatopani Myadi 1,000 KW 1992

Hydroelectric Projects Under Construction:

Name District Capacity Production Goal

Jhrimrook Pyuthhan 12,000 KW 1994 June

Hydroelectric Projects of which Detailed Studies are Complete:

Name District Capacity Production

Khimpti-1 Ramechhap 60,000 KW 1998 Kaligandaki -A Syangja 140,000 KW 1999 Arun-III (1st phase) Sankhuwasabha 201,000 KW 2002 Arun-III (2nd phase) Sankhuwasabha 201,000 KW 2005

                                                                  The total capacity of national grid is 280 megawatts
(hydroelectricity and electricity produced by diesel plants and Nepal Electricity Authority supplies electricity to about 300,000 families from this capacity. A total of only 9 per cent of the people of Nepal are benefitted by electricity.
                                Section 2
                              June 28, 1993
                             Washington, DC
                        PARTICIPATION ON ARUN III
        Presented by Gopal Siwakoti, Member, Arun Concerned Group
                Executive Director, INHURED International

     First of all, we would like to thank the World Bank for inviting NGOs concerned with the proposed Arun III Hydroelectric Project in Nepal to attend this consultation and to present issues of local and national concern pertaining to long term repercussions of the proposed Arun III project. However, we are seriously concerned about the utility and usefulness of this meeting, particularly on the following matters:

- Is the Bank prepared to review the project negotiation process and modality before final agreement, and before the submission of the Project before the Board on July 26? If not, why is this consultation being held at the final hour of negotiations?

- We understand that the scope of this consultation is limited to issues directly related to the World Bank, and is not intended to address domestic issues and concerns. If this is true, we do not understand the purpose of inviting Nepali government representatives to participate in this consultation. We welcome the opportunity to discuss the broader international and legal issues raised by the Arun III project proposal. Unfortunately, we regret that we may have had to travel here to Washington to hear arguments from the representatives of the Nepali government, a government which totally ignored and undermined all efforts to promote this sort of discussion of the Arun III project in Nepal.

- We are concerned that the value of this consultation will be directly compromised if the situation between the Nepali NGOs and their government representatives becomes confrontational. We are equally concerned that this consultation be respected with regard to the World Bank's decision making for the Arun III project: we anticipate that the final report of this consultation will be publicly released and used during future negotiations and also submitted to the Board of Executive Directors.

     Keeping in mind the above concerns, we would like to highlight a few points the Arun Concerned Group has raised with respect to the World Bank policies of information disclosure and requirements for public participation and beneficiary consultations.

Access to Information

     The World Bank has failed to adequately inform the Nepali people, and Nepali NGOs, (e.g. Arun Concerned Group, INHURED International, Alliance for Energy, Rural Reconstruction Nepal) with regards to the Arun III project. The World Bank office in Kathmandu and the Nepali Government consistently failed to provide any information or documentation to groups who issued written requests for basic project documents. Even the Project Information Document for Arun III which is easily available here in Washington was not offered. Given that no information was produced on request, it goes without saying that the local people were not informed of the realities of the Arun III project. The Nepali Government has, however, mounted a campaign of misinformation regarding the alleged benefits that local people will receive from the Arun III project. The Government of Nepal did not promptly make available in local languages a project summary. The only material initially provided in the local language was a leaflet explaining the procedure for receiving compensation for lands required by the Arun III project.

     In our understanding that the World Bank's new information policy and the EA policy requires meaningful "access to information". This would imply more than simply informing the Nepali public that Arun III will be constructed. Meaningful disclosure of project details is understood as an invitation to participation, a mandate for public knowledge, critical discussion, and finally--if the project is a good one--public support. When
"information policies" act to exclude public participation from project formulation, designing, decision-making, and implementation, the legitimating benefits of democratic participation through informed decision making are invariably lost. In these unfortunate situations, "access to information" only notifies the public of the imposition of projects through the government channels which lack democratic accountability and procedural transparency.

     After the local groups were denied basic information by the Nepali government, the groups filed public interest litigation in the Supreme Court of Nepal demanding the disclosure of all information related to the Arun III project. This culminated in a legal review of the Arun III project and the donor conditionalities. The Court has decided that all information and conditionalities relating to Arun III are subject to the Court's extra-ordinary jurisdiction and review, as specified by Article 16 of the new Constitution of Nepal. The Supreme Court has ordered the Nepal Electricity Authority, and concerned ministries to disclose all information on the Arun III Project to the petitioners and the public. Nonetheless, the Government has repeatedly ignored provisions for the release of basic documents on Arun III: e.g. the Memorandum of Understanding of October 19, 1993. Since further litigation is to be filed very soon to address this violation, any acts which the Government of Nepal may be involved with may soon be declared unconstitutional and in violation of the Supreme Court judgment. It should be understood by the World Bank that the Nepali government must abide by the mandate of the Nepali people, particularly as stated by the Constitution and the judgments of the Supreme Court. Ultimately, these mandates of national sovereignty supersede illegal agreements with outside agents. In this situation, the World Bank must pay full respect the Nepali Constitution and decisions of the Nepali Supreme Court. It is also important to note that the government has lost in all public interest litigation in recent years, including Arun III and the World Bank must not contravene decisions of Nepalese courts.

     There is some confusion about the role of the democratically elected Nepali Parliament. So far, the Parliament has never been provided any information about Arun III by the government other than general statements by the ministers. A report on Arun III is expected to be submitted by the Opposition Party in the upcoming session of the Parliament starting from next week. A report and findings of a Public Commission on Arun III is also expected before the vote on Arun III on July 26. If the Bank approves the project on July 26th, this will jeopardize the internal negotiations, voting and democratic processes and will lead to mistrust of the Bank and donors by political parties and the public in Nepal.

Public Participation:

     It is useless to talk about public participation since there is nothing to "participate" as a result of the absence of relevant information, particularly in local languages. The government has never genuinely held any public hearings or distributed information about Arun III. The series of public meetings that were held in different parts of the Arun Valley and other areas were nothing but distribution of a leaflet telling people about procedures for compensation. No important issues were raised or debated about the Project itself. Some NGOs were invited to attend, but were prohibited from raising any issues other than compensation, and in some cases they were systematically threatened as a result of their activities in encouraging local people to participate in debate on issues of local and national concern relating to Arun III. Furthermore, creation of so called pro-Arun groups only undermined the image and sincerity of the government and donors.

     It is difficult for people to understand information distributed by government to local NGOs and the people in a so called consultation with the local NGOs and the people in the Arun Valley in preparing the Regional Action Plan. Can the government or the Bank provide any information about what were the procedures and methods of such consultations and list of NGOs that were part of it
? If so, why did the government or the Bank did not bother to invite the Arun Concerned Group or the Alliance for Energy. Involvement of a few vested interest group or individuals without opportunity for broader participation can only be regarded as a manipulation to legitimize the Arun III Project.

     Before there are further negotiations between the World Bank and the Nepali government and before Bank management sends the Arun III project to the Board of Executive Directors, we request the World Bank to ensure that the following has taken place:

1. Provide all basic project documents to NGOs and the public, including an update of recent negotiations with the Nepali government officials and new conditionalities, if any.

2. Ensure that Bank actions in relation to the project do not undermine democratic processes inside Nepal, including respecting the recent Nepalese Supreme Court decisions.

3. Comprehensively answer all questions being raised about Arun III at local, national and international levels.

4. Ensure that the project is in compliance with all World Bank policies including energy, information disclosure, resettlement, and environmental policies.

5. Ensure that alternatives to the project have been adequately investigated.


Presented by Bikash Pandey, Alliance for Energy & Intermediate Technology Development Group, UK

World Bank's Plan B and Sectoral Issues

The Bank's Plan B

The debate over the relative merits of Arun and the alternatives has been going on for over a year and the Bank has had an analysis of 'Plan B' since July 1993 (see footnote to table 7.9 in the recent Argonne Laboratories report). NGOs have, however, only seen any relevant documents in the last two weeks and have not been given sufficient time for detailed comment.

Nevertheless, it is clear that the results of the comparison of plans A and B are inconclusive. The 3-4% difference in the two models is easily within the margin of error of the assumptions. In April of this year, ITDG( Intermediate Technology Development Group) presented its own analysis, suggesting that all of the small hydro schemes for which it could gather firm date were very significantly cheaper than Arun in terms of the costs of generated power. As yet the Bank has made no response at all to that paper.

The Bank's examination of plan B appears to make an arbitrary choice of six projects from a range of over 20 possibilities. No justification of the selection has been presented. In addition, the Bank claims that the schemes in plan A and plan b cannot be directly compared because the plan B schem es have not been studied to the same extent. A proposal to study these schemes has been with the Bank since July 1993, yet it has taken no action. In order to make a clear comparison of plans A and B, such studies must be carried out before Arun is presented to the Board as the least cost option.

Beyond Least Cost

Given that the results of the plan A/B comparison were inconclusive, it is even more imperative that the Bank looks at the wider developmental parameters which are not considered by a least cost methodology.

The key issues in the context of this particular project are:

* Capability building. The adoption of such a large scheme as Arun when indigenous institutions are weak does nobody any favors. Adding local man hours to such a project is not 'institution building'. The need is for planned development of whole institutions around smaller schemes so that the country can implement complete schemes in the future.

* Geographical balance of hydropower development. Hydropower investment and the associated benefits need to be distributed more equitably across the country.

* Risk associated with a single large scheme. Seismic risks , glacial lake outburst floods, etc are no specific to any particular project but larger schemes (particularly if there are several in a singly valley) make the country's power supply unduly susceptible to these risks. Putting all of the concessionary financing available to the country into one large scheme designed to come on line in eight years time puts the country at risk in terms of unscheduled delays and cost overruns.

Additionally, there are unsettled issues which will be critical to the success of the Arun project - in particular the riparian issue with China and the lack of agreement on further power exports to India.

Future Development

We recognize that, in the long rung, larger schemes will be needed to meet the ever increasing demands on the grid if reasonable economic growth is to be sustained. There is also no disagreement that the role of the private sector will be critical. The question is whether the implementation of Arun at this point in time is consistent with a long-term vision of sustainable hydropower development.

The Alliance is arguing for the use of concessionary financing for sectoral support rather than for individual projects. Money available from the donor community must be focused on long-term strengthening of the sector than on producing megawatts in the short-term.
  The Bank has said that it will 'aggressively pursue the commercialization and corporatization of, and private sector participation in, developing country power sectors'. This privatization will not occur spontaneously and it is most likely that the private sector will first want to invest in smaller schemes (say 10-20MW). There is significant money in the commercial sector with no mechanisms in place to utilize this for hydro sector development. A package of institutional reforms will be needed to spark off this process. banking regulations will need to be changed to allow for longer-term loans; legal institutions will need to be put in place to regulate buy-back; schemes will need to be covered by insurance and guarantees.

There is no money now available in either the government budget or the donor loans to even study these schemes. To prevent the long- term recurrence of the 'no-options trap' that has arisen with Arun, such study work must be initiated now in order that the country has a wide range of potential hydropower schemes available to it in a few years time.

Action Required

Arun should not go before the Board until the following issues have been adequately discussed:

  The issues raised in ITDG's paper on relative costs
  The riparian issue with China
  Power sales to India
  The impact of the project on the people in the Arun valley


Presented by Ganesh Ghimire, Member, Arun Concerned Group & Coalition Nepal

     The Arun Concerned Group is an open platform of NGOs, professional groups, and individuals concerned with various issues relating to Arun III hydroelectric project. Some of us, including myself, are from the Arun Valley, where the project is to be located. The name of the river, "Arun", means the sun and it represents life. Like life itself, Arun basin is full of diversity, both environmentally and culturally. Within 100 km, the Valley rises from only a few meters above the sea level to about 8500 meters, which gives rise to its unique and rich environment and culture.

     The World Bank has recognized the Arun Valley as a bio- diversity hotspot of global importance. But at the same time,. it is allowing the intricate and dynamic balance between the natural processes and human activities to be seriously threatened by the Arun III project. The area is very remote, and its people are vulnerable and naive. They live, however, in peace, social harmony and tranquillity. The Arun III project documents acknowledge that the project, especially the road, will bring many negative and irreversible changes to communities and the environment. These documents further acknowledge that many of the indirect environmental and social impacts cannot be predicted now. Given the rapid construction plan and the size of the project, a vast package of measures has been proposed to mitigate against its likely direct and immediate impacts. In addition, a Regional Action Plan (RAP) has been designed to take care of the indirect and long-term environmental and social impacts.

     Despite the impressive amount of paperwork, we do not believe that the measures proposed will protect the people and the environment from the negative irreversible changes expected. The mitigation measures are inadequate, misleading, often unrealistic, and also exhibit non-compliance to the World Bank's own requirements. It is irresponsible for the World Bank to allow the project to proceed until these issues are resolved. I would like to give you some examples to demonstrate how we have arrived at this conclusion.

1. Some serious environmental and social impacts have been ignored, underplayed or in some cases, removed from early drafts of project documents. For example, part of the economic justification for the project relies on the assumption that the high cost of the project will be offset by the Upper and Lower Arun schemes, since the opening up of the Valley facilities developing these schemes. But, at the same time, the cumulative environmental and social implications of opening up of the whole Valley are given only a cursory mention in the Environmental Impact Assessment (EIA) and other environmental studies. If the benefits of other schemes are to be accounted for to justify Arun III's high cost, then the much more serious environmental consequences of building these schemes also must be taken into consideration at the same time.

2. The rapid pace of construction, particularly of the road, as much more serious environmental implications than presented in the project documents. The road route, timing and methods of construction have been chosen with the single objective of commissioning the power from Arun III as soon as possible. This 120 km road is planned to be built in only three years. Quite apart from the huge costs this will incur (including extensive air support), managing the construction in compliance with the proposed mitigation measures will be extremely difficult, if not impossible. To meet the deadline, 6-7 camps of up to 1,500 workers will need to be set up at 10 km intervals spread all the way up to the Valley. This will make policing of the contractor's compliance to the mitigation plan impossible in practice.

3. Preparations for the project have failed to comply with several World Bank policies. We trust that these violations will be taken seriously by the Bank. For example:
* There has been a violation of the Bank's Operational Directive 4.30 on Involuntary Resettlement which outlines one of its primary aims as "providing people displayed by a project with the means to improve, or at least restore, their former living standards, earning capacity, and production levels" (art. 2). Quite the opposite is happening. The people in Tumlingtar, for example, are being compensated at rates far below the market price of their land. Similarly, the Bank strongly advocates "land for land" compensation, which is particularly important in the Arun Valley where people are not linked in to the cash economy and where serious problems have already been highlighted from cash compensation measures implemented for the original ridge route alignment. But the Acquisition, Compensation and Rehabilitation Program (ACRP) has not identified a single piece of land for this purpose, despite that fact that much of the compensation has already been paid.

* The Bank's Operational Directive (OD) 4.01 on Environmental Impact Assessment states that for "major, highly risky, or contentious projects with serious and multi-dimensional environmental concerns" (art. 13), an Environmental Advisory Panel must be engaged in preparation of the EIA. No such panel has been appointed for the Arun III project, despite its classification as a Category A project.

* The same directory also expects "the borrower to take the view of affected groups and local NGOs fully into account in project design and implementation, and in particular in the preparation of EAs"
(arts. 19, 20). There was no public consultation at all in the preparation of EIA for the Valley route for the road. Neither was there any open consultation on the King Mahendra Trust Study on the Management of Basinwide Environmental Impacts -- consultation was limited to discussion of how best to deal with a fait accompli.

* The Bank's OD 4.01: Environmental Assessment requires that "the borrower provide relevant information prior to consultations ... in a timely manner and in a form that is meaningful for, and accessible to, the groups being consulted" (art. 21). Let alone the timely manner, most of the relevant information were never disclosed to interested parties. The Nepali government was found to be negligent in this respect by the Supreme Court earlier this year.

* OD 4.20: Indigenous People states that "Successful planning for indigenous peoples frequently requires long lead times, as well as arrangements for extended follow-up" (art. 14g). This is one of the universal truths of development, yet the Bank and the government's greed for Arun's power has bulldozed this concern aside. For the RAP to be effective, it must be started way in advance of the project. Building the road at such high speed will exacerbate the difficulties in overcoming the already almost insurmountable challenge of trying to implement such an ambitious mitigation program alongside project construction, rather than in advance of it.

     I would like to remind you that, at this point, the fate of the Sardar Sarovar Project (Narmada Dam) in India which had much to do with the non-compliance with the Bank's own requirements.

4. Many of the mitigation measures for direct and immediate adverse environmental impacts are not just practical. For example, the loss of fertile top soil is supposedly to be prevented by taking a layer off in selected sites prior to the project activity and storing it until it can be returned to its original place. Villagers in the Arun Valley would laugh at such an absurd suggestion.

5. The RAP is supposed to take care of the long-term, indirect and broader socio-economic, cultural and environmental impacts of the project in the whole Valley. However, the RAP appears to be little more than a wonderful shopping list of good intentions. Were it to be taken seriously, the resources required would stretch way beyond the budget aside up to ($17 million). But, money is only part of the problem. Much more concerning is the capability in the executing agencies to execute such an ambitious and far-reaching plan. A $14 million grant is sitting in Kathmandu, set aside for a clean-up program for the capital, yet bureaucratic inertia has prevented any work from going ahead. If such a straight-forward project like this cannot be managed, how can we be expected to have confidence in implementation of the RAP?

     We strongly differ with the Bank's assertion that there is little opposition to the project in Nepal. Within the last six months alone, opposition to this project from among the people at large, intellectuals, professionals, politicians, NGOs, and political parties in Nepal has grown tremendously. And opposition will rise dramatically once local people start realizing the impacts on their lives once construction works begins. Unless satisfactory answers fare given and the issues raised are resolved with regard to the controversies of the present form of the Arun III project, more wide-reaching campaigns are bound to take place in the days to come.

We demand that the Arun III project be delayed until:

1. The appropriate groundwork for the RAP has been done
(including the Kind Mahendra Trust follow-up study for the new road alignment), adequate funding has been secured, and the construction schedule is modified to allow for RAP implementation to proceed in advance of project construction.

2. The construction schedule for the road is extended to maximize the use of local labor, minimize impact on the environment and allow work to commence from a single roadbed.

3. The ACRP program is overhauled, so that people are given a
"land for land" option and are offered a fair price for their land.

4. A panel of experts is appointed to evaluate and modify the EIA.

Section 3

 Washington, DC

 We would like to thank you for meeting with us during the week of June 27th, and hearing our concerns about the Arun III hydro- electric project in Nepal. We hope that through these meetings, you have come to understand the risks, drawbacks and wider implications of Board approval of the Arun III project as currently designed. We remain unconvinced that our concerns are being taken seriously by the Country Department managing the project. Because of the many unanswered questions and unresolved issues relating to the project, we believe it would be irresponsible of the Bank to allow Arun III to come to the Board on July 26th. We urge you to delay the Board date until the following issues have been adequately addressed:

1. Adequate Analysis of Alternatives

     The very high unit cost of construction and the corresponding high tariff that consumers of the energy from Arun III will have to pay remain a serious concern. Lack of study of the alternatives during the eight years of preparation of this project continues to be a major criticism of this project. The Least Cost Expansion Generation Plan exercise that has been used to justify the project to date has been admitted by Bank Management not to show conclusively the superiority of the Plan A option (the Arun project as currently designed) over Plan B (which proposes to have the project come on line in the year 2009 after the construction of a number of small and medium hydropower schemes) to supply the national grid. The cost of the plan B projects compared with the Plan A option are extremely preliminary. The study 'Arun III - Cheaper Energy for Nepal' put to Bank management in April 1994 indicates that hydropower schemes in the under 100MW range that have been studied in greater detail in the last year have all come up with energy costs lower than Arun III. There has been no response to this document from the Bank.

     In the interests of generating energy for Nepal at least cost, it is imperative that the study of the alternatives be taken to at least the feasibility level to allow a proper comparison with the Arun project before the project is taken to the board for a vote. Unless this is done the Bank will not have fulfilled its policy requirement to compute the Least Cost analysis for additional power generation for Nepal.
  2. Public Participation and Access to Information

A. Public participation and Consultation

     Public Participation in the project has not been adequate. The project is being portrayed by the government of Nepal as having been chosen through a transparent and open democratic process. However, only in the last six months (with project preparation almost at completion) has there been any serious discussion in Parliament or with the public with the benefit of accurate information. Prior to that, Arun III was consistently presented to the public as a fait accompli. The discussions that have taken place have been forced by concerned groups rather than at the instigation of the Government of Nepal or the World Bank. For example NGOs organized a public hearing in February 1993 which was boycotted by the Ministries of Water Resources and Finance and by the National Planning Association, which meant there was no opportunity to challenge the government about project.

     The alternatives to the project (along the lines of Plan B) that are available to Nepal have never been presented to the people or the Parliament. The Nepali government claims to have held 23 public meetings, 11 of which were in the Arun Valley. While it is true that there was one public hearing in Tumlingtar, many of the other meeting being classified as public hearings were meetings strictly to inform people about compensation rates for their land. NGOs who tried to raise issues in the meetings about the adverse environmental and social impacts of the project were prevented from doing so. The Government has also misinformed people in the Arun Valley about the project, leading them to believe they will receive jobs and electricity. In reality there has been no concrete commitment to supply electricity to the people in the Arun Valley and only a small number of jobs will be created for local people, because outside workers will be brought in.

     This lack of consultation represents a violation of the Bank's Operational Directive on Environmental Assessment, which requires that the government take into account the views of affected groups and NGOs in the preparation of project design and implementation
(OD 4.01, para 19) and to publicly release the draft environmental assessment.

B. Failure to Release Information

     Despite repeated requests over several years, only in the last few months have any project documents been made available to the Nepali public. Their release only came about following a court case filed by NGOs which led to a Supreme Court decision demanding their disclosure. Despite the ruling, which demanded the release of all documents related to the Arun III project, many of the key documents are still being withheld by the Nepalese Government, precluding any meaningful debate.
     The library which was established by the Nepal Electric Authority after the Supreme Court Case verdict does not contain many key documents such as the Memorandum of Understanding between the Government of Nepal and the World Bank or the draft project appraisal documents. In a project of this size and cost which will affect the whole nation of Nepal, the public should be able to access information about existing agreements between the Government and the World Bank. The full environmental impact assessment has not been made available in Nepali, which is a requirement of Bank policy.

C. Failure to Release World Bank Documents

     Both the Bank's Environmental Assessment Policy (OD 4.01) and the Information Policy (BP 17.50) require the timely release of information about the project, especially before public consultations take place. This has been violated consistently throughout all project planning and design. The Bank's new information policy requires the release of the Project Information Document and the release of all factual technical information about the project. While the project information document was readily available in Washington, it has not been available in Nepal. Requests for factual technical information on the project, including studies on alternatives to the project were denied until June 10th, when the Bank released a study on alternatives by Argonne National Laboratories. NGOs have not had sufficient time to analyze this document and many of the assumptions used in the document are not explained.

     Requests for the green cover staff appraisal report, and other technical information such as hydrological studies have also been withheld. The staff appraisal report is the basic technical document of a project which contains the project justification and rationale for the Bank's involvement in the project. It is critical that this document be released, before it becomes final. While we realize there may be a small portion of confidential information within, we believe these sections should be excised, and the rest of the document should be released. The Project Information Document has never been updated and it contains so little information that it is useless for NGOs who are questioning the basic assumptions and objectives of the project.

3. Environmental And Social Issues

A. The Regional Action Plan Must Be Completed

     The King Mahendra Trust follow-up study to the MBEIS report, which is essential groundwork for the Regional Action Plan, will not be completed for at least six months. The World Bank Board date and Road construction must be postponed until all portions of the Regional Action Plan are completed and are in place. Previous Bank experience in which project construction was started before

to environmental studies were completed and implemented have failed as in the case of Narmada.

B. A Realistic Implementation Program and Timetable for The Regional Action Plan and Road Construction must be Established.

     Road construction is currently planned at a rapid rate, which will adversely impact on the 450,000 indigenous people living in the valley, through an influx of up to 10,000 construction workers, which will put pressure on precious food and water resources. There are no mitigation measures in place to ensure that these people are safeguarded. The people of the Arun valley fit the Bank's definition of "indigenous people" in its operational directive OD 4.20. OD 4.20 states that "successful planning for indigenous peoples frequently requires long lead times, as well as arrangements for extended follow-up". For the Regional Action Plan to be effective, it must be started well in advance of the project. The rapid speed of road construction will further undermine the Regional Action Plan's ability to cushion this sensitive region from the long-term and indirect impacts on the valley. The construction schedule for the road must be extended to minimize disruption to local communities and the environment.

     Moreover, we question whether the Nepal Electric Authority which has its primary interest in promoting the project has the capability or the will to properly implement the Regional Action Plan.

C. Long Term Cumulative Environmental Impacts of Arun III and Subsequent Projects

     Arun III is only first phase in a plan to build three dams in the Arun Valley. Despite this, Environmental studies have only covered the adverse impacts of Arun III. Before the project is approved there should be a comprehensive study of the long term cumulative impacts of dam building and road construction in the entire Arun Valley.

D. The Acquisition, Compensation and Rehabilitation Program (ACRP) Should be Revised to Ensure That Families Receive Equitable Compensation and That the Program is in Compliance With Bank Policy.

     Families whose land will be acquisition for the project are being compensated at a rate that is well below the market rate for their land. In this respect the project is failing to comply with the Banks Operational Directive on Involuntary Resettlement (OD 4.30, para 2). In addition, Bank policy advocates "land for land" compensation, which is particularly important in the Arun valley where people are not linked to the cash economy. Serious problems were highlighted in project documents after the earlier round of cash compensation measures implemented for the original ridge route alignment. Despite this, no land has been identified to offer the option of land for land compensation.

4. Agreements with Neighboring Countries

A. Power Sale Agreement Must be Reached With India

     Since phase II of the Arun III project and future power development in the valley have been predicated on the sale of power to India, the project must not go ahead until an agreement has been reached. India currently buys power from the Chukha dam in Bhutan at prices significantly below cost price. The high cost of Arun's power means it is highly unlikely that any power sale deal with India will make economic sense.

B. The Riparian Issue Must Be Resolved with China.

     In the Nepali parliament recently, the Water Resources Minister announced that China held "no objection" to Nepal's plans to build Arun III. However, this does not constitute a promise to guarantee Arun's water supply for the lifetime of the project. Even now, a proposal is pending in China for the Changsuo Basin irrigation project on the Arun (Phung Chu) river. In addition, there are a large number of glacial lakes in Tibet which could produce Glacial Lake Outburst Floods to which Nepal has no access. Going ahead with Arun without a firm commitment from China markedly increases the risk of the project.

5. Conclusion

     The Bank's failure to ensure that its policies on Environmental Assessment and Information Disclosure are being followed is undermining democratic processes in Nepal. We believe the unresolved issues surrounding this project, and the lack of public consultation and access to information makes it highly unsuitable for Board consideration at this time. We also question whether a project of this magnitude and cost is a reasonable use of IDA funds. If the Bank is to take seriously its publicly stated commitment to sustainable development, then there should be a full investigation of alternatives which are more suitable for Nepal's long term energy needs.

     If the concerns outlined in this letter are not addressed adequately by Bank management, we may be forced to submit a claim to the Bank's Inspection Panel.

     Thank you for your attention to these matters.


Bikash Pandey Alex Bush Alliance for Energy Intermediate Technology Nepal England

Arjun Karki Gopal Siwakoti

Arun Concerned Group Arun Concerned Group Nepal Nepal

Rajendra Dahal Ravi Pradan Alliance for Energy Alliance for Energy Nepal Nepal

Pitamber B. Chettri Ganesh K. Ghimire Alliance for Energy Arun Concerned Group Nepal Nepal

Gopi Upreti Yukio Tanaka Arun Concerned Group CEPAT
      Nepal Japan

Herman Warth Brent Blackwelder Urgewald Friends of the earth Germany USA

Lori Udall Chad Dobson International Rivers Network Bank Information Center USA USA

cc: Lewis T. Preston, The World Bank
    D. Joseph Wood, The World Bank
    Ismail Serageldin, The World Bank
    Ann Hamilton, The World Bank
           Section 4
************************************************************************************************** **************************************************************************************************

(Finl and, France, Germany, Japan, Sweden)

                                                             July 7, 1994, Washington, DC


     We are writing to you regarding the Arun III Hydroelectric project in Nepal which is under consideration to receive funding by the OECF and to follow up on a meeting we had in Washington, D.C. with Mr. Hasegawa, of OECF on June 5th in which we discussed our concerns about the project as currently designed.

     We believe that alternatives to the project have not been adequately investigated or publicly debated. We also submit that the long term cumulative environmental and social impact of development and road building in this remote and pristine environment have not been adequately addressed. Moreover, public information and access to information has been inadequate in the preparation of the project. Listed is an elaboration of our major concerns:

* With a current price tag of $764 million, the Arun III
     hydropower scheme will cost as much as the entire national
     budget for one year. This is a major financial commitment way
     beyond Nepal's limited resources.

     Although much of the loan for the Arun project is being made available on confessional terms, it is still a huge burden for a country with such a limited budget. One third of the country's national revenue already disappears into loan repayments. Since only 9% of the population has access to electricity, the whole country will bear the debt burden for the benefits enjoyed by a few. Large, centralized power schemes like Arun will not help the remaining 90% gain access to electricity.

     Even to those who will benefit from Arun, the cost will be very high. Despite concessional terms on the loans from the World Bank and Asian Development Bank to His Majesty's Government of Nepal (HMG/N), the Nepal Electricity Authority will be required to make payments to HMG/N for the loan at an interest rate of 10.25%. This cost will ultimately be borne by the consumer, who will pay very high electricity tariffs.

* The scheme will cost $3,800 per installed kW. Private
     companies in Nepal can and are building small and medium hydro
     schemes (up to 60MW) at half that rate.

     In the light of the high cost of power production, it is surprising that Arun came out as the best option for Nepal to pursue in the Least Cost Generation Expansion Plan (LCGEP). The LCGEP did not consider all the possible options for hydropower development in Nepal, and largely ignored the small/medium scale sector.

     Local private sector initiatives are consistently building schemes for less than $2,000 per kW installed in the small (1-15MW) and medium (15-100MW) hydro ranges, and $1,500 per kW in the mini/micro-hydro range. The 20 to 25MW of annual incremental power needs of the national grid can easily be met with a basket of 1- 100MW schemes coming on line one after the other.

* Investing in Arun means putting all Nepal's hydropower eggs in
     one basket. This makes it a high-risk option and provides no
     answer to the current load shedding problem.

     Investing in more, smaller schemes would spread the risks of investment and energy provision. If anything goes wrong with Arun, the country will have no alternatives to fall back on. The start date for the construction of Arun has already been shifted and is likely to be further delayed. Shorter-gestation projects will relieve load shedding much sooner.

* Political stability in the country will be threatened if
     tariff has to be raised to the level being insisted on by the
     World Bank for this project to go ahead.

     Since the newly elected democratic government came to power, electricity tariff was raised 61% in November 1991 and again 40% in February 1992. This has been followed with an increase of 38% in early 1994. This increase of over 200% in the electricity tariff has led to political protests in all the major cities in Nepal and petitions from the business community for tariff reductions.

     The high tariff is seen to be a direct consequence of the high cost of power generation from the Arun scheme and is doubly unpopular because together with the tariff increase people can expect more load-shedding for the foreseeable future. The further 50% tariff increase that is expected to be needed to pay for the energy produced from Arun will mean that Nepal will have the highest energy prices in South Asia and threatens to destabilize the country politically.

* There has not been enough preparation for detailed planning of
     the mitigation measures needed to counter the serious adverse
     environmental impacts of the access road to the Arun Project.

     The Arun Valley is a remote area of vast biological diversity and ecological fragility. The valley is inhabited by 450,000 people comprising 10 ethnic groups. These people will be extremely vulnerable during road and project construction. Over 1000 families will be affected by the loss of their homes, lands and livelihoods. Pre-project mitigation activities to prepare the local people for the effects of the construction of the road has not even begun and there are only some months left before the proposed beginning of construction. The Nepal Electricity Authority which is in charge of co-ordinating the mitigation activities and has full responsibility over environmental management during construction and after commissioning has no capability or experience in this area. There are serious doubts that NEA can execute these functions effectively in spite of the "unprecedented level of planning of mitigation for this project".

* Public participation both at a local level in the affected
     district and at a national level has been insufficient in the
     development of the Arun project.

     Serious questions that the people of Sankhuwa Sawa (the district where the project is to be sited) have regarding the alignment of the road, and benefits to the local population of jobs, training and access to electricity have not been adequately answered. The one Public Hearing that was held in the district was not publicly announced. When satisfactory answers to their questions could not be provided during the Hearing, local leaders asked the organizers, more than once, to terminate the meeting and go back to Kathmandu. No documents regarding the project (including the Environmental Impact Assessment in the local language) were available to local people before the Hearing.

     The project affects all the people of Nepal in different ways
- as consumers of the produced electricity or as those carrying the burden of the loan. Government officials boycotted a Public Hearing in Kathmandu on the project organized by NGO's on February 11th, 1993 and have not organized one of their own. A Public Hearing needs to be held in Kathmandu to discuss the risks of the project to the national economy and the alternatives to Arun that are available to Nepal.

* The engineering and management capability to build a large
     project like Arun does not exist in the country, which means
     that the entire scheme will be built by international

     Previous experience with large hydro projects in Nepal managed in this way (the Marsyangdi and Kulekhani schemes) demonstrates that such dependence on external technologies and expertise does nothing to help local capability grow and mature - in fact, the reverse is often the reality. While there were token provisions made for local capability building in the two projects named above, they never developed into genuine capability building. It is hard to see how Arun will enhance the hydropower capability of Nepal.

     The shortcomings of this approach are already clear. Japanese experts had to be brought in to assess the damage on the Kulekhani penstock (washed away in the floods of 1993) and four years after the completion of the plant, German technicians are still needed long term to run the Marsyangdi power plant. The Japanese experts have pointed out the lack of routine maintenance on the Kulekhani project and almost no record keeping of the maintenance that was done.

     Local capability in hydropower has been growing and maturing rapidly over the last 10 years, particularly in the private sector. Local companies are now taking on 50-60MW schemes, which are plenty big enough to meet Nepal's relatively modest energy needs. However, local initiatives require support rather than competition from schemes like Arun.

* Given Nepal's current development status and priorities, Arun
     could do more to damage than enhance the country's overall
     development prospects

     Nepal is one of the 10 poorest countries in the world. Its most urgent needs are for the basic services of clean water, sanitation, health and education. While electricity is high on the list of priorities for Nepal's rural communities (which represent 90% of the population), they stand little chance of gaining access to Grid electricity even in the long term. Stand-alone mini- and micro-hydro schemes offer the only realistic option for many of these communities ever to benefit from electricity.

     Given the Bank's emphasis on 'poverty alleviation' strategies for development and the recent concerns raised in the Wapenhans Report about the 'sustainable development impact' of its projects, it is difficult to see how it justifies the construction of Arun, which will benefit so few, generate no income for the country and increase its burden of debt.

The Alternative Approach

     The alternative approach to hydropower development focuses on a sectoral approach to hydropower generation that recognizes the complementarity of private and public sector elements. It also acknowledges the interdependence between, and complementarity of, the large, medium/small and mini/micro sectors in the industry. It is a process-oriented rather than product-oriented approach, which places equal importance on the establishment of greater hydropower capability as on increased power capacity per se.

     The aim of this approach is to plant Nepal firmly on the path to self-sufficiency in hydropower generation, and to reduce the country's dependence on foreign aid and technical assistance in the long term.

     The essential characteristics of this approach are:

* Focusing on schemes that use and enhance the country's
     existing capability

* Investing in building up local capability, in both the public
     and private sectors

* Switching to a decentralized model of power production, which
     ensures a sharing of risks among a number of schemes, and
     promotes local management and control of projects

* Removing the barriers to private sector investment, and
     creating an environment which is conducive to growth,
     maturation and expansion of private industry

* Adopting an evolutionary approach to hydropower development,
     whereby the industry moves ahead in manageable steps, taking
     on larger and more ambitious projects as its capability grows
     and matures.

     This approach is realistic. Nepal has the technical capability to take it on, though it will still require support for some years before it is totally self-reliant. Financial and institutional arrangements, however, require serious consideration
, as the current mechanisms cannot provide the necessary support.

     Based on the large number of concerns regarding the Arun project, we would urge your agency to consider utilizing your funds for supporting small and medium hydropower schemes of less than 100MW capacity which are more economically, environmentally and socially sound for Nepal's current situation.

     Thank you for your attention to these urgent matters.


Bikash Pandey Alliance for Energy Nepal

Gopal Siwakoti Arun Concerned Group Nepal

Lori Udall International Rivers Network USA

Chad Dobson Bank Information Center USA

Brent Blackwelder Friends of the Earth USA

Yukio Tanaka CEPAT Japan
                                Section 5
      By Gopal Siwakoti, Executive Director, INHURED International
                      Member, Arun Concerned Group
                              July 12, 1994
                             Washington, DC

       First of all, I would like to express sincere thanks for meeting the members of the Arun Concerned Group during the past two weeks and giving careful attention to issues that were raised regarding the proposed Arun III Hydroelectric Project in Nepal about access to information and public participation, environmental and social impacts, alternatives for energy development and the process of design and implementation of the project. I hope the following information will assist you further in understanding the critical issues and debates that are taking place in Nepal with regards to the merits and demerits of Arun III if it is implemented in its present form, shape and size as well as its possible adverse impacts in national economy and development process.

       It is our belief and understanding that the postponement of the Board date of July 26th will provide all of us a unique opportunity in carefully looking at all aspects of Arun III and take appropriate policy and implementation measures in future. It is mainly because the information release process has just began and it needs more time for their availability in local language for public consultation with the local people as well as national debate in the Parliament. Since a thorough discussion of the project in the Parliament and its approval is highly significant for the better future of Arun III as well as a secure investment of donors, it is important that this opportunity is given to the forthcoming new Parliament to be elected on November 13, 1994 as the existing Parliament has been dissolved on July 10, 1994 due to political infighting in the ruling party. I would like to assure you that the postponement of the Bank date will be viewed by the people, political parties and NGOs in Nepal as the sympathy and support of the Bank and other donors in stabilizing the hard-won democracy in Nepal.


       Denial of basic information by the Nepali Government, particularly Nepal Electricity Authority (NEA), about the Arun III Hydroelectric Project has been one of the serious matter of concerns for the people and NGOs in Nepal. A formal request was made by the Kathmandu-based International Institute for Human Rights, Environment and Development (INHURED International), Secretariat of the Arun Concerned Group, on December 10, 1993 requesting for all information about the project, and copies of the request letter was also sent to ministries of finance, and water resources as well as to the donors.

       As response to this letter, NEA provided the following documents on December 16, 1993:

     1. Environmental Assessment and Management, May 1993
     2. Environmental Management and Sustainable Development in the
          Arun Basin, October 1991

       Since the above documents only give a general knowledge about the environment aspect in the Arun Valley, and not the details of the project and the environment impact assessment, a follow-up letter was sent for the availability of complete set of documents and information on the project, including frequent visits to NEA officials but without a success. Formal and informal requests were also made for the cooperation of the World Bank office in Kathmandu about the availability of basic project documents and information. It is now confirmed from the World Bank list of reports that about 13 major environmental assessment- related documents were denied by the government until very recently.

       A public interest litigation was filed in the Supreme Court on December 31, 1993 under articles 16 (right to information) and 88.2 (right to public interest litigation) of the Constitution of the Kingdom of Nepal. By exercising its extra-ordinary jurisdiction, the Supreme Court delivered a verdict on May 8, 1994 in favor of the petitioners and ordered the Nepali Government to provide all documents and information about the project. The Court decision went even further and stated that denial of information, fully or partially on any grounds that there may be, can be challenged in the Court within 7 days from the date of such denial. The Court did not believe that the government has fulfilled its constitutional and legal obligations by referring to some public meetings and the setting up of "library" after the case was filed in the Court.

       Following the Court's verdict, the petitioners first demanded the list of documents and information from NEA that only provided a list of 151 reports in the second week of June in which many of the project documents and basic information were missing. It was only after a threat of another litigation and the contempt of the Court, the government provided a copy of the Memorandum of Understanding of October 1993 on June 26, 1994 at the outset of the Consultation with NGOs on June 28, 1994 by the World Bank. It is found out that NEA has supplied the World Bank a list of 298 reports which was not available in Nepal.

       Efforts of seeking project documents and basic information are still underway and there are strong possibilities of the second round of legal suits in the Court by challenging the complete or partial denial of basic project documents by the government without valid legal justifications. Similar efforts are also being made at the World Bank office in Washington, DC for the disclosure of project documents and information according to the list of 298 reports that was made available by the Bank on June 15, 1994.

       In conclusion, the process of access to information on the Arun III project has just began and several obstacles are foreseen in future despite the Court verdict for their release.

       Another disturbing issue regarding Arun III has been the lack of fruitful debate in the Parliament and its approval. The government has never presented any documents and information, other than policy statements and general information about the construction of the project, in the Parliament despite repeated efforts of Members of Parliament for the disclosure of project documents for debate and approval. A group of Members of Parliament even issued a public statement on January 12, 1994 with other public figures and demanded for the release of project documents and review of the whole project by the Parliament. Around the same time, the largest Opposition Party in the Parliament Communist Party of Nepal (UML) issued an statement and said that it will neither approve project nor assume any responsibility in future if the matter is not debated in the Parliament with the disclosure of project information.

       There are several issues involved relating to the design, funding and implementation of the project that need approval of the Parliament, e.g. approval of agreement with China on riparian issue
(since 86% of the water flows from China); status of agreement with India on the sale of energy, if it exists; approval of 10% investment by Nepal of the $764 million project and other questions relating to the cost, conditionalities of donors, and environmental and social impacts. So far the Parliament has not been provided this opportunity, and significant pressure on the government for the disclosure of project documents and a fruitful debate was expected in the present session of the Parliament, including independent reports by the Opposition Party and the People's Commission on Arun III, which is not the case anymore due to recent political developments in the country.

       The dissolution of the Parliament this week, and the calling of mid-term elections on November 13, 1994 have created further uncertainty of Arun III project if it is not critically reviewed by the donors to win the consensus of the fragile political parties and the confidence of the Nepali people. The final decision of the loans for the project will be viewed as undermining the democratic internal process in Nepal as well as seizing of "opportunity" during political turmoil. The status of the project will further degrade if the existing members of the Cabinet and the ruling party get defeated in the November elections leading to new opening of debate on Arun III.


       It will be essential for the borrower country, the people and the donors to postpone the July 26th voting of the project by the Bank, and review the whole project with careful attention during the period of electoral preparation for November elections, particularly:

 1. investigate violations of the Bank's Information Policy and operational procedures by the Bank Management;

2. study of issues and concerns raised by NGOs during the June 28th consultation meeting held at the Bank;

3. review the compliance of the Bank's policy, procedures, guidelines and standards relating to the project as the obligations of a borrower country, and access to basic project information by the affected people and the citizens of Nepal;

4. ensure the debate of the project in the next elected Parliament
(November 1994) and its approval;

5. respect the decisions of the Supreme Court of Nepal on access to information on Arun III as well as the internal democratic process;

6. take into account the detailed information to be provided by NGOs in Nepal on various issues relating to Arun III, particularly environmental impact assessments and mitigation measures as well as alternatives to Arun III; and

7. satisfy with other unresolved issues relating to the life and sustainability of the project, e.g. riparian issue with China, glacier outburst, alternatives to energy development, adverse impacts in social sectors.

Please do not hesitate to contact for further information or clarification.

Thank you.

Contact address in Washington, DC: c/o Lori Udall International Rivers Network 1025 Vermont Avenue #300, NW Washington, DC 20005 USA Tel: (202) 879-4280 Fax: (202) 879-3186

Section 6
                              July 27, 1994
                              Washington, DC
     Kathmandu, Nepal On July 22, at 2 p.m. local time, a mob of sixty burst into the Arun Public Commission's office, which is conducting hearings on the controversial Arun III hydroelectric project. Openly led by the president of the District Development Board of Sankhuwa Sawa, the gang wrestled the Commission members that attacks would escalate if public hearing continue on the Arun III project. The group then announced plans to break into the office of INHURED International (International Institute for Human Rights, Environment and Development) the Secretariat of the Arun Concerned Group, to attack its officials. At that point, they were restrained by police.

     The Arun Public Commission was created to conduct independent hearings on the Arun III project, now being pushed by World Bank staff but not yet formally approved by the Bank's Board of Directors. The five-member Commission is headed by the former Acting Chief Justice of the Supreme Court of Nepal, and two of the commissioners attacked on July 22 are university teachers. Similar attacks have also been threatened against members of the Arun Concerned Group.

     INHURED International was created in 1987 to monitor democratic efforts in Asia. While its concerns are varied, the threatened attack seems to be based on its study on of the probable adverse impacts of the World Bank-funded Arun III project. In January, INHURED's Executive Director and Program Director received death threats after filing a petition at the Supreme Court of Nepal for public disclosure of Arun III information.

     Controversy surrounding Arun III has become a major issue in upcoming Nepalese elections. To consolidate its hold on power, the government has heavily publicized a "coalition" of non-government organizations who allegedly support the building of Arun III. This group is apparently the same set of people that attacked the Commission's office Friday. While the police have been informed of these attacks, many are concerned that they will go unchallenged, due to government support of the project.

     Arun III, which depends largely on proposed World Bank funding, has been challenged on several grounds:
     - Environment - Arun III will cause severe corrosion, floods, land slides, deforestation, and loss of biodiversity.
     - Economics - The cost of Arun III, $764 million, is as large as the entire annual Nepalese budget. Arun III also has a higher cost per kilowatt-hour than that for any alternative energy projects, demonstrating its lack of cost-effectiveness.
     - Culture - Proposed construction of Arun III will depend on foreign, rather than local, labor, bringing a huge influx of outside interests into an isolated area of Nepal.

     More information is attached, or contact Brent Blackwelder at 202-783-7400.
      Address: 1025 Vermont Avenue, NW, Third Floor, Washington, DC
     20005 Phone (202) 783-7400 Fax: (202) 783-0444 EcoNet ID:

                                Section 7

                                                                  On May 8, 1994 the Supreme Court of Nepal issued an order in favor of the petitioners and against the defendant: Ministry of Finance, Ministry of Water Resources, Nepal Electricity Authority and Arun III hydro-electric project. This came after the series of hearings on the historic public interest litigation filed by the Executive Director of INHURED International, Advocate Gopal Siwakoti
'Chintan', and a human rights activist Dr. Rajesh Gautam, demanding the right to information regarding the controversial Arun III hydroelectric project as the dispute comes under article 88 (2) of the Constitution of Nepal which provides for such litigation and the solution of the legal and constitutional disputes regarding the project. According to the decision made by Joint Bench of Justices Mr. Haragovinda Singh Pradhan and Mr. Keshab Prasad Upadhyaya, the defendants should provide all information regarding the Arun III according to the article 16 of the Constitution.

                                                                  The Supreme Court has made a new and historic interpretation of legal principles in the context of the lack of necessary laws for the enforcement of the right to information in Nepal and the situation in which several provisions of other existing laws are yet to come into force. It has decided that up to the time when appropriate laws are not enacted, the government agencies should provide information to the Nepali citizens by applying the following guidelines and procedures:

1. The applicant should first demand the list of documents from the
                                                                                                                                  defendants. 2. If the defendants provide the list within seven days, the applicant
                                                                                                                                  should demand an inspection of the concerned documents. 3. If the demand is made according to clauses 2 of these procedures, the defendants should set the time, date, and place and provide information to the applicant within three days. 4. If the applicant wants to make a note or copy of the document after inspection, he or she should request the specified authority for the same. 5. In the absence of laws for providing copies, the copies should be certified by accepting the expenses for copies as fees. 6. If the defendants have to deny the right to provide the list, full or part, or inspection or for providing copies, they should indicate the reason and inform the applicant within three days. 7. In conditions under clause 1 and 6, where the applicant is denied the right to information, the applicant, if not satisfied with reasons for denial, can file a petition in the Supreme Court within seven days after the receipt of the information of denial. 8. The procedure for the action described above shall be made according to the rules of the Supreme court.

                                                                  This Supreme Court precedent has established the right to information for all citizens regarding the Arun III hydroelectric project and any other subject of public interest from the government agencies in the future after the fulfillment of the procedures as mentioned above. In addition, the decision of the Supreme Court has also outlined the structure of future law on the right to information.
                                                                  So far, application has been made to the government authorities according to the Court decision, But, unfortunately, they have still been denying the disclosure of many information relating to Arun III. NGOs and activists are now, preparing for another round of legal battles in the Supreme Court on the grounds of contempt of Court and the further denial of the right to information as provided for by the Court decision.

                                Section 8
                        INTERNATIONAL SOLIDARITY
                          ON ARUN III CAMPAIGN
       Global Legislators Organization for a Balanced Environment
                                                           March, 8, 1994 Mr. Lewis T. Preston President The World Bank 1818 H Street, NW Washington, DC 20433

Dear Mr. Preston:

                                                                  We write to express our concern over the proposed Arun III hydroelectric dam project on the Arun River in eastern Nepal. It is our understanding that this project is scheduled to come before the Board for a vote in April.

                                                                  We recognize that detailed environmental impact statements have been prepared for the Arun project and that the Government of Nepal supports the building of this hydroelectric facility. While we are sensitive to the Government of Nepal's desire to meet the energy needs of its country, we are concerned that the Arun hydroelectric dam and its accompanying access road and associated transmission lines, as currently planned, may pose serious economic, environmental and social impacts that have not been adequately addressed.

                                                                  Arun III would be one of the most expensive hydro power projects in the world. As you know, the cost of the project at present is estimated at $764 million, an amount greater than Nepal's national budget. Furthermore, there are reasons to believe that, although lengthy, the environmental impact statements are incomplete. Finally, we are concerned that the assessments have not adequately taken into account the adverse social impacts of opening up this isolated area of the Arun valley by constructing an access road and bringing thousands of people to the remote project site.

                                                                  We urge the Bank to give serious consideration to alternatives put forth by Nepalese NGOs that utilize the extensive small-scale and mini-hydro potential of Nepal. Such an approach would be considerably less expensive and result in a lower debt burden for the Nepalese, be less detrimental to the environment and probably would not require the construction of new roads into this pristine area, and would be decentralized and smaller in scale than the Arun III proposal, Finally, this type of approach would make greater use of local materials and expertise, and could involve a greater number of Nepalese in all levels of the project decision-making and implementation than the current plan.

                                                                  We strongly encourage the World Bank to carefully reexamine the economic, environmental, and social implications of the Arun III project and to give the same level of consideration to alternative approaches. We also ask the Bank to evaluate whether Arun III is the "least-cost" approach to meeting the energy needs of Nepal, a critical criterion of the World Bank's energy policy.

                                                                  We appreciate your consideration of this important issue and look forward to your response.


 Takashi Kosugi, President GLOBE International

Akiko Domoto, President, GLOBE Japan

John Karry, President, GLOBE USA

Nikolay Vorontsov, President, GLOBE Russia

John Edward Porter, Vice-Pres, GLOBE USA

Hormo Muntingh, President, GLOBE EC

Karl-Heinz Florenz, Member, GLOBE EC

Carlos Pimenta, Vice-Pres., GLOBE EC

Kaneshige Wakamatsu, Member, GLOBE Japan

Eva Quistdorp, Member, GLOBE EC

Tamako Nakanishi, Member, GLOBE Japan

Kiyoko Ono, Member, GLOBE Japan

Anatoly Shabad, Member, GLOBE Russia

Noboru Usami, Member, GLOBE Japan

Vitaly Sevatyanov, Member, GLOBE Russia

Constance Morella, Member, GLOBE USA

Jolene Unsoeld, Member, GLOBE USA

(printed from the original text)

Address: Ginza Form 21 Bldg., 7th Floor 8-13-4 Ginza, Chuo-ku, Tokyo, J-100 Japan Tel: 81-3-3545-9555 Fax: 81-3-3545-8620


          As the debate on the status of the Arun III hydro- electric project is intensifying in Nepal, global environmental groups have been expressing their critical concerns to the World Bank, other donors and the Nepali government authorities. Such major concerns such as adverse impacts on society, culture and environment, cost and benefit, debt burden, donors' inappropriate conditionalities, heavy use of foreign manpower and absence of local human resources, lack of effective participation of the local people in decision-making and implementation. Some of these organizations include:
  1. Both Ends (The Netherlands) 2. Friends of the Earth (USA) 3. Global Legislators Organization for a Balanced Environment
(Japan) 4. International River Network (USA) 5. Netherlands Committee for IUCN (The Netherlands) 6. United States Environmental Protection Agency (USA) 7. Women's International League for Peace and Freedom
(Switzerland) 8. Bank Information Centre, USA

                                                     C. US COGRESSMEN/WOMEN
                         (list to be confirmed)
                                     Mr. Lewis Preston President The World Bank 1818 H St. NW Washington, DC 20433

Dear Mr. Preston:

We would like to express our strong opposition to the pending application for financing by the World Bank and other agencies of the Arun III Dam in Nepal. The cost of this massive and destructive project - $764 million - equals the entire annual budget for the country. The World Bank has failed to give serious consideration to smaller scale alternative energy investments.

The dam could spell cultural and environmental disaster to an isolated biologically high, and ethically diverse mountain valley in Nepal with high quality forests. Construction will involve a major influx of outside building interests with sparse local participation. The World Bank explicitly admits that the project
"will bring rapid and irreversible changes to the area.'

We are opposed to this kind of uneconomic massive, destructive engineering investment. We urge the World Bank to consider small and medium scale hydro. This project comes at a time when Commissioner Board of the U.S.. Bureau of Reclamation speaking at he International Commission on Irrigation and Drainage says:
"Within the last two decades, we have come to realize there are many alternatives to solving water resources problems in the U.S. that do not involve construction. Non-structural alternatives are often less costly to implement and have fewer environmental costs. For example, we have seen the emergence of more sophisticated resource management approaches in both energy and water."

The Alliance for Energy has put forward an alternative approach to the Arun hydroelectric project which focuses on developing Nepal's existing electric capacity, both in public and private sectors. The plan promotes local management and control of projects while providing electricity to local and rural people.

We urge you to support sustainable energy development and oppose the uneconomic Arun III Dam which will cause significant social and environmental damage.




Section 9


     (Published is a text of a letter sent by the Secretary of Ministry of Water Resources, Surya Nath Upadhyay, to a U.S. Government official on June 24 that reflects existing position of the Nepali government on Arun III and views about the public campaign.)

     "At the very outset, let me note that the project has not only been approved by the democratically elected government, but also enjoys support in the Parliament. This support was obvious during the almost day long debate on this project in the both Houses of Parliament held in the late march/early April 1994, as well as reflected in the letter dated April 4, 1994 written to the President of the World Bank by the members of the Parliament including the opposition members and various local bodies of the region where the project is located.

     "Arun III HEP is perhaps a unique development in the world for which a basin wide environmental study was conducted to identify various programs/activities to be implemented to ensure that the construction of the project will lead to the sustainable development of the whole valley. In the process of the study, local people were extensively consulted and recommendations were made on the basis of these consultations. The study was carried out by Nepal's most prestigious non-government organization (NGO), Kind Mahendra Trust of Nature Conservation (KMTNC). While preparing the Acquisition, Compensation and Rehabilitation Plan (ACRP), the people to be affected by the project were interviewed using exhaustive questionnaires.
     "Public consultation has been considered as an ongoing process by the project. As of today, the project officials have either organized or participated in 23 public meetings which took various forms and took place in various places within the project area, district headquarters and the capital - Kathmandu. The proceedings from these meetings have either been video or audio tapes and are available to any interested person. In order to facilitate dissemination of information about the project, a documentation center/library has been opened where all interested parties can read, copy and discuss any aspect of the project.

     "The project is the most widely debated government undertaking and the government is committed to maintain utmost transparency in the execution of the project. This commitment is guaranteed by the constitutional obligation, whereby the people's right to information is ensured.

     "Despite all these efforts, unfortunately, the are a few NGOs and INGOs, who support them, that are actively involved against the project. While we in the government respect divergent opinion of the people and right to form his or her opinion, we regret to state that these NGOs/INGOs never directly approached us either to discuss or to ask information about the project. On the contrary, we have requested them to communicate with us, but without success. We wonder whether these INGOs have ever been to the project sites or tried to feel the aspiration of the people of that area.

     "We in the government believe that Arun III HEP is one single development which will change the face of the nation by generating electricity so much needed for agricultural, industrial and tourism development in the country.

     "Before concluding, I must point out that Nepal has only three resources - hydro, human and tourism. Exploiting huge hydropower potentiality that Nepal is bestowed with is vitally important for the overall economic development of the country, and Arun III HEP is going to be an important landmark towards this."

                                                                                                                                                                                                                                                               Section 10


1 Panauti 2,400 K.W. 2 Trishuli 21,000 K.W. 3 Sunkoshi 10,000 K.W. 4 Gandak 15,000 K.W. 5 Kulekhani-1 60,000 K.W. 6 Devighat 14,000 K.W. 7 Kulekhani-2 32,000 K.W. 8 Marsyangi 69,000 K.W. 9 Andhi Khola 5,100 K.W.


10 Jhimruk Piuthan 12,500 K.W.


11 Budhi Gandaki 6,00,000 K.W. 12 Kaligandaki No. 2 6,60,000 K.W. 13 Kankai (Multipurpose) 60,000 K.W. 14 Sapta Gandaki 2,25,000 K.W. 15 Naumure 2,00,000 K.W. 16 Lower Arun 3,00,000 K.W. 17 Seti (West) 2,85,000 K.W. 18 Arun-3 4,02,000 K.W. 19 Bagmati 1,40-2,10,00 K.W. 20 Kali Gandaki A 1,00,000 K.W. 21 Tama Koshi No. 3 1,23,000 K.W. 22 Bhote Koshi No. 2 69,000 K.W. 23 Andhi Khola No. 1 (Reservoir) 1,80,000 K.W. 24 Upper Arun 3,80,000 K.W. 25 Khimti Khola 49,000 K.W. 26 Seti Gandaki 3,20,000 K.W. 27 Karnali (Chisapani) 1,08,00,000 K.W. 28 Upper Karnali 2,40,000 K.W. 29 Pancheshwar (Mahakali0 10,00,000 K.W. 30 Puwa Khola 5,000 K.W.

Note: In the above list, Arun III is in the eighth priority of the government until August 1992 out of 20 such planned and proposed projects. (Source: Hydroelectric Projects, Identified for Private Investmetns (1 MW to 50 MW Capacity), HMG, Ministry of Water Resources, Water and Energy Commission Secretariat, Kathmandu, August 1992).


"I am a bit disappointed with the World Bank because sometimes they say one thing and sometimes another. They say they prefer democracy to be maintained in the countries receiving their aid, and yet they impose such conditions which put democracies like ours in trouble. I fee they are themselves not sure of what they want."

Prime Minister Girija Prasad Koirala in an interview to SUNDAY, Calcutta, as published in WEEKEND, May 28, 1993, Kathmandu.

                                    "JUSTICE DENIED"
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                                                                                                                                                                                                                                   Copies of the 185-page book can be ordered in US$14 or equivalent
      from: INHURED International, P.O. Box 2125, Kathmandu, Nepal
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             WILPF, C.P. 28, CH 1211, Geneva 20, Switzerland
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      Purushottam Subedi, Nepal Human Rights Committee-USA
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