The 60 versus 90 MW Battle over Upper Trishuli-3A
The Victors and the Vanquished
Classic Case of throwing the Baby with the Bathtub!
Asar 2070 (July 2013)
Abstract: The chronicling of Upper Trishuli-3A (UT-3A) controversy is necessary because it is a classic example of what ails our power sector and why we suffer such long load shedding. With a concessional US$ 120 million loan from China, UT-3A was tendered in February 2009 as a 60 MW project but with the ‘alternative proposal’ caveat. Bids were opened in May 2009 and the lowest evaluated bidder, China Gezhouba Group Company (CGGC), also had the ‘25% of the cost’ caveat for the ‘90 MW option’. NEA envisaged starting project construction ‘from the dry season of 2009’. However, a full two year lapsed before order to commence work on the 60 MW UT-3A was given in June 2011. This unduly long two year delay and the ‘chalkhel’ therein could be another chronicle in itself. The 60 versus 90 MW controversies then spilled over to the public. The blistering partisan stands of the media were further compounded by the bureaucratic ‘save your necks’ committees’ recommendations. 20 months after commencement order for the 60 MW was given, Prime Minister Baburam Bhattarai’s cabinet approved ‘in principle’ the 90 MW upgrading in January 2013. This was lambasted for abuse of power ‘for personal and party’s benefit ….. no other motive than earning cash.’ Strangely, the cat was finally belled by Khil Raj Regmi’s bureaucrat-led Interim Election government when the NEA Board on 31st May 2013 decided on the 90 MW upgrading to ‘optimize available resources.’ The NEA Unions, in close unison with the political stalwarts, immediately rose up in arms. In a mere 12 days, the cobbled-up Interim government buckled and the NEA Board ate the humble pie by retracting its 90 MW decision to 60 MW for a ‘more congenial environment’ in the supply of electricity. This article attempts to analyze this controversial issue by reconstructing the sequence of events and decisions so that latter-day researchers will judge who the victors and the vanquished are in the UT-3A controversy.
Upper Trishuli-3A 60 Megawatt Project:
Salient features of UT-3A Project:
Headworks: 1 km downstream of Mailung/Trishuli confluence (19 km north of Trishuli town)
Access road: 2.3 km new and 11.3 km upgrading
Design discharge: 51 cumecs based on 70% exceedance flow
Gross head: 144.5 meter
Headrace tunnel: 4.095 km
Installed capacity: 60 MW (2x30 MW units)
Minimum Power: 43.75 MW
Gross annual generation: 489.76 GWh (average annual generation: 460 GWh)
Transmission line: 48 km to Kathmandu, 220 kV initially charged at 132 kV
Estimated project cost: 109.224 million US$
Specific energy cost: 3.03 US Cents/kWh
Estimated project completion date: 2014
Some important milestones of UT-3A:
January 22nd 2009: Tender Floated for 60 MW with Alternative Proposal clause
May 5th 2009: Bid Opened
May 28th 2010: Contract Agreement (with subject to condition)
February 28th 2011: Nepal Government and China Exim Bank sign Loan Agreement
April 15th 2011: Nepal Government and NEA sign Subsidiary Loan Agreement
May 18th 2011: Loan Agreement Effective
June 1st 2011: Commencement of Work Order given to CGGC (completion in 35 months-May 1st 2014)
January 3rd 2013: ‘in principle’ approval by Cabinet for 90 MW upgrading
May 31st 2013: 654th NEA Board approves 90 MW upgrading for US$ 132.00 million
June 12th 2013: 656th NEA Board retracts its 90 MW decision to 60 MW
The August 2009 NEA annual report stated that the Detailed Project Report (DPR) of 60 MW, 460 GWh UT-3A was prepared in 2007 (FY 2064/065) by NEA using its own indigenous resources. Estimated cost of the project then was US$ 125 million and this was envisaged to be financed through a US$ 120 million concessional loan from China Exim Bank under the Engineering, Procurement and Construction (EPC) model. Based on the 2007 DPR, tender was floated on 22nd January 2009 with the Alternative Proposal clause and the Bid opened on 5th May 2009. The August 2009 NEA annual report also stated that evaluation was in final stage and ‘actual construction of the project is envisaged to start in the dry season of 2009.’
As indicated above, UT 3-A was designed by NEA as a 60 MW project with an average annual energy generation of 460 GWh at a high 70% exceedance flow. NEA, unwittingly, planted the first seed for controversy by inserting the clause ‘Alternative Proposals by Bidders’ in the tender document. Media reports indicate that, of the four bidders, China Gezhouba Group Co. Ltd. (CGGC) quoted US$ 111 million for the 60 MW with an ‘additional 25% cost’ for the 90 MW ‘alternative.’ However, finding that its other competitor, Sino Hydro, had a lower bid of US$ 90 million, CGGC offered, on the last bid closing day, a discount such that its bid price came down to US$ 89.1179 million. Bids were evaluated and the EPC contract for major works of 60 MW UT-3A was awarded to CGGC with a ‘subject to’ clause at US$ 89.1178 million on 28th May 2010. This ‘subject to’ clause was ‘contract will be effective once the loan agreement with the Government of China is accomplished.’ It took a full one year for the loan to be effective and CGGC was given the work order to commence only on 1st June 2011. This meant the period between the tender opening date (5th May 2009) and the order to commence work (1st June 2011) took a full two year. This unduly long two year delay incubated and germinated various kinds of chalkhel/controversies in the urja sector.
Upper Trishuli-3A Controversies:
The media, as the nation’s fourth estate, played an important role in highlighting the UT-3A controversies. With the benefit of hindsight, it may be stated that some got so carried away that they tended to be partisan highlighting only one side of the coin. The projected picture was, thus, blurred and the danger of mistaking the trees for the forests became very high. Some of the major arguments of the proponents for the 60 MW and 90 MW are highlighted below:
60 MW Proponents:
90 MW Proponents:
This 60 versus 90 MW debate became very contentious in the power sector. NEA carried out a number of in-house reviews but the recommendations were conflicting. The June 2011 Review of 90 MW Plant Option for Upper Trishuli 3A Hydroelectric Project recommended: ‘immediately start negotiation with the Main EPC contractor CGGC in order to upgrade the plant capacity to 90 MW that will benefit the country.’ However, NEA’s 23rd June 2012 (2069/3/1) Committee gave a categorical ‘no…but’ worded bureaucratic recommendation: ‘in the present context, upgrading cannot be called appropriate. However, in another context……concrete decision be taken only after detailed studies by concerned experts.’ Energy Ministry’s Joint Secretary MB Kunwar’s committee gave a similar ‘either…or’ safe bureaucratic recommendation: ’either complete the 60 MW project within the stipulated time and cost or in the light of prevailing energy crisis upgrade the project to 90 MW.’ The Kunwar committee was well aware it was impossible for CGGC to complete the 60 MW project within the ‘stipulated time and cost.’ The committee, therefore, shrewdly left the onus on the Cabinet’s shoulders.
Based on the Kunwar recommendation, Prime Minister Baburam Bhattarai’s cabinet chose and approved the 90 MW upgrading of UT-3A ‘in principle’ on 3rd January 2013. Dr. Ram Sharan Mahat immediately went into tantrums charging that Prime Minister Bhattarai had abused his power ‘for personal and party’s benefit. There is no other motive than earning cash.’ These were indeed very serious charges. Furthermore, advocate Lekhnath Chapagain filed a writ at the Supreme Court arguing that the cabinet’s decision to award the 90 MW upgrading to CGGC without competition was against the Public Procurement Act. The Court on 3rd February 2013 refused to issue stay order on the ground that the NEA Board is yet to approve the Cabinet’s decision. Finally, on 31st May 2013, the cat was finally belled by the 654th NEA Board (reshuffled by Interim Regmi government) by awarding CGGC the UT-3A 90 MW contract at an inexplicable incongruous amount of US$ 132 million.
The following are the details of some of the key milestones in the 60-to-90 then back to 60 MW reversal decisions:
Letter to Energy Minister-cum-Chairman of NEA Board by NEA’s 5 Unions on May 28th 2013 (Jestha 14th 2070): The five employees’ unions of NEA (Rashtriya Karmachari Sangathan NEA, Nepal Rashtriya Karmachari Sangathan NEA, NEA Karmachari Kalyan Parisad, NEA Karmachari Sangh and NEA Karmachari Union) submitted a letter on 14th Jestha 2070 to the Energy Minister-cum-Chairman of NEA Board with the following warnings:
Note that while the Unions mention that about 35 to 40 percent of work has so far been completed by CGGC, the NEA Board maintains that only 21 percent work have been completed.
NEA Board’s Decision to Upgrade UT-3A to 90 MW on May 31st 2013 (Jestha 17th 2070) : Exactly three days after the Unions’ letter, the NEA Board on Jestha 17, 2070 in its 654th meeting decided to upgrade the US$ 89.18 million 60 MW UT-3A to 90 MW at an inexplicable incongruous amount of US$ 132.00 million. The Board defended its decision through a lengthy press release highlighting the following salient points:
Project Capacity Estimated Cost per Kw in US$
The addition of the third 30 MW turbine will provide flexibility in preventing spillage of dry season flows while performing maintenance of the power plants. 60 MW capacity means two 30 MW turbines and when maintenance has to be performed on a machine about 14 MW of valuable dry season flows would be spilled. Such would not be the case when there are three 30 MW turbines.
In the din and noise of this lengthy press release, the NEA Board unfortunately clubbed the upgrading of the lower cascading Upper Trishuli-3B from 37 MW to 55 MW as a minor sundry bye-product. This issue should have been stressed much and highlighted as the project is about to go into construction and the fate of UT-3A will determine UT-3B’s fate. The press release deliberately ignored the cabinet’s ‘in principle’ approval and also failed to mention that the ‘90 MW option’ was part and parcel of the tender documents.
By all accounts, the US$ 132.00 million award contract for 90 MW was an incongruous figure. The dispute between NEA and the contractor CGGC for the 30 MW addition was whether the ‘additional 25% cost’ was of the contracted but discounted US$ 89.18 million price or the initial CGGC bid of US$ 111.00 million. Whereas, one gives an additional cost of US$ 22.29 million, the other gives US$ 27.75 million. This should mean the upgraded 90 MW UT-3A should be contracted either at US$ 111.47 million or US$ 116.93 million. Both the figures were thrown out of the window, when the NEA Board awarded the contract at US$ 132.00 million. The NEA press release appears to deliberately ignore this inexplicable figure. It should have gone at length to justify this incongruous figure.
Gyapan Patra of 5 ex-ministers to Khilraj Regmi, Chairman of Council of Ministers June 6th 2013 (Jestha 23rd 2070):
Six days after the NEA Board’s decision to upgrade UT-3A to 90 MW, five former ministers (Dr. Ram Sharan Mahat-NC, Dr. Prakash Chandra Lohani-RPP, Surendra Pande-UML, Dr. Prakash Sharan Mahat-NC and Gokarna Bista-UML) on Jestha 23, 2070 submitted a petition (gyapan patra) to Khil Raj Regmi, Chairman of the Council of Ministers requesting that the decision to upgrade UT-3A to 90 MW be retracted to 60 MW. The ex-Ministers pointed out that the 90 MW upgrading decision by the Energy Ministry and NEA Board is against the laws and is clearly in the interests of the contractor. NEA will have to bear a huge loss from this decision and load shedding in the country will get worse. The ex-Ministers requested the Nepal Government to retract this decision putting forward the following six arguments:
In view of the above reasons, not stopping the upgrading will mean going along with those who break the laws and resort to corruption. The Cabinet cannot shirk its responsibilities by throwing it on the shoulders of Energy Ministry and NEA Board. It is the responsibility and duty of the government to stop the decision of the institutions under it that go against the laws, the nation and its people!
Public memory is short. The two Energy Ministers ahead of Dr. Baburam Bhattarai were Gokarna Bista and Dr. Prakash Sharan Mahat. It should be noted that Dr. PS Mahat manned the Urja Mantralaya from tender opening date (May 2009) to commencement of work order date (June 2011) – the two years wherein the chalkhel was intense! Such a gyapan patra by the stalwarts of three parties (NC, CPN-UML and RPP), with three of them hailing form Nuwakot district itself, added fuel to the agitation of NEA’s unions. The Unions starting with the token pen-down strike escalated their agitation by obstructing management vehicles into the office then disconnecting the electricity supply at the Pulchowk Ministers’ quarters. The last straw on the camel’s back for the cobbled-up Interim government was when the Unions threatened to also disconnect the electricity supply of their Chairman of the Council of Ministers at Baluwatar.
NEA’s Press Release Retracting the 90 MW Decision Back to 60 MW on Jestha 29, 2070 (12th June 2013): The following are the main highlights of NEA’s press release of Jestha 29, 2070 while retracting the decision on UT-3A from 90 MW to 60 MW:
Though many of the above points are repeats of the previous arguments put forth while approving the 90 MW upgrading, the NEA Board now deemed it a necessity to refer to the cabinet’s ‘in principle’ approval which was deliberately ignored in its previous press release. The Board, for face-saving purposes, attempted to give the message that it was merely following the dictates of previous government’s cabinet decision. The press release of NEA Board cited just one and only one reason for its withdrawal of 90 MW upgrading: to create ‘congenial environment in electricity supply’ as the NEA Unions had resorted to and threatened more disconnections of electricity. Electricity supply is categorized by our laws as essential services and existing Essential Services Act clearly outlines how to tackle such disruption cases. However, the cobbled-up Interim government preferred to take the path of least resistance and bowed down to the wishes of the NEA unions.
So finally the drama was over in a mere 12 days. Despite mentioning the upgrading ‘issue was already before the country’s authorized authority and the Court’, the NEA Board or rather the cobbled-up Regmi government could not withstand the pressure and just crumbled to its knees. This confirms that the political parties were very much behind the unions’ agitations. The lone scapegoat of this debacle was the Energy Secretary, Hari Ram Koirala, who was conveniently transferred from the ministry to the ‘fly swatting’ Office of the Vice-President.
Four Unions’ Press Release of Jestha 30, 2070 (13th June 2013):
Strangely, the Unions’ have demanded strong action against those ‘matiyars/accomplices’ responsible for the wrong 90 MW upgrading and even ‘warned’ senior NEA officers not to make such wrong decisions in future. Yet, the Unions do not hesitate to state in the same breath that the responsibility has now fallen squarely on NEA shoulders to implement the 60 MW UT-3A in that ‘timely, well-intentioned and as per the country’s laws.’ Can a house divided be able to do that? Only Time will tell.
Final Word: Throwing the Baby with the Bathtub?
So, finally, who are the victors and who the vanquished in this 60 versus 90 MW controversy? Basking in the immediate glow of hindsight, the writer enumerates below some of the principal actors who committed the cardinal sins in Upper Trishuli-3A’s controversies:
By retracting UT-3A’s 90 MW decision to 60 MW, the lower cascading UT-3B’s capacity has also been retracted from 55 MW to 37 MW capacity. So who are really the victors and the vanquished in this battle? One is not certain whether or not the five former Ministers and the five NEA Unions are the victors. If indeed victory, then, no doubt, Pyrrhic victory at a very high cost? As for the vanquished, it is the nation that lost the opportunity to optimize her resources not only at UT-3A but also at UT-3B. Vanquished are the people of Nuwakot and Rasuwa along with their children and grandchildren to come, tragically for no fault of theirs at all. They were deprived of crores of Rupees from enhanced electricity royalty that the upgraded capacities would have brought to their villages and districts for a good fifty to hundred years. That is why many, along with this writer, believe that the 90 MW baby has been tragically thrown with the bathtub!
It is indeed amazing that those at the helm of the nation have devoted so much time and energy (from bid opening date of May 2009 to 60 MW reversal from 90 MW of June 2013) for a tiny 30 MW upgrading. For a mere 30 MW capacity that is about 2.4% of the country’s peak demand, we have wasted four valuable years fretting, frothing and even threatening to disconnect the electricity supply of the very Chairman of Council of Ministers we enthroned. Yet, we do not refrain from boasting from the top of Dharara that we would build 10,000 MW in 10 years and even 25,000 MW in 20 years. While we wail and beat our breasts about the 14/16 hours of load shedding per day that has become a religious ritual in the dry season, we are quick to resort to gyapan patras and strikes for a mere 30 MW addition. We are indeed a nation of seasoned politicians who eased out constitutional monarchy and ushered in republicanism in a well orchestrated manner. We are a nation where our Nepali Congress brethren, RC Poudel, unflinchingly stood 17 times for the post of Prime Minister and only then withdrew solely for the larger interest of our nation. We are probably the only nation where our CPN-UML comrade, MK Nepal, despite gamely losing the election from both his constituencies, was deemed the only personality fit to rule over us as our Prime Minister. And then faced with the misfortune of having run-out of politician Prime Ministers, we humbly beg a sitting (but unwilling?) Supreme Court Chief Justice to embellish the post of the Chairman of the Interim Council of Ministers.
We are an amazing nation. Having forced over 30 lakh young industrious Nepalese to become migrant job seekers in the torrid deserts of Arabia (all due to selfish inter/intra party squabbles) and despite the leaders’ endless crowing of ‘chunab ko bikalpa chhaina’, no provisions were made for such a large number of Nepalese to exercise their ‘fundamental voting rights’ during election. Thus, having resorted to all these gimmicks and antics in the last five years, do we really have the moral authority to demand that the 90 MW upgrading was ‘against the laws, the nation and its people?’ This is our Nepal unfortunately. Time and only time, that great healer and truth teller, will judge who the victors and the vanquished are in the UT-3A controversy!
The writer was planning to have this article published in NEA’s Vidyut Bhadra 2070 (August 2013). He was, however, ‘advised’ to write something else as the Upper Trishuli-3A had become too sensitive at NEA!
NEA, A in Review – August 2011 (Bhadra 2068)
Many are not aware that this Alternative Proposal (90 MW option) was part and parcel of the tender document itself.
Balaram Baniya in Kantipur of Mangsir 30, 2069 (Dec. 15, 2012) and Poush 4, 2069 (Dec. 19, 2012).
NEA – A Year in Review, Bhadra 2067 (August 2010)
Op. cit. Footnote 4.
Op. cit. Footnote 4.
NEA, A Year in Review – Fiscal Year 2011/2012 (Bhadra 2069-August 2012). Generation Construction Business Group. Readers need to be careful that these figures do not tally with those given by the NEA Board in its press release!
Former Finance Secretary, Rameshwar Khanal, in his interview to Kantipur daily stated that 90 MW will be available for only one month. Secretary Khanal was either misquoted or he was misinformed.
Hari Bahadur Thapa’s Trishuli-3A: Khula Bharastachar ko Model in Kantipur 23rd Jestha 2070 (6th June 2013)
 Mukul Humagain’s reporting in Kathmandu Post January 4, 2013 (Poush 20, 2069).
 Kathmandu Post, Money, January 8, 2013.
 On behalf of their Unions, Secretary General Dip Raman Adhikari, Acting Chairman Khagendra Shahi, Chairman Amrit Bahadur Khapung, ‘Baristha’ Vice-Chairman Indra Prasad Neupane and Chairman Ram Prasad Rimal respectively signed the letter to the Energy Minister.
 Kantipur Jestha 18th 2070.
 Note this was before June 1, 2011 when the work order to proceed was given by NEA. Around this time the writer, hearing of this 90 MW upgrading, approached the then NEA MD, Dr. Jivendra Jha, and requested him to go for this 90 MW proposal. Dr. Jha, raising both his wrists above the table, gave this unforgettable reply, ‘Pun Sir, I have no desire to go to the CIAA with handcuffs to reply to their questions!’
Khimti and Bhotekoshi per Unitrates for 2068/069: Rs 8.0394 and Rs 8.0378. But the US$ rates for 2068/069 fiscal year varied from Rs 72/- to Rs 84/-. With the 2070 Asar rates for one US$ nearing the Rs 100/- mark, the Khimti and Bhotekoshi power rates have skyrocketed. There are 4 Indian rates: i) Kosi/2012 – IC Rs 3.51 (NC Rs 5.62) ii) Power Exchange/2012 – IC Rs 4.91 (NC Rs 7.86) iii) Power Trading Corporation/2012 – IC Rs 4.35 (NC Rs6.96) iv)PTC – 25 years’ levelized tariff for 150 MW from Muzaffarpur-Dhalkebar 400 kV transmission line IC Rs 3.60 (NC Rs 5.76).
 While Dr. RS Mahat, Dr. PC Lohani and Surendra Pande were former Finance Ministers, Dr. PS Mahat and G Bista were former Energy Ministers. Incidentally, Dr. RS Mahat, Dr. PC Lohani and Dr. PS Mahat all hail from Nuwakot district where the UT-3A is located. Posta Bahadur Bogati, who was Energy Minister after G Bista, alsohails from Nuwakot.
Energy Minister, Dr. PS Mahat, even squabbled with his Secretary, Shankar Prasad Koirala, and successfully shunted Secretary Koirala to cool off at the mundane inconspicuous Nepal Trust. The same Secretary Koirala now holds the important Finance portfolio in the Khil Raj Regmi Interim government.
Note that when the American IPP, Panda Energy, applied for license to develop Bhotekoshi as a 36 MW project, there was much debate at the Ministry of Water Resources with a group demanding that license for only 24 MW be issued. Surya Nath Upadhyay, the MOWR Secretary, approved the license for 36 MW with the convincing argument that the nation’s water resources utilization should be optimized.
 Note only four Unions signed this press release. The missing fifth Union, deliberate or by accident, is the Rashtriya Karmachari Sangathan NEA. Khagendra Shahi/acting Chairman Nepal Rashtriya Karmachari Sangathan, Amrit Bahadur Khapung Chairman NEA Karmachari Parishad, Janardan Bhattarai Chairman NEA Karmachari Sangh and Ram Prasad Rimal Chairman NEA Karmachari Union signed the press release.
 A back of an envelop calculation indicates an additional generation of 250 GWh of energy per annum (150 GWh from UT 3-A and 100 GWh from UT 3-B). Present royalty rate increases from 1.85% to 10% of energy sold in 15 years which means an additional revenue of about Rs 2.5 crores in first year to Rs 13.5 crores per annum after 15 years even at the present sale price of Rs. 5.40 per kWh. Such revenues (Rs 2.5 to 13.5 crores) clinking every year continuously into the scarce coffers of Nuwakot and Rasuwa is a neat tidy sum for her badly needed development works!
 NEA’s Forecast of system peak demand and energy requirement for fiscal year 2013/014 is 1,271.70 MW and 5,859.90 GWh respectively. This means UT-3A’s 148 GWh through 30 MW upgrading is a mere 2.5% energy-wise!