When Water Works: A Lesson from Jumla
The potential of effective water governance is already visible within Nepal. Mr. Gor Bahadur Budha, a native of Chukeni in Jumla District, provides a compelling example. With limited formal higher secondary education but extraordinary commitment, and leadership; he spent more than a decade advancing a vision of local prosperity through water based rural economy development. The Chukeni Khola mini-hydropower project of 1 MW transformed a district once crippled by chronic electricity shortages. Until recently, residents struggled even to charge mobile phones; today, Jumla enjoys reliable power. Electricity now supports digital banking, small enterprises, agro-processing, and women-led energy-based businesses. Farmers irrigate apple orchards and crops during dry periods, strengthening climate resilience. Banks and public services operate more efficiently, even in remote rural areas of Jumla. This experience demonstrates a critical truth: when water resources are governed competently and aligned with local needs, they become a powerful engine of rural economic transformation. The tragedy is not that Nepal lacks solutions, but that such successes remain isolated rather than systemic.
Unequal Beginnings: A History That Set the Pattern
Nepal’s water story has been shaped by historical imbalances. Early treaties with India: such as the Koshi, Gandak, and later the Mahakali were negotiated at a time when Nepal lacked technical expertise, institutional capacity, and political stability. India, by contrast, had clear priorities: irrigation for its plains, flood control for Bihar and Uttar Pradesh, and long-term hydrological security to dry zones of India. The outcomes followed predictably. India secured substantial downstream benefits, while Nepal received symbolic concessions that appeared positive on paper but offered limited practical gains. The Koshi Barrage delivered flood regulation and a stable water supply, while Nepal faced displacement and gained only marginal irrigation benefits. The Gandak Treaty similarly guaranteed India extensive water flows, while Nepal struggled to secure even basic irrigation for the Terai. The Mahakali Treaty, perhaps the most celebrated politically and rhetorically, remains largely unimplemented because its keystone project, Pancheshwar, has been trapped in endless joint studies. These agreements did not fail simply because India negotiated assertively; they failed because Nepal lacked a unified strategy, consistent leadership, and the technical confidence required to negotiate on equal terms.
Water, water everywhere but no water to drink!
India’s Evolving Strategy: Control Without Dams
India’s approach has since shifted from traditional water treaties to a more sophisticated model. Rather than relying solely on treaties and barrages, it now exerts influence through hydropower licensing, project ownership, cross-border electricity trade rules, and regulatory approvals. India-linked developers hold licenses for multiple large projects across the Arun and Karnali basins, yet progress remains painfully slow. Arun-3 is the only major project under construction, while many others remain stalled due to financing delays, licensing disputes, or lack of commitment. These delays are not accidental; they serve India’s strategic interests. As long as Nepal does not build large storage dams, India retains natural control over dry-season flows. As long as Nepal cannot generate surplus firm energy, it avoids becoming a serious competitor in regional markets. And, as long as Nepal depends on India for export approvals, its energy sector remains geopolitically constrained. Power trade has become India’s most effective instrument of influence. Every export approval, transmission corridor, market access, and hydropower qualification is filtered through Indian regulatory mechanisms. This places Nepal in a fundamentally dependent position: even when it produces electricity, it cannot sell freely without external consent.
Nepal’s Internal Weakness: The Decisive Factor
India’s leverage, however, works only because Nepal enables it. Governance failures are the decisive factor. Institutions operate in silos, political leadership changes frequently, and continuity is undermined. Mega-projects are negotiated without sufficient technical grounding, and licenses are issued or withdrawn based on political convenience rather than national priorities. Projects such as West Seti and Budhi Gandaki languished for decades due to indecision, creating space for external actors to dictate terms. Nepal’s legal and investment frameworks further compound the problem. Complex approvals, unpredictable tariffs, and frequent policy reversals deter credible global investors. When alternatives disappear, India becomes the default partner, not because it is ideal, but because Nepal has failed to create options. License speculation has also taken root. Strategic hydropower licenses are often held, transferred, or leveraged as political and commercial assets rather than developed as national infrastructure. This culture of delay and brokerage undermines accountability and postpones generation.
The Cost of Failure: A Nation Falling Behind Its Potential
The costs of failure are profound. Nepal remains energy-poor in an energy-rich landscape. Industries continue to face power shortages during dry seasons. The Terai depends on groundwater while Nepali rivers irrigate fields across the border. Floods devastate Nepali communities annually, while downstream systems benefit from regulated flows. Economically, the losses amount to billions of dollars in foregone revenue, employment, and infrastructure. Each stalled project represents not just lost electricity, but missed opportunities in irrigation, agro-industry, tourism, and regional influence. Water is one of Nepal’s few assets capable of transforming the economy at scale, yet it remains chronically underutilized.
A New Direction: Reclaiming Nepal’s Water Governance
Nepal must therefore redefine its water and energy strategy with clarity and courage. Outdated treaties should be revisited based on principles of equity, transparency, and modern international water law. Nepal must demand clear downstream benefits, irrigation guarantees, and shared responsibility in flood management. Equally important is the need to revoke licenses of non-performing developers including domestic institutions such as VUCL (Vidhyut Utpadan Company Limited) and even NEA(Nepal Electricity Authority)linked entities and replace them with credible global investors or responsible Nepali power producers. The hydropower sector has long suffered from practices in which licenses are obtained not to build projects but to hold, transfer, or use them as political and commercial bargaining chips. This has turned strategic projects into negotiable assets rather than national infrastructure. VUCL’s role in projects like Phukot Karnali reflects a broader structural problem: companies with development mandates often behave like intermediaries, prioritizing license trading over power generation. This culture is enabled by political patronage, weak oversight, and a lack of clear accountability. Nepal must enforce a simple but critical rule: licenses are for those who develop, not for those who speculate. Large storage projects should be prioritized within reliable international financing to reduce political interference and enhance transparency. When bilateral mechanisms stall, Nepal should not hesitate to pursue neutral international arbitration, particularly for long-delayed projects like Pancheshwar. Domestically, reforms are urgent: predictable policies, a single-window system for investors, clear export rules, and depoliticized approvals. Above all, Nepal must move beyond viewing water merely as an export commodity. No country has achieved prosperity by exporting raw electricity alone. Sustainable wealth comes from domestic utilization, using energy to power industry, agriculture, services, and innovation, multiplying economic value across sectors.
Leadership, Not Geography, Will Decide Nepal’s Future
Nepal’s challenge is not India’s strength but its own lack of strategy and sound leadership. Water is not just a resource; it is the backbone of Nepal’s economic future. Without strong governance and institutional unity, Nepal will continue to watch its rivers flow south while prosperity slips away. What Nepal urgently needs is a long-term vision, a twenty-five-year National Water and Energy Strategy (2026–2050) that defines basin-wise development priorities, clarifies which projects will be built independently, which require credible partners, and how national irrigation and energy interests will be protected in every negotiation. The next decade is critical. Nepal can continue along the familiar path of delay and dependency, or it can take charge of its water destiny. The choice is still ours, but the window is closing.
(Krishna Neupane is a seasoned hydropower engineer who holds a Master’s degree in Water Engineering and Management, is a gold medallist from the Asian Institute of Technology (AIT), Thailand. Laxman Neupane, PhD, resource economist, previously served as Chairman of the Nepal Stock Exchange.)
