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The long term vision of the hydropower sector is to develop hydropower
based on op� mal u� liza� on of water resources to meet the domes� c
power demand and export the surplus while expanding the development
and services in order to contribute to improving the livelihood of Nepalese
people. The Government of Nepal has envisaged a strategy to develop
hydropower es� mated to be 820 MW (short-term 5 yrs) by the end of 2007.
Similarly, the government has the plan to develop hydropower es� mated to
be 2,230 MW (Medium-term 15 yrs) by 2017 and, subsequently, 22,000 MW
(long-term 25 yrs) by 2027. Following a� ainment of these targets, electricity
will be available to 60.0 percent HHs including 1,500 MW for export to India
and Bangladesh. Harnessing of water resources and developing hydropower
will ensure both sustainable high growth and substan� al poverty reduc� on
not only in Nepal but also in South Asia region (Water Resources and
Energy Commission, 2001). As envisaged in Water Resources Strategy 2002
and current evalua� on of hydro electricity development, programs will be
formulated to generate at least 25,000 MW within forthcoming two decades
(Economic Survey, 2009). However, India is the only market to export
surplus hydropower and this demand for a high-level agreement between
Nepal and India to facilitate market for surplus electricity generated through
mega-projects ini� ated by bilateral, regional and mul� -lateral funding. Thus,
harnessing of water resources and developing hydropower is not only an
economic and technical issue but also a serious poli� cal concern of utmost
signifi cance for both countries (Dahal, 1992).
Prolonged economic downswing is more precarious than poli� cal
predicament. Galloping recurrent expenditure against small size and underspending
of capital expenditure, rapidly falling exports against alarmingly
growing imports, decelera� ng compara� ve and compe� � ve edges over
viable exportable items to interna� onal market, declining growth rate of
tourists arrival and remi� ances, nega� ve balance of payments situa� on
and gradually declining interna� onal reserves, frequent liquidity crunch,
poor integra� on of domes� c economy with global economy, extremely
limited employment opportuni� es at home, inadequate infrastructure
with increasing load-shedding, poor governance, prolonged transi� on and
poli� cal instability, absence of elected bodies at local levels, ineffi ciency, and
rampant corrup� on are major impediments to economic development in
Nepal (Dahal-b, 2010).
The major challenges to Nepalese economy are, fi rstly: (1) How to transfer
excessively dependent popula� on from agriculture to more produc� ve nonagriculture
sector (manufacturing, services and ter� ary) through crea� ng
employment opportuni� es by a� rac� ng FDI and promo� ng indigenous
investment in coopera� on with private sector and thereby reducing extent
of absolute poverty to zero? The process of economic transforma� on will
help increase effi ciency and compe� � veness of rest of the farmers a� ached
to agriculture and boost-up produc� on as well as produc� vity. Over the
years, produc� vity index of food crops remained almost constant, while
index for cash crops moderately increased during the same period. Secondly:
Changing paradigms of aid eff ec� veness in Nepal 31