From politicians to policy-makers and intellectuals to bureaucrats in Nepal, the news of Enron's arrival could not have come at a better time. In 1995 the World Bank, castigated by Nepali social auditors for its poor projects economics, had pulled out of the 201 MW Arun III hydropower project. One year on, the Nepali Parliament had ratified by a two-thirds majority the controversial "Integrated Treaty on Mahakali", albeit with four conditions that reinterpreted the provision made in the original treaty (see Himal, April 2001). It was in such 'volatile' circumstances that the Texan giant Enron, having just secured a contract to op erate the first phase of the Dhabol Thermal Power Plant in Maharashtra sought a license to build the 10,800 MW Karnali-Chisapani hydropower project in the country's west — long regarded as a site to make a mega dam to deliver mega dollars. A "prestigious" energy company had shown confidence in the government of the Himalayan Kingdom. For believers, the proposal was motherhood and apple pie; only the misguided and the malign would question it.
Enron's proposal followed Prime Minister Sher Bahadur Deuba's visit to India in February 1996. During the course of this visit, the concerned secretaries of Nepal and India signed the Power Trade Agreement in Bombay. Immediately thereafter, Nepal's suave Water Resource Minister, Pasupati Sumshere Rana, speaking to Indian businessmen, invited foreign investors to develop Nepal's hydropower. Sais1.111 ". you can pick from the shelf whether you want a 10 MW or 10,000 MW project". Enron, with no track record of building a single hydropower project anywhere in the world, opted for the mighty 10,800 MW Karnali hydropower project. And in typical Enron fashion, it did not make its approach through the formal channel, the Electricity Development Centre that is authorised to issue licenses, but forwarded its application through the Prime Minister's Office.ele
The company's 1996 proposal aimed to sell power to Xian in China, roughly 2500 km away across the Himalayas from the Chisapani dam site. This was only a ploy to co-opt Nepali politicians who swallowed this impractical idea, hook, line and sinker. The promised fiscal utopia to Nepal: the government would make USD 70 to 130 million annually over the first 15 years. This figure was hypothetical because the only legal instrument of that period, the 1992 Hydropower Policy, stipulated a two percent royalty on the sale price per unit of electricity. In this case, there was not even a buyer, let alone any decision on sale price. Even more absurd was the proposal to sell the output to China, which had never expressed any desire to buy power from Nepal. India, though interested in the Karnali- Chisapani, the Pancheswar and other high dams, had not stated the price it was willing to pay.
The Karnali project would dam the Karnali River at Chisapani gorge where it emerges into the plain from the Himalayan mountains. Conceived initially in the early 1960s, the project passed through various incarnations until Himalayan Power Consultants (HPC prepared its latest design. This version has a 270 m high rock fill dam that would permanently inundate Nepal's valley in the mid-west to create a 20 billion cubic metre capacity reservoir. This water, regulated through the turbines, would generate 10,800 MW of peak power.