Escalating Hydropower Dispute in Sankhuwa-Sisuwa Corridor Puts Investment Security at Risk

A significant and escalating conflict has erupted in Nepal's Sankhuwa-Sisuwa river corridor, pitting local communities against the developers of four crucial hydropower projects. This dispute, centered on environmental impact, ancestral land rights, and potential displacement, has now reached the Ministry of Energy, Water Resources, and Irrigation, raising serious concerns about investment security and the future of hydropower development in the region.

The corridor is home to several vital energy initiatives: Gurans Hydro Limited's 47 MW Sankhuwa Khola project, Happy Energy Limited's 40.1 MW Upper Sankhuwa Khola, Matribhumi Hydropower Development Company's 16.5 MW Sisuwa Khola, and Madhya Sankhuwasabha Hydropower Company's 40.8 MW Madhya Sankhuwa Khola project. These projects collectively represent a substantial investment in Nepal's energy sector, crucial for meeting the nation's growing power demands and achieving its renewable energy targets.

Local residents express profound apprehension regarding the potential adverse effects of these projects on their ancestral lands, livelihoods, the fragile environment, and cultural heritage. They argue that the Sankhuwa Khola, flowing through a narrow, landslide-prone gorge, and the Sisuwa Khola, traversing flood and landslide-vulnerable terrain, make the corridor geographically sensitive. Consequently, the construction of tunnels, blasting activities, dam building, and other infrastructure could exacerbate existing risks, leading to increased landslides, floods, and displacement. The communities are demanding a comprehensive, joint, and long-term geological and environmental impact study for all four projects, asserting that individual Environmental Impact Assessments (EIAs) are insufficient to address the cumulative risks. Their primary concerns revolve around ensuring the safety of settlements, mitigating landslides and floods, preventing environmental degradation, and protecting their ancestral homes.

In an effort to mediate the conflict, a multi-party meeting was convened at the District Administration Office in Khandbari. This meeting, attended by 61 representatives including local government officials, security personnel, project developers, and affected residents, led to the formation of an 11-member study committee. Chaired by Surendra Rai, the committee was tasked with investigating issues such as compensation, environmental concerns, and potential geological risks, with a mandate to submit its report within 15 days. Developers claim that during this meeting, locals agreed not to obstruct project work while the study was underway. However, this agreement has been vehemently rejected by the affected communities, who assert that they were coerced into the decision under administrative pressure. They maintain that the agreement disregards their fundamental rights to protect their cultural identity and ancestral lands, rendering the local resolution efforts ineffective.

The dispute has since escalated to the highest levels, with affected locals directly appealing to the Ministry of Energy, Water Resources, and Irrigation, demanding the cancellation of the projects. This move has drawn strong criticism from the developers, particularly after Energy Minister Biraj Bhakta Shrestha reportedly endorsed the locals' memorandum. Developers argue that such ministerial intervention, especially while the local study committee's report is still pending, is premature and undermines established administrative and technical processes. They emphasize that any conclusion should only be reached after a thorough review of the District Administration's decision, the committee's report, technical recommendations from the Electricity Development Department, and comprehensive environmental assessments.

The private sector has voiced significant apprehension regarding the potential ramifications of this dispute. Arjun Prasad Gautam, a director at Peoples Hydropower Company Limited, highlighted that moving towards project cancellation without completing due administrative and technical processes poses a direct threat to the security of private investment in Nepal's hydropower sector. Similarly, Uttam Bhlo Lamichhane, Senior Vice President of the Independent Power Producers' Association, Nepal (IPPAN), stressed the importance of adhering to legal and technical procedures for resolving local disputes. He warned that abruptly halting ongoing projects, which often involve substantial investments from banks and financial institutions, could trigger significant financial risks, potentially leading to loan recovery challenges and broader instability within the financial sector.

Developers collectively argue that decisions influenced by administrative or political pressure, bypassing established licensing, environmental approval, and Power Purchase Agreement (PPA) processes, could severely erode investor confidence. The ripple effect of such actions could extend beyond individual projects, impacting the overall investment climate for infrastructure development in Nepal. Furthermore, they caution that if legal recourse is sought against state decisions, it could lead to substantial compensation liabilities for the government. Conversely, the affected communities steadfastly maintain that the protection of citizens' lives, property, environment, cultural rights, and ancestral lands must take precedence over investment security.

The Sankhuwa-Sisuwa corridor dispute represents a critical juncture for Nepal's hydropower sector. It underscores the delicate balance between national development aspirations, private investment interests, and the fundamental rights and environmental concerns of local communities. A resolution that respects both investment security and community well-being, achieved through transparent, legally sound, and technically informed processes, is imperative to ensure sustainable development and maintain investor confidence in Nepal's promising energy future.