Socio-economics and hydrological impacts of intersectoral and interbasin water transfer decisions: Melamchi Water Transfer Project in Nepal

A common solution to the problem of rising urban scarcity is to transfer water to cities from rural, agricultural areas. This paper, using the case of the Melamchi water transfer project in Nepal, illustrates some of the complexities involved in the planning and implementation of a rural to urban intersectoral water reallocation. We present an analysis of the socioeconomic, rural livelihoods, and hydrological consequences with a focus on the basin of water origin giving consideration to the people most likely to be adversely affected. To alleviate the existing water-scarcity situation in Kathmandu city, the Government of Nepal has recently initiated the Melamchi water reallocation project to divert a planned 170,200 cubic meters per day into the city drinking water system. This has a potential to generate large aggregate economic benefits due to difference in the relative economic value of water between the two river basins. The project benefits are realized by the urban sector, but all of the opportunity costs of the project are borne by the poverty-stricken residents of the basin of water origin. Within this context, the project effectiveness was assessed by considering the additional value generated, the process adopted, and the benefits sharing mechanism including the scale of compensations provided to the adversely affected households in the basin of water origin. The case study indicates Kathmandu residents including the urban poor will benefit from a well implemented project. The extent of impact in the Melamchi will be limited to the area close to the diversion point during the dry months of the year. The existing project compensation scheme has provided compensation for local public goods, such as, construction of school, hospital and road in the basin of water origin benefiting people there. But insufficient attention has been given to those directly affected. There was little discussion with donor basin residents during the initial stages of the project, and little negotiation on the compensation package. Vulnerable people such as Ghatta owners and tenant farmers, whose livelihoods entirely depends upon the water use activities in the water supplying basin could unduly bear the brunt of the project with little compensation. To achieve equitable gains from intersectoral transfers in situations where formal land and water rights are weak or absent will require an understanding of who will be impacted – especially marginal or vulnerable groups; and early discussion and negotiation with those affected for the development of due compensation. 1 Selected paper presented at “Asian Irrigation in TransitionResponding to the Challenges ahead.” April 22-23, 2002 at Asian Institute of Technology, Bangkok, Thailand. 2 Postdoctoral Scientist, Research Associated and Research Coordinator of Nepal program, and Program Leader respectively, at International Water Management Institute (IWMI), Colombo, Sri Lanka.