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Melamchi Water Supply Project


Six years after its conception, the Melamchi Water Supply Project (MWSP), the Asian Development Bank’s pet project inSindhupalchowk District, Nepal, is still mired in controversy. Three of the project’s original funding agencies—the World Bank, Swedish International Development Agency (SIDA), and Norwegian Agency for Development (NORAD) —had pulled out in the last three years brought about by several pressing issues. In fact, the water project has been on the donors’ priority list in the last two decades but was never pursued due to conflict of interests among donors, mainly between the World Bank and the ADB.


Envisioned by the Bank and its co-financiers to solve the chronic water shortage in Kathmandu Valley, the project is supposed to improve the health and water supply in Melamchi Valley. A pre-condition of the ADB to fund the project is the privatization of the Nepal Water Supply Corporation (NWSC).


The inter-basin river project will divert 170 million liters of water per day from Melamchi River to Kathmandu through a 26.5-kilometer tunnel. ADB’s loan is US$120 million of the initial project cost amounting to US$464 million. The cost later escalated to US$531 million in 2005.

In 2002, World Bank withdrew from MWSP citing the following reasons: (1) important options have not been explored to utilize the water resources within the valley; (2) the need to fix the distribution system first; and (3) MWSP would only benefit the richest five percent of the population.


In 2004, the ADB’s Special Project Facilitator (SPF) received a complaint from the Water and Energy User’s Federation-Nepal (WAFED) and three other affected individuals regarding MWSP’s non-compliance in the following areas: access to information, environmental impact assessment, land acquisition, compensation and resettlement, the rights of indigenous people, the social uplift program, and agriculture and forestry. After its investigation, the SPF concluded that there was no evidence of serious or systematic non-compliance with ADB policies in terms of design and implementation.2 In effect, the report also dismissed the complaint saying it was filed not so much to resolve the specifics of the complainants’ charges but to actually question MWSP’s compliance with ADB policies and reopen the debate on changing the process of project consultation and participation.


In 2005, SIDA and NORAD quit the project, citing their dissatisfaction with the progress of the project and the ADB, as well as, concerns about Nepal’s unstable political situation following the February Royal Palace coup. After the political turnover in 2006, Norway revised its funding support to Nepal except for the MWSP. Norway’s decision to withdraw from the project is linked to the recently endorsed Soria Moria Declaration on International Policy that restricts Norwegian aid to projects and/or programs that promote liberalization or privatization.


In July 2006, Melamchi works in Sindhupalchowk district were suspended for several days after locals padlocked half a dozen offices of the project after officials failed to meet their demands for employment. The ADB has announced that it will continue funding the project despite “minor hurdles in the construction process”.


Various studies, including those conducted by the ADB, clearly show that the MWSP is not necessarily the best option since there are several other options within Kathmandu Valley. The Bank and other donors have conveniently ignored these. Given the Kathmandu’s population growth rate, no river would be able to meet the water supply-demand of its people. Huge groundwater resources are yet to be explored/regulated while the large potential of rain harvesting and management of ponds and streams around the Bagmati River Basin is yet to be tapped.


Another highly sensitive issue is the price of potable water which will become very costly once a foreign private operator or private management handles the water supply system. There is no provision yet on how water will be made available to more than 30 percent of the poor population of the valley. The prescription of the Bank and its co-financiers is towards the dismantling of the Nepal Water Supply Corporation in favor of foreign private companies.


As regards public participation and consultation provision of the Environmental Impact Assessment (EIA), there has been a lack of transparency and the democratic process involved in the implementation of the road survey, land acquisition, compensation, resettlement, and the SUP. Locals, including the ethnic Tamang communities, want the SUP to be thoroughly discussed, designed, and implemented with their full consent.



The project is not environmentally sound. The construction of the tunnel between the mountain will cause irreparable loss to the surrounding environment. The prescribed release of 0.4 cubic meters per second of water in the river after diversion is insufficient to sustain the present and future water demand of Melamchi Valley. It is not yet clear whether there is any budget for comprehensive environmental mitigation plans.



The MWSP has also failed to identify the amount of water that will be required in the Melamchi Valley by the local people for their livelihoods and ecosystems. The reduction of existing water flow will lead to the closure of hundreds of existing irrigation canals and ghattas (traditional water mills), including those funded by ADB loans. Watermill workers, fishing farmers such as the Majhi ethnic community and other locals will lose their traditional occupation. Moreover, the issue of guaranteed provisions for skill development training and employment for the locals has caused conflicts between the locals and the contractors. In principle, there is a provision for a minimum of 30 percent of jobs to locals during construction.


A potential major conflict over water rights among affected communities also looms ahead. People in the Melamchi Valley are also demanding a share of the profits in the form of a levy for their freely supplied water to Kathmandu.


On a larger scale, the MWSP has unwittingly promoted social injustice. While the project will benefit only 10 percent of the country’s population, the burden of debt will be shouldered by all Nepalis. More than 70 percent of the country’s tenth five-year budget on water and sanitation has been solely allocated to the MWSP.





Claimants didn’t have access to critical information and documents such as EIA, feasibility studies, options assessments, cost-benefit analysis, lending conditionalities, and agreement with donors/lenders, specifically in local Nepali language before the project was finalized. Few documents were provided after the official claim was made in the OSPF of the ADB, but these were largely insufficient. Critical documents like cost-benefit analysis, lending agreement, and conditionalities have still not been disclosed by MWSP.


There was a lack of meaningful public consultation. The project did not make sincere attempts to inform local people. It also did not make public the documents and information in time. Because of pressure from WAFED and the local people, MWSP was forced to release a few documents.


The EIA failed to study and incorporate all the environmental/ecological impacts of MWSP on the local ecology and people’s livelihoods. The suggested mitigation plan is also grossly inadequate.


As far as forest issues are concerned, the project has been causing serious impacts in some of Melamchi’s community-managed forests. The current problem is the lack of adequate arrangements for the continuing access and management of these forests.


In terms of agriculture impacts, the project has seriously affected Melamchi’s agricultural system due to the construction of access roads through the most fertile land. The loss of small and large scale irrigation canals after the diversion of the river has impacted adversely on food security, as well as on local ecology and biodiversity. There is also a question of inadequate investigation on the downstream impacts of the river diversion to the long-standing agricultural lands of the indigenous people and others in Melamchi Valley.



The land acquisition, compensation, and resettlement process and related activities have been grossly arbitrary. There has also been no reasonable offer for resettlement. Not only did MWSP also fail to assess all the direct and indirect impacts of its activities, it likewise failed to provide adequate compensation and relocation (i.e. displacement of ghattas or water mills, and electricity-run economic activities.)


Meantime, the Social Uplift Program has been grossly criticized and rejected by the claimants and other affected communities in Melamchi Valley. The program has failed to address the local needs, priorities, and democratic process. It has also failed to include the most economically and socially neglected and marginalized communities and integrate them into the local development activities; and the trafficking-prone Tamang communities that suffer from worsening social and economic conditions and cultural exploitation.



There has been a gross denial of the rights and interests of IPS who have been directly and indirectly affected by the project. They include the Majhis (traditional fishermen/women) in the downstream as well as the majority of Tamang communities in Melamchi Valley.



True to form, the Bank has denied all these accusations and has maintained that the vast majority of affected people are supportive of MWSP and are satisfied with the compensation received notwithstanding the slow process. In terms of information flow, the ADB said improvements have been implemented. Apart from available documents in Nepali, the project has undertaken workshops and consultation meetings. Three hundred of the 328 cases related to land acquisition, compensation, and resettlement have been settled. A significant part of the SUP budget has been allocated to uplift the socially disadvantaged sections of the population, including women and ethnic groups.


The Bank has further claimed that mitigation of environmental and agricultural damage caused by access road construction is ongoing. Rigorous monitoring of water flow in the Melamchi River is ongoing with a view to ensuring adequate water for agriculture and irrigation. Forests and residents in four of the seven communities affected by the project have already been taken care of. Newly created conflict response teams operate regularly in the Melamchi Valley and have handled grievances.


For more information visit the following links -

  1. Siwakoti, Gopal ‘Chintan’. “Donors’ Rejection of Governance and Human Rights: Two Case Studies of Hydropower and Water Supply Projects in Nepal.” The Reality of Report 2004.

  2. ADB. “Report of the Special Project Facilitator on Melamchi Water Supply Project Nepal.” Manila, 2004.


Melamchi Water Supply Project




Asian Development Fund

$ 145.00 million

OPEC Fund for International Development

$ 13.70 million

Nordic Development Fund

$ 10.50 million

Japan Bank for International Cooperation (ODA)

$ 47.50 million

MOF, Japan

$ 18.00 million



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