HC Deb 02 November 1994 vol 248 cc1183-6W
Mr. Denham

To ask the Secretary of State for Foreign and Commonwealth Affairs what are the estimated risks to the success of the Arun III hydro-power project in Nepal from(a) glacier lake outburst flow, (b) earthquakes and (c) possible future irrigation or hydro-electric developments upstream in Tiber; and what efforts are being made by the projects planners to ensure that any such risks to the success of the dam and the prosperity of Nepal are fully researched and minimised.

Mr. Baldry

The geological risks and impact on upstream developments have been studied and taken into account in the design of the project. An independent panel of experts has been involved with the design, and in advising on safety aspects as well as geological, hydraulic, seismic, structural and environmental aspects.

Mr. Denham

To ask the Secretary of State for Foreign and Commonwealth Affairs what evidence he has that the Arun III project in Nepal will contribute to the development of technical and managerial capacity in the Nepali private sector.

Mr. Baldry

The Nepalese authorities have drawn on local private sector expertise in preparing the project; and local staff will be responsible for a substantial proportion of the supervision contract. In addition, the Government of Nepal are committed to facilitating private sector investment in the power sector. The proposed project includes a facility to strengthen the capacity of the private sector to undertake feasibility studies and to provide partial financing in selected cases.

Mr. Denham

To ask the Secretary of State for Foreign and Commonwealth Affairs what assessment he has made as to whether the rate of return, quoted in the World bank's staff appraisal report, as expected for the Arun III hydro-power project in Nepal, is a sufficient economic return to justify a World bank decision to fund the project.

Mr. Baldry

We are currently assessing the bank's appraisal of this project, including the economic analysis and justification.

Mr. Denham

To ask the Secretary of State for Foreign and Commonwealth Affairs on what grounds the World hank has not established an inventory of the species at risk from the planned Arun III hydro-power project.

Mr. Baldry

One of the volumes in the environmental impact study, which was an important element in the bank's appraisal and was carried out by the King Mahendra Trust for Nature Conservation, is devoted to a survey and catalogue of biodiversity in the Arun basin.

Mr. Denham

To ask the Secretary of State for Foreign and Commonwealth Affairs when the World bank will make a final decision on funding for the Arun III dam project in Nepal.

Mr. Baldry

A date has not yet been fixed for consideration of this project proposal by the bank's board of directors.

Mr. Denham

To ask the Secretary of State for Foreign and Commonwealth Affairs on what basis the Overseas Development Administration and the United Kingdom executive director to the World bank decide what constitutes a least-cost approach to meeting energy needs when evaluating projects; and if he will place in the Library the cost benefit analysis and least-cost study on the Arun III hydro-power project in Nepal.

Mr. Baldry

The least-cost approach to generation expansion and cost benefit analysis are standard project appraisal techniques employed by the bank. A copy of the least-cost generation expansion plan, excluding the detailed technical annexes, is being placed in the Libraries of the House. Under existing rules of procedure, the bank's appraisal report remains confidential for the time being; but a copy will be placed in the Libraries after board approval of the project.

Mr. Denham

To ask the Secretary of State for Foreign and Commonwealth Affairs on what basis a comparative assessment of alternatives to the Arun III project in Nepal was performed; and what conclusions were reached regarding the suitability of small-scale and mini-hydro options for tapping the power potential of Nepal.

Mr. Baldry

The bank's appraisal report considers the option of smaller hydro-power schemes as an alternative investment strategy and concludes that the overall balance points in favour of the Arun project.

Mr. Denham

To ask the Secretary of State for Foreign and Commonwealth Affairs what steps have been taken by the World bank to ensure that the Nepal electricity authority has the institutional capacity to manage and recover revenue from a completed Arun III hydro-power project.

Mr. Baldry

The Nepal Electricity Authority has engaged consultants to help it adopt measures to strengthen its financial management and cost recovery, including reducing system losses and improved revenue collection performance. The Asian development bank intends to provide technical assistance to the NEA to strengthen its environmental unit.

Mr. Denham

To ask the Secretary of State for Foreign and Commonwealth Affairs what assessment he has made of whether the proposed Arun III dam project in Nepal is consistent with the country assistance strategy developed for Nepal by the world bank.

Mr. Baldry

This is among the issues covered in the staff appraisal report and is being taken into account in our assessment of the proposal.

Mr. Denham

To ask the Secretary of State for Foreign and Commonwealth Affairs what percentage of Nepali citizens are expected to benefit from access to the power generated by the Arun III hydro-power project, if completed.

Mr. Baldry

The project is designed to help meet the growth in demand for power in Nepal as a whole, for industrial users and domestic consumers alike. The World bank estimates that currently only 9 per cent. of Nepal's population of 20 million has access to electricity, and that this share is expected to double by the end of the project period.

Mr. Denham

To ask the Secretary of State for Foreign and Commonwealth Affairs what guarantees have been provided to the World bank as to whether India will buy the excess energy to be generated by the Arun III hydro-power project planned in Nepal, and to ensure prompt payment for any electricity India undertakes to buy from Nepal.

Mr. Baldry

The project is not designed as a power export project, but to meet Nepal's domestic energy needs.

Mr. Denham

To ask the Secretary of State for Foreign and Commonwealth Affairs what initiatives the United Kingdom executive director of the World bank has taken regarding the development of the World bank's cost-accounting system for the World bank; and what input he has made to that development.

Mr. Baldry

The task force on portfolio management identified weaknesses in the bank's consideration of risk and sensitivity analysis in its loan appraisals. As a response to that report bank management are producing new guidelines on the use of risk/sensitivity analysis. The United Kingdom executive director has been active in pressing the bank to undertake full and thorough follow-up to the task force recommendations.

Mr. Denham

To ask the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on the early retirement of Martin Karcher, division chief for the south Asia region in the World bank.

Mr. Baldry

We are not in a position to comment on Mr. Karcher's early retirement.

Mr. Denham

To ask the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on the type of cost accounting methodology now applied by the World bank to the loans in its portfolio.

Mr. Baldry

The World bank applies well-established techniques of economic and financial analysis on all its loans, including cost benefit and cost effectiveness analysis where appropriate.

Mr. Denham

To ask the Secretary of State for Foreign and Commonwealth Affairs what proportion of the total British contribution to the funds of the World bank was invested in the Sardar Sarova dam before the World bank withdrew finance from the project.

Mr. Baldry

The bank's board of directors approved an IBRD loan and two IDA credits for the Sardar Sarovar dam project and associated canal in March 1985. IBRD shareholder capital is not used to finance bank loans directly, but as a guarantee for the bank's borrowings on the international capital markets. In 1985, the United Kingdom held 6 per cent. of the IBRD's subscribed capital. At the end of June 1994, the share was 4.92 per cent. The IDA credits were committed under the seventh replenishment of IDA, the United Kingdom share of which was 6.70 per cent.