Governance, not engineering, holds back Budhigandaki Hydropower Project

Leadership instability, sequencing failure, and weak institutional trust—not engineering constraints—continue to delay Nepal’s most important storage hydropower project. Despite decades of political attention, the Budhigandaki Hydropower Project remains unimplemented. Recent government decisions to pursue implementation through a high-level authority rather than the previous company-based structure indicate continued efforts to find an effective institutional model.

Yet the core issue remains unchanged: not design or resource uncertainty, but governance fragmentation, weak execution systems, and the inability to sustain institutional continuity. Compensation and resettlement challenges also remain unresolved. Lessons from global projects such as Rogun Dam of Tajikistan and the Nam Theun 2 of Laos highlight a consistent truth: financing and construction follow governance credibility, not the other way around.

Is Budhigandaki a structurally complex project?

The Budhigandaki Hydropower Project is widely regarded as Nepal’s most strategically economically game-changing storage hydropower initiative. With a planned capacity of 1,200 MW, it is central to long-term energy security, dry-season power supply stability, flood management, and industrial expansion.

Yet despite decades of discussion and repeated political commitments, the project remains stalled. The explanation is often reduced to financing constraints or technical complexity. In reality, the binding constraint is deeper: governance weakness, sequencing failure, institutional instability, and erosion of public trust.

Large storage hydropower projects are not delivered through political declarations. They are built through stable institutions, credible safeguards, disciplined sequencing, and consistent leadership over time. In such projects, trust is not external; it is part of the implementation infrastructure itself.

The real governance constraint

The Budhigandaki is frequently framed as an engineering or financing challenge. Both technical feasibility and resource potential are already well established. The core constraint lies in weak governance integration and institutional fragmentation. A central issue is the persistent trust deficit between project institutions and affected communities. Many households remain uncertain about compensation valuation, eligibility criteria, and resettlement arrangements.

In several instances, inconsistent communication and limited transparency have reinforced confusion and reduced confidence in the process. Importantly, this does not reflect strong opposition to the project itself. Most affected communities recognise its national importance and are broadly willing to cooperate. The real concern is procedural legitimacy; whether decisions are transparent, fair, and predictable.

Leadership crisis and institutional trust deficit

At a deeper level, the most critical factor is not only leadership instability, but the quality of leadership selection and institutional incentives shaping it. In large energy projects, executive appointments have often been influenced by informal political proximity rather than merit-based evaluation, weakening the foundation of professional governance. When leadership selection is shaped by loyalty networks rather than technical competence, accountability is diluted from the outset, weakening managerial capacity and institutional integrity.

Even formal competitive processes may not fully eliminate perceptions of pre-aligned outcomes, weakening public and institutional confidence. As a result, leadership positions do not consistently attract or retain the most capable professionals, weakening institutional autonomy and long-term planning capacity. Each leadership transition often resets priorities, disrupts coordination systems, and weakens institutional memory, preventing the accumulation of execution experience that mega-projects require.

The result is a fragmented governance environment where resettlement planning, safeguard systems, grievance mechanisms, and inter-agency coordination remain incomplete despite years of preparation. In infrastructure development, such weaknesses are not procedural delays. They directly affect legitimacy, financing credibility, and implementation readiness. These institutional weaknesses inevitably translate into financing constraints, not because capital is unavailable, but because governance credibility determines financial confidence.

Financing reality and the sequencing failure

Budhigandaki is a capital-intensive storage hydropower project whose financing requirement exceeds Nepal’s domestic capacity. While domestic financing has been politically emphasised at different times, such approaches often overlook risk concentration and long-term fiscal implications. In Nepal’s hydropower discourse, financing is often framed within a narrative of national self-reliance, where major energy infrastructure is to be developed primarily through domestic resources as a matter of economic sovereignty.

The aspiration to build large energy projects through domestic resources reflects legitimate development confidence, yet it can also become a politically attractive slogan that overlooks financial realities and long-term sustainability. For capital-intensive storage projects like Budhigandaki, international experience shows that blended financing, combining domestic ownership with multilateral institutions, development finance agencies, and private sector participation, is often essential to ensure bankability, risk management, and execution discipline.

At a deeper level, the issue is not financing availability, but sequencing failure in project preparation. International experience in storage hydropower development follows a clear order: compensation → resettlement → environmental and social safeguards → land acquisition → financing closure → construction → Operation. In Budhigandaki, this sequence has frequently been reversed. Financing discussions and structural investment debates have advanced while compensation settlement and resettlement readiness remain incomplete.

This creates a fundamental contradiction. A project cannot become financially credible if its social and institutional foundation remains uncertain. In infrastructure finance, governance credibility is not the result of financing; it is the precondition for it.

International lessons from Rogun and Nam Theun 2

Rogun Dam – Institutional Continuity and Execution Discipline: The experience of the Rogun Dam- 3700 MW (Tajikistan) highlights the importance of institutional stability. Originally initiated during the Soviet period, Rogun was conceived as a strategic storage hydropower project. Yet the collapse of the Soviet Union led to institutional breakdown, financing uncertainty, and loss of implementation continuity. The project stalled for decades due to political instability, funding gaps, and unresolved resettlement challenges. Progress resumed only when Tajikistan adopted a phased construction approach. Phased implementation allowed early power generation before full project completion, strengthening financial confidence, operational learning, and implementation credibility over time.

Nam Theun 2 – Financing Built on Credibility: The experience of Nam Theun 2- 1080 MW (Laos), demonstrates how financing depends on governance credibility. Early development attempts failed due to weak bankability and limited investor confidence. The breakthrough came when the project was restructured into a hybrid financing model involving the World Bank, Asian Development Bank, bilateral partners, and private sector developers. Risk was redistributed across sovereign, multilateral, and private actors, supported by long-term power purchase agreements. Crucially, environmental and social safeguards were not treated as post-approval obligations but as preconditions for financial closure.

Across successful international hydropower projects, several established principles emerge that apply directly to Nepal’s Budhigandaki Hydropower Project. Leadership stability is essential for institutional continuity, while governance determines sequencing, discipline and implementation credibility.

Safeguards are core infrastructure, not secondary concerns. Financing follows credibility and trust; multilateral institutions fund projects that demonstrate transparency, institutional readiness, and independent technical review, not merely ambitious plans. Public acceptance is an operational requirement, not a political assumption, meaning affected communities must be engaged as stakeholders from the outset.

For mega hydropower projects, phased implementation can enhance financial sustainability through staged commissioning, enabling early revenue generation and gradual reinvestment into remaining construction works. Budhigandaki does not require a new model. It requires disciplined implementation of principles already proven across successful international projects.

A governance-first action framework

The required path is not mysterious. Budhigandaki requires a governance-first and phased execution approach grounded in transparency, sequencing discipline, and institutional stability. Transparency must be fully restored by digitising compensation records and making valuation and payment status publicly accessible at the local level.

Compensation disputes should be independently verified and resolved within a clear and time-bound framework, while a formal grievance redress system must provide affected communities with structured and accountable mechanisms to raise concerns and receive timely responses. Resettlement must be completed before financial closure, with livelihood restoration, housing arrangements, and social infrastructure treated as core project readiness requirements rather than secondary obligations.

Whether implemented through a dedicated company, a high-level authority, or another institutional arrangement, leadership and institutional stability must become a reform priority. The effectiveness of any structure will ultimately depend on professional management, continuity of leadership, and protection from frequent political turnover. Financing should follow governance readiness—not precede it—with blended financing pursued only after compensation and resettlement systems become credible. Finally, community engagement should be institutionalised as a permanent governance function rather than treated as an occasional administrative exercise.

From political symbolism to execution discipline

The future of the Budhigandaki Hydropower Project will not be determined by engineering ambition or political commitment alone. It will be determined by whether Nepal can establish stable leadership, credible institutions, and disciplined governance systems capable of sustaining execution over time. Budhigandaki already demonstrates the consequences of fragmented decision-making, weak safeguards, premature financing debates, and leadership deficiencies.

International experience, however, shows that these challenges are solvable when sequencing is respected and governance systems are strengthened. Ultimately, Budhigandaki will not be built by slogans or isolated decisions. It will be built through trust, institutional discipline, phased execution realism, and sustained implementation capacity. The tragedy of Budhigandaki is not that Nepal lacks the right model; it is that for decades, it has chosen not to follow the one already written. The real question is no longer whether Nepal can imagine such a project, but whether it can govern it effectively.

The post Governance, not engineering, holds back Budhigandaki Hydropower Project appeared first on OnlineKhabar English News.