Concerning the Neelum-Jhelum hydropower project controversy

By Kaleem Omar

A delegation of Pakistani officials, led by the head of the Pakistan Commission for Indus Waters, was in New Delhi last month for talks with their Indian counterparts. On their return to Islamabad on May 29, a member of the delegation told reporters that India has agreed to suspend all construction work on the Kishan Ganga Hydropower Dam for six months and address Pakistan’s reservations about the scheme before recommencing work on it.

Pakistan objects to the construction of the dam, saying that India is trying to divert the waters of the Neelum River (known as Kishan Ganga in India) into the Wullar Barrage on the Jhelum River, which, under the Indus Waters Treaty of 1960, it cannot do. The Neelum originates in the Himalayas, runs along the Line of Control through the Neelum Valley in Azad Kashmir and enters Pakistan near Domail.

The picturesque Neelum Valley – one of the most beautiful places on earth – was for years the scene of artillery shelling from the Indian-held side of the LoC, with Pakistani forces shelling Indian positions in reply. The shelling only stopped in November last year when Pakistan declared a unilateral ceasefire along the LoC, resulting in the Indian guns also falling silent. India has taken advantage of the ceasefire to press ahead with the construction of Kishan Ganga Dam.

Meanwhile, Pakistan continues to dawdle over its own plans for building a 960 megawatt hydropower project on the Neelum-Jhelum Rivers in Azad Kashmir.

It has been over a year since China offered to provide $ 1 billion worth of financing to Pakistan for the Neelum-Jhelum project through a mix of equity and credit. By starting work on the project without further delay, Pakistan would be in a better position to maintain its legal rights over the waters of the Jhelum under the Indus Waters Treaty.

Yet Islamabad has been dragging its feet over accepting the Chinese offer, claiming that the terms offered by them are not soft enough. But is that a valid reason to reject the offer? For one thing, the terms can always be re-negotiated to make them softer – which the Chinese would very likely be prepared to do given the close friendly ties between the two countries. For another, it’s not as if Islamabad has any better offer of financing from any other country or international aid agency.

The need for Pakistan to firm up financing for the project has acquired even greater urgency in light of the fact that India, meanwhile, is not only pressing ahead with the construction of the Kishan Ganga Dam but also with plans to build a 450 MW hydropower project – the Baghliar Dam – on the Chenab River in Indian-occupied Kashmir in violation of the Indus Waters Treaty, which gives Pakistan exclusive rights to the waters of the three western rivers (Chenab, Jhelum and Indus) in the Indus Basin, with India getting exclusive rights over the waters of the three eastern rivers (Ravi, Beas and Sutlej).

Beijing’s offer of May 2003 to fund the foreign exchange component of the Rs 87 billion Neelum-Jhelum hydropower project came at a crucial time for Pakistan, because the timeframe allowed to Pakistan by the Indus Waters Treaty to build a hydropower project on the Jhelum is running out. Unless work on the project is started without further delay, Pakistan may be obliged, under the terms of the treaty, to allow India to divert Jhelum waters for a power generation project of its own.

The danger of that happening makes Islamabad’s reluctance to accept the Chinese offer of financing for the Neelum-Jhelum hydropower project all the more inexplicable.

The sequence of events is instructive in this regard. On May 8, 2003, it was reported that Pakistan was putting India on notice on New Delhi’s violation of the Indus Waters Treaty, saying the two countries should appoint a neutral expert “within 15 days” to resolve the dispute over the construction by India of the proposed Baghliar hydropower project on the Chenab River in Indian-occupied Kashmir.

Aside from the fact that India has no right to be in Kashmir in the first place, Pakistan has serious technical objections to the design of the Baghliar Dam, which, it says, is not confined to power generation but will enable India to illegally divert Chenab water for irrigation purposes, thereby reducing water flows to Pakistan, in contravention of the provisions of the Indus Waters Treaty.

India and Pakistan have been locked in a serious dispute over the issue for over five years. All bilateral means of resolving the dispute at the level of the Permanent Indus Commission (set up under the 1960 treaty to monitor the treaty and resolve disputes) have been exhausted, and India is illegally going ahead with the construction of the controversial gate-structure which could deprive Pakistan of more than 7,000 cusecs (cubic feet per second) of water a day from the Chenab.

Pakistan wants to appoint a World Bank official as a neutral expert to resolve the dispute, as the bank was the guarantor of the Indus Waters Treaty. India, however, wants the matter settled bilaterally. Yet India refuses to submit the design of the Baghliar project to Pakistani experts for review. How can the issue be resolved “bilaterally” if India refuses to agree to Pakistani experts reviewing the project’s design?

But India is mistaken if it thinks it can bulldoze Pakistan into agreeing with the Indian position. The dispute has to be settled in an equitable manner. Otherwise, it could end up becoming yet another stumbling block in the improvement of relations between the two countries.

During the Pakistani delegation’s visit to New Delhi last month, the Indian side again brought up the Baghliar issue, rejecting Pakistan’s position that the dispute could only be resolved through third-party mediation.

When India insisted that the matter should be resolved bilaterally, Pakistan asked India to stop construction of the dam first and then enter into negotiations with Pakistan to find a solution. The Indian side agreed to get back to Pakistan after consultations with the government in New Delhi.

Under the terms of the 1960 Indus Waters Treaty, the Permanent Indus Commission is a key mechanism to ensure an equitable distribution of water resources between the two countries, with the riparian rights of both sides being protected.

The treaty has survived the worst of political upheavals, including two wars and several other military conflicts between India and Pakistan. Now, however, for the first time in more than four decades, a need has arisen to resort to a neutral expert for adjudicating a water dispute between the two sides, as provided for in the treaty.

On May 7 last year, Water and Power Minister Aftab Ahmed Khan Sherpao told reporters in Islamabad that Prime Minister Zafarullah Khan Jamali had approved the summary submitted to him by the ministry to issue a notice to India. Press reports quoted the ministry’s then-secretary, Riaz Ahmed Khan, as saying that the two sides were bound under the 1960 treaty to meet and appoint a neutral expert within 15 days (that deadline expired more than a year ago).
Asked why Islamabad was extending a hand of friendship to India when New Delhi was trying to deprive Pakistan of its rights over the Chenab and Jhelum waters, Sherpao said that Pakistan, too, was initiating a hydropower project of its own on the Jhelum River in Azad Kashmir. However, he added, funds for the project had not yet been arranged.

That statement prompted the Chinese to come forward with an offer for financing the Neelum-Jhelum hydropower project.

Only three days after Sherpao’s remarks appeared in the press, the China Machine Tool Company, a state-owned power construction company, approached the Pakistan government and expressed its willingness to finance the project through an equity-cum-credit package on very competitive terms.

The Chinese offer demonstrated yet again that Pakistan has no greater friend than China. Pakistan, too, has been a very good friend to China. Indeed, the ties between the two countries are a model of good neighbourly relations.

Why, then, Islamabad’s seeming reluctance to accept the Chinese offer of financing for the Neelum-Jhelum project?