Politics

Deconstructing Narmada: Large Dams and Economics

For better or worse, the Narmada Dam is now complete. Its various NGO opponents and their star cast must now accept defeat against the economic logic of growth. And where economic logic prevails, can comparisons with China be far behind?

The Asia Times is carrying an article exhorting India to replicate China’s Three Gorges Dam. The author, calling himself ‘Chan Akya’, writes:

The tortuous process of getting large hydroelectric projects commissioned in India contrasts with the relatively easy path hewn by China. While Indians can be proud of some aspects of due process that help to maintain the rights of those adversely affected, there is much to learn from China’s ability to convince broader interest groups of economic advantages to be derived from such projects.

Let us ignore the secretive presumptuousness of an author equating himself/herself to Chanakya. Let us also ignore the disingenuous use of the word ‘convince’ - the Chinese authorities do not ‘convince’ but decree. Let us presume that the author is unbaised, though he gives us no reason to - discarding frivolously democracy’s benefits to authoritarianism’s. Let us, essentially, give him/her every benefit of doubt.

Nevertheless, the author’s fundamental case for large dams rests on four assumptions:

1. That hydroelectric power, generated through large dams is essential for growth and hard to replace.
2. That India is way behind in exploiting its hydroelectric potential.
3. That China derives greater economic benefits from its ‘development by decree’ model.
4. And, that economic logic is all that matters in deciding state policy.

1. Hydropower in the Energy Mix

There is no doubt that hydropower is important. It is cheap, long-term, and stable, providing a reliable resource that is also often plentiful. However, it would be wrong to say that it is essential.

In most developed countries, for instance, hydropower is not the dominant source of power. Canada, with the largest hydroelectric program that generates 30-40% of its electricity, is something of an aberration. In the USA, less than 10% of electricity is hydroelectricity. Nor is hydro the only substantial renewable resource. Germany, for instance, generated 18,428 MW of wind power in 2005.

The point is not whether hydropower is good or not. Rather, it is simply of point out that hydro-electricity is not as important to a country’s energy mix as is suggested. Further, technology improvements have provided new options, particularly in coal and nuclear energy to policy makers. Similarly, another option seldom discussed in the developing country context is energy efficiency, policies on which can significantly impact energy needs while also providing environmental and social benefits.

2. India’s Hydropower Potential: Expanding Comparisons

Ís India really far behind in tapping its hydropower potential? Since we are making comparisons, let us extend the comparison to a few developed countries. While total installed capacity is a good measure, it is incomplete, preventing cross-country comparisons. Instead, I use here installed capacity as a percentage of total potential, with the results listed from Wikipedia:

Country	Potential (GW)	Installed (MW)	Installed %
France	56,100	25,335	0.045
Japan	88,500	27,229	0.031
USA	260,400	79,511	0.031
China	401,300	117,000	0.029
India	125,126	33,600	0.027
Canada	396,700	68,974	0.017
Norway	180,800	27,528	0.015

Suddenly, India does not fare too poorly. Indeed, an additional 3,000MW would bring India on par with Japan and USA in hydropower potential developed.

Interestingly, large dams have been out of fashion in the developed world for several decades. All existing large dam projects are being constructed in developing countries. Among the largest dams in existence, those in the USA and Canada were built before 1982. The remaining have all come up in the developing world much later. So, could this be the west exporting its technology a few decades late and us poor sods accepting it as holy grail?

Large dams suffer the same problems nuclear power and other big industrial projects do in the western world - nobody wants them in their backyard. If we are making comparisons with China, we should also compare with other countries that have been through this development cycle. And numbers suggest that simply because China is doing it does not mean that should.

3. The Chinese Model

The third assumption, that China has benefited significantly from its authoritarian liberalization, is also questionable. For three decades, China has had much better infrastructure, attracted FDI an order of magnitude higher, and grown substantially faster than India. Yet, the jury is very much out on whether this is ‘better’.

Indeed, policy decreed infrastructure improvements and economic growth are today recognized as having caused rampant environmental damage and demographic problems for China. While India cannot compare its infrastructure with China’s, nor need it (thankfully) compare its noxious emissions. With expansion of renewable and energy efficiency policies there is hope that India may be better equipped to handle the long-term problems associated with economic growth. This hope is further strengthened by stronger institutions in India and a significantly higher ranking on the WEF’s Global Competitiveness Report.

4. The Primacy of Economic Logic

Finally the author’s fundamental case for the Narmada Dam rests on his argument that economic logic is the most important:

In essence, the Chinese have every expectation of and desire for material improvement, for which they are willing to bear small sacrifices at the present juncture, such as a regimented communist government. In contrast, Indians have had a poor experience of growth’s benefits until recently, and thus have greater inertia when it comes to matters of development.

Fortunately, economic logic is not the only logic. As with hydro and nuclear power in the west, societies routinely make choices that go against economic logic. Otherwise, why not clear entire villages to create massive coal-based power plants. They are the cheapest, even if the most polluting.

National policies are informed by economic logic, yes. But to use that as the only logic is to fall into the same trap that overzealous economists fall into.

Large Dams, Economics, and Public Policy

The economic case for large dams is actually not undeniably strong. In fact, it is economics that has prevented large dams from being built in the west. To quote a friend in the business:

Big dams cost a LOT of money to build and need sharp engineering expertise, even though they are very cheap to operate thereafter (like nukes - large economies of scale). For instance, many Canadian dams are very remotely located and need very long and expensive transmission lines to deliver the power. Financing can also be a big challenge - Newfoundland wants to build a huge project in Labrador and deliver the power to the US, but they do not have a contracted buyer nor do they have the technical expertise and a good enough balance sheet. Hence, no project.

It would appear that most large dams - including Narmada & Three Gorges - would never exist as commercial ventures. It is ironic then that what ‘Chan Akya’ recommends for economic reasons is only viable on the back of government policies that subsidize land acquisition and provide discounted capital taken from the taxpayer.

This article has avoided a discussion of the problems of large dams (see the World Dams Commission for more) such as disruption to ecosystems and forced displacement, because dams also provide benefits, most notably electricity generation and irrigation. Conflict occurs because they benefit some, while damaging the interests of others.

However, if we are to make a case for large dams, it must be based on a stronger argument than that our neighbor is doing it. Equally important, it should be based on a comparison not only with other generating technologies, but also with options such as more efficient electricity utilization, or drip irrigation that reduces consumption.

And finally, one cannot take the decision based solely on criteria of growth. Public policy is not about growth but development of the sort sought by society. That inevitably requires consideration of justice, equity, and development. To confuse growth with development is to miss the point entirely.

© 2007 The Discomfort Zone.