A Project On Trial

The tunnel that will drain water to Bandipore. Photo: Bilal Bahadur

New Delhi and Islamabad claimed victory when the International Court of Arbitration (CoA) issued an interim order that permitted India to go ahead with almost everything at Kishangaga project except permanent construction on the riverbed. As the two countries are gearing up to identify agreements and disagreements over the order for the Court, Kashmir Life takes a peak into what the September order was all about.

They tried to talk it out for about six years. The last sitting that members of the Permanent Indus Commission (PIC) of India and Pakistan had on the controversial Kishanganga Power Project was in May-June 2009. But the differences could not be ironed out. Eventually, it went to a third party for arbitration, which has been going on for almost a year now.

In 1960, the Indus Water Treaty was signed between India and Pakistan, many think at the cost of J&K. This water sharing treaty has a well-defined dispute resolution system enshrined in its Article XI. According to Raymond Lafitte, a Swiss professor who settled the Baglihar crisis as a World Bank appointed Neutral Expert (NE), any debatable question which arises between the Parties (India and Pakistan) concerning the interpretation or application of the Treaty should be treated with the following gradation: (1) ‘agreement’ researched by the PICs, (2) ‘difference’ dealt by a NE, (3) ‘disputes’ resolved either by agreement between governments, with negotiators or mediators or by a court of arbitration or arbitrators.

Ever since the NE settled the ‘difference’ over Baglihar by offering six decisions favouring three each to India and Pakistan, the waters of the subcontinent had turned into ‘dispute’—this time, over the upcoming 330-MW Kishanganga (read Neelum if you are on the other side of the LoC) project, in remote Gurez, the last abode of the Dard Shin tribe.

The project has an interesting history. J&K wanted to set up this project on its own, but the initial investment of around Rs 15 crore failed to yield anything—as most of the amount was swindled by the contractor-engineer combine. After Dr Farooq Abdullah returned to power in late 1996, he signed a series of MoU’s with various foreign consortiums. One such MoU was signed in late1997 and later revalidated in mid-1998 with the Kishanganga Group of Contractors. This group consisted of the Swedish consortium, Skanska International and a few domestic companies, including J&K’s Power Development Corporation (PDC).

The foreign consortium would arrange 85 percent of the project costs from foreign donors and the state would arrange the balance capital locally. In fact, Skanska approached IMF and the Development Bank of Sweden to arrange a measure share of over Rs 2,700 crores. Environmental concerns triggered a fierce reaction from the Kashmiri diaspora. But New Delhi refused to offer a counter-guarantee.

Finally, the project was given to NHPC in July 2000 and for many years the files were gathering dust in the Central Electricity Authority (CEA) and MoD. The final design was approved in 2006. In late 2008 Government of India’s Cabinet Committee on Economic Affairs (CCEA) approved its revised cost. The Hindustan Construction Corporation, which bagged the contract, started working in the summer of 2009.

Quite flows Kishanganga

A 330 MW (3 x 110) project is designed to generate 1350 million units of energy in a year. Initially, it was meant to be a storage project, but given the massive inundation and displacement of Gurez valley and the spiralling costs for rehabilitation, the dam height was reduced from 77 meters to 37 meters.

The project envisages taking water from Gurez to Bankote near Bandipore through a 23.50 kms-long tunnel to generate energy. This will divert Kishanganga waters to Wullar lake through Bunar Madumati Nullah, a tributary of Jhelum river, almost 100 kms ahead of its natural confluence in Muzaffarbad outskirts.

The inter-tributary transfer of water would raise the level of Wullar lake and provide 52 cubic meters more water to downstream 480-MW Uri and Lower Jhelum projects where it would run an additional turbine to increase generation estimated to be over 500 million units a year. Three power transmission lines of 220-kv each would evacuate energy to the northern grid.

Islamabad had a series of objections. It believes an inter-tributary transfer was a violation of the water sharing treaty. If it takes place, it will force a shift in the crop pattern between Gurez and Muzaffarabad and leave part of the Mangla Dam un-utilized as the diversion would deprive it of 27 percent discharge of the Neelam river. Finally, Islamabad fears that it would nuetralise the viability of its upcoming Rs 8450 crore 969-MW Neelum-Jhelum (Jagran) project.

As a series of talks held at Permanent Indus Commission (PIC) and foreign secretary levels failed, Islamabad implemented its threat and took the issue to a CoA. Pakistan had only two points of dispute over the project: Whether India’s proposed diversion breaches India’s legal obligations owed to Pakistan under the Treaty and whether under the Treaty India may deplete or bring the reservoir level of a run-off river plant below Dead Storage Level (DSL) in any circumstances except in the case of an unforeseen emergency.

In the first hearing, when the parties flew to The Hague with huge delegations to defend their positions, Pakistan took a position that it may not require any interim relief. On January 14, 2011 Islamabad stated that NHPC’s Kishenganga project was “not yet so far advanced that such harm is imminent.” Pakistan, however, said it does not surrender the right to seek any provisional measure if the situation demands so.

Given its pleadings before CoA, it seems Pakistan started making a point of dragging specifics of international law into the case. “Major construction projects are, however, not easily reversible processes. The excavation of construction sites and the filling of dams cannot easily be undone. Equally importantly, costs are not incurred in a regular and uniform fashion.

There are points at which major investments of capital and resources have to be made. Beyond those points, a State might find it more difficult to abandon the project and restore the status quo ante,” Pakistan stated before the CoA according to the interim order. Pakistan also sought an undertaking not to take steps that would have a “significant adverse effect” on its ability to abandon the project and return to the status quo ante.

Islamabad insisted that New Delhi should adhere to the principle of proceeding at its own risk. In its decision on the merits, the court may order that the work must not be continued or must be modified or dismantled. Pakistan argued that its invoking of the international principle was in response to India’s understanding that appears to be contemplating “at most a risk that it would be required to open the spillways of the KHEP [Kishanganga Hydroelectric Project] and allow the Kishenganga to flow unhindered—but not the possibility that it might be required to dismantle the dam.”

After a series of communications, India’s agent in the case finally informed the court that India will fully abide by the decision even if it means dismantling of the dam, a possibility that is unlikely to arise. “Yes, I agree to a dismantling. I say that there is no occasion in this case. You could modify, you could do it, and the cases do say you can order a dismantling,” the interim order records the Indian agent as saying. India said the same principle should cover Pakistan’s Neelum-Jhelium project as well.

However, Islamabad sent an application through e-mail in the first week of June seeking an interim order “restraining India from proceeding further with the planned diversion of the river Kishenganga / Neelum until such time as the legality of the diversion is finally determined by a Court of Arbitration”. The urgency came after Pakistan discovered during the site visit that the local diversion of the river through the by-pass tunnel is taking place in November.

Though the ultimate diversion would take place in 2015, Pakistan contended that it is “no more than one particularly serious act in a project that has been unlawful from its inception.” The diversion, Pakistan claimed, would modify hydraulics of the river and enable NHPC to accelerate work on it.

India suggested to the court that any interim order be refused to Pakistan on the plea that India is not diverting the river till 2015. India asserted that the ‘by-pass tunnel’ that is being projected as the main urgency by Pakistan is otherwise permitted under the Treaty, and it lacks any impact on the volume or timing of the flow of the water as it flows to the LoC.

India asserted that the project is reversible, and Pakistan lacks urgency for any provisional measure. Interestingly, India suggested any provisional measure would trigger irreparable impact on India because “the State of Jammu and Kashmir is seriously short of power,” would add “enormous financial costs” to the project and impact the lives of people currently engaged in the project.

Judge Stephen M Schwebel

The interim order details the court’s mandate in wake of the Treaty and explains every detail from the point of view of both parties. It concludes that Pakistan “presented a plausible, provisionally tenable argument under the Treaty” but suspension of many of the key components of the project like boring of tunnels and the construction of the powerhouse are not necessary to safeguard Islamabad’s plea because these do not obstruct the flow of water.

“In the Court’s view, the continuation of such activity is appropriately governed by the ‘proceed at own risk’ principle of international law, as specifically recognized by India during the hearing,” the Court concludes. “The situation would merely be one in which India would have invested considerable sums of money without reaping the benefit of the operation of the KHEP as currently envisaged.

This, however, is precisely the risk that India has declared it is willing to assume, and there seems to be no further risk of ‘prejudice to the final solution’ in terms of the Court’s award, in allowing these aspects of the KHEP’s construction works to proceed.” Instead, the court considers the construction of the permanent dam on the riverbed squarely within the category of works that create a significant risk of “prejudice to the final solution.”

It is plainly on this basis that the Court ruled that India can continue with all works relating to the project including temporary diversion tunnels which it has claimed to have completed at Gurez. However, NHPC is restricted from any construction of any permanent work on or above the riverbed that may inhibit the restoration of the full flow of that river to its natural channel.

Both countries have been directed to arrange periodic joint inspections of the dam site at Gurez in order to monitor the implementation of the order. They are supposed to submit a joint report to the Court by December 19, 2011 setting forth the areas of agreement and any points of disagreement that may arise between them concerning the implementation of the Order.

The Order apparently pleases both the parties. Pakistan claimed a victory, saying India has been restrained from constructing the dam. India claimed victory saying the Court has permitted it to go ahead with almost everything that makes the project—with the exception of the dam. Both countries have agreed they will proceed with construction of the respective projects on either side of the LoC on the principle of proceeding at their own risk.

Neither of the countries has stopped working on their projects. The final award of the Court, which is slated for late 2012 or early 2013, will determine who actually loses. Days after the celebrations, pessimism has taken over in a select group of thinkers in both countries who see loss in the long term.

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