A fresh US$250M Japanese concessional loan, announced on 27 March 2002, has cleared the way for construction of Sri Lanka’s highly contentious and consequently much delayed 150MW Upper Kotmale run-of-river project. Located at the heart of the island’s central Nuwara Eliya mountain range, it was originally funded in 1992, also by Japan, for US$290M but was shelved in February 1995 for environmental reasons.

The project approval agency found that the developer, the Ceylon Electricity Board (CEB), had not sufficiently investigated alternatives to a scheme that would deprive the country’s three most scenic waterfalls of much of their water. Present approval, following investigation and rejection of the main alternative, requires CEB to supply adequate water to the falls for 10 hours each day including the dry season. Flows during the other 14 hours will be diverted for power generation.

The project was first mooted two decades ago. In its original configuration, two small storage reservoirs at Caledonia and Talawakele would have accumulated the diverted flows of several of the headwaters of the Mahaweli Ganga to generate 248MW at an underground powerhouse at Niyangandora, upstream of the 200MW Kotmale reservoir.

This configuration was abandoned at feasibility stage because it would have deprived the 85.3m Devon as well as the smaller St Clair and Ramboda falls – all major tourist attractions – of almost all their water. Over 2000 families would also have been resettled.

The present project, which the 1992 Japanese loan was intended to finance, has dropped the Caledonia reservoir and hence some diversion. But up to 70% of the flows of the Devon, Puna, Pundal and Ramboda streams – all tributaries of the Kotmale before it joins the Mahaweli – will still be diverted through 22km of tunnels to a 25ha reservoir at Talawakele. Flows from this reservoir’s 38m dam will supply the downrated 150MW Niyangandora power house. Only 450 families will be resettled.

Even this smaller scheme, involving four diversion works and one small storage reservoir, has still caused an outcry. Its 1994 EIA was rejected because another proposal, known as the Yoxford Option, which would have saved the waterfalls and required no resettlement but still provided 100MW capacity at Yoxford, had been inadequately studied.

The required studies, which found that Yoxford was geologically unsuitable, were submitted to the Central Environmental Authority (CEA) in April 1996. After a furious rearguard action by the Environmental Foundation (EFL) NGO through to February 1998, the project was finally approved in August 1998. Fresh funding means construction can soon begin.

This opposition has had two important outcomes. First, Sri Lanka has secured better loan terms this time than in 1992. The first loan carried 2.6% annual interest over 30 years while this one carries only 0.95% interest over 40 years.

Secondly, the extended delay in perennially power-starved Sri Lanka has provoked intense debate. One view, expressed most forcefully in May 2001, is that EFL’s campaign was counter-productive. It claims that EFL ‘achieved absolutely nothing’ as the project ‘is going to be implemented exactly as it was planned six years ago’.

Moreover, had it been unopposed in 1994 it would have been commissioned in January 2001 and its 530GWh of energy per year would have matched exactly the country’s electricity shortfall in 2001.

Another view is that EFL was right and that the country’s power shortages reflect severe shortcomings within CEB that should therefore be overhauled. In any event, the project will now go ahead, complete with waterfalls on demand. It may well be Sri Lanka’s last major hydro scheme.