POLITICAL ECONOMIC ANALYSIS Political Economy Analysis to Identify Champions for Freshwater Policy Change and Conservation of Aquatic Biodiversity 1 Disclaimer This publication was produced for review by the United States Agency for International Development. It was prepared by ISET Nepal, NEF and Niti Foundation. The authors’ views expressed in this publication do not necessarily reflect the views of the United States Agency for International Development or the United States Government. Ajaya Dixit, Ashutosh Shukla, Anustha Shrestha, Binod Bhattarai, Kopila Wagle, Deep Narayan Shah (PhD), Hari Dhungana (PhD), Bijita Thapa, Anurag Pokharel, Sawar Basnet Thapa, Srimanjari Tamrakar, Yogendra Subedi, Ananta Tamang, Mohan Das Manandhar, Niraj K.C, Prakash Dev Pant (PhD), Rajan Karna, Rojen Bajracharya, Sreya Gyawali, Silanath Jha, Sudip Bhaju, Sujeev Shakya and Rabi Wenju. FINAL DRAFT Political Economy Analysis to Identify Champions for Freshwater Policy Change and Conservation of Aquatic Biodiversity Submitted to PAANI Programme DAI International USAID By ISET NEPAL, NEF, NITI FOUNDATION February 2020 POLITICAL ECONOMIC ANALYSIS Political Economy Analysis to Identify Champions for Freshwater Policy Change and Conservation of Aquatic Biodiversity Ajaya Dixit, Ashutosh Shukla, Anustha Shrestha, Deep Narayan Shah, Kopila Wagle, Hari Dhungana, Bijita Thapa, Anurag Pokharel, Binod Bhattarai, Sawar Basnet Thapa, Srimanjari Tamrakar, Yogendra Subedi, Ananta Tamang, Mohan Das Manandhar, Niraj K.C, Prakash Dev Pant, Rajan Karna, Rojen Bajracharya, Sreya Gyawali, Silanath Jha, Sudip Bhaju, Sujeev Shakya and Rabi Wenju. 4 POLITICAL ECONOMIC ANALYSIS Acknowledgement This study has been conducted by the consortium of the Institute for Social and Environmental Transition-Nepal, Nepal Economic Forum and NITI Foundation. We express our thanks to DAI International for supporting this study. We also express our deep thanks to Ms Nilu Basnyat, Dr. Narayan Belbase, Dr. Allen Turner, Mr Jeremy Keeton, Dr. Deepak Rijal, Mr Bhaskar Bhattarai and Mr Sanjog Sriwastav for their support throughout this study. This study would not have been possible without the support of river basin team leaders, watershed management specialists, citizen scientists of the 12 priority watersheds. We offer our appreciation to everyone participating in the FGDs, KIIs and other interactions. We express gratitude towards the participants from the 12 watersheds for taking part in the validation workshops in Surkhet, Nepalgunj, Dhangadi and Kathmandu and for providing useful suggestions. Finally, we would like to thank Mr Mukesh Sharma, Mr Akendra Joshi, and Mr Narayan Ghimire, for their support during the field visits. 5 POLITICAL ECONOMIC ANALYSIS Table of Contents 1. The Political Economic Analysis ............................................................................................ 24 The Political Economic Analysis ............................................................................................................24 The MKWR Basins ....................................................................................................................................26 The Waterscape .........................................................................................................................................29 Groundwater .............................................................................................................................................33 Climatic Context .......................................................................................................................................33 Climate Change ........................................................................................................................................35 Water Development Context ...................................................................................................................38 Hydropower Projects ...............................................................................................................................41 Development Programs ...........................................................................................................................44 Government-Run Programs ....................................................................................................................46 Final Observation .....................................................................................................................................46 2. The Conceptual Framework .................................................................................................... 48 Preamble ....................................................................................................................................................48 Framework ................................................................................................................................................49 Study Methodology ..................................................................................................................................51 Methodological Tools ..............................................................................................................................52 Champions.................................................................................................................................................53 3. River basins: State of art and Stresses ................................................................................... 56 West Seti Watershed .................................................................................................................................56 Rara-Khatyad Watershed ........................................................................................................................62 Phoksundo-Suligaad Watershed ............................................................................................................66 Tila Watershed ..........................................................................................................................................69 Middle Karnali Watershed ......................................................................................................................74 Jhimruk Watershed...................................................................................................................................79 Rangun Watershed ...................................................................................................................................84 Thuligaad Watershed ...............................................................................................................................87 Bogatan Lagam Karnali Watershed .......................................................................................................91 Middle Rapti Watershed ..........................................................................................................................94 Lower Mahakali .......................................................................................................................................100 Lower Karnali Watershed .......................................................................................................................103 Stresses and Pressures ...........................................................................................................................108 Concluding Remarks ..............................................................................................................................116 4. Aquatic Ecosystem Analysis and Management .................................................................. 118 Introduction ..............................................................................................................................................118 Freshwater Ecosystems and Aquatic Diversity ...................................................................................118 Ecosystem Services .................................................................................................................................128 Conserving Aquatic Ecosystems ...........................................................................................................132 6 POLITICAL ECONOMIC ANALYSIS 5. Local Knowledge and Practices on Conservation and Management and Use of Aquatic Resources ....................................................................... 134 Introduction .............................................................................................................................................134 Identification and Relevance of ILKPs in the 12 Sub-watersheds of the MKWR Basins.......................................................................................150 6. Identification of Indicators of Freshwater Biodiversity and Freshwater Habitats .............................................................. 156 Background .............................................................................................................................................156 Objectives ..................................................................................................................................................157 Approach ..................................................................................................................................................158 Monitoring System: Proposed ...............................................................................................................162