Power price revision

Amid widening upheaval on the political front propelled lately by the renewed efforts of the political parties to form a government and the planned handover of the Maoist army to a committee under the prime minister, an important plea made by power producers this week for a revision of the power purchase rate went largely unheard. Putting forth a demand for raising the selling or buying rate of any product or service is nothing new. However, the logic that the power producers presented along with their demand is worth pondering.



The crux of their argument was that the current power purchasing rate that  state-owned Nepal Electricity Authority (NEA) offers yields no profit for  private power developers, who are thus unwilling to jump into new ventures. Power producers have long been arguing that the present rate that the financially troubled NEA is offering is not lucrative enough to lure additional private investment in the hydropower sector. They even claimed that if they get the rate they want, they are in a position to add 1,500 MW to the national grid in the next five years, thereby substantially reducing the current power deficit.



NEA, however, says it is not is a position to revise the power purchase rate as long as the rate for retail to consumers is not raised. Maybe true. It is a fact that the consumer rate for power has not been revised since the last nine years. But another important aspect is that it is NEA and government agencies, not private power producers, that should be pushing for raised rates. It’s high time the government made clear why it is shying away from taking a bold decision to raise the selling rate of power in gradual fashion when it is quite capable of frequently revising the price of petroleum products to match international prices?



The government needs to do a thorough cost-benefit analysis of the overall social and economic impact of 12-hour power cuts, and start gradually raising the rates. Undoubtedly, the cost of crippling power shortages will be much higher than a gradual and logical rise in power tariff. A power tariff rise will bring inflationary pressures but these will subside over a few months.



The point to be noted is that power shortage, which takes an alarming toll on the efficiency and productivity of both industrial and service sectors, is exerting more sustained pressure on domestic inflation, as this shortage has swelled the production cost of domestic industries. It is about time we all made a hard choice: whether we want to continue living with an actuate shortage of power or put up with the slight burden of a price rise and move on toward prosperity.

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