The government has announced to make investment in hydropower its first priority in the fiscal policy of 2013/14. The focus of the budget, the Ministry of Finance (MoF) has indicated, will be the development of transmission lines and large-scale hydropower projects, along with accelerating the process of inking Power Purchase Agreement (PPA) for different projects.
southasiabiz.com
All those endeavors are welcome. But if the government really wants to address Nepal’s acute power shortage, these are not the areas it should focus on. It should either introduce bold structural reforms in Nepal Electricity Authority (NEA), or let it go and establish separate institutions for generation, transmission and management of hydropower. [break]
NEA came into existence in 1985 under the Nepal Electricity Authority Act, 1984 by merging the Department of Electricity (under Ministry of Water Resources), Nepal Electricity Corporation, and related Development Boards. The goal behind was to provide efficient and reliable service. Almost 28 years down the line, NEA has become more inefficient, employees have become more corrupt, and the whole system almost dysfunctional. There are many reasons for this, but the most important one is appointment of political cadres in responsible positions, usually in the board of directors.
NEA’s cumulative net loss stands at Rs 36 billion as of fiscal 2011/12, of which Rs 8.5 billion was incurred just in the fiscal 2011/12. But this is not all. According to the Federation of Nepalese Chambers of Commerce and Industry (FNCCI), the industrial sector is losing around Rs 60 billion each year due to lack of smooth power. NEA has property, plants and equipments worth around Rs 86.12 billion as of fiscal 2011/12, but still, the government endorsed a reform proposal in 2011 aimed at writing off around Rs 28 billion of its loans. That would make people pay NEA twice: once in electricity tariff and again to write off its loans. It is a suicidal step in the long run. NEA should cover its own costs.
NEA, which works both in generation and marketing of hydropower, is also responsible for power distribution throughout the country. A few years ago, the government had come up with a plan for a separate body for development and management of transmission lines, but the plan failed to gain momentum owing to lack of political willingness and vehement opposition from within NEA.
NEA, which has more than 10,000 employees, has admitted that most of its yearly losses occur are due to increase in power purchase costs, depreciation and staff maintenance.
For the effective development of hydropower sector, it is essential to develop sound infrastructure for transmission, expedite PPA and reduce leakages. And the success of these steps will depend on NEA’s willingness to take the initiative.
In many cases, NEA itself poses hurdles in the development of hydropower sector. It has been hesitant to sign PPAs for super-six hydropower projects being developed by the private sector. The super six projects—16 MW Singti, 24.1 MW Khare, 23.5 MW Upper Solu, 82 MW Lower Solu, 14.9 MW Maya Khola and 50 MW Mewa—are all set to start construction. NEA should be responsible for the loss of the private sector due to its apathy in signing PPAs.
The case of Upper Trishuli 3A has brought to light the corruption inside NEA, and gives enough reason to let it go. NEA board itself had highlighted the importance of bold structural and operational reforms within the organization, but the reforms had to be shelved due to employee unions at NEA.
An increment in electricity tariffs will help NEA, but it will not be enough for it to emerge from the mess it has been in for the last 28 years. The government is surely going to allocate a substantial amount to the hydropower sector in the new budget. That money should be spent in the development of transmission lines, given that NEA will be reformed. Otherwise, the government should dissolve NEA and come out with a plan to establish separate institutions for generation, transmission and distribution of hydropower. NEA’s monopoly has to end. Political parties need to realize that people deserve to live with adequate light, and stop politicizing our water resources and related institutions.
The author is associated with Business and Economic Bureau of Republica
bhoju.poudel1@gmail.com
Related story
Social Practices Reform Act: Outdated, ignored, and unenforced
