Govt loses Rs 3 billion in revenue as industries face 22-day power disconnection, industrialists report losses of Rs 12 billion

KATHMANDU, Jan 23: The Nepal Electricity Authority (NEA) disconnected power lines to various industries on December 19, last year, disrupting regular operations for 22 days. This sudden power cut, amid the country's economic downturn, has created additional challenges, leading to significant losses incurred by both the government and industrialists.

The government has formed an inquiry committee headed by former Supreme Court judge Girish Chandra Lal to look into the tariff dispute. On January 8, the government instructed the NEA to reconnect the power lines temporarily, pending the committee's recommendations.

However, during the 22-day power cut, the government suffered a loss of over Rs 3 billion in revenue, while industrialists reported losses exceeding Rs 12 billion.

As 23 industries were affected by the NEA’s power cut for 22 days, the industries suffered losses. Along with the industries, the NEA and the government also suffered huge financial setbacks. The losses encompassed revenue from customs and excise duties, income tax, and electricity tariff.

The affected industries are among the largest in the country, with some engaging in export activities. The losses are evaluated based on regular business operations.

According to the Internal Revenue Department (IRD), the government has lost Rs 46.4 million in excise duty from the eight cement industries that had power cuts.

Similarly, value added tax (VAT) of Rs 217.6 million has been affected. According to the Department of Mines and Geology (DMG), in the meantime, the government used to get Rs 81.6 million for mining royalty.

According to the Department of Customs (DoC), Rs 96 million has been lost by importing coal, cement and other materials used by the cement industry. In this way, Rs 441.6 million has been lost in excise duty, customs, mining royalty and VAT.

Arghakhanchi's cement export business, valued at Rs 390 million, was affected during this period. The NEA is estimated to have lost Rs 234.4 million in electricity tariff during the 22-day power cut.

The DoC estimated a loss of Rs 253.16 million in customs revenue after the NEA disconnected power lines to seven major steel plants. Additionally, Rs 84 million in excise duty was lost during this period.

According to the IRD, it is estimated that Rs 1.20 billion of VAT was lost due to the closure of large industries during this period.

Similarly, it is estimated that the NEA has lost around Rs 160 million in electricity tariff. Among the steel industry, Jagadamba Steel was regularly exporting its products abroad. Meanwhile, it is said that exports worth around Rs 39 million have been affected.

It is estimated that the revenue loss of Rs 34.5 million was made when the lines of three spinning industries were cut. The spinning industry used to export yarn in large quantities. In the meantime, it is claimed that the export of spinning mills alone worth Rs 1.28 billion has been affected. It is estimated that the NEA also lost Rs 143.1 million electricity tariff of the spinning mill.

Furthermore, Siddhartha Pet Plastic Industry reported a loss of Rs 3.93 million for the government, comprising Rs 900,000 in excise duty, Rs 2.46 million in VAT, and Rs 569,000 in customs revenue. The export of Siddharth Pet Plastic alone is estimated at Rs 735,000. Other four industries are estimated to have incurred similar losses.

According to the Nepal Cement Manufacturers’ Association, the daily capacity of all the cement industries whose power lines were disconnected is 3,000 tons. It is mentioned in the data recently published by the Confederation of Nepalese Industries (CNI) that the industry is operating at an average of 60 percent capacity.