Govt forms panel to study electricity tariff reduction

KATHMANDU, July 30: The government has formed a study committee to explore reducing electricity tariffs in a bid to boost domestic consumption.

Private-sector energy producers have long complained about wastage of nearly 1,000 megawatts during the rainy season, citing limited local demand. Critics argue that high tariffs have discouraged households and industries from using electricity, despite Nepal’s growing generation capacity.

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According to the Ministry of Energy, Water Resources and Irrigation (MoEWRI), a board meeting of the Nepal Electricity Authority (NEA) chaired by Energy Minister Biraj Bhakta Shrestha on Wednesday decided to establish a seven-member panel. The committee, led by NEA Board Member Anshu Kiran Shahi, includes representatives from MoEWRI and the Federation of Nepalese Chambers of Commerce and Industry.

The panel also comprises experts from the energy, consumer, and financial sectors, with the Deputy Director of NEA’s Distribution and Consumer Services Directorate serving as member-secretary. The committee has been tasked with submitting its recommendations within 15 days.

Nepal’s installed electricity capacity currently stands at around 5,300 MW, including 4,300 MW from hydropower plants. However, peak demand is only about 2,200 MW. While roughly 1,000 MW is exported to India and Bangladesh, another 1,000 MW goes unused due to insufficient domestic consumption.

Instead of lowering tariffs, the government recently introduced a five percent value added tax (VAT) on households consuming more than 50 units per month, a move that has drawn criticism for further discouraging electricity use.

The NEA currently collects tariffs under 13 consumer categories, ranging from domestic and industrial to irrigation, drinking water, religious institutions, entertainment businesses, and wholesale users, as per the Electricity Tariff Collection Regulations, 2021. The last tariff hike was in July 2021, when rates increased by up to 19 percent.