"The decision to make the changes was made after we found out that the poor people´s access to alternative energy sources had not increased significantly despite the government´s distributing subsidies in various rural areas," Dr Narayan Prasad Chaulagain, executive director of Alternative Energy Promotion Center, said, addressing a consultative workshop on implementation of smart financial mechanisms in rural energy technology.
The government, under the rural energy project, is currently giving a subsidy of Rs 97,500-Rs 125,000 per kilowatt of electricity generated through micro-hydropower projects. Similarly, the state is doling out up to Rs 10,000 for the installation of solar energy plants, and up to Rs 16,000 is given for the installation of biogas plants. Although there are no updated statistics available for how these subsidies have helped the poor, a study conducted some years ago shows less than 20 percent of the poor have access to alternative energy sources.
One of the reasons behind this inequitable access to energy sources, as suspected by many experts, is the flat subsidy amount given by the government. Currently, the government gives the grant amount on the basis of the size of an alternative energy project. In other words, the same amount is given, for example, for setting up projects in more urbanized places like Dhading and for those in extremely remote places in Karnali zone.
"We have now realized that a blanket solution cannot solve the problems of geographically and economically dissimilar place”," Chaulagain said.
Furthermore, there is a discrepancy in the subsidy amount increments over the years and the cost increments in labor and construction materials.
About 10 years ago, the cost for producing one KW of power averaged Rs 110,000. The subsidy per KW at that time was Rs 70,000, meaning the government was covering 64 percent of the total project cost. However, in 2006, when the average production cost of one KW of power went up to about Rs 200,000, a grant amount of only Rs 85,000 per KW was given, meaning the compensation amount stood at 31 percent of the total project cost. Although the gap was bridged in 2008, and the subsidy amount started covering 45.4 percent of the total project cost, that amount is still less than that of a decade ago.
Against this backdrop, where most of the people who can afford to already have access to alternative energy sources, "the government should increase the subsidy amount further if it wants to give benefits to the poor," Dr Govinda P Koirala of the Support Activities for Poor Producers of Nepal said.
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