Power sector reforms

When Prime Minister Dr Baburam Bhattarai assumed office some five months ago, he impressively pointed out one simple fact: There is no meaning of talking of rapid economic growth without electricity. Soon, he explored available options including a controversial plan to install thermal power plants and purchase of electricity from India as immediate response to deepening power crisis. Many experts, including this newspaper, opposed the idea of installing thermal plants since they are not financially viable due mainly to the high per unit production cost that is roughly three times of the average retail cost.



Instead, there were calls for new strategies for rapid development of clean energy like hydropower, with focus on middle-sized projects that can be constructed within a period of three to four years. Since Nepal lacks both resources and technologies, there were also pleas for granting tax incentives and even limited subsidies to certain projects that plan to generate power within three years.



It is heartening that Immediate Action Plan for Economic Development and Prosperity that the prime minister himself announced last week has made some attempts to accelerate hydropower development in Nepal by addressing some core issues. It is encouraging that the action plan has identified at least five hydropower projects, including 456 MW Upper Tamakoshi that can be brought into operation within the next three years, provided the government creates a conducive environment for carrying out construction works.



For that, the decision to ban all forms of strike and disruptive activities at ongoing power projects is another move in the right direction. But bear in mind, imposing such a ban without workable mechanism to safeguard basic rights of workers and to address genuine grievances of local people can bring about many complications. Likewise, the decision to revise existing power purchase rate for those projects that can start generating power in next three years is yet another good move. We believe, this offer will motivate private power developers to expedite construction works at ongoing projects.



That said, we reiterate that Nepal has no dearth of new programs and policies. All that we lack is the institutional capacity to successfully translate the programs into reality on the ground. When we talk about power development in Nepal, the weak institutional structure of Ministry of Energy and Nepal Electricity Authority is the biggest obstacle, which can be addressed only by sweeping reforms. We hope the proposed unbundling of NEA into three different entities will further bring appositive synergy and will kick start a new phase in power reforms in Nepal.

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