Nepal | May 29, 2020

NEA seeks power tariff hike for industrial sector

Pushpa Raj Acharya
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Kathmandu, January 21

Owing to huge loss due to mismatch between purchase and selling rate of electricity, Nepal Electricity Authority has sought a hike in tariff for electricity supplied to the industrial sector.

NEA has urged Electricity Tariff Fixation Commission to hike the tariff for power supplied to industries to strengthen NEA’s financial health.

According to NEA, the average rate for users of the industrial sector is Rs 9.66 per unit. However, it costs Rs 12.13 per unit for NEA to supply power to the industries. Due to this, NEA has been facing a loss of Rs 2.47 per unit or 25.57 per cent on the sale of electricity to the industrial sector, which is worsening the financial health of the government entity.

ETFC has fixed separate rates for industries for peak hours, normal hours and off-peak hours. NEA was not too concerned about the tariff fixed for the industrial sector till last year because the country’s power generation was sufficient to meet the demand of the industrial sector during the dry season as well. “However, as NEA has been supplying ‘round-the-clock’ electricity imported from India to industries from this year, the power utility’s loss will increase if tariff is not adjusted,” said Prabal Adhikari, NEA spokesperson.

“There is no doubt that the industrial sector should get cheaper and reliable power supply to minimise cost of production. However, NEA as a business entity cannot keep supplying cheap power unless the government subsidises electricity for the industrial sector,” said Adhikari.

Along with the daunting challenge of ending power cuts at major load centres, NEA has also given priority to improving its financial health, said officials.

NEA estimates its total expenditure on operation, maintenance, administrative cost, principal and interest repayment on loans, and cash flow requirement to manage various ongoing projects to hover at around Rs 74.50 billion this fiscal. However, its total revenue is expected to stand at a mere Rs 52.22 billion.

If ETFC fails to adjust the tariff, NEA will log a Rs 22 billion loss, which will need to be injected by the government.

“There is no option for managing the loss other than to revise the tariff structure and NEA has asked ETFC to adjust tariff on the ‘cost plus pricing’ basis,” an official told The Himalayan Times.

Due to lack of adequate fund, NEA has failed to invest according to its transmission, generation and distribution plan.

Though NEA has proposed to hike tariff for industrial sector users, it has overlooked leakage control, which could be instrumental in reducing NEA’s loss. Data reveals that 24.28 per cent of the total supply is lost due to leakage.

NEA has been losing revenue of around Rs 17 billion (based on the existing tariff structure) annually due to electricity leakage. It is reported that it is not possible to completely control leakage, but much power could be saved by making the distribution system robust.

A version of this article appears in print on January 22, 2017 of The Himalayan Times.

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