Extended load-shedding : Symptom of deeper malaise

As the nation reels under a frightening sixteen hours of electricity outage daily, it is worthwhile to ponder whether such a situation could have been avoided. The government has gone on to declare a state of power crisis and has apparently adopted a series of short term and medium term measures designed to cope with it. The short-tem measures inter alia include mass scale promotion of compact florescent lamps (CFLs) to replace incandescent bulbs; reduction in technical losses and thefts by strengthening existing transmission and distribution system and by enactment of appropriate laws and regulations; reduction in the tariff on import of equipment and fuel to promote investment in new thermal (diesel) generation and the setting up of privately funded 200 MW thermal plants in about 8 centres throughout the country. The issue of diesel plants whose generation cost is estimated to be above Rs.30 per unit has caused nationwide resentment and protest.

The medium term measures include: facilitation for the setting of hydro plants of up to 50 MW by expediting power purchase agreement (PPA); providing tax concessions on the import of plant, equipment and construction materials; a seven-year tax holiday if such plants generate electricity within a 5-year period and the waiver of the requirement for environmental impact analysis (EIA) for such projects. While such actions will provide some relief, they may however not necessarily obliterate power woes. When at the helm of state affairs, no political parties seems to be able to rise above narrow partisan considerations. The pathetic security situation prevailing during the ten-year-old conflict period did indeed prevent potential private investors from setting up hydro plants,. However, this should not have prevented the government and NEA from adding new generation capacity.

With each change in government, heads begin to roll in public enterprises, and in this manner, a new managing director is appointed in NEA, not primarily on merit but on considerations which are at best questionable. Successful corporations worldwide derive the benefits of being served by competent and experienced CEOs over fairly long periods of 5 to 15 years. However, in our case, the tenure of a CEO often depends on the life of a particular government. Under such circumstances, it is unreasonable to expect good performance from any enterprise — public or private. Political influence has had a massive toll on the fortunes of NEA. On many occasions, it has been treated as a fiefdom for its political bosses to cater to their demands which could range from appointment of party cadres as NEA advisors, to providing vehicles for extended periods and to paying bills incurred to conduct party programmes. A most glaring example of interference was the appointment of the consultant for German-aided 70 MW mid-Marshyangdi hydro-project against the advice of the technical committee. Owing to the lack of experience and competence, the consultant kept on changing the civil construction design resulting in inordinate delays and doubling of costs.

To avoid future load-shedding, the nation needs to work under a new paradigm. Towards this end, a few essential measures must be adopted in addition to those already undertaken. Private sector must be genuinely encouraged to undertake small and medium projects with active support of NEA. The DoE and NEA must formulate a master plan of the development of the power sector with a time-bound programme including the construction of its nationwide transmission network. NEA should be made a responsible, independent and financially viable institution so that it can launch new generation/transmission projects under the PPP model.

In addition, Nepal Government must review its licensing procedure to discourage rent seeking license brokers and encourage genuine and capable investors. The CEO of NEA should be appointed as an executive chairman for a period of at least 5 years, on the recommendation of the CEO selection committee to minimise interference (as has been recently done in the case of Nepal Stock Exchange). Although politically unpalatable, the expansion of rural electrification connected to the national grid — a highly uneconomic undertaking — must be temporarily suspended till generation capacity is enhanced. Political parties must help NEA to reduce theft and NEA must take proactive measures to reduce technical losses. NEA must also be allowed to raise tariffs on a periodic basis to cover increased cost of operation and maintenance. As it has become indispensable to import about 300 MW power from India for the next five years, it is important that the interconnections between India and Nepal be quick. If required, Nepal Government should not shy away from seeking the help of the GOI to seek an Indian partner to set up a thermal plant of 200-300MW (coal-based) in India for dedicated export to Nepal.

Thapa is a former MD, NEA