Budgeting for energy self-reliance

Photo :China Daily

Who in his right mind levies VAT on hydropower projects when a country is reeling under crippling power cuts? Answer: Nepal’s Finance Minister.

There is a gross misconception which terms hydro, solar and other renewable energy developers as belonging to the so-called energy sector. Actually every citizen of Nepal and every Nepali home is a microcosm of the national energy infrastructure. What use is developing energy projects if they do not bring electricity to Nepali homes and make our country self-reliant?

From that perspective, the question arises: does this year’s annual budget at all address the urgent energy needs of Nepalis? Sad to say, it did absolutely nothing. It did not take one single measure to bring more electricity into the homes of Nepalis. It did nothing to reduce the consumption of imported petroleum products, which form the biggest component of Nepal’s imports and is a dependence that threatens our national security.

Instead, the Finance Minister wasted valuable taxpayers’ money funding projects that will probably take 20 years to complete, neglecting the immediate energy crisis. Any budget that relies on increasing revenue from taxes on imports is one prepared by people with no basic understanding of national economic planning. To prevent this yearly calamity from re-occurring, the Customs Department and the National Planning Commission should be kept out of budget planning.

One intelligent move in the budget would have been to bring down the duty on electric vehicles and electric cooking stoves to zero. This would have weaned Nepali families off gas and petrol, increased the demand for electricity and promoted domestic electricity generation. The Ministry Finance, obsessed as with revenue, would see a windfall of royalty from new power projects.

It would narrow Nepal’s trade deficit with India as petroleum imports decline, thus reducing Nepal’s political and economic dependence on the outside world. But our inept planners will never allow this to happen because they only look at short-term revenue generation from the duty on imported fossil-driven vehicles.

Did the Finance Minister announce any measures to reduce Nepal’s trade deficit? No. Did he introduce any substantial programs to decrease imports? No. Did he offer incentives for electricity generated and consumed within Nepal? No.

On the contrary, he allocated funds to build a petroleum pipeline from India to Nepal, thereby increasing the import of even more fuel, spending our foreign reserves and piling up our trade deficit. This year’s diesel imports by Nepal Oil Corporation went up by 14 per cent and petrol, by 13 per cent. Energy self-sufficiency through renewables has now become Nepal’s main national security need, and it has to be addressed immediately to protect Nepal’s independence. Otherwise the sight of Nepali leaders trooping off to New Delhi every time they have to take a major national decision will be even more frequent.

Which planner levies VAT on hydropower projects when the country is reeling under crippling power cuts and importing electricity? Answer: Nepal’s Finance Ministry. Mr Finance Minister: the hydropower sector does not need subsidies, it just needs you to stop thinking like a Customs official. What was your logic behind providing incentives to polluting cement factories and not to hydropower developers? Those cement manufacturers will now get diesel-generated electricity at Rs 45 per unit. Cement consumers will pay more because the energy component of each bag of cement is so high.

The Ministry of Finance should do the energy sector and all Nepalis a big favour by waiving VAT on all power projects and announce zero duty for electric vehicles and cooking stoves. Private developers will rush in to generate the required power. All they need from the state are transmission lines. This will reduce the trade deficit and remove the chronic shortage of gas and fuel that occurs because of corrupt syndicates with political protection. A stronger, more self-reliant and more independent Nepal will then emerge.

By: Sujit Acharya