Dispute about electricity tariff hike

LightThe country has been facing a frightening level of load-shedding in the past few years. The installed capacity for generation of electricity in the country is not even 700 MW when the demand has reached around 1100 MW, and the actual generation is almost half of the installed capacity during the winter season. The country has been suffering 12 hours of power cuts a day with generation of around 400-500 MW from hydropower projects, 50 MW from thermal plants, and import of 150-200 MW from India not able to meet the demand during the winter season. The transmission lines constructed unscientifically and mismanagement of the Nepal Electricity Authority (NEA) are also to blame, along with the lack of adequate generation, for the escalating load-shedding. NEA concedes that there is a leakage of 26 percent but energy experts claim that it is over 30 percent, out of which technical leakage is 15 percent. NEA officials themselves put the non-technical leakage at around 18 percent. There is very little chance of reducing technical leakage due to the faulty construction of domestic transmission lines in the country and leakage is becoming a serious problem with NEA showing not much interest in reducing even non-technical leakage. NEA had expressed commitments of reducing leakage, cutting administrative expenses, bringing plan to reduce load-shedding, reducing the free electricity provided to its staffers, making strategic reforms and others while raising electricity tariff effective from mid-July 2011.

The government had written off its accumulated loss of Rs 27.32 billion just two years ago. There should be a rise in the income after rise in the cost of product when accumulated loss has been reduced to zero according to basic principle of the market and NEA’s data also shows a rise in the income. But the operating cost of NEA is also rising at a very high rate. The proposal by NEA to again raise tariff citing the rise in loss, and support from the Electricity Tariff Fixation Commission (ETFC) for the proposal have given room to doubt their intention. The private sector, that also has a representative in ETFC, has already stated clearly that it will not support the hike. The private power producers have raised questions even about the relevance of ETFC. They argue that electricity tariff should be determined according to the state of demand and supply in the market and the price of petroleum products in the international market as per the principle of free market economy. But there is a risk that leaving the market free to determine the price may also prove to be counter-productive as the government still controls transaction of electricity. The demand of NEA that the government should provide grant for the street lights and the loss suffered due to the difference between the cost and selling prices of electricity can also not be called wrong. The demand for grant for an essential commodity like electricity when the government is already providing a grant of around Rs 2 billion a month for petroleum products is also a matter to ponder about.

The proposal to raise electricity tariff even without fulfilling the prior committed reform programs should be immediately withdrawn at a time when the Nepal Water Supply Corporation (NWSC) has already issued public notice informing about a huge rise in price of drinking water across the country. Such proposal should only be moved forward after NEA succeeds in reducing leakage, reduces the free electricity provided to its staffers and initiates other reform programs as per its five-year plan.

Source : Karobar