Is power really a priority?

power-a-priorityKATHMANDU: Though repeated assurances have been given by the present elected government that the hydropower sector will be prioritised and problems will be addressed, it is inspiring little or no confidence in the sector. The reason being that while words  are eloquent, the action is lacking and the committment unseen.

Budget ceiling constraints

While the finance ministry is busy preparing a new budget policy, the Ministry of Energy (MoE), private sector and concerned stakeholders would like major issues plaguing this sector to be addressed. To start with the announcement from the National Planning Commission (NPC) to place a budget ceiling of Rs 30.68 billion for the hydropower sector has shattered the expectations of stakeholders. According to NPC, of that total budget ceiling, Nepal Electricity Authority (NEA) will get Rs 26.84 billion and the MoE

will get Rs 3.84 billion by.

Stakeholders pointed out that the budget ceiling set for the sector is not enough to minimise power cuts within three years. MoE recently submitted its plans and programmes to the Ministry of Finance (MoF). Sanjeev Baral, Deputy Spokesperson of MoE, said, “We recently submitted our programmes for the upcoming budget demanding Rs 55 billion from the finance ministry.” Citing that the MoE plans to end the present power crisis within three years, he added, “Without adequate resources the development of the hydropower sector is impossible.”

Priority areas

According to Baral, the ministry has prioritised the construction of transmission lines and alternative energy. Besides, it has outlined minimum common programmes that include new hydropower projects, feasibility study, maintaining existing power projects, east west transmission highway, river basin wise programmes, et cetera. While Rs 40 billion is allocated for transmission lines and hydropower section, Rs 15 billion is segregated for alternative energy. As immediate relief from the power crisis MoE plans to produce 100 MW solar energy. Baral informed that to encourage public interest in hydropower, this fiscal they have come up with a public private partnership model ‘Janataco vidhyut janatakai laganima’ which translates as ‘Public energy by public investment’. He said that the programme will help minimise objections from locals and the public will have a sense of ownership in hydro projects.

While the government is preparing to introduce the budget for the upcoming fiscal year 2014-15, the Independent Power Producers’ Association Nepal (IPPAN) has also submitted its 11-point demands to be addressed. For uplifting the sector from various problems, they urged the government to increase VAT concession from Rs one million to Rs 10 million per MW, conduct power trade agreements by establishing a special committee, power purchase agreements in dollars and to pace up the construction of internal and cross border transmission lines, among others.

Not connected

As the government has not connected generating projects with transmission lines, power produced by private companies is also wasted. There is no synchronisation between load centre and generation power projects. “To mitigate these problems, there is a need to invest in transmission grids as soon as possible and to use produced energy through grid lines,” said Baral, adding that for constructing a transmission highway it requires funds. He further added that it will take more than three years to overcome the present

power crisis if funds are lacking.

Amrit Man Nakarmi, Professor and Coordinator of Energy Systems Planning and Analysis Unit at the Institute of Engineering, said, “Development of the nation is only possible through developing and investing in the hydropower sector. The government should

allocate around 15 per cent of the total budget for this.” He stated that the usual allocation of budget for the hydropower sector is

nominal and hardly five per cent. Stating that the major focus should be on transmission lines, Nakarmi said, “Produced 24 MW electricity is wasted due to the lack of grid line connection and it seems the number will increase in the coming fiscal as many projects are on the verge of completion.”

According to him, there should be Rs 85 to 100 billion budget allocation if the government is serious about mitigating load shedding problems as well as promoting industrial and overall growth in GDP.

Nakarmi also recommended updating the tariff system and introducing an Integrated Power Policy. Stating that 60 per cent of imported diesel is consumed for power generation in Kathmandu valley alone, he said, “The nation spends billions of rupees on diesel plants every year. Diesel power plants are not suitable for the nation as it produces expensive energy costing from Rs 31 to Rs 58 per unit.” According to him, import of petroleum products has increased by 131 per cent in 2013. Citing that the plan to invest in solar is a good option for some time, he stressed, “However, in the long run there is no option other than hydropower for overall development.”

Tall talk

Gyanendra Lal Pradhan, Chairman of the Energy Committee at the Federation of Nepalese Chambers and Commerce Industry, pointed out that the government has no will to uplift the country from the present power crisis. “The budget ceiling in the present situation is just another updated version of the previous plans and programmes where no new mechanism was implemented,” he said, adding that the nation does not seem to be aware of the importance of hydropower. Accusing the government of lacking political will to develop the

country, he said, “It is our bad luck that our government could not get electricity at Rs 5.4 per unit but now talks big about investing in Rs 15 per unit solar energy.”

Citing that the country annually acquires losses, Pradhan added, “Nepal annually spends Rs 37 billion importing diesel which produces electricity at Rs 24 per unit while the whole hydro sector only gets Rs 30 billion from the budget.”

Lacking progress

There are 27 hydropower companies which are sick due to exceeding construction cost and lower rates of PPA. Pradhan said, “The government should introduce plans and policies to uplift developers and make a favourable environment to encourage foreign direct investments.” He accused the government of not approving the proposed Electricity Act 2007 till date. “All these delays and such attitude shows the government is not serious or willing to develop the hydro sector. If the same pace persists load shedding won’t end in another 30 years also,” he asserted.

“If the government widens the VAT concession for under construction projects, it will lower total construction cost by two to five per cent,” said Khadga Bahadur Bisht, President of IPPAN. However, he is not optimistic about the budget and any relief it will offer the sector. He said, “The budget is the ultimate indicator of the government’s priority. The government said that it will prioritise the hydro sector but with the ceiling it definitely shows the contrast between what it says and what it does.” According to him, of the total 1,200 MW under construction projects, almost 60 per cent work has completed. “We are hopeful that adequate budget on transmission line will come,” he opined.

Bisht said that solar power costs Rs 16 to Rs 32 per unit, which becomes expensive when compared to hydropower.

Ray of hope?

Baikuntha Aryal, Joint Secretary at MoF, claimed that the government has prioritised the hydropower sector. Clarifying that MoF does not decide resource allocation, he said, “The ministry allocates budget seeing the significance and immediate plans and programmes proposed by the concerned ministry.” According to him, the budget for the hydro was finalised with the NPC ceiling.

But it has now been reopened to discussion among stakeholders with the recently presented programmes by the energy ministry. “However, we still have to work on proposed programmes as we also have limited resources,” he added.

Source : The Himalayan Times / The Perspective / SUJATA AWALE