AJIT NS THAPA
The Board of Directors of Nepal Electricity Authority unexpectedly decided to upgrade the under-construction Upper Trishuli 3A project from its existing capacity of 60 MW to 90MW on May 31, at an additional cost of Rs 4 billion and extended three years’ time. This sent shockwaves through NEA rank and file and drove the entire middle management, staff and NEA unions to take up arms against the Board of Directors. They padlocked the office of the MD, went on a pen-down for a few hours every day and even cut off electricity supply to the Minister’s Quarters demanding that this wrong decision be taken back and the entire BOD resign.
Their cause received a boost when three former finance ministers including Ram Saran Mahat and Prakash Chandra Lohani and two former energy ministers submitted a joint memorandum to the Chairman of the Interim Election Council (IEC) to annul the decision in view of its poor legal standing and the colossal impending losses. The protests gained further momentum when former finance secretary Rameswore Khanal categorically stated in an interview in Kantipur that there was absolutely no merit in the decision to upgrade Trishuli A capacity and the decision had been motivated solely by greed. Finally, after 12 agonizing days and heavy blow to NEA and its employee morale, the decision was reversed by the BOD at the request of the IEC Chairman Khil Raj Regmi. NEA is back to business as usual and the only fallout from the fiasco has been the shunting of energy secretary, Hare Ram Koirala, to the office of the Vice-President. Surprisingly, the other members in the Board, and especially the chairman, are yet to resign on moral grounds.
NEA and China Gezuwa group of Companies (CGGC) entered into an EPC (Engineering, Procurement and Construction Contract) for the construction of a 60 MW hydro power project in Nuwakot district based on international competitive bidding. The project was started in July 1, 2011 and would be completed in 35 months (i.e. by June, 2014). In an EPC arrangement, the contractor takes all the risks to execute the project at a fixed cost. It seems NEA decided to go the EPC route in light of the vast cost increases under other construction modalities in Kali-Gandaki and Mid-Marsyangdi. However, it appears that CGGC wanted to increase the capacity from the very beginning and had even offered to upgrade capacity to 90 MW at an additional cost of only 25 percent. NEA had constituted two technical committees to evaluate the repeated request of the contractor and both of them pointed out the need for: 1) Review of technical designs, 2) New survey license and upgrade of Environment Impact Assessment (EIA), 3) A new Detailed Project Report (DPR).
All this, along with new construction, would take three additional years. The annual loss due to the delay would be 463.7 million units of salable energy, amounting to Rs 11 billion over three years. Furthermore, if the upgrade was approved, it would relieve the contractor from its commitment and would enable it to not only avoid penalties arising out of delays but also to make variation claims. For these reasons, the NEA Board seems to have decided to shelve the upgrade proposal. However, forever alert to the environment and persistent as ever, the contractor sensed a chance with the corrupt Bhattarai government and soon brought him on board. To get a favorable report, Bhattarai formed another evaluation committee within the Energy Ministry under a superintending geologist. Even this committee was not gung-ho for an upgrade and left it to the Cabinet to make the decision in national interest. The Bhattarai cabinet then took the liberty to upgrade capacity ‘in principle’. Subsequently, the current Board of NEA, ignoring all legal hurdles and economic hazards and motivated by sheer greed, went ahead with the upgrade citing the Bhattarai government’s “in principle” decision to save its own neck.
As per the Public Procurement Act 2063, there is no provision to change the nature of a public contract midcourse. Further, should the nature of the contract change, there has to be new competitive bidding. The Trishuli Three A clearly violated this principle.
The cost of the project would go up by Rs 4,000-5,000 million over the price quoted by the contractor at the start.
The added capacity of 30 MW would only add 1.75 Gigawatt of additional energy during the dry season (when additional energy is most required). This is only 1.235 percent more than would be produced by the 60 MW project, but at an additional 50 percent cost. Further, the additional energy produced in the wet season would go to waste as there is no arrangement for the export of the surplus energy.
The silence of NEA board and management even while only 30 percent of the project has been completed with only a year to the completion date speaks volumes about the way NEA is now managed. The CIAA seems to have turned a deaf ear to the wailing of NEA employees. Apparently, it is now ‘studying’ related files from NEA at its leisure instead of working with the energy needed to investigate one of the biggest attempted frauds in Nepal’s history.
One wonders whether the series of kram bhangas (discontinuities), as the Maoists like to call them, are the order of the day in New Nepal. After all, they have already used the strategy to disrupt established democratic and judicial norms in the formation of the CJ led government, to implant a controversial figure as CIAA head and now to push a power project by breaking all established precedents. As vigilance is the price of liberty, I appeal to all concerned citizens to keep up their vigilance to save the nation from those who want to turn it into a failed state to fulfill their vested interests.
The author is former Managing Director of Nepal Electricity Authority and current Vice President of Nepali Congress Dhankuta district chapter
Source : The Republica