Why NEA is a loss making entity


    NEA losses doubled in the last fiscal year

    With the increment in electricity import from India, Nepal Electricity Authority ( NEA) has incurred losses which are double the losses in the previous fiscal year. Low production from domestic projects, expensive electricity import, higher purchase rate than selling rate are some of the major reasons why NEA ended up with such huge losses. Moreover, over staffing, monopoly of NEA in generation, transmission and distribution is also responsible for ballooning losses. According to the data provided by NEA, in the fiscal year 2015- 16, NEA incurred a loss of Rs 11.75 billion which was 126 per cent higher than the previous fiscal that totalled Rs 5.13 billion.


     According to NEA, they have incurred a loss of three rupees on each unit of electricity imported from India. NEA purchases electricity at Rs nine per unit of which 25 per cent is lost in transmission. The authority sells electricity at Rs 6.15 which means it directly incurs a loss of Rs three per unit. In this fiscal NEA imported electricity from India that totalled around Rs 25 billion which was Rs six billion higher than the previous year.

    NEA collected total revenue of Rs 31 billion in this fiscal which was only Rs one billion higher than last year ( Rs 30 billion). With lower electricity production, revenue collection has only slightly increased. “ Due to the earthquake, many individual power producers’ and NEA’s generating projects were damaged which is why we could not produce the amount of power compared to the previous year,” said Mukesh Kafle, Managing Director at NEA. Kafle further said, “ After the earthquake, we faced four months of blockade and strikes in the Terai region. At that time, we were not able to collect revenue from the Terai belt and that also resulted in less revenue collection.” Stating that a loss is obvious, Kafle said, “ Being a public entity, we are obliged to supply electricity by importing at a high rate and selling it at a lower price which is obviously a business loss.” According to him, they import electricity from India that costs IRs 5.5 to IRs 6.8 while NEA sells at an average of Rs eight per unit.

    “ We had been proposing an Electricity Tariff Fixation Commission ( ETFC) for adjustment in tariff since the last few years. It has only recently adjusted the tariff which will certainly help to some extent,” he added.


    When asked about electricity leakage caused due to unauthorised usage, Kafle informed that 25 per cent of total supplied electricity was leaked in the last fiscal year. According to him, NEA bears a direct loss of Rs 400 million because of leakage every month while dollar PPA on Khimti, Bhotekoshi and Chilime hydropower projects also contribute to NEA’s loss.

    “ We hoped to decrease this percentage by at least two to three per cent but we could not,” he said, adding that the existing outdated distribution system contributes to leakages. “ Being aware about the poor distribution system, we plan to change the whole system with a new underground system which will be implemented from November in the Kathmandu valley,” he explained.

    Admitting that the blame game will not end the losses of NEA, he said, “ Leakage control, flexibility on policy, scientific adjustment of electricity tariff and emphasis on power generation projects will only help to reduce losses.”


    Due to the earthquake many IPP projects and NEA projects were damaged and domestic generation dipped. At the same time, the 144 MW Kaligandaki Project went for maintenance and added to the gap. Moreover, Bhotekoshi 45 MW project has not been repaired till date. According to the Load Dispatch Centre at NEA, the current demand for electricity is 1,335 MW and NEA supplies 805 MW and rest is managed through loadshedding.

    Of supplied electricity, NEA’s projects generate 322 MW, 251 MW is supplied by IPPs and 232 MW is imported from India. Electricity demand this year grew by 10 per cent as compared to last year. “ In the last fiscal year, we had to elongate power cuts due to the projects being damaged by the earthquakes,” said Bishnu Prasad Shrestha, Chief of Load Dispatch Centre at NEA. Citing that the earthquakes disrupted almost 200 MW electricity supply, he said, “ To fulfill this gap, we had no other option than to import from India.” It means 200 million units were not produced and NEA lost Rs 1.70 billion revenue.

    According to him, the demand for electricity in the dry season soars while production dips significantly. He said that the demand for electricity is around 18.6 million units per day. “ We have completed maintenance work on Kaligandaki project and it is now functional,” said Shrestha. “ The import of power from India was increased to reduce the loadshedding hours,” he added.

    A high ranking official at the Finance Department at NEA said, “ Due to the dry season the water level of Kulekhani had significantly dropped. On the other hand, the 144 MW Kaligandaki Hydropower Project went for maintenance hampering production which directly affected revenue collection.” The source further said, “ Since March, Dhalkebar Muzafarpur Transmission Line came into operation and NEA paid transmission charge of Rs 400 million to PTCN, Nepal and CPTC, India which further added to the expenditure burden.” Moreover, he further said, “ In the last fiscal, the generated bill from street lights was Rs 600 million. The government agencies are yet to pay us the total bill which amounts to Rs three billion, including this fiscal.” According to him, NEA collected Rs 10 billion from industrial, Rs 15 billion from domestic, Rs four billion from commercial and Rs two billion from other sectors.

    Citing that Nepal imports electricity majorly from North Bihar Power Distribution Company ( NBPDC), he said, “ Nepal purchased Rs 25 billion worth of electricity from India in the last fiscal year, of which Rs 16.5 billion was imported from NBPDC at the rate of Rs 10 per unit.” According to the data, 1.26 billion units were imported from India in the fiscal year 2014- 15 while 1.77 billion units were imported in 2015- 16.


    KATHMANDU: The Electricity Tariff Fixation Commission ( ETFC) has increased electricity tariff on various category effective mid- July. The tariff has increased by 12.5 per cent to 15 per cent in domestic, 20 per cent in industrial and commercial users, 30 per cent in entertainment and non domestic users. The commission has introduced a new system where unlike the earlier system, domestic users are not obliged to pay a minimum monthly charge. They will be charged according to the units they use and the service charge.

    Due to soaring losses, NEA has been demanding a hike in the electricity tariff, which was adjusted four years ago. “ We have increased the tariff in a scientific way to minimise the soaring losses of NEA; which will also benefit consumers, especially minimum electricity users ,” said Jagat Kumar Bhusal, Chairman at ETFC. In June 2012, ETFC raised the tariff by 20 per cent for the first time in 11 years.

    Moreover, he informed that ETFC has introduced different rates according to the season ( dry and wet) for industrial and commercial users from this fiscal.

    As per the new system, the applicable rates during the dry season will be 100 per cent higher compared to the rates for the wet season for these users.

    By : Awale Sujata

    Source : The Himalayan Times