Power
Crisis Nepal ’s political leaders - who have spent decades selling dream of exporting energy to India to make Nepal prosperous – find themselves facing load shedding of seven hours a day. Unfortunately, the leaders - who have already convened dozens of all party meetings to discuss all kinds of issues - are yet to treat country’s power crisis as a national agenda. In reality, it seems that everybody loves load shedding. With enough internal resources, technical and managerial capabilities, hundreds of various sizes of potential hydro power sites are available to meet the increment of 60 MW of power annually. Nepal , which has already shown its capability in 1995 after Arun III debacle in averting a major crisis by constructing a number of small and medium scale hydro power plants - can easily handle this power crisis also. What Nepal does not have right now is the leadership with a vision and commitment and stable government. As such, the country will have no immediate solution for the power crisis
By KESHAB POUDEL
“We are going to start some new hydropower projects so the country would not have to face load shedding for a long period of time. For this, the government is proposing large and medium scale projects. NEA is planning to construct Upper Tamakoshi Project,” said Gyanendra Bahadur Karki, Minister of State for Water Resources who is uncertain about his re-appointment in the new interim government which is going to be formed anytime soon. “I will submit this proposal in the cabinet,” said Karki, chairman of Nepal Electricity Authority Board, indicating there will be financial guarantee from the government to build the hydropower by NEA. “We are also encouraging private sector to invest in small and medium projects by signing Power Purchasing Agreements.”
Though his tenure is uncertain, Karki is seeking financial guarantee from the Ministry of Finance. However, Finance minister Dr. Ram Sharan Mahat, who also faces similar fate, revealed that the government has no plan of investing in hydro power projects. “It is purely an economic area and it is the responsibility of the private sector,” said Dr. Mahat addressing a program by the Management Association of Nepal.
At a time when the country is facing a severe power crisis with seven hours of load shedding daily with possible increment of another few hours in next month, Dr. Mahat’s and Karki’s reactions indicate more gloomy scenario of the future power supply.
Although the statements of both ministers, whose fate in the interim government is unknown, are valid in principle, it reveals the delay in the construction of new power projects. “Finance minister Dr. Mahat may be in principle correct as the government needs not stand as a financial guarantor for the organization like NEA which has its own assets valued at about Rs.50 billion,” said journalist Rajendra Dahal who specializes on hydro power. “Since generating energy is an economic activity, private sector should be given the role with complete autonomy to NEA. However, given the present circumstances when the government has absolute control over NEA’s management, policy and marketing, it is also the obligation of the government to respond to its concerns.”
As a government-owned institution, NEA is still a milching cow for the persons in power. Minister of Water Resources and other senior officials regularly misuse vehicles and other properties of NEA for their personal use. According to Nepal Electricity Authority fiscal year 2004/05 year review, besides paying royalty of 6 and 21.72 percent as interest, out of Rs.13.389 billion to the government, NEA also paid other taxes. According to an estimate, NEA pays about Rs.5 billion to the government under different headings.
“Since the government is reaping enormous benefits from NEA, it is also the duty of the government to back it whenever it requests some support in terms of implementing the projects. If NEA collapses, how can the finance minister generate such huge revenue?” asked a former managing director of NEA.
If government wants to see NEA’s own investment in hydro power projects, the government has to give up all its control in the electricity trade from tariff to pricing.
Gap in the Construction
The present power crisis is not an overnight development. It is the inevitable result of political crises and conflicts of the last ten years. Following the completion of Chilime Power Project, Nepal did not start any major project to meet the growing demands of electricity. Although some efforts have been made to increase the power production of Devighat and Sunkoshi, they were too little.
Even the completion of construction of Middle Marsyangdi project continues to be delayed because of disturbance caused by Maoist insurgency and political instability. Following the dismissal of Sher Bahadur Deuba’s government in October 2002, Nepal has seen a number of governments with unstable tenures. Although the new interim constitution was promulgated and new government with the backing of eight political parties is ruling the country, it is not in a position to take major decisions and nobody can predict its future.
After the debacle of Arun III, the situation was tackled since there was a parliament and continuity of the government. The NEA singed agreements for 144 MW Kali Gandaki A, 14. 8 MW Modi Khola, 6.2 Puwa Khola. In private sector, 60 MW Khimti and 36 MW Bhotekosi came. They filled the gap of power demand and supply.
“This is a national crisis and there is a need for high level commitments to address it,” said S.B Pun former managing director to NEA. “There is no alternative other than to formulate clear plans.”
Now the situation is completely different. Despite the end of violence, the phase of political instability and anarchy seems to be the rule of the game. The 70 MW middle Marsyangdi project, which was supposed to be completed by end of 2005, is yet to materialize as it faces various crises. In present circumstances, whatever officials say, Nepal ’s power sector will have to face more painful days in coming years.
“It is for the Maoists and leaders of seven parties to decide as they are responsible for the present crisis of power. It is not technical incapability or lack of resources but it is the lack of commitment,” said a former managing director.
Private Sectors
There are a number of small and middle scale projects with capacity of 10-30 MW in Nepal and NEA and private sectors can construct them without any major financial involvement from foreign countries. For private sector, NEA’s policy is not optimistic. Thanks to the policy of the NEA, which prefers to import electricity from India with per unit cost of Rs. 6.40, it is always adamant to sign Power Purchasing Agreement with private sector investors even at a price of below Rs. 5. “If NEA gives Rs.5 per unit, I am sure many Nepali investors will pour investment in this sector,” said journalist Dahal.
Many private sector developers are showing interest in the construction of hydro power projects. From small to medium projects, they have already invested a lot of money in it. Although there is some controversy over the pricing of some projects, private sectors contribute more than altogether 148 MW in the electricity generation. Butwal Power Company, Khimti, Bhotekosi and Chillime, which supplies cheapest energy - are major suppliers.
There are many other private parties which are supplying the electricity to NEA grid including 7.5 MW Indrawati, 3MW Piluwa Khola, and 2.6 Sunkosi Small. The 3.4 MW Khudi Project and other two small projects below 1 MW each are under construction.
Role of NEA
The NEA, as the largest public sector enterprise, has technical, financial and managerial capability to start any middle sized projects in the country.
“Had NEA been given full autonomy in its functioning and allowed to work with concept of market economy, it would not have to knock the doors of the government for financial guarantee. It has all necessary capability,” said the former MD.
At a time when the NEA is fully owned and controlled by the government, it cannot make decisions on policy matters. Whenever there is a change in the government, the managing director of NEA has to go. In the last two years, the NEA has already seen three MDs.
Although Nepal Electricity Authority Act gives it an autonomous status, the NEA cannot act alone as it is under the control of the government. Minister for Water Resources is the chairman of the board of NEA and government has control over pricing, appointments and other major decisions. As the government representatives have overwhelming majority in the NEA board, it cannot take any decision without the permission of the government. But, it hardly gets government support when it requires it.
Amid dispute between the Ministry of Finance and Water Resources, it seems inevitable that the power sector will suffer. As there is no power project under construction except the delayed middle Marsyangdi, the country is certain to suffer from regular power cuts from now on - there will be planned and/or contingency power cuts round the year, even in the monsoon for at least another six years.
Load Shedding: A reality
Whether one likes it or not, the load shedding is now a stark national problem and policy makers will have to accept it and adjust. Along with treating it as a reality, the political leadership of eight parties, who are mostly responsible for bringing the present crisis, must show vision to overcome it.
Since it is a reality of the country, one must make a long term vision and program to address the problem. As country cannot go ahead by just cutting the power, addressing load shedding will be of concern for all. To address the load shedding, the government has many options before it - it can import the electricity from India , build some thermal plants and give green signals for new hydro power projects both for NEA and private sector.
With deadlock over the financial matter for construction of new projects and only a few Power Purchasing Agreements having been signed with small hydro power developers, Nepal is getting pushed to the new no option trap to buy the electricity from India on its own term. It shatters the hope of Nepal of becoming a major power supplier to India .
“The only way ahead is to start the construction of new projects which are in the pipeline. For short term, Nepal can import certain quantity of electricity,” said Rabindra Shrestha, former senior employee of NEA. “If we launch the program now, we will be out of trap within a few years.”
As usual, almost all snow-fed rivers have dried up in the dry winter months and the electricity production has gone down. Most of the power houses of “run of the river project types” are now producing less than one fourth of total capacity. Naturally, the pressure is building on country’s only storage project Kulekhani I and II.
In a situation of such a panic, the officials from NEA have even signed an agreement with Power Trading Center of India to import 28 MW of power at the rate of Rs. 6.30 per unit. The NEA is also working to import 50 MW electricity from India through Duhabi- Purnia transmission line. The NEA officials, who hesitate to sign PPA with domestic power producers even at Rs.5 per unit, see this price as cheap and acceptable. Similarly, the NEA officials are now working to develop more exchange points so that Nepal can import electricity as much as possible.
“There is a need to establish high powered national committee to implement the plans,” said Dr. Rabin Shrestha, a former senior executive of NEA.s
Talking to Kantipur Daily, economic counselor of Indian Embassy Javed has already indicated that Indian government is ready to supply the electricity to Nepal in the current price.
It is well known that Nepal ’s electricity tariff is much higher at 9 cent per unit. Indians are said to be arguing with Nepalese officials about the per unit prices they are paying for two IPPs like Khimti and Bhotekoshi.
New Projects
As the power supply has reduced and the load shedding hour increases, the officials in NEA are in panic. From negotiating for import to inviting private builders for PPA and beginning the construction of new power projects, they are taking all the steps together. “There will be no power cuts from 2012,” said Arjun Karki , MD of NEA.
In the last few weeks, Arjun Karki has already spoken volumes about the need to develop power projects to avoid the prolonged load shedding. As he does not have any role in decision making, Karki’s statements have very little importance. Leaders of eight parties must come up with a strong commitment to meet the present challenge of power crisis.
If it comes true, the NEA is starting construction of projects totaling 481 MW in output and entering into Power Purchasing Agreement with private hydro power producers for projects totaling 150 MW in the next six months.
“Of the projects, we are building, we have more or less sealed financial commitments for the 61 Megawatt Upper Trishuli A, 30 MW Chameliagiadh, 27 MW Ragughat and 14 MW Kulekhani III,” said Karki in an interview with The Kathmandu Post. “China, South Korea, the OPEC fund and NEA are funding these projects.”
“Apart from these Nepal will start the construction of the 309 MW Upper Tamakosi either with internal funds or through international funding with the project remaining under NEA’s ownership and work will also start on the 40 MW Upper Trishuli B which will follow Upper Trishuli A as a cascade project. In case NEA gathers internal funds for Upper Tamakosi , Upper Trishuli B will be built with international funds and vice versa,” said Karki.
After the intensification of Maoist insurgency in 2001, Nepal ’s power sector has also badly suffered. The construction of 70 MW middle Marsyangdi was already delayed for more than two years and it is expected to complete by 2008.
Similarly, only a few IPPs have shown interest to invest in the power sector as uncertainty and frequent disturbances have discouraged the private sector from investing in the hydro power.
“ Nepal has technical, managerial capability as well as financial resources to construct the middle and small scale hydro projects,” said journalist Dahal. “There is every possibility to meet Nepal ’s annual incremental demand is 60 MW by encouraging the small and medium scale hydro power plant.”
If Nepal has such capacity to construct hydro power plants, then why is the country facing the acute power crisis. “Every one in Nepal loves load shedding,” said Dahal. “If NEA pays Rs.5 per unit for private entrepreneurs, there will be rush for projects. But, every one seems to be happy to import the electricity from India by paying Rs.6.30 per unit.”
Non Committal leadership
Although there is a dispute over the cost and benefit of Arun III projects, Nepal ’s power sector has lost a great opportunity through the debacle of Arun III. It was cancelled following the letter sent by CPN-UML general secretary Madhav Kumar Nepal in the last minute of finalization of the project.
The dispute of Arun III is now history in the hydropower development. It is always remembered by Nepalese whenever there is power crisis in the country. Had the 402 MW project been allowed to proceed, the country would have got all weather road to Arun III basin with immense potential of generating power.
There were many groups that came to block the projects but the project was finally killed by the letter of CPN-UML general secretary Madhav Kumar Nepal whose party had then formed a minority government for nine months following the collapse of the project.
The scenario is not much different now. As the country is facing power shortage, Ministry of Water Resources is preparing to sign a number of projects aiming to supply cheap energy to India . A senior official at the Ministry confided that the government is preparing to sign agreements with Indian companies to build 600 MW Budhi Gandaki and 300 MW Upper Karnali.
“After the completion of the projects, Nepal will receive 10 percent of power from these two projects along with royalty,” said a senior official at the ministry. “This will contribute to reduce power shortage in the country.”
As t he country is facing problem of load shedding, the time has come now to start new projects. For this, there is a need for political commitments.
Potential Projects by NEA
309 MW Upper Tamakosi
61 MW Upper Trishuli
40 MW Upper Trishuli
30 MW Chameliagadh
27 MW Raghughat
14 MW Kulekhani III
Potential Projects by Private Producers
53 MW Upper Marsyangdi
42 MW Upper Modi A
20 MW Trishuli A
14 MW Maikhola
9.5 MW Seti
Other smaller projects
” Along With The Construction Of Power House To Domestic Use, We Are Also Proposing Some Power Projects For Exports”
Gyanendra Bahadur Karki
As the country is passing through a very serious phase of power crisis facing 7 hours load shedding every day, Minister of State for Water Resources Gyanendra Bahadur Karki addressed media at the Reporters’ Club recently. Excerpts of his remarks :
On Power Supply
We are in the process to increase the power supply. As we don’t have any internal sources, we are negotiating with Indian officials to import additional electricity from India . For immediate solution, we have already signed an agreement with Power Trading Company of India to import 26 MW power.
On New Projects
We need to construct more power plants in future to maintain power supply. This (load shedding) is not the result of one day or one month but it is the result of accumulative effects of last few years. Had the country’s planners made the efforts a decade ago, the country would not have to face this kind of situation. Except middle Marsyangdi, no power projects were forwarded for execution. Now we are proposing 330 MW Upper Tamakosi project, Upper Trishuli A, Upper Trishuli B, Chameliagadh, Raghughat and Kulehani III.
On Private Sector Participation
We are also encouraging the private sector for power generation. NEA is signing PPA agreement with private sector’s producers. Private parties are developing Upper Marsyangdi, Upper Modi A, and Trishuli A, Maikhola and Seti and a number of other projects. NEA has policy to encourage the private sector.
On Load Shedding
This is a reality now. We are making every effort to reduce load shedding hours. After importing the electricity from India , the situation will be eased next year. Frankly speaking, the country will have to pass through a few more years of load shedding. We don’t have any project now to meet the annual demands. That means there will be more power cuts in coming days.
On Financing the Projects
We are talking with different international and national financial institutions regarding the issue of financing the NEA. Upper Tamakosi is one of the cheapest projects and NEA is technically capable to construct the project. I don’t want to disclose details now but I will assure you that we don’t have any financial constraints.
On Export of Power
We have a major power market in India . Along with the construction of power house to domestic use, we are also proposing some power projects for exports. We are in the process of signing the agreement on the development of Budhi Gandaki and Upper Karnali projects. Along with exporting the power, these projects also provide the power for internal use. As there is growing demand of energy in India , we have great potential to export our hydro power.
On Priority of the Government
The priority of the government is to maintain the uninterrupted supply of power in the country. We have already directed the NEA to make necessary arrangement for the construction of new hydro power plants. You can see some changes soon in power sector. We are also taking efforts to reform power sector by encouraging them to play lead role. We are also making efforts to complete the construction of middle Marsyangdi project in schedule. As the construction work is in final stage, it will complete on schedule.
