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Kathmandu Monday November 06, 2000 Kartik 21, 2057.
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NEA under criticism over
'take or pay' term in BPC
By Binaj Gurubacharya
KATHMANDU, Nov 5 - The Nepal Electricity
Authority (NEA) has endorsed a proposal that not only goes against its own earlier
decision but also against the directives of the Parliamentary Finance Committee.
NEA's Board agreed onto the "take or
pay" term on the Butwal Power Company (BPC) agreeing to buy a total of 17 megawatts
of electric power produced by its two hydro power plants.
"We were forced to sign the agreement
under pressure from the Finance Ministry which has begun the process of privatising
BPC," a high level NEA official who did not want to be named told The Kathmandu Post.
Three months ago, the same board had passed
a resolution which stated that NEA would not sign any new deal under the "take or
pay" term which compels NEA to pay for the total amount of power generated and
supplied whether it uses it or not.
Before that the Parliamentary Finance
Committee, which had been reviewing similar arrangement in the Bhote Koshi and Khimti
Power Projects, had directed it to refrain from signing any more "take or pay"
deal and any new power agreements until NEA fully reviewed the Bhote Koshi and Khimti
deals.
"This move by the government is to
attract private investors to invest in the BPC which is being privatized so that it
becomes a guarantee to the investor that NEA would buy all the power produced and they
would be getting their full returns on their investment," the official said.
With this guarantee, all the power produced
from its 5-megawatt Andhi Khola project and 12-megawatt Jhimrukh power plants would be
bought by NEA whether it uses it or not.
NEA has come under criticism for the deal
on Khimti and Bhote Koshi since it was compelled to buy power at a high rate as per the
"take or pay" agreement.
Even though BPC's rate is much less than
the Rs. 5 per unit rate of Khimti and Bhote Koshi, it would still load NEA with an
additional burden. BPC at the moment sells its power at Rs. 2.23 per unit from its Andhi
Khola plant and at Rs. 3.08 fro its Jhimrukh plants to NEA.
NEA has been buying some power from these
two plants but now, with the new arrangement it would be compelled to buy their entire
output for the next two years. The NEA officials translate this into an annual loss of Rs.
70 million for NEA.
Worse, during winter months which is the
peak season for electricity demand, the Andhi Khola plant can not be operated and the
other one only produced meagre amount of power. These two plants run in full capacity only
during the monsoon season when NEA already has surplus of power from its other plants.
Now NEA officials fear that, there could be
more pressure to sign similar deals with at least half a dozen new private projects that
are being considered by the Department of Electricity Development.
NEA's has the Secretaries of both the
Ministry of Water Resources and Finance, the President of Federation of Nepal Chamber of
Commerce and Industries, National Planning Commission member and NEA's Director General in
its Board.
"We had proposed that we would not be
signing "take or pay" deal but after request from the government we signed
it," said NEA Director General Bishnu Bam Malla.
BPC has been in the pipeline for
privatization for the past year or so. Two companies had initially applied with the
government, however, Independent Power Corporation (IPC)-- a British-American joint
venture-- pulled out of the bidding process accusing the government of favouring
Interkraft-- a Norwegian Company. Following that, the present government has decided to
begin the privatisation process bid once again.
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