Privatization in doldrums

The much-hyped and long overdue privatization process has received another setback with the privatization of the Butwal Power Company (BPC) mired in controversy. Bogged down in bureaucratic bungling and legal wrangling, the BPC privatization is in the doldrums. Efforts to privatize BPC have fallen flat after the Finance Ministry scrapped a technical bid by the Independent Power Company (IPC), a joint power venture. The bid was cancelled since it failed to fulfil bureaucratic niceties or so the officials concerned say. With the IPC off the scene, the Norwegian Interkraft is now the sole bidder for 75 percent of the shares of 30-megawatt BPC. Rules are that the Finance Ministry cannot decide on privatization on its own without approval from the Ministry of Water resources, and this means further delay and more hassles. Coordination among the various ministries seems to be a daunting task, as each tends to work in its own style. And what happened with BPC is just a poignant instance of the prevalent bureaucratic culture. Since the last three years, BPC has been talk of the privatization circles, but for much of the time it has been overshadowed by controversy. Such a development only dampens the government’s economic liberalization policy. But the point is that privatization cannot be called policy in true essence because the government has embarked on it without any convincing rhyme or reason.

Privatization was the buzz-word in the post-jana andolan era. Though the Ninth Plan has put 39 public enterprises on the list for privatization, only 16 have changed hands so far, with the other sick public enterprises still draining the national coffers. This has not only sent a negative signal to the international donor community, but is also a major setback for the government’s commitment to economic reform. The Department for International Development even threatened to withdraw its financial support owing to a very slow privatization process in Nepal. Even after making a string of mistakes, the government is yet to learn. Take the case of Hetauda Textiles Industry. This loss-making public enterprise has set a kind of good precedence in the privatization venture. Before going in for privatization, the government pruned the overstaffing. But not all are following in its footsteps. With their overwhelming number of employees, the sick public enterprises are readying themselves for privatization. And this is exactly where the problem lies. No rational private entrepreneur wants to take on such ailing industries along with their bloated staff.

In a donor-driven economy like ours, gains and losses are tallied by how well we carry out the wishes of international donor agencies. At a time when they are putting so much emphasis on privatization, the snail-like progress comes as a major constraint. So much so, even the management contract hand over for the Rashtriya Banijya Bank and Nepal Bank Limited is tied up with donor promises. Likewise, to qualify for World Bank loans, the government has to privatize seven state-run enterprise riddled in corruption, mismanagement, overstaffing and poor technology. But due to the government’s lackadaisical approach, privatization has been little more than a frivolous slogan. Surely, with the donors treating privatization as a make or break proposition, the government cannot afford to ignore it.

The probable dialogue

By Nagendra Chhetri

The probable government-Maoist dialogue has been occupying major space and time in all news medias, both electronic and print, in the country for the last couple of weeks. The country, after about five and half years, is breathing a sigh of relief. Everybody, both inside and outside, believes that dialogue is the only and the best solution to the multitude of problems including problems raised by the Maoists. Every Tom, Dick and Harry would believe it if we say that this nation is in deep trouble and its twelve year old democracy and democratic institutions are limping towards untold misery. Every Nepalese knows the reasons. What are they? In a nut shell, Nepalese political institutions could not grow up. Torn apart by party politics and intra-party squabbling and rampant corruption, democratic forces lost control of themselves, got drunk on the power entrusted to them by voters and became a burden to the nation. They were interested more in settling personal scores and enriching themselves rather than fighting the poverty and backwardness of the masses. Democracy came only for a few and its fruits were enjoyed by the leaders only. This gave birth to a force called Maoist.

In the name of ideology the Nepalese people have already lost about 1,700 hundred precious Nepalese lives. Sandwiched between two ideologies are Nepal’s national interest and integrity, its sovereignty and independence. Because, finally, when we fight amongst ourselves and because of our uncomfortable geopolitical situation and awkward geographical location, our nation and its pride would be at stake. So what should be the principal objectives of holding a dialogue. What should get priority. Naturally Nepalese national integrity, its cohesive nature and traditional unity in diversity, our culture, tradition, usage, customs and unflinching belief in our Nepalese way of life. Nepal belongs to every Nepalese and therefore every Nepalese has an inherent right to lead a decent, peaceful, free and fearless life without infringing on the rights of others. Simultaneously every Nepalese has a duty and responsibility to protect the geographical boundaries of Nepal and stand together as a team and fight whenever Nepalese interests are challenged/threatened.

Now what are the Nepalese national interests which we cannot compromise on whether the country is ruled by western-style democratic forces or a Maoist people’s revolutionary force. These must be identified and defined. What are the likely external and internal threats and how are we going to meet them! Before holding a dialogue serious and detailed homework is needed. No emotional declaration and camouflaged political move will bring any solid and substantial result in charting a stable course for the future. What are the contingencies? Are the democratic forces prepared for the alternatives if the negotiation fails? The talks are going to be long drawn out, very tricky, heated and uncompromising. It is going to be the toughest nut to crack in the course of these last twelve years. Nothing is guaranteed. If the talk succeeds the world history of insurgency will have to be rewritten. Although there is a sigh of relief, the present situation has created unprecedented curiosity in the public as to how the dialogue progresses and what the real objectives are? Is there sincerity or just a ruse to consolidate gains and buy time to prepare for further violent action to achieve the stated goal? Has the government consulted everybody that matters including the national security apparatus?

The stated agenda so far on both sides seems to be uncompromising. One talks about total change, a republic, an interim government and election of a constituent assembly. Now they are out in the open lashing and bashing the monarchy and democracy. But there are a few principle characteristics of our constitution which are unamendable and therefore un-compromisable. This was the will of the people as reflected in national opinion and accepted and respected by the international community. Between these two opposing and antagonistic lines one has to think of the prevailing international wave and the inherent national characteristics of the people. Therefore it would be prudent and wise to go for a practical, workable and evolutionary solution that would best suit the characteristics, needs and requirements of the country. This will further consolidate and strengthen the cohesive nature of our national structure.

Let us not forget that Nepal, although a small geographical land-mass, is a multiethnic, multilingual, multiracial and multi-religious geographical entity which naturally needs a binding and cohesive factor that remains above these diverse characteristics and keep us united together as one single nation. Also let us not forget that not long ago the bi-polar world changed into a uni-polar one following the ideological defeat of the communist system. Under a communist republic with an inflexible regimented social order in the midst of these diverse characteristics will our traditional, social values survive? The western system of pluralistic social order and free market economy with guaranteed individual rights and the social security of a welfare state has proved beyond doubt to be a better way of improving the quality of people’s lives so far.

Even the North Koreans and Vietnamese are attracted, to the great surprise of the world, toward a market economy and fundamental individual rights because of the proven evolutionary victory of the democratic wave in the world today. The technological revolution and economic prosperity brought about by the democratic system are unchallenged.

Look at the living standard of the Chinese fuelled by the progress made in market oriented economic reforms adopted not very long ago. After a long trial with the communist system complete with communes China found out that a liberal and open economy has no alternative for the economic welfare of the nation. China today is the biggest of all the big emerging markets, an elephant among the tigers, challenging Japanese economic domination and global American supremacy.

Let us assume that the democratic institutions have given way to a one party proletariat communist system in this country and a so called people’s government is established. Will Nepal survive as an independent, sovereign and integrated country in the community of nations? With its geographical constraint and handicap and in-built diverse characteristics will Nepal find its historical place in the world? Will China recognize and support a government without a monarchy at the top not to speak of other neighbours and global partners? The fast growing global wave for democratic values and fundamental freedoms is there to remain whether we like it or not. And in Nepal the relationship between the diverse cultural, traditional, racial and religious national values, and the monarchy are so inherent, in-built, interwoven and instilled that the people will just not break the connection. They may be hungry but they will be that the happy to see the king at Narayanhity. The Nepalese monarchy is a monarchy under which even a communist government could function, a something historic in itself.

The democratic forces, therefore, should consult with the widest possible range of parties, institutions, organisations at all levels and fully equip itself to persuade the Maoist leadership to join the national mainstream after analysing the internal and external factors. None should deceive the people in the name of obsolete ideology nor act out of emotion, jeopardizing the over all national interest of Nepal. Talking about dialogue but preparing, organising and consolidating for further violence would be cheating the nation. Nepalese have tolerated enough. Any excuses to break off the dialogue would be a serious blow to any ideology. There is an opportunity for national consensus in order to solve a multitude of problems facing the country today. Our ideology should be ‘Let Nepal be Nepal’ and we are all Nepalese. United we stand, divided we fall.

Tomorrow syndrome

By Laxmi Sharma

Bholi Aunosh (Come tomorrow)." Does it sound familiar? B.A. syndrome is prevalent not only in Kathmandu Valley, but in the whole nation. All of us , in one-way or another, have experienced this deep- rooted syndrome within the government bureaucracy. Perhaps, it reflects our typical Nepali culture. A person on the Chair, even if he is a junior staff, wants to pose as if he is a bigwig,
and throws "come tomorrow" command at any person standing in front of him. If the motive is
for monetary gains, the situation can get even more complicated.

It is amazing how easily they say, "come tomorrow" as if the person in-waiting is a beggar. When they say this they do not realize that the person, who has come to get his or her work done, may be busy the very next day or other unforeseen difficulties can come up again. Many would not have
suffered if those affected by this syndrome had even an ounce of rationality and efficiency.
Their little awareness or concern could have saved many citizens’ money and time. It seems we Nepalese have topped the list in creating bureaucratic hassles.

Why is that the government officials do not have to discharge their duties on time? Their lack of concern and professionalism have proven too costly for ordinary citizens. Making a complaint against this malpractice is futile. Your plea reaches the authority concerned only after your second or third visit. Even after that your grievances are not addressed. The Hakim Sahib gives excuses and throws tantrums in wayward ways. Those, who are more than familiar with this working culture, ask the Sahib, " Sir, may I have your home telephone number?" He gets the message, and you become confident that your work will be done.

While writing this, I remember one incident. I had an appointment with a Secretary of a ministry. I reached there on "given" time and asked his P.A. about my appointment. Despite my pre-arranged appointment, the employee as usual announced proudly, "Come tomorrow, the secretary is busy right now". Finished. The P.A. was not at all willing to listen to me. I became quite furious and left the place determined never to return again. I knew his automatic answer- "come tomorrow" was not what the secretary wanted, but his junior's command. (Or perhaps, I was not a white foreigner to command secretary’s time ,despite the appointment.)

Events like this happen quite often. Works in public offices never get done in the first attempt. Even to collect your remuneration you are bound to make several trips. Government officers love to say: "Oh! Come tomorrow", as if this is a line from their favourite song.

Electricity pricing and tariff hike

By Jal Singh

After getting the green signal from the Electricity Tariff Fixation Commission, the state-owned Nepal Electricity Authority (NEA) has announced a hike in power tariff by up to 18 percent beginning mid-August, this year. As per the new tariff structure, the price up to 20 units of electricity consumption per month has been increased by 2.56 percent. Those consuming over 250 units will now have to pay at the rate of Rs 9.90 per unit instead of the earlier Rs 9.25 per unit. The NEA says the tariff has been effected to meet the growing demand for electricity in the country, to expand rural electrification, make power supplies reliable and strengthen electricity production, transmission and distribution mechanisms. Meanwhile, the main opposition party CPN-UML, has demanded that the government immediately withdraw its decision.

Electricity pricing: When bilateral and multilateral aid agencies provide loans and grants for energy projects in developing countries, they usually specify that the recipient governments should allow pricing policies that ensure financial viability by yielding a positive rate of return on assets, and are conducive to economic efficiency.

It is agreed that electricity tariff policy should be consistent with economic principles and also ensure the financial viability of the Nepal Electricity Authority as well as take into account HMG’s
social objectives. The Electricity Tariff Fixation commission is a government formed independent body comprising representatives from the NEA, the Ministry of Water Resources, Nepal Rastra Bank,
the FNCCI and the Consumers Forum
as well as experts.

Donors agencies have been pressing the NEA to increase tariff as a condition for new loans. The government is badly in need of loans to fund its rural electrification and power sector reform programs under its Eighth Power Project (2000-2003). Money was required to turn that dream into reality.

To recapitulate, in June 2000, the government reached a US $ 50 million (Rs 3.5 billion) soft loan agreement with the Asian Development Bank. The lending agency had put forth its loan conditionalities. According to these, the government was required to hike the price of electricity by 60 percent by July 2000, maintain its Self Financing Ratio (SFR) at 23 percent and the Rate of Return (RoR) at 6 percent, and take other reform measures.

In this connection, the NEA already hiked the price by up to 30 percent one and half years ago. Attempts to hike the price another 30 percent were made in June last year, but were postponed to a later date following uproar in Parliament when newspaper broke the news.

According to one power authority, since a tariff hike is long overdue the government has no option but to go ahead with the proposed tariff hike. He was also of the view that during this period, inflation was in the higher percentage range and there was a sharp depreciation of the Nepalese currency vis-a-vis
foreign currency.

NEA efficiency: Some multilateral agencies are of the view that NEA should incorporate regular tariff reviews in its corporate development plans. This would allow for timely signalling to consumers of short term increases in electricity supply costs resulting from long dry periods requiring heavy load shedding or thermal generation. Lack of tariff adjustment to compensate for unexpected short term increases in electricity supply costs could worsen NEA’s financial performance.

Meanwhile there seems to be no regulation of tariffs for private sector schemes, which are limited to isolated micro-hydro power plants of up to 1,000 KW capacity. Rather, tariffs in the private sector seem to be established on an ad hoc basis and vary from scheme to scheme. In the recent past, NEA’s self-financing ratio and the rate of return stood at 10.5 percent and 4.38 percent respectively.

Experts and analysts are of the view that in the last ten year period, the price of electricity has gone up by 270 percent and admit that Nepal’s electricity price is the costliest in South Asia and amongst the costliest in the world, although Nepal is a water resource rich country.

It has been noted by newspapers that despite strong resistance within the ruling party and the uncomfortable timing, it was the Asian Development Bank’s (ADB) constant pressure and final refusal to extend funds for the Eighth Power Project that forced the government to raise the electricity tariff. The Eighth Power Project loan is basically intended for rural electrification and extension of other transmission lines. In 1996, before acquiring a US $ 160 million loan as partial funding for the 144 MW Kaligandaki "A" Hydro Project, the government had signed a loan agreement with the ADB. The government had then agreed to increase the NEA’s rate of return to at least 6 percent on average revalued net fixed assets by fiscal year 1998. The present performance level of the NEA is miserably below the agreed level and stands at 3.5 percent only.

Serious thought should be given to whether consumers in a least developed country like Nepal can afford to pay the ridiculously high amount of Rs 7.57 per unit. The NEA should begin collecting outstanding dues, especially from big defaulters.

Hydropower experts opine that if the NEA functions competitively then the tariff rate could be lowered substantially. They opine that in the name of revaluating NEA’s assets, they are increasing the tariff rate.

The general practice is that the price of any product goes down after use and reuse, but the price of NEA assets has been increasing after use and reuse. Experts are also of the view that due to the monopoly of the NEA, donors are investing their money in the form of loans for generating costlier electricity thereby making sure of returns. The experts opine that the NEA’s structure should be changed in the total national scenario and in view of the needs of the country. Once a competitive structure in the energy sector is introduced the tariff rate will naturally be reduced. Citing an example, experts say that our planners were all ready to build the Arun III at the cost of five thousand dollars per kilowatt. After heavy and strong resistance that plan was aborted and has not been tried again.

Protest: The Federation of Nepalese Chambers of Commerce and Industry (FNCCI) has protested the power tariff hike to come into effect from August 17 this year, and said it would further worsen the situation of the country’s industries and businesses which are in grave crisis at present. In a statement issued recently, the apex private sector chamber said the price hike would lead to further deterioration in the competitive edge of the nation’s industries and businesses. The rapid increment of up to 80 percent in electricity demand tariff paid by industries and businesses can in no way be considered to be appropriate on the basis of any standards. Nepal Chamber of Commerce has also demanded an immediate withdrawal of the proposed power tariff hike.

In sum, the hike in energy tariff will hit the poor Nepalese. Effective and efficient management of the electricity supply by cutting down on leakages, getting rid of unnecessary manpower, increasing the productivity and efficiency of NEA staff, and above all breaking the monopoly of the NEA in the power sector and turning it into a national transmission centre would have helped bring down the cost of production.