NEA works on new pricing mechanism

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KATHMANDU, Feb 17 : The government is preparing to make changes in the electricity tariff fixation process. With the new mechanism coming in force, domestic electricity tariff would be reviewed on a scientific and rational basis at the beginning of each fiscal year.

Nepal Electricity Authority (NEA), the state-owned monopolist power distributor, and Ministry of Water Resources are presently carrying out the necessary homework.

The NEA has formed a committee to carry out the groundwork to develop the tariff review mechanism. The committee after completion of work would report to the NEA Board and Electricity Tariff Fixation Commission (ETFC).

The changes come in a bid to meet the conditions laid down by the Asian Development Bank (ADB), the principal financier to Nepal’s Power Plans, which has demanded a financially strong and sustainable NEA.

Among others, the ADB during the signing of the loan for the Rural Electrification, Transmission, Distribution and System Reinforcement Project had asked the NEA to maintain its self financing ratio at 23 per cent, rate of return (ROR) of 6 per cent and debt service coverage ratio at 1.2 per cent.

However, the NEA is presently far below the financial health benchmark laid down by the ADB. While its non-technical losses amount to over 23 per cent, the NEA’s self financing ratio stands at 6.2 per cent, rate of return at 1.2 per cent and debt service coverage ratio around 2 per cent.

The latest effort is geared at strengthening the poor fiscal state of the NEA. The corporation in the past had hiked electricity tariff a number of times in a bid to meet the ADB specifications. In the past two years alone, the NEA has hiked tariff first by 25 per cent and then by 10 per cent.

According to a high-level government source, the exercise is made in an attempt to prevent any unwarranted and sudden hike in domestic electricity tariff. "Once the changes are made, cross subsidies that are presently being provided will be minimized and the NEA’s health improved," the source said.

As of present, the average cost per unit of electricity stands at Rs 6.81, the NEA has been adopting a differential pricing mechanism depending on the sector to which it is supplying power. Household consumers, temples, street lights, community groups, industrial estates, irrigation and drinking water projects, among others, are presently subjected to differential pricing.

"The current homework aims to create a pricing system based on the cost and to reduce the disparities in the prices paid by different sectors. The gap in cross subsidies will be minimized considerably," said the government source, talking to The Kathmandu Post. "Under the new system, electricity tariff will be more logical and justifiable."

Till date, in order to meet the financial health standards laid down by the ADB, the NEA would need to hike electricity tariff by over 8 per cent. If prompted, electricity then would be costlier by Re 0.69 per unit. The NEA is, nonetheless, empowered by the Electricity Act to annually raise tariff by a maximum of 5 per cent.

Tara Bahadur Pradhananga, Chairman of the ETFC, said that sudden and untimely hike in electricity tariff hits hard not just the household consumers, but even industrial settings. "Only control in losses and leakage can help contain unwarranted tariff hikes," he said.

Handicraft exports dip over 7 pc

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KATHMANDU, Feb 17 : The gloom running in the handicraft industry, which mostly represent self employed small and medium enterprises (SMEs), continued during the first half of the current fiscal year with exports recording a decline of 7.15 per cent.

Exports of the handicraft goods during the period was valued at Rs 1.48 billion, while it was Rs 1.58 billion during the like period last year, according to a figure released by Handicrafts Association of Nepal (HAN).

The overall export figure of handicraft goods was pulled down largely by a decline of over 26 per cent recorded in the export of pashmina, which is the third largest exports of the country and the largest handicraft item. Pashmina export comprises some 70 per cent of the total handicraft exports in general.

Hit by the global slowdown and domestic turmoil, pashmina exports plunged to Rs 675.61 million during the period against the export of Rs 916.03 million recorded during the like period last year.

Trend analysis of monthly exports of the largest foreign currency spinning handicraft goods reveals that the days ahead is still bleaker for the industry. Such a speculation comes given the fact that earlier trend of constriction in decline of its exports has widened in the sixth month. The decline in exports, which narrowed down to eight per cent in the fifth month has again soared to 16 per cent in the sixth month.

The gap created between the total handicraft and pashmina exports, however, has been bridged by the better export figures recorded for woollen goods and silver jewellery, among others.

The export of woollen goods, the second largest handicraft export, went up by 27.73 per cent during the period as compared to the like period last year. According to HAN, its exports valued at Rs 173.45 million during the first six months this fiscal year, while it was Rs 135.79 million during the like period last year.

Likewise, export of silver jewellery went up by 31 per cent during the review period to touch Rs 174.39 million as compared to the export of Rs 133.12 million registered in the corresponding period last year.

While the export of metal craft went up to Rs 143.09 million against the export of Rs 127.81 million recorded during the corresponding period last year, export of handmade paper rose to Rs 133.73 million during the period from Rs 127.69 million registered during the same period last year. During the period, the export of orthodox tea too was valued over Rs 811 thousand.

However, the export of thanka declined by about 11 per cent to Rs 7.82 million. Its export during the like period last year was put at Rs 8.77 million.

Handicraft entrepreneurs attribute to the failure of the sector as a whole in tackling the deterrent factors strategically for the bleak performance of the handicrafts industry. It is lapses in efforts, which has rendered Nepal a failure in recovering on the export front, while most of the countries across the globe are already on the track, say entrepreneurs.

The continual decline in handicraft exports is largely due to failure in uplifting country’s deteriorating image in the key markets like the United States, they emphasize. Use of inferior quality of pashmina yarn and wool imported from the northern neighbour hit the quality of pashmina, hence affecting the demand.

Also, rise of China and India as the closest competitors and largest producers of the brand in recent years too has been diverting the international orders away from Nepal.

Latest threat in the field has been the incentives provided on exports by the Indian Government, owing to which the transshipment of Nepali pashmina to India is increasing, from where it is exported to third countries under the Indian brands. "This is why Nepal’s exports to third countries is declining while that to India is recovering," say concerned people.

Easing gold price brings relief to buyers

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KATHMANDU, Feb 17 : Aspirant gold purchasers can afford to wait for a few more days. The possibility of US-led war against Iraq has been differed for now, easing price rally of the precious metal in the international market. Subsequently, gold price has caught a declining trend in the domestic market as well.

"If the latest trend is any indication, the price of gold will further recede," stated Tej Ratna Shakya, President of Nepal Gold-Silver Dealers Association (NGSDA). The price of gold has been sliding after the investors were convinced that the risk of war has been postponed for now and the market started behaving stable, as people knowledgeable to the matter relate. The news is good for the Nepali consumers, who are on the threshold of getting married this season.

Regarded as a safe haven for the international investors, owing to the pricing of the metal in dollars in the world market, gold price had rallied at the highest level in around seven years. But the good point is - like the rally, the receding of price has been sharp.

The precious metal, which was as high as US$ 388 per troy ounce a couple of week back landed to about US$ 345 on Monday in the London market. The fall in price was by some US$ 7 in a day. "This means, the price is returning to the market value which existed prior to the US-Iraq row," according to Shakya.

In the domestic market alone, price of gold has slid by over Rs 500 per 10 grams in last 12 days. The price that rocketed up to Rs 9,400 per 10 grams, a historic record high in the Nepali bullion market on February 5, has come down to Rs 8,900 per 10 grams on Tuesday.

"Given the existing response of the market, the price is expected to come down further to Rs 8,550 per 10 grams in a week time," states the capital-based gold dealers. The news definitely comes to the relief of commoner, who had been bearing the brunt of egos exhibited by countries existing miles away.

Hard hit by price rally, coupled with shrinking expenditure capacity, the local consumers had been switching to recycling of old stock to meet their demand. Such a trend existed during the last marriage season and is still visible. Of the total gold business, reselling and redesigning of the old ornaments alone comprises 90 per cent.

Sanchita Khanal, a customer from Baneshwor visiting a gold dealer in New Road told The Kathmandu Post that she had to contain her desire for new gold to just a tola (about 11.664 grams), although she required much more for the marriage season. "I require about 10 tolas of gold. But I preferred to recycle 9 tolas of old ornaments and bought just a tola to fulfil the deficit," she stated.

People like Sanchita that are compelled to acquire the precious metal due to seasonal reasons are the rare visitors to gold suppliers. "It is this type of business that has been helping to maintain the pulse of the market. Otherwise, the market is as stagnated as ever," added Shakya.

The demand of gold, currently, has slid to about 10 kg per day against the daily demand of about 15 kg recorded a few months back, which itself was a declined demand. In normal times, the daily consumption of gold is put at over 25 kg. Hence, the decline in price has come as a relief to the gold dealers as well who expect the demand to pick up subsequently.

"With yet another marriage season on the corner and price going down, the market is expected to gear reverse," said another New Road-based gold supplier. But he is quick to add that he is not very optimistic of the business to boom to make up for the past losses.

Contractors still to be paid

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HETAUDA, Feb 17 : After six months of the completion of their contract of re-constructing the roads and bridges damaged by the incessant rains and flooding last year, the construction companies, workers and petroleum dealers here are yet to receive the due payments from the Department of Roads.

The Department of Roads had called the contractors to repair the Hetauda-Lothar section of the Mahendra Highway and several other sections of Tribhuvan Highway after highway traffic came to a halt following the rains and flooding last August damaged these roads.

The District Division Road Office had given the contract for the road re-construction to local construction companies and labourers promising to pay after the works were completed. The companies had borrowed petrol and diesel from local petroleum dealers with reference from the Office.

"There were pressing requests from the officials of the Department of Roads before we accepted the contract on credit," said Jaya Ram Bartaula, chief of Sapana Construction Company. "But when it came to payment, they are just turning their backs around. It is now six months after the completion of our terms and we are still awaiting our payments."

In total, the Road Office has to pay Rs 3.9 million to the construction companies and Rs 1.6 million to the petroleum dealers. Sapana Construction Company alone has to get Rs 3.2 million from the Office.

However, the Road Officials said that they were not authorised to make any expenses. "The Ministry has not authorised us to make any payment or expenses," said Ram Nath Mishra, engineer at the Road Office.

FNCCI urges India to help set up more quarantine check posts

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KATHMANDU, Feb 17 : The Federation of Nepalese Chambers of Commerce and Industry (FNCC) today asked the Indian Ambassador to Nepal Shyam Saran to help in establishing more quarantine check posts in the bordering cities between the two countries, according to an FNCCI press release.

The request was made by Binod Bahadur Shrestha, acting president of the FNCCI during his meeting with the Indian ambassador at the FNCCI secretariat today. Shrestha also expressed his hope that the recent decision on operating Inland Container Depot (ICD) would be helpful in promoting the legal trade between the two countries.

Pointing out the need to discourage illegal trade between Nepal and India, Shrestha said that the procedural hurdles should be eliminated and the process has to be further simplified.

Lack of transparency in the customs and the procedural hurdles are the major reasons behind the increase in the illegal trade between the two countries, said Shrestha adding that both the countries have to be serious in resolving these problems.

Some of the positive provisions in the Nepal and India Trade and Transit Treaty have helped in promoting legal trade and investment environment in the two countries, Shrestha said. He also highlighted the promotional activities carried out by the Joint Economic Council of the Confederation of Indian Industries (CII) and the FNCCI.

During the meet Indian Ambassador said that there are several fields that can be jointly explored for the mutual benefits of both the countries. India is a big market for Nepal and thus efforts should be made to tap the potential, states the press release quoting Shrestha.

"The recent agreement reached between both the cities on transit and railway treaty is of mutual benefit of both the peoples," said Ambassador Saran, adding that the embassy would do its best to make the further dialogues a success.

CMPCU submits seven-point demand to DPM

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KATHMANDU, Feb 17 : Central Milk Producer’s Co-operative Union Ltd. (CMPCU) today submitted a seven-point memorandum to Deputy Prime Minister and Minister for Agriculture and Co-operatives Badri Prasad Mandal.

According to a press release issued here today, the union has demanded with the government to make the National Dairy Development Board (NDDB) an autonomous body, to make provision on incorporating the representatives of the union to the Board and to formulate timely dairy policies.

They have also demanded with the government to help establish a powdered milk factory in the country in order to utilise the over production of milk during the flush season thereby ending the Milk Holiday, which has been badly affecting the milk producers, and to stop importing powdered milk.

They have also demanded with the NDDB to review the milk price every year on the basis of production cost among others.

Dolakha district to be computerised

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CHARIKOT, Feb 17 : Increasing number of employees associated with Local Development Office (LDO) of Dolakha district are queuing up to take computer classes after the office decided to computerise the development activities of the district.

With an aim of registering the information in systematic module, the office even has set up Information Centre for regularly updating every vital information of the district.

The local office has decided to computerise necessary information following the government decision on preparing poverty index. Such a decision on preparing poverty index comes under the local self-governance programme.

An official of the LDO says that with the computerisation of information, the office will be able to provide any vital information of the district. "Every information of the district including poverty, road, forest, school, students, farmers, teachers, rivers, bridges among others will be computerised," said Mahesh Nepal, an advisor to Local Development Committee.

Similarly, Gopi Krishna Khanal, another official says that with the new system of record keeping, the office will be able to provide even such information that are supposed to be minor till now. "Even the number of cows in any given household be calculated with the help of this new system," added Khanal.

The new system of recording information, according to senior officials, will be the base while planning the development of the district in future. Also such preparation of poverty index will also be supportive for the ministry, local bodies and even donor agencies for allocating the funds in the appropriate development areas.

The other major information that the poverty index will be providing includes educational status, average age, required quantity of foodstuffs, health status of the district among others.

When the local body is initiating to prepare poverty index, official Khanal complained that Ministry of Science and Technology was not so supportive in training the officials.

"Even when I visited the ministry expecting to learn more on preparing poverty index, the ministry was not much supportive," added Khanal.

Senior officials have also expressed their hope that the development of the district will expedite, when the entire development activities will be based under such new programme. "The priority areas for development will be identified with the computerised system. This surely will mobilise the development activities of the district," added advisor Nepal.