E-Kantipur

Hydropower can be Nepal’s best exportable output. We have been exporting non-renewable natural resources like sand and stone for marginal economic gains ignoring the various ecological disasters such reckless exploitation will lead to. There are no such hazards when exporting energy. However, there are some striking features of the electricity sector. One is the great disparity between buying and selling prices. The Nepal Electricity Authority (NEA) pays to India and expatriate investors within Nepal a much higher price than what it charges domestic consumers. But it pays a much lower rate to indigenous private sector investors. I fail to understand how and why the NEA sells power at a rate that is lower than the production cost. This is the antithesis of all economic theories. No wonder the NEA is in high debt. And again, I fail to understand why there should be discriminatory treatment between foreign and domestic investors. Why should the NEA pay more to expatriate investors? The discrimination is ridiculous.

Another striking point is the high-handedness of political parties. Private investors are reportedly required to support the political parties financially. When the parties hold their grand meetings, hydropower investors have to pay for them at least partially. In this context, the Maoist party is at the forefront because it is a bigger bully than the other parties. In the context of investment by expatriates like INGOs or private parties, the Maoists have declared a moratorium. While the parties should have been facilitators, they have, in fact, become inhibitors.

The government sector is no less an exploiter. The NEA buys at a much lower rate from the private sector. How can the private sector invest under such circumstances? There are said to be almost a hundred license holders of small or medium hydroelectric projects spread over as many rivers throughout country. In fact, such licenses cover almost 90 percent of the rivers from the east to the west of the country. But most of them have not started work. There is as much political obstruction as there is bureaucratic obstruction.  

The other aspect of the problem is that the NEA is sinking under unfathomable debt. That is because it is charging the consumers less than the cost price. My question is: Why cannot the NEA charge the consumers a rate which can at least be self-sustaining? Does the NEA have to be populist by running the business in sheer deficit? Who makes such suicidal policies? We know that donors paid for the construction of most of the public sector electricity projects. If there is a deficit even with donor-funded free projects, what would be the condition if the projects had been built with borrowed mo-ney? Is it because of bad planning or massive bungling? The management must be highly irresponsible. Talking of mismanagement, hundreds of NEA-owned vehicles are being used by VIPs and the NEA pays for the fuel. Such VIPs are either ex-ministers or other weighty leaders who are fond of riding expensive cars.

It can be inferred that the NEA management is totally inefficient. There are a number of faults that the public can see. For example, many highly placed people have not paid their energy bills. The ex-king and his kin have not paid their bills saying that the government would take care of it. Many five-star hotels have defaulted on their payments. It is also rumoured that there is rampant fraud in billing. Many areas in the Kathmandu Valley and elsewhere are taboo for meter checkers with the ban being enforced by local muscle power and threats of severe physical consequences. Thus, there is either no billing or reduced billing. Electricity theft is another direct fraud. This is also said to be rampant. Next, nobody pays for the street lights in the towns. Either the central government or the local bodies should pay for them. If all these factors are taken care of, the debt burden of the NEA can be

minimised.   

There is a baffling aspect in the pricing policy of the NEA. While the rate of a commodity or service is reduced after a certain slab in the market sense, the NEA tariff structure is just the opposite. The rate per unit is lower if the electric consumption is low; but if consumption is higher, the rate also goes up. One fails to understand the rationale. It may make sense when considering that a consumer who buys a large quantity of electricity is richer than an ordinary customer who can afford to use only a little. But this interferes with the concept of free economic competition where the higher the service or product, the lower is the rate per unit charged.

I see the need for some strong steps to immediately correct the pricing policy. So far as bureaucratic meddling is concerned, there should be a mechanism of independent evaluation and regular monitoring to see that such corrupt practices are stemmed at the early phase. Such a mechanism can work as a link between the government and the private sector and help design a remedial system to benefit private investors whereby they may be protected and encouraged.

There should also be a provision to punish culprits regardless of where they work, within an organisation or outside it. The government should strongly protect the interest of investors, indigenous or foreign, from political exploitation in order to permit license holders to complete their work. If all the license holders finish their projects, we will not only be self-sufficient in electricity, but also have extra for export.

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