E-Kantipur

KATHMANDU, NOV 06 -

The Finance Ministry has endorsed the plan for financial reforms in Nepal Electricity Authority (NEA).

Under the reform programme, the country’s only power utility will get loans from the government at reduced interest rates and will be allowed to write off its cumulative losses.

Now, the Ministry of Energy will get the proposal endorsed by the Cabinet. After proposal gets the Cabinet nod, NEA will be able write off its cumulative losses amounting to Rs 28 billion. “We will take the proposal to the Cabinet as the Finance Ministry has already endorsed it,” said Energy Secretary Balananda Poudyal, who is also the chairman of NEA.

The NEA management had held talks with Finance Minister Barsaman Pun about implementing the reforms measures last Tuesday. According to Poudyal, the reform proposal was drafted based on the recommendation of the report prepared by a taskforce led by former secretary Bimal Wagle.

As per the proposal, the government will have to lower the interest rate on loans it provides to NEA. The government has been charging high interest on such loans although it gets the amount from international banks and donors at concessional rates. The government says it charges higher interest from NEA as it also has to consider the exchange rate risk while providing long-term loans.

Although the government receives soft loans at a maximum rate of 1.5 percent, it has been charging up to 8 percent from NEA. The government also receives some commercial loans, at relatively lower interest rates.

Lately, the government has lowered the rate on some loans to 5 percent. The power utility body has been demanding that the interest rate be maintained not above 5 percent.

NEA’s cumulative losses continued to pile up due to internal irregularities, high interest rate and its failure to hike electricity tariff. It incurred a loss of Rs 7 billion last year alone.

In the reform proposal, the government has been asked to form a mechanism to hike electricity tariff scientifically. The power tariff has not been adjusted for the last decade.

NEA has sent a proposal on hiking the tariff to the Electricity Bill Determination Commission. In the proposal, NEA has proposed 30 percent hike in power tariff for consumers using over 20 units a month. The commission had rejected a similar proposal earlier, terming the sought increment ‘too high’. But NEA has maintained that hiking the rate by 30 percent is not irrational, as it has not been revised for the last 10 years.

With NEA seeking to operate all diesel plants on its own during winters to reduce load-shedding hours, it has sought a separate mechanism to manage the power generated from such plants. NEA has maintained that it cannot sell the electricity generated from diesel plants at the usual rate of Rs 7 per unit, as it costs Rs 22 per unit to produce power from such plants.

Posted on: 2011-11-06 09:05

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