It all started in 1985, when Nepal Electricity Authority (NEA) was created by amalgamating Electricity Department, Electricity Corporation and various Electricity Development Boards under the aegis of the World Bank and Asian Development Bank (ADB). The government entrusted NEA with the planning, construction, generation, operation and maintenance of Integrated Nepal Power System (INPS). The main aim of this change was to operate this vital institution in a technically sound and financially viable way, without political interference.
But the then ministry of Water Resources, Pashupati SJB Rana, became the first Chairman of the NEA Board and his hand-picked person became the Board Member from private sector, mostly commission agents. As the rules and regulations of NEA were more flexible than that of the government, the Minister recruited about 4,000 unnecessary staff – mostly administrative instead of technical.
During the creation of NEA, about 60 engineers opted to stay in government service. So the Electricity Development Centre (EDC) was created to adjust these engineers, who were merely involved in administrative job. With the opening up of the power sector to the private sector in 1992, EDC’s job under the Water Resources Ministry started to expand.
Best Hydropower Sites relinquished to Indian Companies
USA is the 3rd and China is the 4th largest oil producing countries in the world. But they don’t use their oil for internal consumption (forget about exporting), because it is related with their energy security and national security.
But in Nepal, without any technical knowledge and experience, EDC started to blindly promote hydropower projects. After getting hold of River Basin Master Plan prepared at NEA, without considering the requirements of the National Power Grid operated by NEA and even undermining the recommendation of the River Basin Master Plan, the Water Resources Ministry with the EDC recommendation started distributing licenses for feasibility study and construction of more than 20,000 MW of hydro projects to private parties.
This is the biggest blunder made by the government in power sector. It has created confusion and high expectation while overshadowing the vital role of NEA. NEA has now been reduced to play a mere secondary role. No thought has been given in enhancing the financial and technical capability of NEA.
The Energy Ministry, which has the mandate of policy making, coordination and monitoring started the job of project execution by distributing hydropower project license. Grabbing this opportunity, the commission agents (with Indian support) have taken control of NEA and are involved in appointment of Managing Director (MD), relinquishing promising hydropower sites to Indian companies, manipulating high rate PPAs for private companies and lobbying the construction of export oriented high voltage 220/400 kV transmission lines instead of the transmission/distribution lines for the internal domestic use.
Breach of National Security
Hydropower projects are built in far-flung remote hilly areas requiring long transmission lines to bring electric supply to the consumers. All power plants and transmission lines are connected to form an Integrated National Power System/Grid.
Nations all over the world have their own independent Integrated National Power System/Grid under the control of a central Load Dispatch Center(LDC), which is the apex body to ensure integrated operation of the power system. The INPS and LDC are always under the aegis of the government. Being such a vital installation LDC is usually secured by army.
In the name of ending load shedding, electricity import from India has increased dramatically and the whole Terai area (50 % of the population) has been completely handed over to the Indian Grid, isolating it from Nepal’s National Grid System. This is a serious act of violating national security.
The commission agents have lured top NEA and Ministry officials for lucrative jobs after retirement and hefty rewards for each high rate PPAs. These corrupt bureaucrats signed hydro-generation PPAs without building internal transmission and distribution lines to deliver power to domestic consumers.
The next moves of these commission agents are even more dangerous. As per their vicious design, they have already completed the high voltage Khimti- Dalkebar -Muzaffarpur (India) line. In another 2 years’ time, about 1000 MW will be added in the system. But the creaking 25 year old National Grid cannot evacuate this generated power as nothing has been done to enhance the capacities of internal transmission and distribution lines.
So these money-monger commission agents will compel the MD to export all the ‘excess power’ to India via the KDM transmission line. As radial modes will be used, all power plants, transmission lines and other structures of Nepal will be isolated and be under Indian Grid control. As such, all Tarai areas and power plants will be under Indian control.
This is a serious breach of Nepal’s sovereignty and security. In such a scenario, our Nepalese Army will be guarding an empty building of Load Dispatch Center. This is a criminal act and all those who are involved should be persecuted as per our country’s law.
Daylight Robbery in the Name of Privatisation
Before talking about privatization, some light must be shed on Nepalese private sector. More than 80 percent of Nepalese trade and industry are undertaken by Indian nationals. Due to open border, loose custom control and corruption, most of the transactions in the business are carried out illegally.
Industries are run with 70 to 80 percent imported raw materials. Use of local labour and skill (value addition) is minimal. Revenue and tax evasion is the basic character in Nepal’s businesses. The private sector operates as a family business. There is no corporate culture, no transparency in the transaction. All this has created black money and parallel economy which is four times bigger than the regular economy.
Most of the private sector businessmen are involved in financial misappropriation, tax evasion, bank fraud, dual accounts, electricity pilferage, low quality products, capital flight, gold trafficking etc. etc. Many top FNCCI officials have been imprisoned, some are underground or under investigation for financial wrongdoings.
The only skill these opportunistic businessmen have is to misuse loopholes in the government’s rules and regulations and make maximum profit in their businesses. But this is not a sustainable method and the country’s economy cannot withstand this for very long.
The past private sector activities in Carpet, Garment, Real Estate and Banking sector have proved that such modus operandi is not sustainable. And for water resources/ hydropower development it is beyond imagination – practiced nowhere in the world.
Trade deficit with India has surpassed the annual budget. Overseas migration for employment is increasing every year. As such, the private sector of Nepal has little or no contribution in the economic development of Nepal.
And yet the government envisages development of Nepal’s water resources/hydropower through the private sector. Following the precedent set by Khimti and Bhotekoshi’s high PPA rates (twice the normal rate), hydropower companies boomed like mushrooms with some developers never seeing a hydropower plant. NEA has to pay the IPP’s for 25 years, from the revenue colleted from the poor consumer of Nepal. Thus, all the benefits of water resources of Nepal goes to few businessmen, bureaucrats abd politicians.
Because of the high PPA rates, NEA has been forced to approach the Tariff Fixation Commission again and again to increase the tariff up to Rs 13 per unit from Rs 6 per unit. Nepal’s tariff is one of the highest in the world (considering PPP it will be NRs 30 per unit). With such high PPA rates, Nepal cannot achieve economic development and the vast majority of Nepalese will continue to grovel in poverty – only a few businessmen, bureaucrats and politicians will get rich.
The government has destroyed the structure of NEA, a once upcoming vibrant institution and converted it into a mere trading house. But surprisingly, during all this mayhem, the World Bank and ADB, the god-fathers of NEA, have remained ominously mum?
Their institutional reform programs have now been directed towards the Department of Electricity Development, the very institution they helped to bury in 1985 ! Doesn’t this all smell of conspiracy to put Nepal’s power sector/ hydropower development in jeopardy ?
Ending of Load shedding: NEA Controlled by Commission Agents?
The load shedding ended without adding a single MW in the system? As per MD Kulman’s explanation; NEA was supplying power to industries 24 hours, while there was 13 hours of load shedding for other consumers. So he just shifted the industrial load to ordinary consumers and ended the load shedding ?
Now it is very clear that these commission agents turned industrialists-cum-bankers, cum-realestate owners, cum -hydropower developers (many became NEA Board members) have complete control over NEA. They can create load shedding and sell their battery-inverters, diesel generators and solar panels. Aren’t they liable for heavy punishment for their crime ?
When they foresee new hydropower plants coming up, they use the new MD to end load shedding. As they are responsible for not allowing construction of domestic transmission lines, generated power cannot be utilized for internal consumption. Hence, as per their vicious planning, these ‘excess power’ will be exported to India at cheap rate and import electricity in Tarai area at high rates.
Another big issue is the pilferage of about 250 MW (27% of total generation), causing financial burden in billions of Rupees to ordinary electricity consumers. NEA claims the pilferage is mainly by ‘hooking’, but the poor ‘hookers’ do not have the electrical appliances to consume such large amounts of power. So, about 225 MW (90%) pilferage is carried out by big industries with the help NEA staff.
All these are serious crime and the Commission for the Investigation of Abuse of Authority (CIAA) should investigate the matter.
The Way Out
1) There is no denial that the country needs a technically strong institution to look after/take care power sector, eventually after 25 years all hydropower plants will be handed over to the government. And the transmission/distribution libes, substations, INPS and Load Dispatch Center are all managed by NEA.
SO there is no alternative, only way out is, NEA should be reinvigurated to its original form, having mandate of the planning, construction, generation, operation and maintenance of Integrated Nepal Power System (INPS).
2) Electricity Development Centre (EDC) should be closed and the master plan abd all other technical reports should be handed over to NEA.The Ministry’s job should be limited to policy making, coordination and monitoring. For large multipurpose projects like Mahakali/Pancheswar, a section can be opened in NEA, where some of the technical staff also can be adjusted.
We must try to make NEA, like Duke Energy, USA; National Grid, UK and EDF, France – top-notch utitity companies of the world.
3) All export oriented hydropower project should be cancelled. Because, building power plants, Thermal, Nuclear or Hydro power plant, all have serious environmental consequences. So no nation can afford to buuld power plant for other country.
4) No more high rate PPA. Levelized Cost of Energy (LCOE) in the Himalayan region region is 1.5 to 3 NRs/kWh, so the the PPA rates should be fixed at 3.5 NRs/kWh (DPM Sailaja Acharya has fixed this rate).
5) Renogotiate to lower PPA rates with existng IPP or purchase the hydropower project altogether.
6) Stop transborder transmission line, focus on internal transmission and distribution lines, up grade INPS and LDC. The transmission line, Khmti – Dhalkebar – Mujaffarpur (India) line should be diverted to Khmti – Dhakebar -Tarai Line.
7) The NEA should develop Run-of-River (RoR) and medium size reservoir projects 200 to 300 MW) as per the load growth of integrated National Power System of Nepal.
To minimize political interference, Nepal should build hydropower projects as per the model of Upper Tamakoshi (with 51 % NEA’s share).
8)If all above done NEA can fixed the tariff at 6.5 NRs/kWh without any subsidy; help to boost industry, agriculture, transport system, reduce the consumption of LPG, trade defect will be greatly reduced and achive substantial economic growth.
9) Last but not least, we don’t have Oil Resources, so ask foreign country to get it. But Hydropower is the only proven natural resources we have, then why we have to ask India, for our own internal use ? Hope our intellectuals will give some thought on it.
PS: As corruption is deeply rooted in NEA and the country, perhaps the Army should oversee the management for some time.
Just to remind every one, even in the country like USA the US Army Corps of Engineers manages all Water Resources Projects in western USA with the United States Bureau of Reclamation (USBR) building all water resources projects. (This writer had the opportunity to visit USBR in 1979 for a year’s on-the-job training.).