Even as the hours of load shedding are set to increase along with the wintry chill, the Ministry of Energy is a scene of extraordinary power tussle. The Minister and the Secretary are not even in speaking terms. Independent power developers have warn

Dec. 20, 2010, 5:45 p.m. Published in Magazine Issue: Vol.: 04 No.-13 Dec.17-2010 (Poush 02,2067)

The quarrel between the Minister Dr. Prakash Sharan Mahat and Secretary Shankar Koirala came to the fore after their public spat over the appointment of Arjun Bahadur Karki – the former Managing Director of Nepal Electricity Authority (NEA) – as the chief of Upper Tamakosi project.

Despite the cabinet decision to appoint Karki as the chief of the project, the minister later backtracked and asked the Secretary not to hand over the appointment letter. However, the Secretary – probably thinking the caretaker government did not have much life remaining – went ahead and gave the letter, inviting the wrath from the minister.

In what many private power developers see as the consequence of the rivalry between the minister and the secretary, the Minister (on November 28) wrote a letter – sealed confidential – to the Department of Electricity Development, asking for the suspension of all licensing procedure.

The licensing procedure, normally, falls under the domain of Secretary.  The Minister has said that he wants to ‘evaluate’ the procedure and, therefore, has ordered for their suspension for the time being.

“The decision to suspend the procedure appears ill-intentioned. We agree that the Minister can and should evaluate whenever it is necessary. But in the name of evaluation, he can’t just shut down the whole licensing procedure, suspending renewals, generation licenses and so on,” said Shailendra Guragain, a private power developer and a member of Independent Power Producers Association of Nepal.

The latest spat in the Energy Ministry comes at a time when the efforts to overcome the crippling load-shedding appear uninspiring.

This winter, the NEA has projected the load shedding hours to cross 14 hours a day. In the last one year, only 2 MW of new power plants came into operation and in the coming one year, another paltry 16 MW of additional power is expected to join the national grid.

“These are very small additions if you compare with the growing additional demand of anything between 60 to 100 MW every year,” said Guragain, who is behind two companies that will be generating 9.5 MW of additional power in the next one year.

The decision of the Energy Minister was followed by reports in media quoting NEA officials that the state-owned power monopoly was considering stopping entering into any new Power Purchase Agreement (PPA) - citing growing losses.

Hari Bairagi Dahal, president of Small Power Developers Association, is exasperated with the situation.

“In a country where the Minister is busy quarreling with his Secretary, where power authorities talk about stopping PPA, how can anyone expect load shedding will be resolved,” said Dahal.

In fact, the IPPs had been demanding that the current PPA rates offered by the NEA were inadequate. The NEA has offered Rs 4 and Rs 7 per unit, respectively, for wet and dry seasons. The IPPs say this rate is not enough to lure the investors.

“No one will take the risk of investing in highly sensitive hydropower if they are not lured financially. The current PPA rates are not good. The NEA should be offering a flat rate of Rs 6 per unit in order to entice the investors,” said Dahal.

But the NEA thinks otherwise. Already running in losses to the tune of Rs 19 billion, the NEA is feeling the bitter pinch of PPA.

The NEA officials say that once they sign PPA, they will have to either pay or take the power from the producers - which is fine but for a little snag.

The PPA means that the NEA will have to construct transmission lines to bring the power from project site to the grid. As per the existing laws, NEA is the sole authority to build transmission lines.

But the budget allocated for the transmission lines construction is too meager, say NEA officials.  And this means, the NEA will not be able to construct transmission lines, without which they cannot bring in the power for which they will have to start paying based on PPA.

Two years ago, then Minister for Water Resources Bishnu Poudel had unveiled 38-point guidelines for hydropower development. It included the government’s commitment to invest Rs 50 billion in transmission lines for 10 years – at the rate of Rs 5 billion a year.

This year, the NEA had asked for around Rs 1.5 billion for constructing transmission lines (already Rs 3.5 billion less than the commitment made in the guideline) but it only got Rs 400 million sanctioned by the Finance Ministry in the budget.

“This amount will be used up trying to bring the power from the single 10 MW-Sipring project in Dolakha. The transmission gridlock will continue to worsen,” said Guragain.

Clearly, there is a mismatch between the government’s commitments and the practices.

In the wake of two subsequent reports – the suspension of licensing procedure and the likelihood of suspension of new PPAs – not only the private investors in the power sector but also the common people suffering from the crippling power cuts are in despair. 

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