Industries and businesses are the backbone of Nepal’s economic development. The government has been giving priority to domestic industry and industrial sector in every policy. However, the role of energy supply, energy costs and energy policy is very important to make industry sustainable and competitive. The development of domestic industry is the first condition for the development of energy.
Nepal is rich in hydropower potential. Although the old study showed the capacity to generate about 83,000 MW of hydropower, the latest study by the Water and Energy Commission shows that about 42,000 MW of electricity can be generated economically and technically. The capacity to generate electricity so far is around 4,000 MW. The consumption of electric energy in the energy sources in Nepal is around 10 percent. The country’s peak demand is only about 2,200 MW and the per capita energy consumption is only about 450 units per annum.
If this potential of Nepal can be turned into a reality, our industries can be supplied with cheap, reliable and long-term energy, the cost of production will be reduced, competitiveness will increase and dependence on imports will be reduced. At present, petroleum is the main source of energy used in the industry. India imports petroleum products worth around Rs 300 billion annually. This has not only made our products more expensive but also played a role in green gas emissions. Therefore, there is no alternative to using renewable energy sources such as solar, wind and biomass along with hydropower to achieve energy self-sufficiency in Nepal’s perspective.
Private sector contribution to hydropower development
First in Nepal, The government hydropower project was started in 1968 with a capacity of 500 kilowatts at Pharping. The power purchase agreement of Khimti Hydropower Project was signed only after 80 years in 2050 BS. This is the first privately promoted project in Nepal. The private sector has entered the energy sector along with other sectors after the government’s open economic policy in 2049 BS. The Electricity Development Policy, 2050 and the Electricity Act, 2049 opened up the entry of the private sector to energy and broke the previous government monopoly.
It would not be out of place to say that the golden age started with the entry of the private sector in energy development. After 30 years of the entry of the private sector, the country is moving towards light. With the bitter reality of 16 hours of load shedding, we are now experiencing the sweet present of electricity export. The private sector contributes three-thirds of the total installed capacity to 4,000 MW.
So far, billions of rupees have been invested by the private sector in energy development. According to the bank’s data, the banking sector has invested around Rs 4.5 trillion in hydropower at present. Some projects have already paid the principal interest of the bank while some are paying more investment. Nepal Rastra Bank (NRB) has directed the banks and financial institutions (BFIs) to invest 15 percent of their total investment in energy development. This also seems to have helped private promoters to invest.
Federation’s advocacy for energy development
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The Federation of Nepalese Chambers of Commerce and Industry (FNCCI) has always played the role of a facilitator for the government and entrepreneurs in energy development. The federation has been lobbying with the government to open the access of the private sector not only in power generation but also in transmission and distribution, keeping the power development at the center in the public÷private partnership concept. As a result of the FNCCI’s leadership role, the government is formulating procedures to allow the private sector in electricity trade.
Even now, NEA has been purchasing electricity along with generation, transmission and distribution. NEA is the buyer and seller of electricity in Nepal. NEA has monopoly from building projects to buying and selling. NEA has been signing power purchase agreement (PPA) for the projects to be constructed by private promoters. In some cases, the NEA has also ruined the investment of private promoters by not purchasing electricity from projects with PPA.
Mainly the private promoters are the river-based (RoR) projects, so the production is as per the capacity during the rainy season and it drops to 30 percent of the capacity in winter. In such a situation, there is a lot of electricity due to low consumption in the rainy season. The NEA has been not purchasing electricity from the projects with private investment citing the delay in the construction of the transmission line. This activity of the regulator demoralizes the private sector. It also affects investment. For this reason, the federation is firm on the entry of the private sector in electricity trade.
The federation has been standing as a charioteer of private power producers in the development of energy. The Federation of Nepalese Chambers of Commerce and Industry (FNCCI) has been playing a decisive role in the recent years on sensitive issues related to the energy sector and capital market. From the modality of PPA in power generation to the dedicated and trunkline dispute and the current IGIN controversy, the role of the federation seems to be at the center of the policy debate.
The government, through its recent budget statement, has introduced the policy of adopting PPA in the ‘Take and Pay’ modality in the electricity sector. The electricity generated by it will be paid only if the Nepal Electricity Authority consumes it. The FNCCI actively initiated a dialogue with the government after concerns grew among the private sector, especially hydropower promoters, about this policy.
The FNCCI has been continuously lobbying the government for policy reforms. The FNCCI has taken various initiatives to invest in hydropower to improve the environment, expand transmission lines, facilitate electricity trade and ensure reliable power supply to industries. The FNCCI has been playing a role in providing policy suggestions, attracting international investment and resolving the problems of industrialists by forming energy committees. The FNCCI has been advocating in various forums to inform the foreign investors about Nepal’s hydropower potentials and bring in investment.
Similarly, the Federation has also advocated for policy-level reforms in electricity trade. The role of the private sector and the efforts of the FNCCI are important in signing power export agreements with India and Bangladesh. The FNCCI has been prioritizing energy in the investment summit to attract foreign investors. It has also been making recommendations for the expansion of transmission lines, development of reservoir-based projects and diversification of renewable energy (solar, wind).
Energy to increase domestic productivity
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Energy is essential for the promotion of domestic industry. Cheap and reliable energy increases the production capacity of industries, increases export competitiveness, and increases economic growth. However, there are still challenges such as lack of transmission lines, policy instability and investment risk. The cooperation of the government, private sector and federations is necessary to overcome these challenges.
FNCCI has always been in the lead role in resolving every issue concerning the private sector. If energy efficiency and self-sufficiency can be achieved, domestic production can be prioritized. Energy efficiency and domestic production should be promoted to reduce dependence on imported goods.
There is a need to focus on domestic consumption of electricity as a raw material rather than a commercial commodity. If more and more electricity produced in Nepal can be consumed in Nepal, it will not only help the domestic industry to flourish but also make the domestic cost cheaper. Production will increase in Nepal if sufficient energy is provided to sectors with potential such as cement, iron, textile, and food industries. This not only substitutes imports but also increases export potential. At the same time, energy availability makes it easier for small and medium enterprises to expand. It creates jobs.
The unemployment rate in Nepal is high and the youth are dependent on foreign employment. If the energy supply is reliable, small industries will expand, which will provide employment to the youth in the country. Entrepreneurship is also directly linked to energy availability. Energy self-sufficiency and efficiency will strengthen domestic industries and businesses, thereby accelerating the overall economic development of Nepal. The federation is continuously striving to make the energy sector the engine of the domestic industry. The active participation of the private sector can prepare the base for prosperity by making Nepal an energy exporting nation.
(From Federation of Nepalese Chambers of Commerce and Industry (FNCCI) President Dhakal Lekh Energy Prosperity Souvenir 2082)
प्रतिक्रिया दिनुहोस्