Thursday, July 9, 2009

Re: article on electricity import from India - 2

July 6, 2009
Mr Sher Singh Bhat
Chief, LDC, NEA

Dear Sher Singhjee

I am glad that we are having this dialogue which is bound to be constructive.

As my last article was on exemption of various taxes and its ramifications and manifestations of it on the macro economy, I will refrain from repeating myself now. I trust that you have read that article too.

Current electricity act, as you have pointed out, does not require domestic developers to transfer project. This is against the very spirit of BOOT and the new policy and draft Bill has rectified it. i do hope this feature of the bill will be retained in the Act that will get eventually promulgated. But my point about paying better tariff to a project built in Nepal, compared to importing from India still stands for projects built with foreign investment.

With regard to the tariff, looks like, you are comparing apples and oranges. If you are right and the rate asked by PTC is just Rs 5.20 (about which I have yet to read it officially) not Rs 7.20, even then the Rs 7.00/unit for dry season and Rs 4/unit for wet season is on the lower side as the rate is to be effective with fiscal year on which Commercial Operation Date occurs to be treated as the base year. Because as I have indicated in my article, even if the project is completed in next two fiscal years, the effective rate at 5% inflation that they actually get is Rs 4.46 only. If the COD is later than that or if the inflation rate is higher than 5% (which actually is the case - it has been hoovering in the two digits) then the effective rate announced by NEA will be much lower.

To conclude, I like to reiterate the strategic value (or rather negative side of it) of electricity imported from India and thus giving them an additional weapon on a silver platter, which will enable them to force Nepal to take decisions favoring India and against our national interest.

With best regards,


Ratna Sansar Shrestha,

From: Sher Singh Bhat []
Sent: Tuesday, July 07, 2009 6:56 AM
To: Ratna Sansar Shrestha
Subject: Re: article on electricity import from India

Ratna Sansarji

I am delighted that you took my comments very positively which usually people don't. My only point is that:
a. for developing a hydropower we import most of materials from abroad and our developers ask everything exemption on that,
b. our developers do not have to surrender license after 30 years like foreigners as developers and hence they have a longer return period,
c. they ask for income tax and other tax exemption,
d. they do't pay millions of Rs per MW upfront for license or royalty energy to Government as in India,
e. they ask to complete the evacuation part and bear the losses after generation point by NEA
f. they get much higher price for dry season ( Rs 7.00/unit on Commercial Operation Date and Rs 8.89 after escalation) yet they are crying for more compared to Rs 5.20 from India.

Look at the fun:
a. Country is loosing all the tax benefits,
b. public is getting costlier energy,
c. our producs are getting non competitive due to higher electricity cost for value addition.
Then what is the benefit of such sentimental domestic electricity generation. Our developers must compete this 5.20 level bar to get competitive and make our other products competitive. Then only we can be benefitted from our own source, hydropower.


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