Saturday, January 15, 2011

Dreams of Jaded System and Load shedding in Nepal

The fundamental reasons behind load shedding in Nepal are lack of vision, commitment and preparation in the leadership - in both political and bureaucratic. There is no concept of vision in these people, because vision means the ability to see ahead of time and chart out the way forward. The leaders here have not only failed to understand what the problem actually is but also failed to appreciate it. Recently energy minister, speaking to the media and delivering speeches on various occasions, has claimed that there will be no load shedding in five years’ time, citing various projects that will be completed by that time. Pointing to these projects, GoN and NEA too are trying to make people believe that there will be no load shedding after five years.

According to the data provided by Nepal Electricity Authority (NEA), the peak demand of electricity after five years in Nepal will be about 1400 MW. At present, NEA’s installed capacity is 700 MW and after the completion of Upper Tamakoshi and various other hydropower projects in five years’ time, total installed capacity in the system will reach 1400 MW level. With the installed capacity equal to the peak demand of that time, they claim that there will be no load shedding. At the superficial level, they seem to be correct but in fact they are completely wrong. Last year, the peak demand was around 900 MW while the installed capacity was around 650 MW. However, the people had to face load shedding of up to 14 hrs/day as the hydropower projects were generating less than 200 MW in dry season and NEA was importing about 100 MW from India to mitigate load shedding. Most of the hydropower projects in Nepal are run of the river (RoR) projects and these produce only one third or less than one third of their actual capacity during the dry season. If we extend this logic, after five years when the peak demand will reach 1400 MW level, we will need to have installed capacity of about 4000 MW to have no or zero load shedding.

Have they identified or started implementation of projects for the additional/incremental 3000 MW? Are they going to be able to add 3,000 MW to the system by next 5 years? Unfortunately they have not. Therefore, their claim that there will be zero load shedding after five years is plain and simple lie. The minister who made this claim holds a PhD degree in economics and he should know better than to make such tall claims. He, however, can be absolved from the blame because of his lack of technical knowledge. But the people in NEA, an institution filled with thousands of technical experts, coming up with such statements regularly is very unfortunate. Therefore, as long as we have such leadership and bureaucracy, it's not just five years that we will be condemned to live in darkness, rather we will be living in the darkness for decades.

Let’s take a look at the Maoist's plan. When Puspha Kamal Dahal 'Prachanda' was prime minister, the GoN promised to build hydropower projects and generate 10,000 MW in 10 years. But building hydropower projects is not like turning an electric switch on or off. First of all, feasibility studies of identified projects needs to be conducted which takes two/three years. Then, they need to come up with necessary design, sign contracts with contractors and suppliers, and achieve financial closure. These activities too take a couple of years. And finally projects have to be actually built/implemented. Depending on the size of the project, it can take between 5-10 years. The concept was faulty in the sense that it was over ambitious to aim to build 10,000 MW in 10 years. They seem to have come up with this slogan on an ad hoc basis.

But still there was some possibility for them to succeed in building 10,000 MW in ten years as there are a number of projects in the pipeline ready to be built. But unfortunately, what the government led by Maoist failed to appreciate is that the problem of load shedding in Nepal cannot be solved by exporting power to India. Most of the projects in the pipeline are dedicated to export power to India like West Seti, Arun III, Upper Karnali and Pancheshwar projects. If they were to build all these projects they could have achieved their target of 10,000 MW but exporting electricity produced from those projects to India will not solve the problem in Nepal. It's just like cooking food in your home and feeding the neighbor’s family which will leave your family still hungry.

A reference about the positive aspect of Dr Babu Ram Bhattari's budget is warranted here. He had used the word 'leapfrogging' and that is what Nepal needs now. Today, most of the industries are not running at their full capacity and new industries aren’t coming up due to the lack of power. Hence, NEA’s load forecast is based suppressed growth. Under suppressed growth, they have forecasted the demand of 1400 MW in five years’ time. If one is to use normal growth rate, the peak demand will reach 5000 MW level in 5 years. However, what the country needs is accelerated growth which is sort of synonym of leapfrogging. We can link this to foreign employment as well. Why are people going abroad leaving their family behind causing disintegration of family? Even inviting HIV AIDS and other various problems. If we have necessary power for industrialization leading to employment generation, those people will not go overseas. They face sexual harassment, physical torture, etc. besides financial exploitation in foreign countries. That is why, Nepal needs to achieve accelerated growth.

The divergence in what I see and Dr Bhattarai sees is that if we are able to generate 10,000 MW energy in 10 years and use it in Nepal, we can achieve accelerated growth such that there will be necessary enabling environment for Nepali youth to return back home. This concept of accelerated growth is highly important but unfortunately many have failed to appreciate it. Dr Bhattarai also came up with the concept of accelerated growth but he too failed to appreciate that it is the energy is that drives the economy and in order for Nepal to leapfrog into double digit economic growth, Nepal will need to consume 10,000 MW within the country. Only this will help her industrialize such that employment is generated in abundance, trade and payment deficits are reduced by decreasing import of fossil fuel by electrification of transportation, value addition in agricultural sector is substantially increased by energizing it, agricultural cropping intensity is increased by irrigating even in dry season with the help of electricity, farmers are enriched by setting up cold stores such that they can sell their produce in off season, etc.

The political parties are even playing one-up-man-ship in fixing target for hydropower. Nepali Congress, in their manifesto, stated that they will build 5,000 MW in 10 years whereas the CPN (UML)'s manifesto was silent in this respect. The UCPN (Maoists) stated that they aimed to achieve 10,000 MW in 10 years. The current coalition government led by UML too had to say something in this respect. So they came up with the slogan of building 25,000 MW in 20 years, which is nothing more than shallow talk. We do not have necessary feasibility studies for implementing 25,000 MW in that time frame. Moreover, the current government has also failed to appreciate the fact that exporting energy to India will not solve the problem of energy crisis in Nepal, nor will it help us achieve accelerated economic growth. If we export power to India, industrialization and employment generation will take place in India and the forward linkaged benefits too will accrue to India. Therefore, present crop of leadership is unaware as to what the problem is, what is its solution is and how to solve it.

All the ministers have been and are in a hurry to build the hydropower projects irrespective of whether such projects will solve Nepal’s problems or not; or whether these benefit Nepal or not. There are a few people like me who are saying that building export oriented projects will not solve Nepal’s electricity crisis. We are not opposing these projects because we don't want them to be built; it is because they do not benefit our country and we want to ensure that these are built in Nepal’s interest. Most ministers, on the other hand, only care about commission and enriching themselves.

In this context, we also need to look at positive and negative externalities in the context of a storage project. Especially, the Budi Gandaki storage project which the current government has included in the Budget Ordinance. This project is situated in such a convenient location that necessary infrastructure like access road already exists. Building a storage project means inundation of land and displacement of people, which are negative externalities. But by building that project we can also get peak-in power; no spill of power involved. We can store water throughout the year in the reservoir and use it to generate electricity when necessary. Another positive externality of that project is availability of augmented flow of water during dry season which can be used to increase cropping intensity in the lower riparian areas to more than 3 crops in a year thereby increasing agricultural production and productivity.

If we were to look at the extant scenario in Nepal, although people say Nepal is rich in water resources, I disagree. Nepal is rich in flood for four months and drought for eight months. Some people (about one quarter of the population) have taps from which no water flows. Most don’t even have taps. By building a storage project, you will be storing water during the rainy season, thereby controlling the flood downstream – another positive externality. As water is stored in the rainy season and is released in controlled manner in the dry season, that water can be used for irrigation as well. Therefore, flood control and regulated flow of water during dry season are two positive externalities of storage project which helps to enhance the cropping intensity.

If we look at Terai region closely, they cultivate only one crop in a year as they do not have access to water for irrigation in the dry season (8 months). If we build storage project, the farmer can cultivate more than one crop in a year making them rich. By extension, the children of the farmers who had gone abroad can return back home. But the leadership has failed to conceive Budi Gandaki in this manner. They are just planning to build it as a hydropower project and send the augmented flow down to India as windfall gain for her. I strongly oppose that idea. Budi Gandaki should be built as a multi-purpose project from which electricity should be used in the peak time and regulated/augmented flow of water should be used in the Terai for irrigation in dry season. The same mistake has been committed in the case of Naumure project for which Prachanda reportedly reached an understanding with India while he was the prime minister. This project too should be built as a multipurpose project so that more than 75,000 hector land can be irrigated in Kapilvastu and neighboring districts.

There is no immediate solution for load shedding in Nepal, though it can be reduced by increased use of compact florescent lamps and by controlling and reducing leakage. There are two types of leakages: technical and non-technical leakage. The non-technical leakages are pilferage by the consumers. Controlling that is impossible for lack of law and order and rampant impunity. However, the technical leakages can be controlled to an extent. Even in advanced countries the technical leakage is about 5-6 per cent and in Nepal it is around 10-11 per cent. We can try to bring it down to 6-7 per cent. This is actually a good idea because it costs 100 million Nepali rupees to add 1 MW to the system but you can reduce technical leakage equal to 1 MW with an investment of less than 20-30 million rupees. But the problem here is due to corruption. They receive more commission by building 1 MW rather than preventing the leakage of 1 MW. Therefore, they opt to build hydropower projects rather than controlling the technical leakage.

They also build the projects in such a way that the cost overrun and time overrun renders a project a huge liability for the country rather than an asset. For instance, the Middle Marsyngadi project was estimated to cost 13 billion rupees for 70 MW power but they have already paid out 26 billion rupees to the contractors and there are still pending claims. In my reckoning the project has already cost the nation 50 billion rupees if one were to include increased cost due to additional interest during construction due to time overrun, loss of revenue etc., which is enough to build a 500 MW project. This is the saddest part of the story. The country has wasted 50 billion rupees to build just 70 MW, most of it in corruption. What aggravates the matter is the fact this will exert undue upward pressure on retail tariff which is already highest in the world if one were to compare it on the basis of purchasing power parity.
Ratna Sansar Shrestha

Based on the interview taken by and published in Greatway Magazine Vol. 2, Issue 4 (Magh 2067).

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