Monday, January 30, 2012

RE: [NNSD] Tax on fuels: The cause of high inflation and energy crisis?

January 28, 2012
Dilli jee

Thank you so much for coming up with an important perspective. Whether handled by public sector or private sector, Nepal cannot be immune from the impact of increasing prices, compounded by appreciating hard currency. On top of this we also shouldn’t forget that use of fossil fuel entails pollution; indoor pollution by LPG (even a number of deaths have been reported due to LPG water heater ascribed to carbon monoxide emitted by it) and outdoor pollution by tail pipe emission which causes respiratory and other diseases (we cannot forget its global warming potential too).

Therefore, the ideal course for Nepal is to liberate itself from fossil fuel dependency by using electricity to displace it as much as is possible for example by electrifying transportation. The government has put so called fast track to Terai at top of its list. However, if electric train is built instead, by one estimate, Nepal’s dependency could be reduced by 120,000 kilo liter/year which is bound to increase every year. This will not only help reduce NOC’s loss, but also reduce balance of trade deficit and balance of payment deficit significantly.

To sum up, we are suffering due to inherent contradictions. On the one hand failing to see beyond the collective noses, the planners think/pretend that we don’t have electricity market and plan to export power from even most cost effective project (like upper Karnali, the only other country to possess this kind of nature’s gift is Columbia) while perpetuating and even increasing our dependency on fossil fuel by building roads even where a train could be feasible.

The tragic contradiction lies in government talking about trains from Kodari to Kathmandu, Kathmandu to Pokhara, Pokhara to Lumbini, in east-west highway, north south highways, et al. But it has left out the sector where the train system would have been most feasible: Kathmandu to Nijagarh.

An important economics that needs to be remembered in this respect is: energy cost of carrying one ton of freight a distance of one kilometer averages 337 kJ for water, 221 kJ for rail and 2,000 kJ for trucks ( This means even a country with abundant fossil fuel should opt for train with diesel engine rather than trucks and buses. For a country like Nepal electric train is the best. To oversimplify the economics, if the fuel cost of a travel by bus is Rs 2,000, it will be only Rs 221 by diesel train. As it costs about Rs 30 to generate a unit of electricity by diesel, while only around Rs 7 for hydropower, the fuel cost of electric train will be only about Rs 60. The salubrious impact of this on inflation (rather reduction in transportation cost and its consequential impact on cost of living) should impel us to go for electrification of transportation. But the government is refusing to hear this logic and mindlessly tearing apart the hills (inviting many more Das Dhungas and Krishna Bhirs, etc. and also destroying/wrecking the ecology/environment more than necessary) in the name of opening track (electric train will need only about 11 meters) to perpetuate and increase our dependency on fossil fuel even more.

With best regards,


Ratna Sansar Shrestha, FCA
Senior Water Resource Analyst

From: [] On Behalf Of Dilli Ghimire
Sent: Friday, January 27, 2012 4:49
Subject: Re: [NNSD] Tax on fuels: The cause of high inflation and energy crisis?

Dear Arjunjee

Thank you for your calculation . It is very nice and based on actual sitation. But the sutions seem for short period . Petroleum is not our product and we cannot control the international price . Why we do not think to cut demand by increasing the supply of electricity. We talk at the time of supply crisis and stop thinking again. The private sector is also not so sincere in our context. Can we count any price cut dicision of private entity except mobile and certain electronic items.

After all I appreciate your collection of facts that was also published some year before. Let us hope the development of electricity and supply of Malamchi water will bring solution in far future not near.

With regards

Dilli Ghimire

--- On We, 25/1/12, Arjun Dhakal wrote:

From: Arjun Dhakal
Subject: [NNSD] Tax on fuels: The cause of high inflation and energy crisis?
To: "NNSD"
Date: Wednesday, 25 January, 2012, 5:57 AM
Dear all,

We are facing serious energy crisis and high inflation rate. Nights are dark and chilled, and days are unproductive and expensive. One of the major issues is—fuel crisis. Nepal Oil Corporation always argues the regular financial loss and lack of capital for purchase due to the under pricing of fuel. But, interestingly, government has been generation heavy revenue since long time (see the facts list below).

Is there any justification or reason to keep continuing taxing on fuel to create this "emergency situation"? This debate opens space for a sustained and argumentative dialogue to systematically but incrementally improving Nepal’s energy market in coming days. I would highly appreciate your observations and comments in this regard.

Please find below some facts, analysis and potential options for the discussion.



Current fuel crisis: some facts, analysis and potential options


1. 1. Interesting facts and figures (based on NOC data of January 2012)

• Total Government revenue/year: NRs 21 Billion (6.7 billion from Petrol, 11.1 billion from Diesel , 3 billion from LPG and 1.2 billion from other)

• Loss of NOC/year = NRs 10.5 Billion

• Average government tax on fuel= 20 %

• Total payment to IOC by NOC/year= NRs 101 billion [(-)Balance of Payment]

• Without government tax, NOC can sell Petrol (NRs 77.20/L), Diesel (NRs 82.63/L), Kerosene (NRs 80.44/L) and LPG (NRs 1545.74/C) including transportation, management, technical costs and commission to the dealer except interest payment and government tax.

• LPG is still highly subsidized

2. 2.Theoretically, taxes on goods (Indirect tax) are designed on the basis of 3E (equity, efficiency and environment friendly) particularly in luxuries and pollutant goods. However, fossil fuels have become basic goods for all economic groups now and facing serious crisis to fulfill the demand of the population. In the other side, there is no any alternative source available to replace its demand now. Might be, it was a luxury goods and major sources of revenue few decade ago but not now.

3. 3. Impacts of fuel price on other market

•Accelerating the price of necessary food items like rice, vegetable, dal etc. In which, poor and vulnerable households are highly affected due to the increased share of their expenditure in basic goods comparing with high income group people. Simple market observation- if fuel price hikes by 10 percent, market price of necessary goods like rice or vegetable's price go up by 20-25 percent in the name of fuel price increased —it always gives golden opportunity for broker/trader –not the producer and consumer.

•Low impact in price of luxuries goods –motor/car, flat TV, imported whisky, ornaments etc

•Excuse/promotion of black market

4. 4. Potential Measures

• Immediate treatment: Considering fuel as necessary goods, tax/VAT should be removed which creates smooth supply system first  control market price and support economic development

• Short term strategies: Open to private sector in fuel supply to develop competition (no more "Gupta" will be born )

• Long term strategies:

o Maximum production and use of locally produce sustainable energy like hydro

o Change in consumption pattern: Use energy efficient equipments, promote public transportation, low energy consumption house designing etc

o When there will be sufficient alternative energy supply in the market then tax in fossil fuel can be resumed again to control the market and pollution by price

5. 5. Current Actual Price and Market Price in January 2012 (Source: NOC )

Petrol NRs/L Diesel NRs/L Kerosene NRs/L Aviation (Dom) Aviation (international) LPG NRs/C

Actual Buying Price in India in January 69.95 76.86 74.38 69.32 69.32 1301.37

NOC cost* 7.25 5.77 6.06 3.16 3.09 244.37

Possible Selling Price in Jan 2012 77.20 82.63 80.44 72.48 72.41 1545.74

Government Tax/VAT 32.97 14.32 2.04 14.50 0.33 215.29

Actually Selling Price in Kathmandu with profit/loss 115.00 85.00 85.00 105.00 99.63 1500

Gap 37.80 2.37 4.37 32.52 27.22 -45.74

Government Revenue in yearly basis 6.7 billion 11.1 billion 150 million 500 million 275 million 3 billion

* included Transportation, management, technical cost and commission but reduced additional charges for interest payment and government tax.


Arjun Dhakal
Environment and Development Economist
Bhaisepati, Lalitpur, Nepal
Telephone: +977-1-5592949 (R)
Mobile: 9841209328

Friday, January 27, 2012

RE: You are obliged to respond...

January 27, 2012

To: 'paras kharel'

Cc: 'Ratan Bhandari'; 'Keshab Poudel'; 'Dwarika Nath Dhungel'; 'Lila Mani Pokhrel'; 'Ek Raj Bhandari'; 'Kunda Dixit'; 'Ajaya Dixit'; 'Sanjay WECS Dhungel'; 'Dipak Gyawali'; 'Gopal Siwakoti 'Chintan''

Paras jee
I too am amazed that this sort of drivel could come from him. However, I now have no doubt that it could only come from him. As you have recalled his another piece of drivel published in Nagarik, I too remember that where he said:

• Let’s have them first build it, and if it isn’t in our interest we can bring it under our ownership – it has not be possible with Koshi, Gandaki, et al and how will it be possible with new ones?

• The project will come under GoN ownership after license period – he forgets that there is no point in marrying a girl and allow someone else to take her away in the hope that she will be returned in about 25 years (as DipakG has put eloquently several times). Especially as Nepal is starved for power right now as you have correctly pointed out.

• We can buy the power at the price the project is to export at – he seems to be ignorant of an instrument called “power purchase agreement” which is sine qua non for achieving financial closing and once such an instrument is executed the project will be under ironclad arrangement with regards to what is done with the power generated and won’t be able to sell to us even at double price.

• Once the project is built, Nepal will have upper hand – like the way Nepal is having upper hand in Koshi barrage (whose life has already come to an end) which is in effective control of India! He seems to have written that piece too losing sight of the ground reality completely.
I can show to him how off mark he is directly to him. But this will amount to private communication. However, as he brought out the claptrap to the general public, I too want to show him how wrong he is publicly. I am awaiting an opportunity.
This reminds me of another expert who apparently wrote in his book (I have not wasted my hard earned money to buy that book and spent my valuable time to read it) that Nepal’s GDP will equal that of Saudi Arabia if we export power and, unfortunately, he was extensively quoted, including by resident representative of the World Bank. He used to write for NT as well. I finally got an opportunity to write an article in NT mathematically disproving him. I personally forwarded my article to the World Bank RR. But she hasn’t responded as of yet.
All this reminds me of a very dirty (actually obscene) Hindi saying which ends by surmising that “if you look for one you will find thousands of them.” We, unfortunately, seem to have more than thousands of them.
With best regards,


Ratna Sansar Shrestha, FCA
Senior Water Resource Analyst
From: paras kharel []
Sent: Thursday, January 26, 2012 16:03
To: Dipak Gyawali; Gopal Siwakoti 'Chintan'
Cc: Ratan Bhandari; Ratna Sansar Shrestha; Keshab Poudel; Dwarika Nath Dhungel; Lila Mani Pokhrel; Ek Raj Bhandari; Kunda Dixit; Ajaya Dixit; Sanjay WECS Dhungel

Subject: Re: You are obliged to respond...

Dipak ji,

Thanks for sharing the article. I had not read it earlier.

He does not explain how loadshedding can be reduced by exporting hydropower. Why can't these projects be developed for domestic consumption? He has no answer.

This person had advanced a facile argument in one of his pieces in nagarik -- if we are able to consume the electricity produced by west seti, upper karnali, arun iii et al, then we can revoke the agreement to export electricity from these projects. such a childish argument. This argument means that he thinks that there is oversupply of electricity in Nepal. Or, if he does not think so, then why did he keep quiet when the agreement was signed? That would have a more compelling reason to resign (than the reason he cited for actually doing so in a huff later -- with contradictory statements). [By the way, he was finance secretary when salary and allowance were doled out to "missing" ladakus. Strangely, he saw nothing amiss in it warranting his resignation!].

He does not talk of the low export price of hydropower. If India is starving for electricity -- and it is -- it would surely be able to pay more than a meagre Rs 3 per unit.

He fails to mention that not all hydropower projects are alike (even a non-expert on this issue like myself -- a trade economist by training and profession -- knows as much) -- some generate power very cheap, some generate expensive power. The question is: should we not utilize domestically the cheaply produced power? But he does not consider this aspect.
He fails to mention that West Set was an export-oriented project.

As I said, I am no expert on water resources (you and a few others in this mail are), but it is sickening to note that this guy is ridiculing the argument that downstream benefits exist aplenty and that Nepal must get paid for the same merely on the basis of an unpublished WB report -- without looking at the assumptions that you mentioned are flawed. For a person who had declared upon his resignation that he would not seek any post or benefit and instead would resign to a simple life of teaching in a village school, he seems to be pretty pally with WB. he is privy to an unpublished report; means WB trusts him; may be this is a clever way of WB to influence the ostensibly marxist PM! and he goes on to write an article based on that. A powerful way of manufacturing consent. ordinary joes who read newspapers will believe what is says -- most of them, trust me! because ordinary jantas especially nepalis are -- you know what. they will certainly believe him -- more so when he happens to be a person felicitated by nagarik and republica.
What is the expertise of this guy actually? Water resource expert -- no. Economist -- no. Political scientist -- no. Media expert -- no. Management specialist/accountancy specialist -- no. But he writes as if he is an expert on all these areas and more. He is a Nepali expert -- that is someone who has been made an expert by the media. For an average Nepali, thus, Dipak Gyawali or Ajay Dixit or Ratna Sansar Shrestha are NOT water resource experts. For an average Nepali, R Khanal is -- since he has the forum, plain and simple.

There is a pattern here, in his advocacy -- BIPPA is a must (to attract investment), export-oriented hydropower projects should not be disrupted (so that we will be relieved of loadshedding!), and, now, there are little downstream benefits (worth arguing over).

Jai hos!



From: Dipak Gyawali

To: Gopal Siwakoti 'Chintan'

Cc: Ratan Bhandari ; Ratna Sansar Shrestha ; Keshab Poudel ; Dwarika Nath Dhungel ; Lila Mani Pokhrel ; Ek Raj Bhandari ; paras kharel ; Kunda Dixit ; Ajaya Dixit ; Sanjay WECS Dhungel

Sent: Thursday, January 26, 2012 2:46 PM

Subject: You are obliged to respond...

Here is a really idiotic piece of senile writing of an incomparable ignoramus that sees “phoren” and “project” as the only manna from heaven. He is merely advocating from the WB’s recent Ganges Basin Strategic Plan of SAWI that has been rejected by Nepali officials in the water ministry (or what remains of it after the parties have balkanized it). He has no idea of the poor assumptions that have gone into its making by SAWI and the geo-politics inherent in it. Amazing that such a person was even a finance secretary and one who sat on the NEA board. No wonder we have 14 hours of power cuts a day! I am not at all surprised.

Given that he is currently the Maoist PM’s advisor, I think it is incumbent upon you in particular to respond, also because the Kali Gandaki episode that he mis-portrays refers to you.

Jai Hos!



Missing the forest


Water debates in Nepal are invariably full of emotional overtones. Unsurprising then that water sharing and associated infrastructure development under Koshi and Gandak agreements have been subjects of heated political discussions. This is the case not just with the big cross-border projects. Smaller drinking water and irrigation projects at the community level too have resulted in bitter rancor in many places.
Whenever a large storage hydropower development is mooted, the first question that comes up for discussion concerns the downstream benefits and how one should monetize such benefits. But large hydro projects meant exclusively for exports have many components besides downstream benefits. One question raised time and again is why our neighbor should benefit from the hydropower that we produce. It is just like Germans asking why Americans should be riding BMWs that their company produces; but the Germans don’t ask such questions.
The ill-fated West-Seti Hydropower Project brought about a similar, though predictable, debate. Even after 14 years of trying, investors were unable to raise money from the financial markets. Eventually, their license was revoked. At one time, West-Seti appeared to be taking off, although there seemed to be little progress on the ground. Project offices were smashed and some officers beaten up.
There was a flurry of NGO activity around the proposed dam site telling people how bad the project was for the area. With West-Seti gone, no one visits the area and Nepali people continue to live in darkness. Now, local leaders and some people living in the area want the Project to be completed by the government, apparently by Nepal Electricity Authority (NEA).
Some 150 kilometers west of the proposed West-Seti dam site, a hydro project about one-thirtieth the size of West-Seti has been under construction for the last six years. Yet it’s nowhere near completion. It might be another year (or two) for the project starts generating electricity. This is the pace of NEA infrastructure projects. Even if the government were to start the project now (assuming that close to US $2 billion of financing is easily available from friendly countries), a person my age will certainly not get to see it generating electricity in our lifetime.
Likewise, Arun III was aborted 18 years ago just when the construction was about to start. As of today, it’s still uncertain when construction work on the project will begin. Those opposing Arun III for various reasons, purportedly for the country’s good, closed their NGO business no sooner than the World Bank headquarters issued a communiqué stating that it is finally withdrawing its aid commitment to Arun.
Kaligandaki would have gone down the same road if community leaders of Sri Krishna Gandaki VDC of Syangja district had not driven away the Kathmandu-based NGO activists. One can only imagine the situation of load-shedding today if Kaligandaki had gone Arun’s way.
Not just hydropower projects, other large-scale endeavors have had to face similar problems. Take the Melamchi Drinking Water Project. After early hiccups, the World Bank, the project’s major co-financier, was the first to drop out, followed hot on the heels by Swedish Development Agency; the Norwegians too opted out. Asian Development Bank (ADB) kept its promise and stayed the course in spite of continued threats in project site and frequent written complaints by Nepali NGOs to Bank’s Accountability Unit.
According to these NGOs, by pursuing Melamchi Project, ADB was doing great injustice to the people of Melamchi area. Now, it has been 12 years since the ADB first approved the loan to Melamchi. The project is still struggling and the costs incurred due to the inordinate delays will ultimately have to be borne by Nepali people.
As a nation we are yet to develop a consensus on the best use of our enormous water potential. Ironically, we seem to prefer spending long hours every day without electricity. While we are still in a state of confusion, a study commissioned by the World Bank challenges—with evidence—most of the long-held beliefs on Himalayan watershed and river systems. The yet to be made public report has been shared in bits and pieces with a few key people in the region. Here are a few of its highlights.

According to the report, one, high dam in any of the river basins does not reduce flood risk downstream. Two, high dam and the resultant regulated water flow do not add much value to irrigation downstream either. Three, high dams do not control sedimentation. Four, hydropower is most significant benefit that any high dam can provide.
The report graphically shows that none of the worst floods in Bihar were the result of increased water flows in Koshi basin. Upstream water storage, no matter how tall a dam, would not prevent the recurring floods in the plains. There has to be an entirely different strategy for flood management through proper drainage systems, land zoning and most important of all proper early warning system to minimize human tragedy. This is where the cooperation of all the countries in the Ganges basin is necessary. To be precise, if we want to minimize human tragedy then Ganges water cannot just be a bilateral issue.
The report concludes that the annual precipitation in the Ganges basin is about 1,200 billion cubic- meter (BCM), of which Ganges runoff is only 500 BCM. Most of the rainwater seeps into the ground making underground water a viable and cheaper option for irrigation-on-demand in the plains.
Interestingly, most of all possible dams in the Ganges river systems (including the 23 large ones) can hold no more than 18 percent of the annual flow. This is paltry compared to what goes into recharging the underground water. All past debates focused on the likely downstream benefits, but new data indicates that maximum benefits are “under-stream”!
If we are to believe the WB report then hydropower development is the only significant benefit that Ganges water can provide. This is the benefit Nepal is losing out on by allowing drainage in the Bay of Bengal even as we continue to debate the upstream-downstream benefits and whether or not Nepal should export power.
Published on 2012-01-26 01:10:36

Sunday, January 22, 2012

RE: recommendation of private sector regarding hydropower coopreation with india

January 22, 2012
To: 'paras kharel'

Cc: ''; 'Ajaya Dixit'

Paras jee

This is the typical instance of intellectual poverty or even “intellectitute”. What these people have forgotten is the fact that neither Canada nor USA starves its own citizenry of power/energy to export peak or off-peak energy (whatever), which these people are proposing. Should they open their eyes and look beyond their collective noses, it will be difficult for them to miss the fact both of these countries prioritize the domestic need and only the remaining power/energy is exported.

It is amazing to see that they see “win” for Nepal by exporting peak power, while we ourselves are short of peak power. Excellent example of intellectual poverty or “intellectitute".

With best regards,


Ratna Sansar Shrestha, FCA
Senior Water Resource Analyst

From: paras kharel []
Sent: Thursday, January 19, 2012 12:52
To: Ratna Sansar Shrestha;
Subject: recommendation of private sector regarding hydropower coopreation with india

Dear Ratna Sansar ji,

This might be of interest to you. Below is a section of a report by Federation of Nepalese Chambers of Commerce and Industry (FNCCI) -

Confederation Indian Industries (CII) Joint Economic Council (JEC), submitted to GoN ahead of the PM's visit to India in August 2009. The section is on hydropower cooperation, and it talks about Nepal exporting peak power to India and importing off peak power from India. It does not make sense: we are in severe shortage of peak power; that's why even if all the proposed hydropower projects come on stream on time, there will still be load shedding because these are run of the river type, right? But they talk of exporting peak power.


Hydro Power

There is a unique power trade arrangement between Canada and USA. Canada imports energy from USA during daytime to meet its base load, and exports its peak energy to USA. In this way, both countries are in a win-win situation. Canada gets good price for its peak energy. USA also sells its off-peak energy to Canada. Same arrangement can be replicated here in this region of the world. Nepal can import off peak energy from India and export its peak energy to India. India can sell its off peak energy from thermal power plants. Our efforts should be geared towards materializing similar type of arrangement between Nepal and India. The proposed cross border transmission line between Nepal and India, if materialized, will prove to be a glaring example of interdependence between India and Nepal. The beauty of the proposed project is that it will put both countries in a win-win situation. India will sell its day time energy to Nepal (as proposed by PTC India Ltd), and Nepal can sell its peak energy to India.

Wednesday, January 11, 2012

Your article on Presidental system in yesterday's Kantipur

January 11, 2012
Mr Binod K. Chaudhary
Chaudhary Group

Binod jee

Your article in yesterday’s Kantipur is very well articulated. Good job! I fully support your perspective.

I agree with you that there has to be full segregation between legislature and executive – MPs shouldn’t become ministers and ministers can’t be MPs.

Actually, in my considered opinion, one can easily find the root of corruption in politicos heavily investing in elections to become MPs with the sole intention of becoming ministers to recover “investment,” many times over. Therefore, I too have been advocating for an “apolitical” cabinet, not only for stability but to root out corruption, since a long time. My article on this vein was published in Nepali Times (#310) on August 11, 2006 and I have uploaded it in my website ( which you can peruse by clicking the link below:

Similarly, Kantipur also published another article of mine on 29th Bhadra 2063 on this very issue which also I have uploaded in my website. You can peruse this article too by clicking following link:

With best regards,


Ratna Sansar Shrestha, FCA
Senior Water Resource Analyst