Friday, July 25, 2014

Developing Megawatts to Brighten Nepali Future

Anil Shah
Mega Bank

Anil jee

As a banker you should know that Nepal isn't fully dependent on foreign financing. One significant example is IFC's plan to float bond in Nepal for Rs 50 billion. Huge potential for raising fund exists in remittances too, which has hardly been tapped. It is not to preclude FDI, though.

Secondly you have jumped to the conclusion that we need to “sell”, implying export, electricity. You should have first consulted those who know how much power Nepal needs. My calculation shows that Nepal needs 5,200 MW right now to meet latent demands in various sectors. 60% people don't have access to power from grid and then there is challenge to reduce load shedding suffered by 40% who have access to grid - additional 1,500 MW is required for this purpose. A number of industrial corridors in Nepal require another 1,000 MW (to increase capacity usage from below 50% to a decent level and to allow new industries to be established), which is the reason behind failure of banks to use excess liquidity. Just to displace LPG from urban, suburban and peri-urban areas we need another 1,000 MW. If we start electrification of transportation, we will need another 500 MW. Where is the "power" to export? I am not against export of power per se, especially since it is not possible to store or is prohibitively costly to do so. Only after Nepal using power in this quantum she can rise above suppressed economic growth scenario obtaining now to normal economic growth scenario. My projection shows that in 5 years’ time Nepal will need about 10,000 MW to maintain normal economic growth rate. I don’t want to waste my time talking of power need for accelerated economic growth.

You are absolutely wrong that we suffer frm inferiority complex – I cannot speak about you in this context, though. Those of us who are holding a discourse on the subject aren’t doing so because we suffer from inferiority complex; rather we wish to ensure that we don’t get cheated once more like in Koshi, Gandak, Tanakpur, Mahakali, et al treaties. If people contemplate a little in-depth it is Nepal’s fault that Nepal got cheated – Indian patriots did what a patriotic Indian would do in the best interest of India. Similarly, Narendra “Bhai” Modi is also going to do the same. On the contrary in Nepal we have many people who proclaim their patriotism from the rooftops, go about waving flag at a drop of hat but are ready to sign on dotted lines even without understanding manifestations and ramifications of the document that is being put forward for signature. The current draft is one which if signed will cause a number of our future generations to curse us – this generation – for failing to do necessary “due diligence” (to borrow a banking term). Of course, this wouldn’t apply to those whose children have already abandoned Nepal.

Water and petroleum cannot be compared till we are able to sell water as Sheikhs sell petroleum. And that is the crux of the issue. If the current draft is signed India will get valuable lean season augmented flow of water free of cost while Nepal will suffer from negative externalities like in Koshi and Gandak projects. This is not an opportunity at all, but a trap under which Nepal would lose internationally recognized “absolute territorial sovereignty” (also know as Harmon doctrine) over her famed 6,000 rivers.

There is an inherent contradiction in your statement about “unprecedented gegawatts of electricity lighting up the future of our nation”. How can such electricity light up future of our nation when the electricity will be exported? This is a clear disconnect. If you mean lighting up India then I would have to, grudgingly, agree with you. The main problem Nepal is facing is that Nepali citizens feel more patriotic towards India and I would like to trust that you aren’t one of them.

Finally you must have learnt that 3 parties have decided against signing current draft, although you wanted Nepal to sign it right away without much discussion.

Wish you a successful foreign trip.
With best regards,


Ratna Sansar Shrestha, fca
Senior Water Resource Analyst

1 comment:

Santosh Thapa said...

Dear Sir, I admire your work and I must say that I have learned from your articles a lot. After reading this post, I would like to point out some bitter truths which may contradict your statements in this post. Please don't take my opinions otherwise. I am just a Nepali citizen like you who want to make this country a better place to live in. Below are some bitter truths:-

1) Almost 50 years have gone by since we first discovered the hydro potential of 83 thousands MW. But less than 1000 MW has been harnessed so far. A stark reality. First of all, we should know where we are standing.

2) The total deposit collection of banking sector is not more than US $ 2 billion. And it will be totally foolish to think that all the money will be invested in hydro. With exposure limit, how on earth we can construct projects through internal fund only? More than that the biggest challenge is to raise required equity for the project. You and i know this very well.

3) Tapping remittance for hydro development seems irrelevant to me. How can average of Rs. 15-20 thousands (per worker) sent be used for hydropower when he/she has three to five hungry mouths to feed in back home?

4) I see big challenges for IFC. Whether NRs 50 billion is going to be subscribed or not is questionable itself? Time will tell. My logic says that the coupon rate will be as low as 2 percent. Or maybe less.

5) IFC encourages foreign investors. It tends to disburse loan to foreign investors. You can say that BPC managed loan from IFC for kabeli. But I think it has to do a lot with the foreign company who is going take the majority. So if you want IFC to invest in your project, tie up with foreign investors. Looks like mandatory to me.

6) Anyways I am against the idea of IFC in hydropower. What is the point of investing IFC's money in the projects where cost is around 28-29 crore per MW? Its so called international standard/due diligence, international consultant and so on simply adds the cost. In simple words, whenever these kind of organisations (like IFC) are involved the investment amount looks pretty high but the end result (actual electricity generation) is damn low.

7) Finally I think we should welcome the proposal forwarded by Indians. Of course, we should negotiate to protect our national interest like fulfilling internal demand first, benefit sharing and so on.

To sum up, we have already wasted so many decades. It was Dr. Hari Man Shrestha who discovered that Nepal’s hydro potential during his PhD research at Moscow Power Institute; USSR in 1966 A.D. Nepalese finally saw light at the end of the tunnel and hoped that the generation of energy will lead towards prosperity. After so many decades passed by, we are still generating less than 1000 MW. This is a stark reality. We did nothing in this 50 years time. Now it’s time to wake up and get things materialized. Otherwise, another 50 years will pass by without any progress.

Nepal has a lot of opportunities besides hydro. There is a huge prospect for tourism industry. Likewise, agro business is promising. Nepal is one of the few countries where you can grow mango and apple trees within less than 50 km stretch. Our rugged topography offers a lot of opportunities. Now it’s time for our politicians, policy makers and energy experts like you to act wisely to create our hydro resource a “reliable cash cow”