Nepali Times
My Two Paisa
In the dark



Last week, Nepal Rastra Bank announced refinancing facilities for hydropower projects of up to 25 MW, under which the central bank agreed to provide banks and financial institutions credit at an interest rate of 6.5 per cent.

The institutions will have to re-lend the amount at interest rate not more than 10 per cent to hydropower investors. For this facility, the banks have been sent a directive to approach the central bank with loan demands placed by such developers.

This is a positive move on the central bank's side to provide relief to the ailing industry, hit by soaring costs. The fixed tariff rates in the power purchase agreement and ever increasing cost of funds have been troubling hydropower project developers and investors. Projects that had begun working at eight per cent interest rate were forced to pay even up to 15 per cent.

Twenty-eight hydropower projects promoted by the private sector had turned to the government, seeking relief measures. Many of them were in such financial distress that they were unable to pay the interest, let alone the principal amount of their loans. Projects, including Tama Kosi, Modi and Mai Khola, had formally applied to the Ministry of Energy to be declared 'sick' and to be provided relief packages such as relaxation in bank rates.

The response from the central bank has been received well, but this move is perhaps too little too late to fix the crisis. First of all, the facility has been provided for only six months, which is too short compared to the gestation period of hydropower projects. Hydropower developers argue that a special provision has to be made which will increase the time frame to at least three years.

Secondly, the central bank has provided an interest spread of 3.5 per cent to encourage financial institutions to invest in the sector, fixing the ceiling for interest rate at 10 per cent. Considering the need of the hour, the interest spread is perhaps too high. The financial sector has experienced a surge in liquidity and the overall interest rate has slightly decreased. In the last five months, commercial banks alone have collected an additional Rs 56 billion, but only Rs 21 billion have been invested in this period. Instead of hoarding this money, the banks should inject it into the market. In this scenario the interest rate for hydro developers can be lowered to less than 10 per cent.

The government could also ease the private hydro developers through external soft loans, as in the case of Trisuli 3A which is funded through a loan from China Exim Bank at the rate of just 1.5 per cent, payable in 20 years.

There are other ways to cut down the cost of hydro power developers. VAT is still levied on construction of the project, which increases the cost by 13 per cent. The Nepal Electricity Authority charges penalties to projects that supply less than the quoted range of electricity, even when the decrease is caused by natural decline in the water flow in the river. These charges can be eased. Instead, the government could charge income tax, which is waived right now, after the project starts earning.

The domestic demand for electricity has crossed 1,000MW, and the country has installed capacity of 70 per cent of the demand. During winter, these plants generate only a third of their capacity. As we head to daily 17 hours of power cuts, investing in hydro projects and easing hurdles of the developers should be top priority if we want to shed our load-shedding hours. Otherwise we will still be in the dark 10 years from now.

See also:
No light at the end of the tunnel, DEWAN RAI and RUBEENA MAHATO
The bad news is that the power crisis will get worse before it gets better

Read also:
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"We are now building capacity"

1. Kalpana Shresha

There is no surprise here ! What can you expect from the idiots that have governed Nepal at least between 1990 and 2011.  Equal balme goes to foreign donors and advisers in Kathmandu for they also failed miserably to put a concrete plan forward. But then again, all these people do not have to be part of the load shedding. Maybe that is why they do not care. Lets cut the power supply to PM's residence, Prachnada the Fearsome's residence. Lets cut the power to the residence of Indian and American and British Ambassadors. They are people just like me and you, if you cut them they will bleed just like you and me. Its disgusting. Its a shame to say I am from Nepal. The people are eually to blame. They just put up with all the crap. Nepal should be exporting power to India and making millions and millions of dollars. Instead Nepalis endure 17 hrs power cut. What are you going to do, people of Nepal, are you not tired of living in the dark. O M G, its time to wake up and smell the coffee.    

2. Janardan Sharma
This is totaly unacceptable. We demand and deserve clean drinking water and electricity. Its the job of the government to provide this service. Why are we paying taxes. We need to whip the people in leadership for using and abusing us. 100 lashes for all those guilty and corrupt who ever they may be. The ministers, political leaders they all should be held accountable. In case any one remembers, these people in position are known as " PUBLIC SERVANTS." Now all Nepalis should know the status of a servant.  Enough is enough. Its time for people to take action. If all govt agencies are corrupt, then let the honest public hold a hearing and punish these bastards.  I can bet that if we break the hands that steal from us, they will think twice about the never ending impunity. You know, if we go after all the black money of the politicians, we will have enough to pay for power stations. Think about that for a moment.          

3. Pravhakar Dongol
Here we go again. Round and round and round. Same problem every time and every year. Why are not the Nepali public / Nepali people fed up and disgusted with the govt. leadership. Why are the Nepali people so weak that they cannot stand up for the basic rights of water, electricity, security, education, Constitution, dignity and rule of law. Hydro power in Nepal should be like oil in the Middle East. Just look at the prevailing conditions - the govt has no ethics and is comprised of corrupt individuals who are looters of Nepali wealth, the Army is corrupt so is the Police, even the Judges are corrupt. Law Minister Gupta has a list of the judges, why does he not just publish that, after all they are gulity of corruption. So the thing left is for the people in general to revolt. Lets have another revolt. Its not only Prachnda or Bauram that can revolt. There must be other sons of Nepal that love Nepal more than these thugs. One thing is for sure, its time to act and act now.            

4. Bikash Pradhan
Unacceptable ! Disgusting ! Shameful ! 17 hours of power outage sucks. Let the leaders and people in power and position share this burden. Does the NEA have the guts to cut power where Bauram and Prachnda and Jhala Nath and Madhav Nepal and Deuba live. Does NEA have the gust to cut power at Indian or other Embassies. Where is the past minister Bista. We need you Mr Bista.  Do someting heroic, help your brothers and sister who will suffer this outrage of load shedding. God gave Nepal the Himalayan Ranges and Nepalis have no water to drink or electericity for light.  What a cruel joke is this????  If we must have power outage then let all suffer eually.      

5. Kale Dai
The interest spread should be just 0.5 % only like in the World Bank or asian Bank as service charge.
 The spread in borrowing and deposit also must be regulated to 2.0 5 only.
Banks are charging too much and making exorbitent profit and making too much perks and profits from the money of the poor depositors at their cost.

(11 JAN 2013 - 17 JAN 2013)