Nepal faces a power deficit of 200MW during peak hours in the dry season. The total installed capacity of 648MW is misleading because most hydroelectric plants in Nepal generate electricity to their full capacity only during the monsoon.

Power demand is highest when the generation is lowest in winter. There are no reservoir projects to store monsoon water to generate power in the dry season, hence the mismatch between demand and supply. Expect electricity rationing at least till 2014.

The rising demand for power has attracted dozens of domestic and foreign private investors who have already acquired licenses but are being hampered by local obstruction. Even so, several small scale projects are already in the construction phase.

The Nepal Electricity Authority (NEA) alone has five projects with total installed capacity of 560 MW in the pipeline. The private sector has 17 projects with total installed capacity of 112 MW at various stages of construction (see box). If current roadblocks are removed, most projects can be completed within five years. Another 27 projects totaling 1,093MW are waiting to start construction.

The critical factor is for the government to remove bureaucratic and financial hurdles and to address local opposition in its prestige projects like Upper Tama Kosi, Chamelia, Kulekhani III, Senjen and Upper Trishuli. Although private investors have appreciated the troubleshooting approach taken by new Energy Minister Gokarna Bista (see interview, below), they acknowledge he has his work cut out.

"Only by changing the work culture of the NEA will it be able to attract more investments in hydropower," says Subarnadas Shrestha of the Independent Power Producers Association (IPPAN). NEA is the sole authority for transmission and distribution and most generation, but has amassed an accumulated loss of Rs 30 billion. Private investors are skeptical that NEA can ensure timely payment for the electricity they supply to the grid in future.

It seems even Minister Bista has given up on NEA ever being reformed, and has proposed an Electricity Development Board. But experts say that unless there is change in the way institutions are run, nothing is going to work. There has been little change in electricity tariff in the past 10 years. NEA buys costly dollar-denominated electricity from private producers but has to subsidise the tarriff bearing a loss of Rs 2.5 for every unit it sells.

If NEA offers an attractive price to private producers and revises distribution tariff, it can gradually make up for the losses incurred. But if it can't for political reasons, experts say it ought to hand over transmission and distribution to the private sector as well.

The government could also entice the financial sector to invest in hydropower. But under current rules an investor has to make the rounds of nine ministries and 35 departments. At best, it takes 88 days to complete Power Purchasing Agreement (PPA). Sometimes a project is faced with retroactive regulations half way through the process.

NC leader Gagan Thapa who heads the taskforce that is preparing a report on Water Resource Development under CA's Committee on Natural Resource says, "If only we pass two resolutions stuck in the parliament, we can ensure effective generation, transmission, distribution and tariff regulation." (See overleaf)

Nepal's private sector is capable of producing more than enough electricity the country needs into the future. But in order to harness this capability, the government must first make changes in regulations that work at cross purposes and correct contradictory policies. The private sector is convinced that with better pricing and fast-tracked bureaucracy at least 1700MW can be generated in the next seven years.

Nepal's energy crisis is sum total of corruption, mismanagement and politicisation of NEA and its lack of accountability. Successive prime ministers and home ministers have abused the NEA's resources and other officials use it as a cash cow. Up to 20 per cent of power is lost through leakage, mostly stolen. Political patronage ensures that thieves and those involved in kickbacks and mismanagement walk scot free.

If the government is serious about addressing the energy crisis, he first steps is the de-politicisation of NEA and its better management. Then, if it can only ensure a stable policy and keep politics out of the power sector there will be no power cuts after 2015. If not, load shedding is here to stay into the 2020s.

Read also:
The urgency of the energy emergency, EDITORIAL
"Things will change"
Electric future, GAGAN THAPA
An end to power cuts is not just desirable, it is possible

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