 PICS: KUNDA DIXIT |
The dark cities, long queues of cars and motorcycles at gas stations, locals commandeering LPG delivery trucks contrast sharply with the political wrangling over power, the peace process and constitution. The economy is a wreck, and investors have crossed the tipping point.
OIL
The petroleum shortage is due to the state-owned Nepal Oil Corporation (NOC) not paying its bills to Indian Oil. NOC's monthly losses are a staggering Rs 1.2 billion despite the increase in fuel prices last month.
"The bottom line is that the selling price is way below the buying price," says Mukunda Dhungel of NOC. The utility loses Rs 14 for every litre of diesel it sells, Rs 454 per LPG cylinder and Rs 3 per litre of kerosene. It makes a small margin on sale of petrol and aviation fuel, but five times more diesel is consumed than petrol.
In the past five years, crude oil prices have roughly tripled from around $30 per barrel to around US$110. The supply chain has also been disrupted because of a gas and fuel crisis in India as well.
The figures just keep getting worse: Nepal's diesel consumption has grown three-fold in the past five years mainly because of the electricity shortage. Nepal's fuel bill grew by 36 per cent last year to Rs 80 billion, and that was Rs 10 billion more than all our exports put together.
The government buckled under student protests last month and offered a 33 per cent subsidy to students and 'poor people' on petroleum products. No one knows what constitutes 'poor' and how to organise the distribution of subsidised fuel.
A cabinet meeting last week decided to release Rs 2 billion to NOC to clear its bills with Indian Oil. But that money hasn't yet reached NOC, besides it owes the Indians Rs 4.5 billion.
ELECTRICITY
If you thought the petroleum scenario was scary, the electricity crisis is worse. Even the chief of general services at Nepal Electricity Authority (NEA), Gosai KC throws up her hands in despair: "I will not live to see load-shedding free day in my life time."
No power has been added to the national grid for the past two years, even though demand has grown 20 per cent in that time. Five hydro projects are expected to start operation in the next five months, but they will add only 40 MW to the grid when the winter shortfall is over 700 MW.
"After we produce enough to meet present demand, we need generation capacity to grow at 100MW per year," says NEA board member Krishna Prasad Dulal. "But lack of planning and poor execution has landed us in the present situation."
The government is trying to encourage investors into hydropower. Nepal Rastra Bank has made it mandatory for commercial banks to make 10 percent of their total lending to the agriculture and energy sectors within the next three years.
The cabinet last week endorsed a 10-point work plan to reduce power rationing, offering a 30 per cent increase in the PPA rate for ongoing and new hydro projects from domestic investors. The new rate is set at Rs 4.80 during monsoon and Rs 8.40 during winter per unit.
"The work plan has addressed our demand but it would be better if it could also include projects which are already operational," says Subarna Das Shrestha of the Independent Power Producers Association of Nepal (IPPAN). "We want the government to implement it, we will do our part."
Then there are the so-called Super Six projects that total 190 MW which are expected to gain momentum after this agreement. NEA itself has another five big projects (including Upper Tamakosi and Chilime) totalling 840 MW to be completed by 2017. By that time, Nepal will have surplus power during the rainy season but there will still be a shortage in the dry season because demand will also grow.
"Load shedding will remain well beyond 2017," explains Sher Singh Bhat of NEA, "we need at least 4,000 MW of run-off-river projects or a 1,000 MW reservoir project to end power cuts."
But local opposition, extortion, labour militancy have all delayed existing projects, including the construction of critical transmission lines.
Sunil B Malla at the Water and Energy Commission Secretariat paints an apocalyptic picture: "The economy will collapse when power cuts reach 18 hour coupled with fuel shortage."
SCARY FIGURES 
Total installed capacity: 700MW
Power generation in winter: 300MW
Power demand in winter: 1,100MW
Demand growth: 10 per cent per year (100 MW)
To be added by September 2012: 40MW
To be added by 2017: 850MW
TOTAL ENERGY
Nepalis consume 410,000 million gigajoules of energy every year (equivalent to 9.3 million tons of oil, or 15,000MW of electricity)
Petroleum products make up 10 %
Electricity 2%
Biomass (firewood, dung) 78%
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