Excerpts from an interview with Bishnu Bam Malla, Managing Director, Nepal Electricity Authority

You say the government has to introduce policy changes to develop hydropower in Nepal. What are these?
We cannot use all the power we generate by ourselves. To maximise the power consumption, the government should make sure that industrialisation takes place on a large scale, and excess electricity can also be sold to other countries. India produces 100,000 megawatts of electricity, Bangladesh produces 6,000 megawatts. We produce only 300-400 megawatts. We should think of producing 20-22,000 megawatts and start exporting it. Electricity has to be generated at a very low cost, and this needs a policy change to make that happen.

How can that be done, there is the debate of big and small projects. What is the way to go?
Projects, whether small or big, can be attractive, feasible and cheap-they can also be very expensive. They need to be selected very carefully. The Rolwaling project under construction is very cheap. The Upper Karnali project is also cheap, as are the Upper Trisuli and Dudh Kosi. The Middle Marsyangdi, the Kali Gandaki and the Modi will generate electricity at the cost of four cents per kilowatt. Electricity from IPP projects cost about seven cents per kilowatt.

It is said foreign investment in power is driving up the cost of electricity used by households. Is it true?
Load-shedding became a compulsion after they scrapped Arun III. Independent power producers moved in at this time. Bhote Kosi happened because of independent producers, and load-shedding was reduced. In a sense this was the right move, but you had to pay in dollars under the Power Purchase Agreement (PPA) for electricity that was generated in this country. Our load factor right now is 50-55 percent. We cannot ask our consumers to waste electricity. But since we have PPAs with IPPs, we have to pay them. Our peak load is between 5PM to 11PM or midnight. The load is almost nil after this, so we have installed "time of day" meters-which means that after 11PM, the cost of electricity goes down by almost 50 percent.

When was such a self-destructive agreement signed? By whom?
The Khimti agreement was reached during the tenure of Laxman Ghimire-in 1993/94. The project was completed when the UML was in power. Later, Pashupati Sumshere became the water resources minister and did a review of the PPA and approved it. The Bhote Kosi was approved by the UML government when Hari Pandey was minister.

Why is the price of electricity rising so fast?
It is mainly because we have to buy our own production and pay in dollars. When the Khimti and Bhote Kosi agreements were signed, the exchange rate was about $1:Rs 49. Now it is around $1:Rs 73 (it is more now)-the rupee is depreciating against the dollar every year. We have to pay in dollars and we also have to pay royalties for Khimti-around Rs 5.50 per unit. Add to all this, loss in distribution and transactions, and the end result is that a unit of electricity costs almost Rs 7.50.

It is said the Kali Gandaki is likely to overshoot its budget and won't be completed on time.
The media has written a lot about the possibility. It is better to go out there and see for yourself. Kali Gandaki is the biggest project in the country, it will generate 144 megawatts. The main factors causing the delay are geological. An entire mountain had to be removed, expenditure increased by Rs 1 billion. Still, Kali Gandaki is a feasible, cheap project. It was estimated to cost $428 million, but we contracted it for only $300 million. We have spent $360 million so far, which is still lower than the estimated costs.