‘Special state provisions a must to address power crisis’ - Karki

‘Special state provisions a must to address power crisis’
eKantipur.com, 4-Mar-07

Arjun Kumar Karki, 44, was appointed Managing Director of Nepal Electricity Authority (NEA) in July 2006. Karki's appointment came at a time when the state electricity utility was recording its biggest operational losses ever and the nation's electricity demand was on the verge of overtaking its total installed capacity. Heir to an unenviable legacy of a utility that generates annual revenue of Rs 12 billion and yet faces a net loss of nearly Rs 2.5 billion, Karki has, in his seven months as NEA chief, seen six projects planned for selling power in the domestic market, reach close to financial closure. A proponent equally of demand management and speedy construction of new projects, Karki stresses that considering the severity of power crisis the nation is facing, some projects should be allowed to enter construction immediately without requiring them to go through the lengthy pre-construction formalities. Post's Puran P Bista and Bikash Sangraula caught up with Karki at his office to inquire on how he plans to steer the country out of a power crisis that threatens to stay for years and erode prospects of an economic growth that the country desperately needs after a decade of insurgency.

Excerpts:

For how long will the country have to face load-shedding?

If we are able to successfully execute the work plan we have, then load-shedding hours will start going down from the dry season of 2008 and disappear from 2010. In order to make our work plan successful, we need the help of all stakeholders.

What is your work plan?

First, demand management and reduction of avoidable losses in the system. Second, we are working to import additional 50 megawatts from India next dry season to ensure that we don't face load-shedding worse than what we have been facing this dry season. Third, we are working to have two high-voltage Nepal-India transmission links ready by the dry season of 2008, after which we can import bulk power from India to reduce load-shedding in Nepal. Fourth, NEA is starting construction of six projects with a target to complete some of them in 2010, others in 2011, and rest in 2012. The projects are the 309 megawatt Upper Tamakoshi, 61 megawatt Upper Trishuli A, 40 megawatt Upper Trishuli B, 30 megawatt Chameliagadh, 27 megawatt Raghughat, and 14 megawatt Kulekhani III. With some of these projects starting generation in 2010 and 2011, we will be in a position to have round-the-clock power supply even by discontinuing power import from India, in 2011.

Observers say that the high-voltage Nepal-India transmission links are meant more for power export to India in the future from Arun III, Upper Karnali and Budhi Gandaki projects that are soon being awarded to private producers, than for allowing Nepal to import power from India to address the chronic power shortage here. How right are they?

Let's be clear on this. Our ultimate objective behind building the high-voltage transmission links is to export power to India. But in the short run, the transmission links will allow us to purchase power from India. At the moment, we are facing a more serious power crisis than they are. Fortunately, power is commercially available in the Indian market. For the next four years, we must utilize this option, after which we will have new projects ready to supply power to the national grid, and others for export to India. It is owing to this long-term objective that we are planning to build 400 kilovolt links rather than 220 kilovolt links. For immediate use, we can charge the transmission link to only 220 kilovolt, and later to higher kilovolts as demanded.

About the six projects that NEA is looking ahead to build, you have been saying that most of them already have funding commitments. So, what is stopping NEA from immediately going ahead with them? We can't afford delays, can we?

Let me make something clear. If we follow all the existing provisions, the transmission links will not be in place by 2008. Similarly, if we follow all existing requirements, construction of Upper Trishuli A, Upper Trishuli B and Raghughat may not commence or be completed according to our schedule. Unlike the other three projects NEA plans to build, the environmental impact assessments of the projects, I just mentioned, have not been conducted so far.

The country is facing a serious power crisis. If our work plan does not move ahead according to schedule, the crisis will deepen. Therefore, the government should allow us to build these three projects and simultaneously conduct environmental impact assessment, rather than the former following the latter. We are proposing to the government, through the Ministry of Water Resources, to allow us do this. The country faces a special situation with regard to power availability. Therefore, we require special provisions to deal with this.

It is being said that Upper Tamakoshi will most likely be the sacrificial lamb of our unique kind of nationalism. Is it not better to build the project quickly with foreign money than build it years later with internal funds? After all, delay means extra cost.

I think we have not been able to clearly explain our position on Upper Tamakoshi. There is no conflict on whose money funds the project. We are only saying that NEA should own the project. Upper Tamakoshi is such a beautiful project that it can do wonders to NEA's financial health. It is true that we are trying to mobilize internal funds to build the project. But this is not because we are against foreign funds. The reason, rather, is that if we ask for loan from foreign financial institutions, they will seek sovereign guarantee, which the government cannot give going by existing provisions. However, the financial institutions in the country understand the gravity of power crisis and will take the offer for financing the project more seriously. NEA has a property of 80 billion rupees and its annual cash flow is about four billion rupees. The country's financial institutions know this and are more likely to invest. That is why we are after mobilizing internal funds. But we are not dead against foreign funds.

We have been talking to Employees' Provident Fund (EPF) for funding Upper Tamakoshi. There have been positive developments. In two weeks, we should be able to reach an agreement with them. We are ready to provide shares to EPF's depositors and also to residents of Dolakha district where the project will be built. Having shareholders from Dolakha will ensure that Upper Tamakoshi does not face local problems that Melamchi or Middle Marsyangdi has faced.

If we are not able to reach an agreement with EPF in two weeks, we will seek foreign funding. We want to begin construction of the project by 2008 end, by which time the under-construction access road will be ready. We plan to complete the project by 2011 end or early 2012.

What about demand side management? You told this daily some time back that NEA is starting a campaign to make consumers switch from incandescent bulbs to compact fluorescent lamps that use 80 percent less energy for the same illumination. Whither the campaign?

We are talking to business houses. Compact fluorescent lamps are costly. Consumers may not be willing to switch to them due to the cost factor. So we are trying to work out a mechanism which will allow NEA pay the supplier, in monthly installments, from savings of monthly bills paid by the consumers. We have asked the Ministry of Water Resources to request the Ministry of Finance to waive off the 15 percent customs on these lamps, so that they become less costly. However, demand side management will only alleviate the power crisis and not solve it. Eventually, we must inject power into our system. There is no alternative to building new projects.

What is NEA doing to bring down its losses of 24 percent?

Losses are happening in three ways. First is theft by our consumers. Second is unauthorized hooking, and third is discontinuation of meter reading and tariff collection during the conflict. We are working to address with all these factors. Currently, Terai unrest has hampered our efforts.

What is the progress in awarding projects to foreign companies for power export? You are a member of the taskforce formed by the Ministry of Water Resources for this purpose.

The taskforce has already submitted its evaluation criteria, including royalties to Nepal and financial as well as technical capabilities of parties interested to build Arun III, Upper Karnali and Budhi Gandaki. We have received relevant documents from interested parties for facilitating evaluation. The taskforce should be able to submit its recommendations to the government in two weeks.

Is there a possibility that these projects might be ready before the projects NEA is trying to build are ready, and Nepal would be exporting power to India while facing heavy load-shedding?

What we need to understand is that the royalties - about 20 percent - that the parties interested to build the export-oriented projects are offering to Nepal, will not come in the form of cash, but as power. So the quick completion of these projects will also help alleviate the power crisis in Nepal.

What about unbundling NEA? There was a lot of talk on this last year.

It is essential. But consider that NEA is unbundled right away. Distribution is where NEA incurs most of its losses. Will the distribution entity survive on its own as things stand? Therefore, first we need to revamp this utility, and then go for unbundling.