Power tariff hike: Onus on NEA to capitalise on the opportunity

KATHMANDU, JUL 01 -

The Nepal Electricity Authority (NEA) on Thursday got what it had been demanding for for the last 11 years: the Electricity Tariff Fixation Commission (ETFC) decided to hike electricity tariff by 20 percent on an average.

Earlier, NEA used to blame the government’s reluctance to hike power tariff for its problems. But now, it will not find such an excuse. Experts say the onus is now on NEA to capitalise on the latest tariff hike and work for the institution’s structural reforms.

According to former NEA Managing Director Deependra Nath Sharma, the government has done almost everything to bail out the debt-ridden power utility. “First, NEA’s accumulated losses were written off, then the interest rate on government loans were reduced to 5 percent, and now the tariff has been increased,” said Sharma. “Now, NEA itself should own the responsibility of carrying out its institutional reforms.”

Former Energy Minister Gokarna Bista said if NEA cannot reform itself now, it will remain problematic forever.

While giving its green signal to the tariff hike, the commission has put forth a list of conditions. They include reducing leakage by 20 percent in the next five years, controlling unproductive expenses, collecting dues within two months, reducing material stocks (inventory), and keeping separate accounts of investment and expenses on power distribution. “The tariff hike was not only directed to uplift NEA’s financial condition, but also force it to work towards its reforms,” said ETFC Chairman Ganesh Prasad Subba.

NEA officials say although the latest tariff hike would not bring NEA to breakeven, it has given the utility at least some breathing space. Despite the government writing off its accumulated losses of Rs 27.53 billion, NEA’s financial woes are far from over. NEA had earlier projected its annual loss at Rs 7 billion for this fiscal year. The latest tariff adjustment, according to NEA, will reduce the figure to Rs 2.5 billion. “At most, we can carry out maintenance in running projects and transmission lines,” said Mahendra Lal Shrestha, acting managing director of NEA.

According to NEA, higher interest rate on government loans is one of its major problems. The utility pays Rs 3.53 billion in interests to the government. The government recently lowered the rate on some loans to 5 percent.

Experts say NEA must be ready for its unbundling, undertake austerity measures and make itself free from political interference. According to them, huge and persistent system losses, overstaffing, towering overheads and political interference have turned the power utility into a loss-making enterprise.

The NEA is one of the government entities that are infamous for the misuse of vehicles. A large number of NEA’s expensive vehicles — bought for various projects — are being used by politicians.

The structural and administrative reforms started during the then Energy Ministry Gokarna Bista’s tenure have lost their momentum of late. The strong anti-power theft drive that Bista started against electricity leakage has also slowed down. Breaking a 26-year-old tradition, Bista stepped down as NEA chairman, elevating energy secretary to the post, and appointed a chief at the utility through freecompetition. However, strong trade unionism within NEA and lack of support from the Energy Ministry saw Dipendra Nath Sharma resigning three months after his appointment.

Following Sharma’s resignation, NEA is being run by an officiating MD. Some of the NEA projects are running behind schedule and the Upper Tamakoshi Project does not have a project chief. “The new managing director must be appointed soon,” said a senior NEA official. “It would give stability to the NEA leadership.”

Source: http://www.ekantipur.com/2012/07/01/business/power-tariff-hike-onus-on-nea-to-capitalise-on-the-opportunity/356440/