“Nepal-India PTA is more important than the Indian Guidelines”

Interview     0
“Nepal-India PTA is more important than the Indian Guidelines”

Energy minister Janardan Sharma has been active in resolving various power related issues in the country after he assumed the office in mid-August. He has initiated some important power sector reform programmes and has started initiatives to spur hydroelectricity development with the participation of the general public. Sharma who has also been focusing the efforts of the ministry on ending the long hours of power cuts recently announced a string of measures including replacing the existing ‘take and pay’ provision in PPAs with ‘take or pay‘ (power purchase agreements) (PPA), signing PPA in US Dollars with foreign investors and the speedy conclusion to PDA deals. While he has been busy in reforming the power sector, the Guidelines on Crossborder Trade of Electricity issued by the Indian power ministry in early December has caused uncertainty and confusion among hydropower developers in Nepal as it is viewed as restrictive regarding the import of electricity from neighbouring countries. This confusion is still unsettled despite some clarifications from the Indian Embassy. In an interview with Sanjeev Sharma of New Business Age, Minister Sharma talks about the ministry’s plans to ease the uncertainty caused by the issuance of the Indian Guidelines, strategies to implement the ‘Nepalko Pani, Janatako Lagaani’ programme and the development of transmission lines. Excerpts:

The Guidelines on Crossborder Trade of Electricity issued by India’s Ministry of Power is viewed as undermining the prospects of FDI and private investments in export-oriented large hydropower projects in Nepal. What is the MoE doing to ease the problems?
That is an internal document of India. We see the Power Trade Agreement (PTA) between Nepal and India as more important than the Guidelines. The agreement between our two countries is more binding. I have talked with the Power Minister of India regarding the speedy implementation of the PTA. 

I have spoken to our foreign minister regarding the status and context of the Guidelines and our secretary has also discussed the issue. We are currently engaged in talks with the Indian government regarding the issue.  

MoE has announced the programme ‘Nepalko Pani, Janata ko Lagaani’ that aims to involve ordinary Nepalis in hydropower development. What strategies are being employed to achieve the objectives of the programme?
The programme will give priority to have 30 percent shares of the general public in the projects that can yield returns quicker. The 10,800 MW Karnali Chisapani Project, for instance, can be a good model regarding such undertakings since it is considered as the most low-cost project. I have proposed that such projects should be developed through the equity investments of the general public. 

We are focused on developing storage type hydel projects. Nepal Electricity Authority (NEA) has been active in moving ahead with the development of projects such as Arun, Tamor and Uttar Ganga with the participation of the general public. The establishment of the Electricity Production Company (Bidhyut Utpadan Company) will further facilitate the initiatives to build reservoir-based projects. The company will soon obtain the license to develop reservoir-based projects. 

We have developed special software for the public which will be launched soon. People from anywhere in the country can subscribe to shares through a website. After receiving the subscriptions, we will designate the projects and the applicants will get the shares after they deposit the money in the bank accounts of the concerned projects. 

How will the National Transmission Grid Company (NTGC) move ahead now as its CEO is already appointed?
The deficiencies in the transmission infrastructure have multiple dimensions. We are facing a power crisis at present and this is related also to our transmission lines. It is the responsibility of the state to install power lines connecting areas with adequate hydropower resources. It is also necessary to assure the HEP investors about the power evacuation. To address the issues, we will actively engage in developing both east-west and river basin-based transmission lines.   

We do not have adequate transmission lines to supply the power to the market and consumers. Right now, we only have 200 kilovolt transformers. We are now going to construct 400 and 765 kilovolt capacity transmission lines. The newly established NTGC will begin to build 765 KV east-west and 400 KV river basin-based power lines.  

The construction of power lines will also speed up the progress of hydel projects that are under construction. The progress of many projects under development is slow due to the lack of transmission lines. We have not been able to add the power produced by some already completed projects to the national grid. 

The government itself has been holding some 210 projects with a total installed capacity of 9,046MW. How is the ministry preparing to take out the projects that are currently in the government basket?
A public notice will be issued when the government will decide to take the projects out of the basket. The process of developing the projects will move ahead after that. 

Despite the fact that per unit production cost of electricity is almost equal in all power projects, the payout in Rupees term from NEA is difficult due to PPA in US Dollars with projects that have foreign investment and Nepali Rupee with only domestic investment. Can’t the PPAs be done in US Dollars with all developers to create uniformity in the purchase rates? 
It’s not that we pay higher prices to foreign producers while signing the PPA. PPA in US Dollars means that foreign investors are paid in the US currency. The situation doesn’t allow the signing of PPA in US Dollars with Nepali power producers. Payments to foreign power producers, meanwhile, are made in US currency until their invested money in US Dollars is recovered. After that, the rest is paid in Nepali Rupees. 

Private project developers have been complaining about NEA’s reluctance to engage in PPA processes for run-of-river (ROR) type hydel projects citing that the power scheduled to be available from such projects with which PPAs are already done is going to be more than demand in rainy season. How will the ministry resolve this issue?
PPAs of ROR type hydel projects will not be stopped. It is important for the overall development of the country’s hydropower sector. The power deficit situation has brought about many difficulties. We need to overcome this situation for industrial development. The rate of rural electrification is only between 35-40 percent at present. Urban consumers are also not able to consume adequate energy. We are asking the general public to limit the use of necessary household appliances such as heaters and other devices. In today’s world, per capita consumption of electricity is a measure of a country’s development. But our present per capita electricity consumption is still far lower than comparable countries.

Export-oriented industries that require lot of electricity, including cement and iron rod factories have been complaining about the inadequate power supply. How are you planning to address this?
 I don’t think they have any complaints. Instead, they are happy now. They want a round the clock power supply. Currently, electricity is being supplied to the industries 20 hours a day which was 16 hours earlier. We are working on the remaining four hours also.  

What is the government doing regarding the purchase of electricity co-generated by the sugar mills?
We have been openly inviting the sugar mill companies to sign the PPA for the electricity they generate. However, no company seems to be interested in our offer. It only ends in talks and discussions. We will also purchase the power generated from other sources. We are ready to negotiate the purchase rates. 

As per the latest official data, the electricity leakage has been reduced by 10 percent. Does this mean that the leakage is now reduced to 16 percent from total 26 percent? Or is it 10 percent of just technical leakage or pilferage?
The overall leakage has reduced by 10 percent from both technical and non-technical leakages. The power leakage varies from place to place. At some locations the leakage is 47 percent, whereas it is five percent in other areas. The report means to say that the total leakage which was earlier at 26 percent of the total transmission has now come down to 16 per cent. However, we are verifying the data. 

What is the ministry doing to further control the leakage? 
The ministry formed a committee to control the leakage of electricity two weeks after I assumed the ministerial post. The committee has formulated a policy to deal with the leakage. The draft of the policy has been submitted to the NEA. NEA has been focusing its leakage controlling efforts as per the policy. The authority has been mandated to control both large and small scale thefts of electricity. It has been told to start a feasibility study into the Time of Day (TOD) metering. Meanwhile, the committee is actively working to achieve the intended results.    

It’s speculated that the initiative to end power cuts will last only till the end of the month of Poush? How is the ministry planning to continue the supply of power? 
Such speculations in our context are obvious. Nevertheless, we will be continuing the supply. Some electricity will be imported from India. Some generated within the country will be connected to the national grid. Similarly, we will be managing alternative arrangements in case of shortage. 

Power deficit Bangladesh has been showing interest in investing in HEP here. What is the progress in this regard?
A draft of the MoU regarding the cooperation in hydropower sector between the two countries has already been prepared. I forwarded the draft to the concerned Bangladeshi ministry three days after I came back from a visit to Bangladesh. I have invited the Energy Minister of Bangladesh who will be probably visiting Nepal in the first week of January. We will sign the MoU during his visit. 

You have proposed establishing a hedge fund for the development of hydroelectric projects. Has there been any headway in your proposal?
Initial preparations have been done to establish the hedge fund. The Ministry of Finance (MoF) and Nepal Rastra Bank (NRB) are responsible for forming such an entity. MoF and NRB are positive in this regard. It will help if they sped up the process of establishing the fund. 

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