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Jan 2017 Economy and Policy

Published on: 2017-01-16 14:46:36     612 times read    0  Comments
A Boost of Electricity

The economy of a small country like Nepal will greatly benefit if electricity generation is taken care of.

--BY SHASHI RANJAN 

Nepal is almost 25 years behind in generating electricity. There is huge potential here to generate electricity, not only hydro based electricity, but also other clean energy using wind and solar power. We regularly hear and read that Nepal has the capacity to develop around 83,000 MW of hydro electricity and more than 3,000 MW of clean energy, but the potential is never realised. We can see a few developments happening in hydro electricity generation but in clean energy it is virtually nil. 

If we can meet the electricity supply it will:
•    Reduce production cost
•    Enable economic activities
•    Improve investment climate
•    Improve agriculture and industrial productivity

With the surplus of electricity Nepal’s balance of payment and balance of trade will receive a big impact, gaining a lot from it. Let’s consider how the surplus electricity will impact the economy:

Reduction in Import of LPG Cooking Gas
Nepal massively imports LPG which stands at around 2,58,299 MT for the year 2014-2015 (source: http://www.nepaloil.com.np/import-and-sales-22.html). Imports see an average 10-15 % increment yearly. Now if we have surplus electricity and it is supplied uninterruptedly then we can definitely stop importing LPG by using electricity for cooking. This will cut the import and we can save around Rs 1800 to Rs 2000 crore in our import bill (25,82,99,000 kg LPG * Rs 70 assumed import price inclusive of all Tax). This will definitely affect our balance of trade and balance of payment. 

Reduction in Various Imports
With surplus of electricity, Nepal can reduce many imported goods which need to be run in the absence of electricity like inverters, batteries, generators, paraffin wax etc. Since we do not have electricity, there has been a huge rise in import of these types of goods and appliances to cater to the demand of the general public, institutions and industries. A surplus of electricity will reduce the import bill of the country.

Electric or Clean Energy Based Vehicles Reduce Petrol Consumption
With more electrical vehicles being imported, the import of petroleum products will go down. It will be the same for coal. The more surplus electricity is available, more electrical vehicles can drive on Nepal’s roads which will help not only in a reduction in the consumption of petroleum products but also to control pollution. 

According to the customs department from Mid July 2016 to Mid August 2016, petroleum products and other mineral oils and products worth Rs 7,06,00,14,000 was imported.

Reduction in Recharging Equipment
With surplus electricity, the recharging of existing UPS, inverters, and related equipments will come down which will help in electricity availability. 

Export of Electricity
Surplus electricity means the chance to export it. We are sandwiched between two of the bigger economies of the world. On the one hand we have India and on the other China. If we plan thoroughly to export electricity not only to India but to China also, then our overall Balance of Payments and Balance of Trade will have a deep positive impact. Our economy can have a non-deficit budget and we can also become a fully developed economy. 

Increase in Industrial Productivity
The more electricity is supplied to the industry the less the cost of production. This gives a great opportunity to the industrial sector to meet demand. The production of a product increases or remains constant, the cost of producing comes down which has a direct impact on the economy. The price in the local market comes down. 

Overall, surplus electricity generation by any means is good for an economy. If the distribution and consumption is planned accordingly, it can boost the economy. The economy of a small country like Nepal will greatly benefit if electricity generation is taken care of. With one source, we can develop many other sources. 

The writer is Managing Director of Ranjan Enterprises Pvt Ltd.


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