Nepal Purbadhar

शुक्रबार, जेष्ठ ११, २०८१
Friday, May 24, 2024

शुक्रबार, जेष्ठ ११, २०८१
Friday, May 24, 2024

Need for private players in power trade

The future of Nepal’s hydropower development is connected to the export of electricity to markets abroad, such as India and Bangladesh. As the demand for electricity used within the country is low, the number of hydropower projects under construction and the capacity of electricity connected to the national transmission line are increasing. Since there is no possibility that the domestic demand for electricity will increase immediately, it will have to be exported to India and Bangladesh to manage the electricity market in Nepal for a few years. This is why the important issue that we need to understand now is that if the electricity market cannot be managed, our hydropower development journey will stop.

As electricity production increases, businessmen who are willing to trade electricity should enter the field to expand the market and increase consumption. Currently, Nepal Electricity Authority (NEA) is the only player in the field. Even though the NEA is a government body, it has not been able to accelerate the work of domestic and international electricity trade due to its decision-making capacity, speed of work, it’s limitations, and other workloads. On the other hand, the NEA is also a complex organization.

In a highly competitive market like India, it is not possible to conduct an electricity business on its own. It is even more difficult for a single organization to do this. Also, the Electricity Authority is a government organization. It has been three decades since the private sector came into power generation. It has been confirmed that the success achieved by the private sector in the field of production has enabled it. As in electricity production, if the private sector is allowed to enter the business, it can show better performance than the NEA. As the private sector is successful in the field of production, it is also capable of doing business. This is why the involvement of the private sector in the electricity business is necessary.

The private sector in the electricity business should be understood as an organization as well, like NEA. Semi-governmental, private, or other bodies can work in the electricity business as the private sector. If the private sector comes into the electricity business, it will be possible to find a market in an effective way to sell the current increasing electricity production. In order to enter the competitive market of India, the involvement of the private sector has become necessary. Even now, the NEA is occasionally tendering for the purpose of international electricity trade. However, it has been canceled. The NEA is testing the idea in a way, and it cannot remain this way forever. The need for cohesion between government bodies and the private sector is essential.

The issue of unbundling the NEA has been coming up for a very long time. A power generation company was also established. According to this, it is a declared issue that the NEA will be fragmented soon

The second issue is that the market has been ‘de-regulated’ in India as well. The involvement of private organizations is increasing. It is seen that the government organizations are also looking into the issue of electricity trade by setting up a separate organization. In India, Tata, Manikaran, and other organizations are involved in the electricity business. The electricity business in the Indian market has been privatized. This means that buying and selling are done through a private company. However, in Nepal, the equivalent institutions of those Indian private institutions are not operating yet. Therefore, now is the right time for Nepal to allow the private sector to enter the electricity business. If we delay, the power sector itself will go into crisis.

It has been three decades since the private sector came into power generation. It has been confirmed that the success achieved by the private sector in the field of production has enabled it. As in electricity production, if the private sector is allowed to enter the business, it can show better performance than the NEA. As the private sector is successful in the field of production, it is also capable of doing business. This is why the involvement of the private sector in the electricity business is necessary.

The issue of unbundling the NEA has been coming up for a very long time. A power generation company was also established. According to this, it is a declared issue that the NEA will be fragmented soon. On the other hand, the private sector has proven itself in power generation. As soon as they brought the private sector into the electricity business, they built the project. It has been established as a good player by increasing production. This is a situation where the private sector has demonstrated its potential.

In addition to this, now the same private sector is trying to secure the market for electricity produced by itself. In addition, due to the NEA’s own financial condition, it is also difficult to increase the electricity purchase rate to transparently purchase electricity from the private sector. The electricity authority is surrounded by its other responsibilities and work. The authority will prepare the electrical infrastructure. As a government agency, that responsibility is primarily theirs. As a buyer of electricity, there are many problems with the electricity authority. There has been no change in the purchase rate of electricity producers for the past nine years. Therefore, the NEA is entangled in its own problems and complications.

Even now, if the private sector is not allowed to enter the electricity business, there may be a situation where the NEA itself will not be able to get a suitable price to sell the electricity and will not be able to pay the private sector in a satisfactory manner. Therefore, if the private sector wants to trade electricity in the long term, it should be allowed. For example, if electricity is sold directly to an Indian buyer, the mediation costs are also minimal. Due to this, more investment and the construction of hydropower plans will also accelerate. At the current rate, it is unlikely that more projects will ever come. In order to reduce the excessive cost of mediation, there should be a close relationship between the buyer and the seller. A mechanism has to be created.

The government should open up the issue of selling this electricity through the private sector. There is also a government policy that says don’t be limited to the product. All areas should be opened. Opening up the electricity business to the private sector will bring competition, increase efficiency, and increase entrepreneurship. Overall, this sector will move forward, and the country’s prosperity agenda will also be completed. If this is kept as it is now, the journey will be more difficult and problems will increase.

Why has the private sector not yet received permission?

The main reason why the private sector has not yet entered the electricity business is political instability. Private companies are not getting permission even if they want to because of frequent changes in the leadership of the Minister or NEA. Political interest also seems to be low. If the NEA could have granted permission using their special powers granted by Section 35 of the Electricity Act, At the meeting of the Council of Ministers, permission should have been given to the power trading company of the Electricity Authority to trade electricity using the same official. However, it has not done anything yet.

Our problem is that issues like hydropower generation, transmission, and buying and selling are being thought of in an ad hoc manner. This matter should be thought of as a long-term thing because this is not an area where decisions are made today and work is done quickly.

The same NEA is doing the work of buying and selling electricity. Therefore, companies that have the capacity, net worth, and experience are not allowed to trade electricity. The government is preparing to open the door to buying and selling through an amendment to the law. Although the amendment was first passed through an ordinance. However, the then-president did not proceed. The minister who came after that brought up the issue of amending the law within a week. However, there was no amendment. The minister left, and now a new minister has come. He also has to understand this matter. It is unlikely that a decision will be made and put forward.

The production, transmission, and trade of hydropower should be thought of from a long-term perspective.

Our problem is that issues like hydropower generation, transmission, and buying and selling are being thought of in an ad hoc manner. This matter should be thought of as a long-term thing because this is not an area where decisions are made today and work is done quickly. It takes about 10 years for a hydroelectric project to be studied, constructed, and completed. A strategy spanning at least 20 years is required for this. The practice of changing the executive director of the electricity authority and the director general of the electricity development department along with the minister is a decision based on the current situation and how this sector is suffering.

If the private sector gets permission, it can do business not only in the international market but also in the country. For that, there should be open access to buying and selling electricity. As the sector develops, new and competitive buyers and sellers will enter the market.

Another issue is that the electricity authority also has political ambiguity. There is no clear line between what to work on, and what to prioritize. For example, an agreement was reached with the Indian company Manikaran to buy and sell electricity and also to develop new projects. However, even after 14 months, there was no progress. This area was not taken as seriously as it should have been. As a result, our electricity market wastes large quantities during the rainy season.

Possibility of the private sector doing business within the country as well. If the private sector gets permission, it can do business not only in the international market but also in the country. For that, there should be open access to buying and selling electricity. As the sector develops, new and competitive buyers and sellers will enter the market. Now that India has reached this situation, Nepal is still behind. There are many sellers in Nepal. However, there is only one electricity authority to purchase. There is a monopoly on purchasing.

Nepal’s electricity market is headed toward becoming bigger than Bangladesh or Bhutan. That’s why it’s time for us to think about open access.

On the other hand, due to the responsibilities, costs, processes, and trends of the NEA, it is hindering the appropriate cost and access to electricity. A market is created if the market can receive electricity directly. Efficiency increases, costs decrease, and competition increases. This will help reduce the cost of electricity for every Nepali. It also has a positive effect on the economy.

Nepal’s electricity market is headed toward becoming bigger than Bangladesh or Bhutan. That’s why it’s time for us to think about open access. On the other hand, when there is open access to India, if we go there, we will learn from there. It will make it easier in the future. First, Indian buyers had to come to Nepal and buy, or the Nepali private sector had to take them to India and sell them. After that, a situation of buying and selling will be created within Nepal. This will create completely open access to power.

Therefore, due to it’s problems and responsibilities, the NEA will be right where it belongs. However, it is leaving a negative impression. This situation has also occurred because the electricity authority has not been reformed. By opening within the country, competition will increase, costs will decrease, and efficiency will come. Industry gets electricity when it wants it and at a reasonable price. When the cost of the industry decreases, it has a positive effect on production. It also excites industrialists and creates options.

Why do we need open access to trade electricity?

India is one of the biggest countries in South Asia, and it’s market is also huge. Open access has also been given to the electricity trade in India. In Bangladesh, the electricity producer is basically the government. There are limited groups of power producers. There is no private sector in Bhutan. All hydropower projects have been developed by the government. Therefore, there is no open access to the buying and selling of electricity in other countries except India. However, Nepal’s electricity market is heading towards becoming bigger than that of Bangladesh or Bhutan. That’s why it’s time for us to think about open access. On the other hand, when there is open access to India, if we go there, we will learn from there. It will make it easier in the future. First, Indian buyers had to come to Nepal and buy, or the Nepali private sector had to take them to India and sell them. After that, a situation of buying and selling will develop inside the country. This will create completely open power access for everyone.

The Electricity Regulatory Commission has also envisioned the issue of open access. This topic is also mentioned in the government’s policies and programs. It is also included in the budget. The matter of formulating a policy regarding the sale of hydropower projects to the industry is mentioned. Therefore, now would be the perfect time to promote open access.

Every state in India has a regulator. It issues policies for open access, so any seller can sell to any buyer in India. For example, if the Delhi Metro needs electricity, it will issue a tender. Those who have electricity, can provide it as per demand and have an infrastructure. Then they can provide electricity without relying on government agencies. Indian companies can directly sell electricity in Nepal. So, Nepal’s electricity sector should also move forward in this direction.

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