Government must create a favourable environment for foreign investment
Sujata Awale
Kathmandu
Nepal successfully hosted the 18th SAARC Summit and concluded it with the signing of a regional energy cooperation pact among SAARC countries in November. The SAARC Framework Agreement for Energy Cooperation (Electricity) has opened the door for electricity trade between member countries by promoting competition, planning of cross-border interconnection and exemption of taxes and duties while exchanging electricity between entities.
Nepal also signed a bilateral Power Trade Agreement (PTA) with India in September, which allows both countries to import and export electricity. Now with the signing of these regional cooperation agreements, Nepal has opened up doors to sell electricity to other member countries as well. Experts state that Bangladesh has emerged as a promising market for Nepal to sell power via India.
Constructive venture
At a time when electricity is the biggest crisis for South Asian countries, it is the determining factor to develop these nations. With the regional cooperation agreements, SAARC nations can now depend upon each other for mitigating the shortage of power and related woes.
"The agreement permits any private or public power producer under the laws of member states to buy and sell electricity within and outside the country and it could compliment their resources," said Keshab Dhoj Adhikari, Spokesperson at the Ministry of Energy (MoE). He further stated, "It also allows member countries to establish regional grid connectivity, enhance power trading, harmonises policies, facilitate the supply of electricity in power deficit cities by exempting taxes and duties gradually."
Citing that Bangladesh has shown interest to buy electricity from Nepal, Adhikari said, "This is a good sign and Bangladesh is keen to have bilateral power trade with Nepal. This has widened the market scope for Nepal." Informing that India has already signed a bilateral power trade agreement with Bangladesh, he stated, "As India and Bangladesh have transmission line connections, this regional cooperation has enabled Nepal to trade power via India to Bangladesh. And India can be the transit for regional integration." According to him, the agreement has created the environment further for investment in hydropower.
Power pack
The Khimti-Dhalkebar 420 kV double circuit cross border transmission line project will be the first cross border transmission line that connects and enables import and export of up to 1,200 MW electricity between Nepal and India. As the supply of electricity swells during the monsoon season, there is an electricity surplus. And during the dry season, due to lack of water in rivers, the country faces a power deficit. Therefore, the country needs to export surplus power during monsoon and import power in the dry season.
“We have immense potential for hydropower projects in the country. The production of electricity in the wet season swells to six times the electricity produced during the dry season. And this fluctuation in electricity generation makes it hard for investors to develop projects,” said Gyanendra Lal Pradhan, Chief of Energy Committee at Federation of Nepalese Chamber of Commerce. Stating that bilateral and multilateral agreements make hydel projects more viable, he said, “Previously developers had to design projects in Q30 and Q40, but now developers can optimise their project capacity and power generation will be cheaper and more saleable.” He also said that as Nepal has signed the PTA with India and India already has 500 MW connectivity with Bangladesh and 1,500 MW with Bhutan and they are in the process to develop a 1,000 MW transmission line with Pakistan, India can play a mediator among these countries to sell generated power from Nepal. According to him, Nepal can be a net exporter of electricity as there is a high demand for power during monsoons in Bangladesh and India.
Pradhan further said that the agreement is only the starting point and the government should now create the environment. “There is no assistance for developers to develop projects from the government side. Differences and lack of collaboration between the Ministry of Energy and Environment, CIAA and NEA creates problems,” he said, adding that FDIs could not materialise due to these hindrances.
Enabling environment
Donor agencies see the new regional cooperation as a huge opportunity to invite FDIs. Although it is a positive sign, they are still waiting for it to bear fruit. "The agreement has paved the way for generating revenue but the donor agencies and FDIs are still hesitant to invest," said an official at International Finance Corporation (IFC). An official further said, “We (Nepal) don’t have a clear investment policy that can lure investors. It takes much time to get approvals and visas,” adding that the government should streamline the process and add facilities for investors. Citing that investors are interested to invest in hydropower projects, an official said, “The government should create the environment and sincerely welcome them with a constructive environment in the local scenario.”
Pradeep Jung Pandey, President of Federation of Chamber of Commerce and Industries, said that the agreements and SAARC regional cooperation is a positive sign. However, he stressed on the need to implement the signed agreement. Citing that hydropower development directly impacts the industrial sector, he said, “Electricity is needed for any industry to operate and we are hopeful that the government will give priority to this sector and do the needful to develop the whole sector.”
Khadga Bahadur Bisht, President of Independent Power Producers´ Association Nepal (IPPAN), said the agreement is an extension of the PTA between Nepal and India that broadens the regional electricity market. Bisht said, “NEA has stated that after 2016, it would not be in a state to purchase produced power. With this agreement, investment in hydropower will increase and invite more FDI in the country.” According to him, Nepal will be able to export electricity by 2030. Although the agreement shows positivity, he said, “The local issues at the Bhotekoshi Project have sent a negative message in the international market. The government should take charge and solve the problem as soon as possible.” He stated that lack of stable local government has caused difficulties to carry out development activities.
Adhikari stressed on the need to create a more investment friendly environment. There should be consensus between political parties to give priority to retaining foreign investors, ensuring security, introducing land acquisition and right of way policy with the implementation of land use policy.
Kathmandu
Nepal successfully hosted the 18th SAARC Summit and concluded it with the signing of a regional energy cooperation pact among SAARC countries in November. The SAARC Framework Agreement for Energy Cooperation (Electricity) has opened the door for electricity trade between member countries by promoting competition, planning of cross-border interconnection and exemption of taxes and duties while exchanging electricity between entities.
Nepal also signed a bilateral Power Trade Agreement (PTA) with India in September, which allows both countries to import and export electricity. Now with the signing of these regional cooperation agreements, Nepal has opened up doors to sell electricity to other member countries as well. Experts state that Bangladesh has emerged as a promising market for Nepal to sell power via India.
Constructive venture
At a time when electricity is the biggest crisis for South Asian countries, it is the determining factor to develop these nations. With the regional cooperation agreements, SAARC nations can now depend upon each other for mitigating the shortage of power and related woes.
"The agreement permits any private or public power producer under the laws of member states to buy and sell electricity within and outside the country and it could compliment their resources," said Keshab Dhoj Adhikari, Spokesperson at the Ministry of Energy (MoE). He further stated, "It also allows member countries to establish regional grid connectivity, enhance power trading, harmonises policies, facilitate the supply of electricity in power deficit cities by exempting taxes and duties gradually."
Citing that Bangladesh has shown interest to buy electricity from Nepal, Adhikari said, "This is a good sign and Bangladesh is keen to have bilateral power trade with Nepal. This has widened the market scope for Nepal." Informing that India has already signed a bilateral power trade agreement with Bangladesh, he stated, "As India and Bangladesh have transmission line connections, this regional cooperation has enabled Nepal to trade power via India to Bangladesh. And India can be the transit for regional integration." According to him, the agreement has created the environment further for investment in hydropower.
Power pack
The Khimti-Dhalkebar 420 kV double circuit cross border transmission line project will be the first cross border transmission line that connects and enables import and export of up to 1,200 MW electricity between Nepal and India. As the supply of electricity swells during the monsoon season, there is an electricity surplus. And during the dry season, due to lack of water in rivers, the country faces a power deficit. Therefore, the country needs to export surplus power during monsoon and import power in the dry season.
“We have immense potential for hydropower projects in the country. The production of electricity in the wet season swells to six times the electricity produced during the dry season. And this fluctuation in electricity generation makes it hard for investors to develop projects,” said Gyanendra Lal Pradhan, Chief of Energy Committee at Federation of Nepalese Chamber of Commerce. Stating that bilateral and multilateral agreements make hydel projects more viable, he said, “Previously developers had to design projects in Q30 and Q40, but now developers can optimise their project capacity and power generation will be cheaper and more saleable.” He also said that as Nepal has signed the PTA with India and India already has 500 MW connectivity with Bangladesh and 1,500 MW with Bhutan and they are in the process to develop a 1,000 MW transmission line with Pakistan, India can play a mediator among these countries to sell generated power from Nepal. According to him, Nepal can be a net exporter of electricity as there is a high demand for power during monsoons in Bangladesh and India.
Pradhan further said that the agreement is only the starting point and the government should now create the environment. “There is no assistance for developers to develop projects from the government side. Differences and lack of collaboration between the Ministry of Energy and Environment, CIAA and NEA creates problems,” he said, adding that FDIs could not materialise due to these hindrances.
Enabling environment
Donor agencies see the new regional cooperation as a huge opportunity to invite FDIs. Although it is a positive sign, they are still waiting for it to bear fruit. "The agreement has paved the way for generating revenue but the donor agencies and FDIs are still hesitant to invest," said an official at International Finance Corporation (IFC). An official further said, “We (Nepal) don’t have a clear investment policy that can lure investors. It takes much time to get approvals and visas,” adding that the government should streamline the process and add facilities for investors. Citing that investors are interested to invest in hydropower projects, an official said, “The government should create the environment and sincerely welcome them with a constructive environment in the local scenario.”
Pradeep Jung Pandey, President of Federation of Chamber of Commerce and Industries, said that the agreements and SAARC regional cooperation is a positive sign. However, he stressed on the need to implement the signed agreement. Citing that hydropower development directly impacts the industrial sector, he said, “Electricity is needed for any industry to operate and we are hopeful that the government will give priority to this sector and do the needful to develop the whole sector.”
Khadga Bahadur Bisht, President of Independent Power Producers´ Association Nepal (IPPAN), said the agreement is an extension of the PTA between Nepal and India that broadens the regional electricity market. Bisht said, “NEA has stated that after 2016, it would not be in a state to purchase produced power. With this agreement, investment in hydropower will increase and invite more FDI in the country.” According to him, Nepal will be able to export electricity by 2030. Although the agreement shows positivity, he said, “The local issues at the Bhotekoshi Project have sent a negative message in the international market. The government should take charge and solve the problem as soon as possible.” He stated that lack of stable local government has caused difficulties to carry out development activities.
Adhikari stressed on the need to create a more investment friendly environment. There should be consensus between political parties to give priority to retaining foreign investors, ensuring security, introducing land acquisition and right of way policy with the implementation of land use policy.
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