Untapped Hydropower Potential in Nepal Gravitational Vortex … · drive the vehicle of merger smoothly. ‘The Economic System’ has analysed herewith what is likely if a fresh

♦♦♦♦♦ Untapped

Hydropower

Potential in Nepal

♦♦♦♦♦ Gravitational

Vortex Power :

A Solution to

Light Nepal

1HYDRO EDITIONwww.corporatenepal.com.np

FEEL THE FIAT

The views expressed in the articles are of the authors’ and do not necessarily reflect on the publisher. If you are interestedin writing for 'The Economic System' please send in your articles, reports in approximately one thousand words oneconomy, finance, management or any financial issue that you feel strongly about. Write to: [email protected]

G l impseG l impse

...TOWARDS 2

PRECISION 3

BANKING

Why not the 'merger' amongst State-run banks ! 4

DERIVATIVE

'Privatise NEPSE to end policy corruption' :

Dr. Surbir Poudel, Chairman, SEBON 6

COVER CHRONICLE 8-36

Untapped Hydropower Potential in Nepal 8

Hydropower to Reduce Poverty 18

Power Crisis An Undue Dilemma 20

Do not hang up 600 MW Budhi Gandaki 22

The Aud i Alteram Partem

Stakeholders in the Public Witness-box 24

Gravitational Vortex Power : A Solution to

Light Nepal 26

Hydropower in Constitution

vis-à-vis politics of Nepal 28

White Coal is yet to be made the most of it 31

SOCIAL CORPORATE

TOYOTA Inspiring Women and Children 37

MANAGEMENT

Management Med itation with Kamal Gynwali 38

Build ing a Strategy- Supportive Corporate Culture 39

DIGI MARKET 44

SPOTLIGHT 45

MEDIC MARKET 47

CORPORATE CORRIDOR 48

'Nabil will shortly ally with NepalInvestment and Himalayan Bank'

12

42

40

Why Nepal is cursed withLoad Shedding?

○ ○ ○ ○ ○ ○ ○

○ ○ ○ ○ ○ ○ ○

2 www.corporatenepal.com.np HYDRO EDITION

epal Rastra Bank (NRB) finally turned its back on tokeep inflation rate on the same as it was projected inits monetary policy 2010/11. As inflation measured bythe consumer price index increased to 11.3 percent inmid-January 2011 from 10.7 percent in the

corresponding period of the previous year, NRB seems a bithesitant and is compelled to revise its projection in the mid-term review of the monetary policy. Governor Dr. YubarajKhatiwada insisted the points like weaker internal supplysystem, price hikes in petroleum products, global inflations andprice status in India, responsible for higher inflation. HenceNRB uninterestingly revised its projection on inflation with ahope it will not cross 9 percent (2 percent more than earlierprojection) in average this year.

Roaring inflation, hiking price and liquidity crunch aresuffering consumers and it may be calling 'Hitler' as in 1930sGermany. At this, what we should remain cautious on is thetendency and nature of the present inflation trend becauseInflation here doesn't seem natural one as it is cost-push ratherthan demand-pull. If the price of commodities and services hikedue to the demand pressure it is demand-pull inflation whereascost-push is a kind of profit-push increase where organizedeffort to raise price margin is the cause for price hiking. Cost-push inflation is rigorously affecting production anddistribution system in Nepal where those having adequate cashin their hands are exploiting short term benefits. Saving cultureis discouraged which is affecting capital formation andultimately it hampers production, employment generation andeconomic growth. Investment is oriented towards consumableitems and service sectors rather than the production in pursuitof fast cash. Black marketing, hoarding, speculation and lessconfidence upon national currency are the critical challengesbrought up by profit-push inflation.

Inflation invites frustrations, tensions and arrogancesamong people which ultimately lead to the depression. SinceU.S. was the major creditor of postwar Europe, U.S. financialbreakdown precipitated economic failures around the world,especially in Germany and Britain. The Depression alsoadvanced Adolf Hitler's rise to power through election inGermany dated 1933 and fomented political extremism in othercountries. Thus casualness over the cost-push inflation mayperhaps not be easy for the coming days and urgent consensusand commitments in between the major political parties isobligatory today. Basic consent on the economic issues willease the investment friendly environment, helps in confiscatingthe contractions on liquidity and capital flow. Consequently,get spotlight on the efficient disbursement of capitalexpenditure to run the economic cycle on track.

...towards

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Corporate Media Partner Pvt. Ltd.C.D.O. Office Regd. No 27/067/68

VOL. 01, ISSUE 05, FEB-MARCH 2011

Control Cost-Push Inflation

N


Precision

EXISTING NEAPOWER PROJECTS

BANKS LENDING

Bank of Kathmandu 2,884,615

Nabil Bank Ltd. 2,650,700

Everest Bank Ltd. 1,876,700

Laxmi Bank Ltd. 1,655,288

Nepal SBI Bank Ltd. 1,124,666

Prime Com. Bank Ltd. 1,057,200

Siddhartha Bank Ltd. 721,000

Bank of Asia Ltd. 648,000

Citizens bank Ltd. 580,000

Kumari Bank Ltd. 508,121

Nepal Investment Bank Ltd. 434,920

Himalayan Bank Ltd. 383,590

NCC Bank Ltd. 320,277

Machhapuchhre Bank Ltd. 285,620

KIST Bank Ltd. 252,390

Global Bank Ltd. 250,000

Ace Dev. Bank Ltd. 210,000

NMB Bank Ltd. 194,840

Janata Bank Ltd. 178,000

Sunrise Bank Ltd. 67,375

Lumbini Bank Ltd. 52,067

TOTAL 16,335,369

FinancingHydropower

Energy Availability Fiscal Year 2009/10

(NRs'000)

16.34 billion rupees is ana p p r o x i m a t eamount financed by

Nepalese banks in the hydropowerprojects.The data presented here isupdated totaling the latestcommitment of consortium investmentof 11 different banks in SanimaiHydropower, promoted by Non-residential Nepalese. Data is retrievedas reported to Nepal BankersAssociation by the individual banks.


Banking

Government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If itGovernment’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If itGovernment’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If itGovernment’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If itGovernment’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If itkeeps moving, regulate it. And if it stops moving, subsidise it. - Ronald Regankeeps moving, regulate it. And if it stops moving, subsidise it. - Ronald Regankeeps moving, regulate it. And if it stops moving, subsidise it. - Ronald Regankeeps moving, regulate it. And if it stops moving, subsidise it. - Ronald Regankeeps moving, regulate it. And if it stops moving, subsidise it. - Ronald Regan

wo plus two isexpected to be fivebut this is possibleonly if the

mathematics of merger gowell. Banks and financialinstitutions (BFIs)considerably shouldconsolidate as much asreasonable in the most rapidway possible to collect goodeggs further in their baskets.With a hope to strengthenoverall capacity of Nepalesefinancial market, while NepalRastra Bank (NRB) andMinistry of Finance (MoF) areemphasizing on merger inbetween BFIs, why not thegovernment should begin thisat its own? The question isquite unsettled and seeks theimmediate arrangement todrive the vehicle of mergersmoothly.

‘The Economic System’has analysed herewith what islikely if a fresh merger will set

off between all of BFIs primarily orpartly owned by the State that is tosay Nepal Bank Ltd. (NBL), RastriyaBanijya Bank Ltd. (RBB), AgriculturalDevelopment Bank Ltd. (ADBL) andNepal Industrial DevelopmentCorporation (NIDC). Despite someissues of merger between RBB andNIDC is reportedly lobbied on by thehigh level authorities in MoF, sourcesclaim it as an attempt of dealing overNIDC’s pricey lands and otherproperties located in the primelocations all over the nation. NIDC hasits ample properties to revive thenegative net worth of RBB and NBL aswell if those capitalised.

Central Bank has postponed allkind of licensing for new financialinstitutions up to the ‘C’ class throughits monetary policy following its priordecision to halt licensing the ‘A’ classcommercial banks. The move isinterpreted somehow as a pressurepush from the central bank to inspirethe existing finance companies anddevelopment banks to form strongercommercial banks through merger and

acquisition process. ‘Pleasecome at a point to consolidateyour business and you will makerewarding profits’, said Dr.Yubaraj Khatiwada, and hefurther suggested the BFIs todiscuss on the issue. He informedNRB is mulling on therecapitalisation of NBL and RBB.‘We too are considering themerger process to upward fromthe state-owned BFIs as mergerwill reduce the supervisory costof central bank as well’ heopined. NRB is ready to providefacilitation to the companies’board of directors if those arewilling to go through merger. Butas by-products of our culture,Nepalese executives do notseemingly agreed to lose theirexisting post which is compulsoryto limit the board andmanagement size following themerger. Three companies havebeen merged thus far in Nepal asthey were promoted by the samebusiness groups.

By Ramesh Ghimire

amongst State-run banks !Why not the 'MERGER'

T

‘The EconomicSystem’ hasanalysedherewith what islikely if a freshmerger will setoff between allfour BFIsprimarily orpartly owned bythe State


Banking

Inflation is when you pay fifteen dollars for the ten-dollar haircut you used to get for five dollars when youInflation is when you pay fifteen dollars for the ten-dollar haircut you used to get for five dollars when youInflation is when you pay fifteen dollars for the ten-dollar haircut you used to get for five dollars when youInflation is when you pay fifteen dollars for the ten-dollar haircut you used to get for five dollars when youInflation is when you pay fifteen dollars for the ten-dollar haircut you used to get for five dollars when youhad hair. - Sam Ewing quoteshad hair. - Sam Ewing quoteshad hair. - Sam Ewing quoteshad hair. - Sam Ewing quoteshad hair. - Sam Ewing quotes

Government is holding fullownership in RBB and NIDCwhereas it has its major shareportion of share in ADBL and NBL.Among the four, RBB and NBL arecurrently running under thefinancial reform programme.‘Financial reform programme issomehow successful to reformthese two banks to some extent’insists Governor Dr. Khatiwadawhile some other bankingprofessionals do not have the sameopinion. Shovan Dev Pant, CEO,Lumbini Bank Ltd sums up thereform programme as anunsuccessful attempt, sensitisedand presented with glamour ofhired experts.

RBB and NBL still count thenegative net worth while NRB hasdirected all commercial banks tofulfil the minimum capital of Rs. 2billion capital by 2013 June. NBLhas hardly Rs. 380 million paid upcapital and though RBB has fulfilledthe requirement of paid capital isstill far behind the requirement ofcapital adequacy because of itsenormous sized cumulative loss.Thus these two banks need anurgent recapitalisation plan andone of the best probable way tomake this possible will be lump-sum merger between the fourinstitutions.

Calculating separately, Rs. 14bill ion additional capital isrequired to positive the networth of RBB and NBL. Howeverthe requirement for theadditional capital will be

downsized if the four institutionsgo into the merger. There will bea requirement for Rs. 8.3 billionadditional amounts only due tothe capital support from ADBL andits irredeemable preferenceshare with value of 6.4 billion.Government will have option tosell few portions of theproperties belonging to NepalBank as it has so many land piecesand buildings in the major citiesall over the country. Governmentcan revaluate and count for thecapitalisation, the properties thatbelong with NIDC too. Despite thehigh figures in NPA, there isnothing to worry about NIDC as ithas just sanctioned Rs. 143 millionas loan. Selling few pieces of land

Bank Paid-up Reserve Local Net NPA %

Capital Fund Deposit Profit

NBL 380383 (4877597) 40601067 357098 4.99

RBB 1172300 (11126990) 68545121 2010687 9.81

ADBL 3037500 988791 32462960 1450055 8.22

NIDC 415823 286801 90995 357353 87.55

Total 5006006 (14728995) 141700143 4175193 -

(Figure in NRs’000)

Financial status of government-owned BFIs as of fiscal year 2009/10

or some other properties mayperhaps be the suitable optionbecause only the revaluation andrecapitalisation will increase theliabilities too and the staff willclaim for the bonus while themerged institution will have netprofit of huge amount in itsaccount.

Compromise is the key for anykind of merger and it is applied inthis case as well. The State-owned four institutions shouldlook forward for theopportunities waiting and thestaffs in these organisationsshould facilitate for a better andhealthier institution like someother State-owned banks in theneighboring countries.


Derivative

The first lesson of economics is scarcity: There is never enough of anything to satisfy all those who want it.The first lesson of economics is scarcity: There is never enough of anything to satisfy all those who want it.The first lesson of economics is scarcity: There is never enough of anything to satisfy all those who want it.The first lesson of economics is scarcity: There is never enough of anything to satisfy all those who want it.The first lesson of economics is scarcity: There is never enough of anything to satisfy all those who want it.The first lesson of politics is to disregard the first lesson of economics. - Thomas SowellThe first lesson of politics is to disregard the first lesson of economics. - Thomas SowellThe first lesson of politics is to disregard the first lesson of economics. - Thomas SowellThe first lesson of politics is to disregard the first lesson of economics. - Thomas SowellThe first lesson of politics is to disregard the first lesson of economics. - Thomas Sowell

Would you please let usknow the progress informulation of capital marketmaster plan expected toadvance the whole market ?

Formulation of master plan isunderway and the action workingcommittee in SEBON is workingincessantly on it. Master plan willmost likely comprise all facets of

capital market explicitly theissues of stock exchange andsecurities board such as capacitybuilding, human resources, planand policy, professionalism andultimately the modernisation ofthese institutions. It seems rathernecessary to amend few laws andregulations to make overall capitalmarket friendly to the

stakeholders and even not unlikethe international standards.

What sort of clauses do youthink should necessarily bealtered in the existing rules ?

Securities act 2007, securitiesregulation, securitiesbusinessmen regulation are someof those prevailing statutes wherefew loopholes do exist and so farinstitute a modus operandi as if itis set to high neatness, the role ofNepal Stock Exchange (NEPSE),reducing what SEBON does haveas a regulatory body. There aresome needless processes definedin the regulations, should becompleted within and undersupervisory of NEPSE to apply forthe broker license. I think lawsand bylaws should not get onnerves to provide licenses if fitand proper documents aresubmitted along with. Similarlyamendments are essential toensure the autonomy of SEBON inthe real sense.

What do you suppose thetrue autonomy in SEBON shouldbe like ?

SEBON should be autonomousto fulfil its available jobs andattain the necessary regulations.Power is hitherto centralisedwithin the chairman and it shouldbe distributed to the personnelwith accountability henceforth.No one should believe in absoluteautonomy and being a chiefexecutive plus chairman of theregulatory board, SEBON, I thinkthis institution must be given withpower to declare annual targetsand we the responsible officebearers should be stood beforethe parliament to face the publichearing once a year. However inthe existing structure, it is noteasy enough to make decisionswhere we have several directorsrepresenting other public andprivate institutions like Ministry ofFinance (MoF), Nepal Rastra Bank(NRB), Ministry of Law andConstituent Assembly (MoLCAH,Federation of Nepalese Chambersof Commerce (FNCCI) etc. Hencehere what I mean to say is we

NEPSE'Privatise NEPSE to endpolicy corruption'Dr. Surbir PoudelChairman, SEBON

Securities Exchange Board of Nepal (SEBON) is formulating itscapital market plan with the aim to refurbish the market,strengthening internal mechanism of the regulation. While thegeneral share investors are nauseating by the unremitting bearishtrend, there are on the other hands plenty of analysis arousing themarket is still in a process of correction. Investment trend issomehow diverted to the commodities and future marketshowever proper planning is yet far from the scene to embark uponit. Dr. Surbir Poudel, Chairman, SEBON talks to the team of 'TheEconomic System'. Here are the excerpts:


Derivative

People who are hungry and out of a job are the stuff of which dictatorships are made. - Franklin D.People who are hungry and out of a job are the stuff of which dictatorships are made. - Franklin D.People who are hungry and out of a job are the stuff of which dictatorships are made. - Franklin D.People who are hungry and out of a job are the stuff of which dictatorships are made. - Franklin D.People who are hungry and out of a job are the stuff of which dictatorships are made. - Franklin D.RooseveltRooseveltRooseveltRooseveltRoosevelt

should create provisions toappoint at least two of thedirectors along with thechairman as full time executivesin SEBON through freecompetition. This willconsolidate professionalism withautonomy in an actual sense.

How do you evaluate theperformance of yourinstitution to ensure corporategovernance in publiccompanies ?

SEBON is working withinlimited human resources for along and thus it is the matter ofpity we still has some spaces leftto make our monitoring andsupervisory role more efficientto maintain discipline in themarket. We are not being able tolocate all sorts of overspeculations and insider trading.We can enhance our role ofwatchdog considerably beingvigilant upon the functioning ofmanagements and boards ofpublic listed companies ifenough human resources ismade available.

What do you like to say thepublic investors in the hardlybreathing present markettrend ?

What it is going on today isthe result of spiral effect andboth the psychological andpolitical factor are the inputsfor it. Though it seems somecorrection in the puffed index,the instability factor ishampering it, off-puttingconducive environment forinvestment. On the other hand,there are few numbers of publiccompanies from real sector,listed in stock exchange.Similarly, due to the limitedfinancial literary within generalinvestors, it is now proper timeto welcome institutionalinvestors in the market.Employees Provident Fund (EPF),Citizens Investment Trust (CIT),Rastriya Beema Sansthan (RBS)etc should take part in themarket as the rational investorand the market maker.

How do you consider the ideato induce large tax payercompanies to shift as the publicones which might result anotable growth of real sector inthe stock exchange ?

We can encourage thevoluntary conversion with someincentives but the mandatorypolicy will not function well.Private enterprises will seek for thecost benefits for such a conversionand listing in the stock market.Handful of private investors willlikely obtain the chance to cheatthe general investors if they areencouraged forcefully where theregulatory mechanism is not well-built yet. Rather it seemsnecessary to privatise NEPSE tosome extent, offering its certainportion of share to the publicwhich will be an attempt to end allform of policy corruption inexistence. NEPSE will thenfunction well and every process ofstock market will run fine.

Why do you think mostly thepublic companies are not runningwith the basic theme of publicparticipation especially indecision making ?

I consider this is an issue ofpower holding and publicparticipation is only functionalwhile public investors will havecontrol over majority share. At

Public areoften dispersed

whereaspromoters are

united. Thusthere must be the

comprehensibleproviso to

allocate 49percent of share

to the publicshareholders in

each publiccompany.

least they should have 49 percentof share in a company toinfluence collectively indecisions. Public are oftendispersed whereas promoters areunited. Thus there must be thecomprehensible proviso toallocate 49 percent of share tothe public shareholders in eachpublic company.

Last but not least, how doyou deem ahead thetransactions of billions incommodities and future marketexclusive of any regulation ?

I believe there is a vastpotentiality of enhancement inproduction if the commoditiesmarket is linked with grass rootlocal productions. We should havelarge chain of productioncooperatives and thosecooperatives will be facilitated bythe future market to sell the foodproducts. Investors will be able tohedge and make contract for thecrop products in the commoditiesmarket and it will support theeconomic cycle. However theseall are only the propositions andwe even do not know whatexactly is going on withincommodities and future market. Iwould like to request thegovernment to manage properresources and guidelines toscrutinise and regulate it.

‘

‘


Cover Chronicle

Economists are pessimists: they’ve predicted 8 of the last 3 depressions - Barry AsmusEconomists are pessimists: they’ve predicted 8 of the last 3 depressions - Barry AsmusEconomists are pessimists: they’ve predicted 8 of the last 3 depressions - Barry AsmusEconomists are pessimists: they’ve predicted 8 of the last 3 depressions - Barry AsmusEconomists are pessimists: they’ve predicted 8 of the last 3 depressions - Barry Asmus

Satellite view of Tanakpur Barrage Photo Credit : Google Earth

Untapped HydropowerUntapped HydropowerUntapped HydropowerUntapped HydropowerUntapped HydropowerPotential in Nepal

By Gajendra Bista

epal is blessed withabundant waterresources combinedwith a wide

geographical variation fromhighest Himalayan peak to thelowest land of Terai. About 6000rivers and rivulets in Nepalpossess about 225 billion cubic

meters of water every year.Several studies have been carriedout and so far stated that Nepalcan generate more than 2hundred thousand Megawatt ofhydro electricity utilizingavailable rivers and rivulets.Besides consumption ofelectricity at home, there is

tremendous potential ofexporting power to India as thecountry is striving ahead toregister double digit growth.What is irony further is thepeople living in the lap of snowymountains have hardly access to 5litres of water every day despiteNepal is the second largest

N

US developed 36 MW Bhotekoshi which is generating NRs. 1billion annual income while investment cost was almost 5billion. Realizing the fact, several Indian companies are tryingto get hydropower licenses as much as possible.


Cover Chronicle

Economy is the method by which we prepare today to afford the improvements of tomorrow. - CalvinEconomy is the method by which we prepare today to afford the improvements of tomorrow. - CalvinEconomy is the method by which we prepare today to afford the improvements of tomorrow. - CalvinEconomy is the method by which we prepare today to afford the improvements of tomorrow. - CalvinEconomy is the method by which we prepare today to afford the improvements of tomorrow. - CalvinCoolidgeCoolidgeCoolidgeCoolidgeCoolidge

country has been able togenerate only 400 MW powerpresently. But installed capacityis about 700 MW. Nepal needsmore than 1300 MW to meet thepresent increasing demand ofpower. In 2015, Nepal’s demandfor electricity is estimated to bemore than 2200 MW and installedcapacity will probably be 1653 MWeven if everything goes well forthe completion of Chamelia 30MW, Kulekhani-III 14 MW, UpperTamakoshi 456 MW, Upper Trishuli-IIIA 60 MW, Upper Trishuli III-B 40MW, Rahughat 30 MW and UpperModi A 42 MW. Despite that, therewill be a deficit of at least 1000MW energy in 2015. It still showsthere will be 8 hours per day,deficit of power. On the otherhand merely less than 20 percentpopulation are getting electricityfrom national grid and less than 1percent of the hydropowerpotential is being utilized.

The power demand isincreasing at the rate of 11percent annually. Governmenthas the policy to promote theprivate sector both domestic andforeign for the construction ofhydropower projects. There aremany small projects run by theprivate sector. Joint venturecompanies have been attractedto invest in hydro sector asdemand is increasing day by day.Recently, 4.5 MW power has beenconnected in National Grid fromMai Khola hydro project in Ilamconstructed by the Nepaleseentrepreneurs. This is theindication the Nepaleseentrepreneurs are also capable ofproducing small scale hydropower projects. There arehundreds of Nepaleseentrepreneurs, they can runsuch micro or small hydro plantswhich will definitely turn out tobe instrumental to reducepresent power crisis in Nepal.Numbers of commercial banksestablished in the country caninvest more than Rs. 40 billion ifprovided sound guidelines on timeby Nepal Rastra Bank. In Nepal,

country in the world to be rich inwater next to Brazil. While inUnited States of America (USA)700 litres of water per person isavailable every day.

While talking about theexploitation of natural resourcesespecially water, we are possiblythe unluckiest one in the world.So far, we have been able togenerate 600 Megawatt (MW) ofhydropower during more than fivedecades of our endeavour andsupplying the generated powerfor less than one third of ourpopulation for less than one thirdof a day. Bitter reality is that weare importing power from India tolessen 16 hours or more loadshedding a day. Nepal importedRs. 2.5 billion worth power fromIndia last year in 2009.

Hydropower Potential inNepal

The gross hydro potential ofNepal’s rivers based on averageflow has been estimated at 200thousand MW. Potential sites areexpected to be economicallyfeasible for generating about 51percent of this potentiality. Itmeans more than 100 thousandMW is considered as economicallyviable. Though the study is notupdated enough regardingeconomically viable projects,Water and Energy CommissionSecretariat (WECS) under theGovernment of Nepal (GoN), hasestimated 157 projects which cangenerate 6,200 MW power incategory of 10 MW to 100 MW. Inthe category of 100 to 300 MW,the commission has identified 47projects which can generate7,815 MW power and 300 to 1000MW category 20 projects havebeen identified with the capacityof 9,437 MW. Five projects withthe capacity of 19,463 MW areidentified under the category ofmore than 1000 MW projects.

Power Generation andDemand

Despite Nepal is rich inhydropower potential, the

per MW project cost is aboutRs.100 million and the abovementioned capital fromcommercial banks will be capableof building more than 160 MW ofpower projects. Some of theprojects namely 1.4 MW ThoppalKhola, 4.5 MW Lower Nyadi, 30MW Chamelia, 14 MW Kulekhani IIIare under construction takingsuch loan from variouscommercial banks.

From the public sector, 70 MWMiddle Marsyangdi hydropower

Potential HydropowerProjects

Projects Capacity (MW)

Karnali Chisapani 10800

Pancheswar 6480

West Seti 750

Kali Gandaki II 660

Burhi Gandaki 600

Upper Tama Koshi 456

Arun III 402

Upper Arun 335

Lower Arun 308

Dudh Koshi Storage 300

Upper karnali 300

Langtang Khola Storage 218

Andhi Khola Storage 180

Upper Seti Storage 122

Upper Marsyangdi A 121

Tamar Mewa 101

Madi Ishaneswar 86

Kankai Storage 60

Likhu IV 51

Kulekhani III 45

Kabeli ‘A’ 30

Chamelia 30


Cover Chronicle

The financial markets play an active role in determining what’s going to happen, how the economy is goingThe financial markets play an active role in determining what’s going to happen, how the economy is goingThe financial markets play an active role in determining what’s going to happen, how the economy is goingThe financial markets play an active role in determining what’s going to happen, how the economy is goingThe financial markets play an active role in determining what’s going to happen, how the economy is goingto function. - George Sorosto function. - George Sorosto function. - George Sorosto function. - George Sorosto function. - George Soros

project is almost completed.Recently, an agreement signedbetween Nepal ElectricityAuthority (NEA), Nepal Telecom(NTC), Employees’ Provident Fund(EPF), Citizen Investment Trust(CIT) and some other commercialbanks to operate 456 MW UpperTamakoshi hydro power project isa positive indication to employNepalese resource forhydropower.

Main Targets of theGovernment

WECS has formulated NepalWater Plan 2002 which wasapproved by GoN in 2005. Thecommission has set a target togenerate up to 4000 MWhydropower electricity to meetthe domestic demand by 2017. Thisprojection is like a day dream inpresent context of Nepal whereinthere is a significant existence ofpolitical instability, weaker andcorrupted bureaucracy, low scaleinvestment, unfavourable businessenvironment, corrupted andlackadaisical attitudes of thepolitical actors. It is logical to statehere that if then Communist Partyof Nepal Unified Marxist Leninist(CPN-UML) had not opposedagainst Arun-III project (335 MW)about one and half decades ago,Nepalese consumers would nothave to suffer under the terribleload shedding.

Project IdentificationSeveral licenses have been

issued for less than 10 MWprojects for Nepalese investorswith a belief that we can developsuch types of projects. In termsof less than 1 MW project, nosuch a license is required, noincome tax is levied and noroyalty fee shall be imposed. NEAhad fixed the rate of bulkpurchase of electricity NRs. 4.25per KWH for dry season and NRs.3 for wet season. In case of smallprojects, investors have toidentify either themselves or caninvest in a project which is at thestage of completed power

purchase agreement (PPA) withNEA. Similarly, in the case of bigprojects, NEA has alreadyidentified some of the projects forshort, medium and long term.Major studies have already beenconducted and therefore will notrequire much time to initiatethem.

Short Term ProjectsThe short term projects are

defined as projects which can beimplemented immediately andcompleted within five years.Government has already reachedan agreement with some of theprojects. The identified projectscategorized as short term are:

· Budhi Gandaki 600 MW PRoR· Arun III 402 MW RoR· Upper Marshyagdi 121 MW PRoR· Upper Karnali 300 MW PRoR (now 480 MW)· West Seti 750 MW StorageBut these projects are already

in the process of final decision ofbidding. Government ofNepal(GoN) had invited proposalsfrom the private sector for threeprojects that is Budhi Gandaki,Arun III, and Upper Karnali whereIndian companies have submittedthe proposals and thus carried onfurther. Upper Marshyangdi isgoing to be financed by Chineseand Nepalese investors and WestSeti has also been booked.

Medium Term Projects

Medium term projects take alonger time for theaccomplishment due to theduration required for study andtime needed for its developmentafter identification because of itsgeographical location. Some ofthe projects categorized underthe medium term projects are:

· Upper Arun 335 MW· Langtang Khola 212 MW· Upper Karnali 4180 MW Storage· Sapta Gandaki 225 MW

Long Term ProjectsLong Term Projects are such

projects which require longimplementation duration due toseveral factors like hugeinvestment, large scaleconstruction, geographicallocations and so on. Some of theprojects identified for long termcategory are:

· Sapta Kosi 4700MW· Karnali Chisapani 10,800 MW· Pancheswar 6,580 MW

Attraction in HydropowerIn recent days, private

investors are notably beingattracted in hydropower sectoras privately run hydropowerprojects are yielding handsomereturns. In the earlier days whileNepalese projects wereconstructed on grant, it wasimpossible for the private sectorto think about it. Gradually whenthe government and government-run NEA jointly constructed somefew projects, private sectorinvestors, both domestic as wellas foreigners have been attractedin this sector. US developed 36MW Bhotekoshi which isgenerating NRs. 1 billion annualincome while investment cost wasalmost NRs. 5 billion. Likewise,some other investors are makingalluring profit from hydropowerprojects that can be seen in thechart mentioned above. Realizingthe fact, several Indiancompanies are trying to gethydropower licenses as much aspossible. Government of Nepal

GoN had invitedproposals from theprivate sector forthree projects thatis Budhi Gandaki,Arun III, and UpperKarnali whereIndian companieshave submitted theproposals and thuscarried on further.

11HYDRO EDITIONwww.corporatenepal.com.npThe gap in our economy is between what we have and what we think we ought to have - and that is a moralThe gap in our economy is between what we have and what we think we ought to have - and that is a moralThe gap in our economy is between what we have and what we think we ought to have - and that is a moralThe gap in our economy is between what we have and what we think we ought to have - and that is a moralThe gap in our economy is between what we have and what we think we ought to have - and that is a moralproblem, not an economic one. - Paul Heyneproblem, not an economic one. - Paul Heyneproblem, not an economic one. - Paul Heyneproblem, not an economic one. - Paul Heyneproblem, not an economic one. - Paul Heyne

had already proceeded agreement with some ofthe Indian companies for construction of potentialthree projects-600MW Budhi Gandaki, 402MW ArunIII, and 300 MW Upper Karnali.

Challenges and OpportunitiesThough many of the projects are attractive and

rate of return is very high and there existsminimum risk for already identified small types ofhydropower projects, mega projects areaccompanied with high risks in terms of investment.Sufficient study is found lacking on the part of bothgovernment and private sectors regarding bigprojects. There are very limited study conductedand it may take longer duration to complete thestudy over any mega project. Environmental issuesare more associated with big projects as suchprojects seek for huge construction work. Howeversome opportunities are adjoined together with bigprojects because major studies have already beendone in less than 600 MW projects and there are nomajor cases relating to water rights associatedwith these projects. It is not very difficult to makePPA with the NEA as government has already setstandard rate for less than 5 MW projects andmore than this can be fixed through negotiation.After completing the PPA, construction of theproject should set off.

Issues on Tariff RateEvery consumer gets frustrated with load-

shedding and one can be ready to pay higher priceif consistent supply of power is guaranteed. NEAhas not been able to increase power tariff formany years as it has to get approval from tariffcommission to fix it. According to the investors, asthe price of input materials has gone up during thisperiod, electricity purchase price should beincreased to attract investment in hydro powerfor the coming days. Increasing price is however avery unpopular decision the question of goodmanagement in NEA is connected within it. TariffCommission has demanded the commitment fromNEA for its transparent and proactive, non-corrupted management. There is no such a groundwith NEA to have public faith due to its defunct

and opaque character without governance. With onethird of its leakage electricity, NEA largely standingwith the cumulative loss of NRs. 22 billion and theinvestors do not seem interested to support this lossmaking government enterprise on PPA issue. Besides,NEA now has monopoly authority of generation,transmission and distribution of electricity in thecountry and the stakeholders are demanding to splitit into the three functioning bodies to promotecompetition that will ultimately help in generatingand distributing electricity to the larger number ofpopulace.

Cover Chronicle

Some Successful Projects with Cost, Capacity and Annual Income(Rs. in million)

Projects Country Capacity Investment Construction Annual

(MW) Period (Yr.) Income

Bhotekoshi USA 36 5000 4 1000

Chilime Nepal 20 2450 4 810

Indrawati Nepal+Norway 7.5 1500 4 240

Sanimai NRN 2.5 34 2 80

Sisne Nepal (IPP) <1 110 2 25

(Author is a senior financial journalist conversant onhydropower affairs. )


Cover Chronicle

By Bikas Thapa

Why Nepal is cursed with

Load SheddingLoad SheddingLoad SheddingLoad SheddingLoad Shedding?epalese consumers arelikely to bear somesixteen hours of everyday power-cut in this

March. Meanwhile there won’tbe further any option than merelyone or two hours of power supplyif either of the powerhouses ortransmission lines catch up withtechnical disparity. Load sheddingis though an infinite dilemmarather than a short term crisiswhich means it is quite imperativeto remain under gloom till thedate we will have either a storageor run of river hydro project withcapacity to generate 1 thousand

megawatt (MW) electricity.Nepalese electricity systemdemands at least 1 hundred MW ofadditional energy per annum. Wehowever do not have any stepsforward to fulfil the additionaldemand of energy. Neither we canproduce energy to such extentnor are we being able to importso. While the highest demand(Peak Load) of energy is 9 hundredMW this year, supplied do notholds even one third of itcomprising total importedelectricity from India.Hydropower Stations owned byNepal Electricity Authority (NEA)

N Khimti andBhotekoshi projects

appeared in thescene as per the

hydropowerdevelopment policy

designed andimplemented in 1993somehow in pressure

from the donors’side.

Five years ago, we thought of the Web as a new medium, not a new economy. - Clement MokFive years ago, we thought of the Web as a new medium, not a new economy. - Clement MokFive years ago, we thought of the Web as a new medium, not a new economy. - Clement MokFive years ago, we thought of the Web as a new medium, not a new economy. - Clement MokFive years ago, we thought of the Web as a new medium, not a new economy. - Clement Mok

13HYDRO EDITIONwww.corporatenepal.com.npWhen a management team with a reputation for brilliance tackles a business with a reputation for badWhen a management team with a reputation for brilliance tackles a business with a reputation for badWhen a management team with a reputation for brilliance tackles a business with a reputation for badWhen a management team with a reputation for brilliance tackles a business with a reputation for badWhen a management team with a reputation for brilliance tackles a business with a reputation for badeconomics, it is the reputation of the business that remains intact. - Warren Buffetteconomics, it is the reputation of the business that remains intact. - Warren Buffetteconomics, it is the reputation of the business that remains intact. - Warren Buffetteconomics, it is the reputation of the business that remains intact. - Warren Buffetteconomics, it is the reputation of the business that remains intact. - Warren Buffett

Cover Chronicleand Independent PowerProducers (IPP) do not so farproduce one third of installedcapacity in every dry season. (Seebox)

Wet season comes across withexcess amount of water in Nepalhaving ample hydro potential togenerate millions of MWelectricity. Thus Nepal is regardedas prosperous nation in waterresources. But most of the riversin the dry season go downsubsequently with more than twothird of their water-level. Thisaffects the overall production inrun of river type hydropowerprojects. Despite the installedcapacity of 6 hundred and 60 MW,overall hydropower projects inNepal are yielding no more thanrelatively half of what is instated.It is due to the reduction in watersurface level of the rivers and itsomewhat poised the statement-’Nepal is not affluent in waterresources where there is a lotenough basically in the floods.Nonetheless we possessundoubtedly the appropriateheads (height necessary toproduce electricity) andgeographical structure suitablylocated to construct dams. Nepal,eminent as a potential terrain toproduce more or less 83 thousandMW power claimed by the studiesso far is however well-to-do nomore than in the principles andbeliefs where the 40 percent ofallegedly ‘benefited’ segment ofpopulation mix supplied withenergy are rewarded abuttingdense load shedding. We supposeto be rich enough in waterresources due to the availabilityof raw materials i.e. water,naturally and at free of cost. Ineach case of energy generationthrough other alternative meanssuch as coal, atomic process andso on, cost on raw materials isamounted ultimately in thegenerated power. India isproducing more than 70 percentof total overall energy based oncoal where buying the rawmaterials is must before the

generation. Hydroelectricprojects in Nepal are supposed asfeasible due to the freeavailability of water to rotate theturbine since one timeinvestment for dam, turbine,penstock (canal to flow runningwater) etc. But hydroelectricproject is not an easily madephysical structure which maycommence generating powerright away. Obviously there arecertain elements, needful to bearranged and managed in theproper technical form to operatea hydro project. Here are someof the major reasons behinds theongoing power crisis andexasperating load shedding.

1. Political Instability

Politics, the major successionfor national development issignificantly the backbone foreconomic boom of the country.We are yet underway to fix ourpolitical system since 1950 andinstability is ruling to date.‘Panchayat’ system with its threedecades of history broughtaltogether 250 MW ofhydropower. Hydropower caughtits verve in the earlier days ofmultiparty democracy after 1990though foreign investors anddonors’ lobbies and theirinfluences in combine weresuccessful to hand over theoverall responsibility ofhydropower development andconstruction to the privatesector. Policy camouflaged as per

Electricity Demand Projection

Year Energy Growth Peak Growth

(GWh) (%) (MW) (%)

2006 2777.40 603.28

2007 2897.10 4.3 642.20 6.5

2008 3136.60 8.3 695.30 8.3

2009 3428.10 9.3 759.90 9.3

2010 3698.40 7.9 819.80 7.9

2011 4057.10 9.7 890.60 8.6

2012 4423.30 9.0 971.00 9.0

2013 4815.00 8.9 1057.00 8.9

2014 5231.20 8.6 1148.00 8.6

2015 5373.80 8.5 1245.00 8.5

2016 6144.70 8.3 1336.10 7.3

2017 6645.90 8.2 1445.10 8.2

2018 7179.60 8.0 1561.10 8.0

2019 7719.40 7.5 1678.50 7.5

2020 8296.70 7.5 1804.00 7.5

Average Growth (%) 8.14 8.14

Source : NEA Annual Report 2006/07


Cover Chronicle

Men do not realize how great a revenue economy is. - Marcus Tullius CiceroMen do not realize how great a revenue economy is. - Marcus Tullius CiceroMen do not realize how great a revenue economy is. - Marcus Tullius CiceroMen do not realize how great a revenue economy is. - Marcus Tullius CiceroMen do not realize how great a revenue economy is. - Marcus Tullius Cicero

those advocacies. Khimti andBhotekoshi projects appeared inthe scene as per the hydropowerdevelopment policy designed andimplemented in 1993 somehow inpressure from the donors’ side.With the Power PurchaseAgreement (PPA) signed bindingthe clause to pay these twocompanies for supplied energy inthe rate of US dollar, NEA is nowburied under the turf of almost Rs.4 billion loss per annum.Government increasinglydepended upon the private sectorfor power production then where214 MW among overall 314 MWproposed target of tenth plan wasscheduled for the private sector.However, 37 MW is the figure thatrepresents the generated powerin the whole five years period oftenth plan contributed from theprivate sector. One thing that mustbe remembered is this 37 MWincludes 20 MW of ChilimeHydroelctric Project too as aprivate one. In the tenth planperiod, privatesectors did not getthe advantages likePPA in dollar rate asin the Khimti andBhotekoshi project.There was none ofthe IPP operatinglarger size projectsthan 10 MW.Investment was areal challenge inthe conflictingpolitical situation.Maoist led people’swar commenced in1996 whichi n f l u e n c e ddifferent aspects ofthe economy.There was noproper guaranteeof investmentcapital, security ofthe project; fearand terror createdby the war etcwere the factors todistract anddiscourage the

national and foreign investors ata time. Large scale investmentwas impossible then.

Political hurdles continuedand the April movement in 2005brought a new scenarioestablishing democracy onceagain. Although republic systemis introduced and put intopractise, stability remains yet tobe established in Nepalesepolitical system. People’s desirefor economic revival and doubledigits growth are still unfulfilledand ongoing stalemates,deadlocks, and lack ofgovernance, push and pulls- backand forth or to and fro to creategovernment, uncertainty vis-a-visbuilding new constitutions areamong such agendas nurturingthe instability incessantly.

Investors are reacting bitterlydue to the instability and theyhave lost their confidence dueto the attitudes of majorpoliticos. Such as for example noone is here to assess the

ineffectiveness of the proposedprogramme of ’10 thousand MWproduction in 10 years’announced by the Maoistprevious government where themajor reason is alteration in theattitude of the same party. Thetaskforce headed by formersecretary Somnath Poudel tostudy the feasibility of theproposed programme of ’10thousand MW production in 10years’ had prepared a report inwhich Unified Communist Party ofNepal (UCPN) Maoist’s Chairman,Pushpakamal Dahal, Prachandahas committed to implement therecommendation of the taskforceand not to disturb the investmentin hydro. The latterannouncement from UCPN Maoistin last October-November to halt14 hydroelectric projects withIndian investment is the examplethat is annoying the hydropowersector which seeks for huge scaleinvestment especially the jointventures.

Policy variationaccording to thealteration ingovernment is thelatest one among thehurdles. UCPN Maoistannounced 10thousand MW targetin 10 years while itwas leading itsgovernment. EarlierNepalese Congress(NC) said 5 thousandMW in 5 years butlatter while handlingthe ministry of energyin the government ledby Communist Party ofNepal, Unified MarxistLeninist (CPN-UML),NC announced 25thousand MW targetof power productionin 20 years. It was justa populist slogan butnothing progress iscounted in tangibleform. There is neithera common opinionamong the leading

Load Shedding

Year Wet Season Dry Season

2007/08 2 hours 11 hours


(Mid-Marshyangdi)




Available Energy SourceNEA (RoR) 274 112

IPP (RoR) 148 63

India (Purchase) 76 80

along with Tanakpur

Thermal 25 30

Kulekhani I 60 60

Kulekhani II 15 15

Total (MW) 598 360

Source : NEA


Cover Chronicle

To think that the new economy is over is like somebody in London in 1830 saying the entire industrialTo think that the new economy is over is like somebody in London in 1830 saying the entire industrialTo think that the new economy is over is like somebody in London in 1830 saying the entire industrialTo think that the new economy is over is like somebody in London in 1830 saying the entire industrialTo think that the new economy is over is like somebody in London in 1830 saying the entire industrialrevolution is over because some textile manufacturers in Manchester went broke. - Alvin Tofflerrevolution is over because some textile manufacturers in Manchester went broke. - Alvin Tofflerrevolution is over because some textile manufacturers in Manchester went broke. - Alvin Tofflerrevolution is over because some textile manufacturers in Manchester went broke. - Alvin Tofflerrevolution is over because some textile manufacturers in Manchester went broke. - Alvin Toffler

political parties regardinghydropower production northey have prioritised it asthe national objective.

2. Ambiguous PoliciesAs hydropower

development policy 2001 hadwaived all sorts of corporateincome tax for fifteen yearsperiod, this sector seemed thetempting one for almost a decade.However, Income Tax Act 2058revoked all of those guaranteesand incentives in hydropower andbrought it inside the periphery ofvalue added tax (VAT). Some of theprojects registered and signed theagreement as exportable venturesalong with Khimti and BhotekoshiHydroelectric project were hardlyany to get the tax incentives butother national projects werecurtailed to get so. Financial billand budget speech per yearafterwards cut off the incentivisedpolicies in hydropower. This sort ofunsteadiness in policy indeeddisappointed the investorshowever instability and alterationis continuing as far as this.Department of ElectricityDevelopment was once terminatedand later revived again butascertained in such a way as if it isonly to issue the licenses onhydropower. Department ofElectricity has issued license forsome 13 thousand MW projectshitherto where one percent of itis enough to wipe out the wholephenomenon of load shedding.Regulation of licensed projects isalways lacking along with thecapable human resources.

3. Insufficient InvestmentStudy has shown the

estimated cost of 25 billion USdollar to generate 10 thousandMW in 10 years period in Nepal. Atthis, 1 MW demands Rs. 150 millioninvestments which is definitely alarge sum of amount for Nepaleseeconomy. A general notion of 30percent equity share and 70percent of loan is the basis ofprivate sector investment in

hydropower even if it is notguided by any certain policy oract. According to Nepal Bankers’Association, national level banksand financial institutions (BFIs) areable to invest in there orthereabouts 50 MW capacityprojects which is an indicationthe financial sector in Nepal isquite small to invest inhydropower. Risk and portfoliomanagement is the theme ofhealthy banking and this sectordoes not and should not invest inonly hydropower projects.Besides investment inhydropower is more risky one dueto its long term nature andlengthy process of generationcum supply. Risk factor is high andon the other hand, benefitingrate is debasing day by day. Someyears back while the internalreturns rate used to be at 16percent, those hydropowerprojects were unable to carry onin the lack of PPA. Nationalinvestors are simply engaged inthe micro hydropower projectsup till then and rapid shortage ofinvestment is entangling themdespite the policy has definedprivate sector roles. In somecases there are up to 40shareholders in the equity

The consultant inKaligandaki A received

some 20 million US dollarwhich is equal to the

cost of 20 MW Chilimehydropower project.

necessary to build a hydroproject with 1 MW license.Large corporate housesseem reluctant to invest inhydropower projects due totheir heavy earning fromshort term trade and so on.Whereas public investment isalmost at zero level these

days and dependency towardsthe foreign direct investment

has been lobbied by thegovernment itself. After the fall ofArun III, donors seem sceptic toinvest in the hydropower projectsand projects like Mid Marshyangdiand Kaligandaki A remained aslatest ones to have bilateral,multilateral loans and grants.Government seems quiteapathetic to invest itself inhydropower which reveals nonepriority to this sector. Investmentcraze in the initial public offerings(IPO) of share by any financialinstitution is an evidence to provewe can collect huge equity fromthe public to invest in any feasiblemega hydro project. Likewise a Rs.3 billion remittance inflow perannum is waiting any reliableproductive sector and megahydropower can possibly be one.Government is ought to guaranteeits people in harnessing theabundant fund to investcollectively in Mega powerprojects.

4. Lack of infrastructuraldevelopment

Infrastructure is theprecondition for hydropowerdevelopment because road accessand transmission line to the entrypoint of power station is must tosupply the generation. It is pity tosay no other projects arefacilitated with these accessesbeyond some of the identifiedprojects. Private parties solely areunable to fund for road access andtransmission lines and thusdemand for the presence of Stateas a patron. Only an entry roadand transmission line can changethe potentiality level of the wholebasin and other several projects in


Cover Chronicle

A creative economy is the fuel of magnificence. - Ralph Waldo EmersonA creative economy is the fuel of magnificence. - Ralph Waldo EmersonA creative economy is the fuel of magnificence. - Ralph Waldo EmersonA creative economy is the fuel of magnificence. - Ralph Waldo EmersonA creative economy is the fuel of magnificence. - Ralph Waldo Emerson

the area are possibly benefited ifthe State is eager to invest in theinfrastructure in sequential formtargeting the identifiedhydropower projects. Departmentof Road is enjoying to perform it itsown orthodox style and do notever coordinate with ministry ofenergy to provide access to theprojects sites while expandingroads and highways. A cabinetdecision prior to two years toinvest Rs 50 billion in transmissionlines has gone in vain following thedefiance of finance ministry toallocate the budget to it. Thistendency has sidetracked some ofthe imminent projects and createsdifficulties in transmitting thegenerated power from loan basedprojects like Kaligandaki A and Mid-Marshyangdi. NEA whimpers thatadequate transmission lines areseverely missing in 25 corridorsaltogether in the country which isthe basic reason to hinder the PPAwith several projects.Unavailability of entry road accessis also delaying the projects. Foran instance, Upper Tamakoshiproject in Dolakha is still withoutentry road. Construction of it isgoing on for last six years. Likewiseprovisions for acquiring land,cutting trees in the jungle areas,financial services, insurance etcare even not sufficient to gear upthe hydropower.

5. Gaps in Technical Know-how

Hydropower requires highlevel technical expertise andknowledge where we have limited

human resources to tackle with it.The consultant in Kaligandaki Areceived some 20 million US dollarwhich is equal to the cost of 20 MWChilime hydropower project.Similarly, numerous medium sizeprojects such as Mid-Marshyangdi,Lower Marshyangdi were to hiredexperts and technicians from theoverseas and later met manydiscrepancies and some of theprojects were delayed. KulekhaniIII and Chamelia hydro are nowfacing many technical drawbackswhere Nepalese technicians areproviding the consultancy service.Those projects are seeking for theexpert services now. In the sameway, Employee’s Provident Fund(EPF), the major institutionalinvestor in the Upper TamakoshiProject has put forward the pre-condition in the project to appointa foreign chief executive officer.This incident is a question over theability of the Nepalese technicalresources. Thus it is not easyenough to move forward thehydropower sector withoutcrafting such an environment inwhich the Nepalese specialist willhandle the hydro projects up tothe 100 MW. Furthermorehydropower projects seek outevery large and medium tools,equipments, devices andtechnologies to import within. Aproject often imports thenecessary devices from the samecompany until the project finaliseand it is supposed the commissionpart is involved together thatascends the price factor.

6. CorruptionDespite the allegation on some

few other factors - technicalfallacies, closures, strikes, preconditions of donors andcontractors, believed to be themajor causes of project costvariation, there is alwayscorruption which remains at thetop among the others. Costvariation is all the time backed bythe corruption regardinghydropower projects in Nepal.Policy corruption and corruptionin the site are pre-designed andmaintained at each level in thesystem. Either in nominating thecontractor or purchasing anyequipment, commission is exactlynecessary. The decision maker inthe project is often encouraged toenjoy the commission to delay theprocess because the contractorand consultants are proportionallybenefited as much as the projectlingers. Thus corruption isadjoined from the beginning stepsof licensing to the powergeneration.

7. Political Invasion in NEANeither the government is able

to form a parallel institution as anoption nor the private sector canhandle it- it is NEA where morethan 50 percent of problems arecreated due to the politicalinterference. Holding about 500MW of installed capacity, NEA isserving as an amusing park for thecorrupted energy ministers.Energy minister is directlychairperson in the NEA board andthere is an established notion to

Headworks of Kaligandaki ‘A’ Photo Credit : NEA


Classic economic theory, based as it is on an inadequate theory of human motivation, could beClassic economic theory, based as it is on an inadequate theory of human motivation, could beClassic economic theory, based as it is on an inadequate theory of human motivation, could beClassic economic theory, based as it is on an inadequate theory of human motivation, could beClassic economic theory, based as it is on an inadequate theory of human motivation, could berevolutionized by accepting the reality of higher human needs, including the impulse to self actualizationrevolutionized by accepting the reality of higher human needs, including the impulse to self actualizationrevolutionized by accepting the reality of higher human needs, including the impulse to self actualizationrevolutionized by accepting the reality of higher human needs, including the impulse to self actualizationrevolutionized by accepting the reality of higher human needs, including the impulse to self actualization

Cover Chronicleinterfere even in the routine jobslike dealing the contracts,appointing project manager etc.Each time the newly appointedenergy minister calls for thetender to appoint executivedirector in the NEA and it is hard tobelieve the very directorappointed after due effort of giveand take can strengthen theinstitution. The then minster hadmade the deals on Khimti andBhotekoshi finally dismissing theexecutive director of NEA, quiteunfavourable to him.

8. Tariffs Rate PoliticsPolitical leaders and the

ministers constantly hesitate inadjusting price on petroleumproducts and electricity tariffs toavoid unpopularity among people.The same concept is working forlast 10 years and because of thelack of tariff rate adjustment,private sector is uninterested toinvest more in hydropower.Adjustment is justifiable as NEA hasits cumulative loss of 19 billionrupees on one side and on theother, inflation and price hike inthe construction materials, wagesetc should not be ignored. Tariffcommission is provisioned to reviewand provide approval for priceadjustment proposal of NEA. TariffCommission has recently demandedfew commitments andclarifications from NEA to reformthe system and minimise theoperation cost. Controllingleakages, cut in superfluousexpenses, transparency are someof the genuine issues raised by thecommission. In the lack of properadjustment in tariffs rate, PPA rateeven does not get a chance tohave present-day tuning.

9. Indo Water PoliticsWe have straightforward policy

to export electricity in India andstanding on the same foundationour policymakers have handedover dozens of license to theIndian company in last 20 years. ButIndia had remained indifferenttowards power generation.

Moreover issues concerningnationality and patriotism hovers inthe market while discussing aboutpower export. In the exemplar ofWest Seti, India was reportedlypresented as if it was in anendeavour to acquire water forirrigation using SMEC Company.These kinds of rumours areresponsible to spoil investmentfriendly environment. If there wasIndia behind West Seti, they wouldhave certainly finalise the projectbecause we should not forget thedark history where two thirdportions of the parliamentarianswere influenced by the south blocto sign the Mahakali Treaty.

Way-out measuresNepal used to be free from

blackouts following the completionof Kaligandaki A project. There usedto be excess energy produced fromthe project for three year. It istechnically sound state to havesome portion of generated poweras reserve in the hydropowersystem. But the power generatedfrom those projects built withinloan facility in US dollar should bemade the most of it. Mid-Marshyangdi, completed in almost adecade is the project whichfollowed Kaligandaki A but there areno more any middle size projectsbuilt after it. Upper Tamakohi,however if will be finalised in nextfive years, it won’t be able tomitigate the load shedding. It willonly generate 80 MW of energy inthe dry winter season though theinstalled capacity will be 456 MW. It

means run-of-the-river projectsalone are not easily able to endthe state of load shedding inNepal. We need 3000 MW run-of-the-river projects to tackle withongoing load shedding. Thus it isnow the right moment seekingprompt action to build storagetype of hydropower projects.

It is quite necessary to havenational consensus on politicallevel to halt all sorts ofinterferences in operating themega hydro projects. Governmentis ought to incentivise thehydropower sector throughmyriads of discounts on incometax, VAT, custom duty and thetariffs. It will be justifiable tocollect income tax and VAT fromthe projects after they will repaytheir loans and interests. Propercoordination in between differentunits and stakeholders ofgovernmental bodies is necessaryto limit the time and effort alongwith the cost factor.

We have to be ready to dowhatsoever necessary in our partto end all of the below listedtrends and tendencies to end loadshedding- All of the suddenalteration in policy by ministry ofindustry and ministry of finance,hesitation for PPA by NEA,indifference to invest intransmission lines, delay inapproving the EnvironmentalImpact Assessment (EIA) byMinistry of Environment,Prohibition in cutting some treesin the site by Ministry of Forest,demanding donations from localpolitical cadres, loading unlimitedburden of education, health etcover a hydropower project arefew among the tendencies waitingthe rapid end. To do so, let ushonestly implement the report oftaskforce, formed to execute thegovernmental proclamation ofproducing 10 thousand MW ofenergy in 10 years. Planning isplenty enough, real challenge liesamid implementation.

(Author is a leading journalistspecialised in water resourcesaffairs.)

let us honestlyimplement the reportof taskforce, formed

to execute thegovernmental

proclamation ofproducing 10

thousand MW ofenergy in 10 years.


Cover Chronicle

In economics it is a far, far wiser thing to be right than to be consistent. - John Kenneth GalbraithIn economics it is a far, far wiser thing to be right than to be consistent. - John Kenneth GalbraithIn economics it is a far, far wiser thing to be right than to be consistent. - John Kenneth GalbraithIn economics it is a far, far wiser thing to be right than to be consistent. - John Kenneth GalbraithIn economics it is a far, far wiser thing to be right than to be consistent. - John Kenneth Galbraith

lectricity is consideredas the indispensablefactor for all kind ofdevelopment activities

and has direct effects in severaldimensions of economy, society,education, health, agriculture,information technology and thelike. Nepal saw its firsthydroelectric power plant in1911, suitably a century ago, that

started generating electricity.Despite of it the ensuing pace ofhydropower development is notpraise worthy. Almost 60 percentof Nepalese do not have access toelectricity. In rural areas, thefigure could be in the order of astaggering 90 percent. Those whohave electricity access also arefacing up to 18 hours of loadshedding a day. Thus they do nothave quality and reliable supply ofelectricity.

Community participation hasbeen identified as a vital tool innatural resources development,optimisation, management andservice delivery. Economicbenefits from such communitymanaged natural resources mayperhaps reach towards thecommunity and thus can help forpoverty reduction as well.Community participation has beenremarkably acknowledged inmicro hydropower projects,electricity distributionmanagement activities, forestry,

and irrigation. Ultimately theseprojects have been playing theeffective role in promotinglivelihood of the communities.Similarly, hydropower is a sectorwhich when developed andmanaged in an effective mannerwould certainly bring the hugeeconomic returns. There is noarguing that hydropower’s returncan be one of the majoreconomic resources or the basefor poverty reduction andprosperity of Nepalese people.For the upbringing of Nepalesesociety and for the promotion oflivelihood, hydropower sector hasto grow with effective mechanismand sustainability is foreseen ifpublic participation is ensured.

The government of Nepal hasrecognized the private sector’srole in harnessing waterresources. From the 1990’ssubsequent to the adoption ofthe policy of economicliberalization, hydropowerdevelopment took another new

Hydropower to Reduce Poverty

By Dilli Ghimire

While receivinghydropower

returns, a gap hasincreased

between capable,rich people andpoor, general

public and minorcommunities.

E


Economic wounds must be healed by the action of the cells of the economic body - the producers andEconomic wounds must be healed by the action of the cells of the economic body - the producers andEconomic wounds must be healed by the action of the cells of the economic body - the producers andEconomic wounds must be healed by the action of the cells of the economic body - the producers andEconomic wounds must be healed by the action of the cells of the economic body - the producers andconsumers themselves. - Herbert Hooverconsumers themselves. - Herbert Hooverconsumers themselves. - Herbert Hooverconsumers themselves. - Herbert Hooverconsumers themselves. - Herbert Hoover

Cover Chronicleturn. The private sector directlyand indirectly is being involved ingenerating hydroelectricity. Theimmediate reaction to the policyhas shown positive results ininstalling new hydropowerprojects in the country. Thegovernment has brought ahydropower policy in order toattract private investment. Againthe government promulgated newHydropower Development Policy(HDP)-2001 with necessaryamendments with the view toattract private sector investors inthe development of hydropower.In response to the hydropowerdevelopment strategy followed bythe promulgation of favourableHDP to attract private producers,at the beginning, Nepalexperiences a successful andencouraging story after 1990.There was an encouraging trendof development of hydropowerthrough private producersalthough the speed of installingwas very slow due to variousreasons.

But this opportunity is quitelimited to some business familyonly. Only limited people are ableto enter into the sector. Legalprovision of entering into thesector on the basis of definedinstitutional, financial andtechnical capability of investorshas prohibited many and providedopportunities to the limited andcompetent people only. Likeother sectors, there is lack ofpublic access in hydropowerdevelopment. Hydropowerdevelopment could not beprogressively achieved throughState’s present mechanism. Statehas acknowledged providinglicense to big projects in thename of liberal policy. Whilepromoting private investment,State has not howeverencouraged and facilitated forthe community empowermentand enhancement for people’sparticipation in the sector.

Very limited smart andresourceful people haveregistered for the hydropower

projects. Other minors are evenunaware of hydropower policy,law and mechanism. Hence, theydo not have access tohydropower development. Whilereceiving hydropower returns, agap has increased betweencapable, rich people and poor,general public and minorcommunities. The gap has beenincreasingly widened and thedisadvantaged groups are findingdifficulties in getting thoseopportunities. This has also raiseda fear of lessening the feeling ofbelongingness in hydropowerprojects by Nepalese people. Thestate has defined certaincapacities, experiences, financialresources and procedures todevelop and enter into thehydropower sector which is reallydifficult for unorganized Nepalesepublic. This has finally limited theopportunities within the limitedbusiness class.Those clever oneswho have registered forhydropower development havebeen benefited through the salesof registration certificate. This isanother frustrating trend.

Environmentalmeasures formitigation andcompensation forpeople andc o m m u n i t i e saffected byh y d r o p o w e rprojects are wellunderstood todaybut policies arenot yetf a v o u r a b l eallowing the fullparticipation ofcommunity andsharing thebenefits. Finally,the state ofdispute has beenraised among thec o m m u n i t ypeople andpossibly the samewill increase inthe coming days.

In this regard,

hydropower development has tobe linked up with publicparticipation process. This is notonly the project affectedcommunities to get some minorbenefits but the door should beopened for all public toparticipate in the process.Hydropower developmentstrategy should be such thatpublic participation should bedrawn in decision making level.Public participation in strategicdesign and project planning is notonly desirable from the point ofview of fostering the rights of theindividual, it can also deliverbetter results in terms of therealization of economic and socialdevelopment goals within thecontext of sustainabledevelopment.

To speed up the process ofhydropower development and forits sustainability, general peopleof the country should bebenefited for objectives of theprogramme. For those difficultieswith regards to the policy, legaland institutional issues shouldhave been addressed evenly.


Cover Chronicle

People want economy and they will pay any price to get it. - Lee IacoccaPeople want economy and they will pay any price to get it. - Lee IacoccaPeople want economy and they will pay any price to get it. - Lee IacoccaPeople want economy and they will pay any price to get it. - Lee IacoccaPeople want economy and they will pay any price to get it. - Lee Iacocca

epal- unlike any othercrisis-stricken nation,with its own politicosto whom citizens

supposed for writing newconstitution, is obviously sufferingdue to the awful sketches theydrew persistently in the part ofcivilian’s fate. Nepal is neither adesert land, irrigation less norinfluenced by any regionalconflict however has beencaught in the midst of poverty,unemployment, scarcity andultimately the most torturouspenalty-like ‘Load Shedding’.

Leaders and the scholarsare paradoxically repeatingtheir double standard quotes,‘Nepal is second richestcountry in water resourceshaving potential to generate 83thousand MW of energy’ andon the other hand, ‘ LoadShedding is our ultimatecompulsion’. UndoubtedlyNepal possesses more or less 6thousands steep rivers withhigher velocity because of thenaturally gifted territorialexistence- grand Himalayas onthe north, the source of everybit of verve i.e. the water andrespectively the Hilly and Teraibelt downwards to the south.Despite these all we are ironicallyin the grip of all-season blackoutslasting for almost 21 hours a day inlast summer.

It is an inherent right of acitizen to have proper access toenergy source especially to move

him/her en route of globalisationand e-commerce. Cyberrevolution, if they, the 60percent of our population remainunder the dim light of oil lantern,will be no more than a myth incoming decades. Load sheddinghas its wide range of depressingaftermaths on overalldevelopment and uplifting the life

standards of the citizens. On theother hand for the haves’ class,no matter how much loadshedding holds total hours a daywhile living convenient life underuninterrupted power systemequipped with invertors.Government, the executive bodywhich is given authority of

collecting lawful taxes in theassumption that it will facilitateits taxpayers to exercise theirfundamental rights and live safelyunder maintained order, hascertain duties to fulfil constantlyto ease the people. While energyis essential to run the dailyactivities and most of the basicneeds, several governments and

States in the world haveprioritised electricity toprovide for their citizens andthus subsidised. In Nepal,regardless of quite insufficienthydropower projects forinternal consumption, despitethe lack of genuinecompletion of feasibleprojects in time, thegovernment is still alienated inbetween one and half decadeor so previous dreaming ofpower export to othercountries. Here are some ofthe key reasons and measuresto tackle on power crisis.

Reasons1. Absence of will power

among the policy dealers is theencompassing factor guidingeach of the government to

limit its priority to hydropowerproduction. Thousands of MWenergy is produced each yearsimply inside the pages of draftsand policies.

2. NEA is hunted by ad-hoc-ismfor last 25 years or more and stillholding the nubs to identify theprojects, surveys, constructions

By Bhanendra Kumar Limbu

Power CrisisAn Undue Dilemma

N

It is an inherent right of a citizen to have proper access to energy sourceespecially to move him/her en route of globalisation and e-commerce.


Cover Chronicle

Globalization presumes sustained economic growth. Otherwise, the process loses its economic benefits andGlobalization presumes sustained economic growth. Otherwise, the process loses its economic benefits andGlobalization presumes sustained economic growth. Otherwise, the process loses its economic benefits andGlobalization presumes sustained economic growth. Otherwise, the process loses its economic benefits andGlobalization presumes sustained economic growth. Otherwise, the process loses its economic benefits andpolitical support. - Paul Samuelsonpolitical support. - Paul Samuelsonpolitical support. - Paul Samuelsonpolitical support. - Paul Samuelsonpolitical support. - Paul Samuelson

and development unremittingly.Today NEA, with its over 10thousands staffs with ‘bigpocket’, is preferred most as afavourable platform by thecorrupted leaders and privatesector ‘Big-wigs’ to make theirdealings.

3. In fact, State does notpossess the exact data ofpotential hydropower generationthus far by which meant thenecessity of proper research andscientific analysis is still lacking. 83thousand is the figure what we arerepeatedly ... till the date but itshumorous to some extent wherewe are facing up to 21 hours ofload shedding in the lack of 1000MW energy, less than 2 percent ofthe above mentioned aphorisefigure.

4. Policy makers and thebureaucratic masters do everseriously workout to preventimminent power crisis in the wholewet season. It is the boon of loadshedding where the dry season isfull of luscious cock-tail partieswondering and pondering over theenergy shortage debacles.

5. ‘Projects inside the wallets’is another sever problemanguishing the entire hydro powersector. License traders alwaysthank to the feeble regulators andmiserable situation of zerodiscipline where ‘Kingpins’ areholding several licenses ofthousands of MW hydropowerprojects. Genuine powerproducers are distracted due tothe phenomenon.

6. Distribution system isanother area that is waiting for along what the power producershad been demanding thealteration. Clear cut andfunctional policy is even sobehind the scene to developinfrastructures like roads, basicstructures and transmission lines.Dozens of projects are still on thequeue following PPA with NEA.Investment in infrastructures isobligated to the State rather thanthe private parties and this is oneof the reason affecting

hydropower projects.7. Leakage is the most alive

crisis in the electricity system,which, as NEA admits, coversapproximately 25 percentage ofoverall generated power. NEA hasrepeatedly mentioned in itsreports the channel of leakages inits power grids but thegovernment had ever taken anyprompt action against these sortsof thefts.

These are few of the commondrawbacks behind thenightmarish of blackouts andthere may be some moretechnical causes hanging behindthe consumers’ eyes, seeking forquick measures from theconcerned stakeholders.

RecommendationsWith the viewpoint of some

windfall traders, thanks to theload shedding- ruining citizens’daily life, hampering students’learning hours, closing hands inthe office hours and finallyopening an enormous market ofinverters, UPS and candle sticks.Load shedding is merely a crisisfor the haves not these daysbecause none of thegovernmental offices, largecorporate houses and thosehaves does ever suffer with thisdilemma. However it is quiteimperative to the government totackle with the power crisis, if it,as it claims itself as the chiefexecutive representative of thecitizens, is so in the real sense.

1. Government is ought toidentify and take into action,swift measures to end loadshedding completely in 3 to 5years.

2. Monopoly in electricitytransmission and distributionsystem should be ended promptlywhich will certainly welcomeprivate sector companies to workalongside NEA. Authority of NEAshould be decentralised and sucha mechanism should be builtaccordingly in which regulatorybody will regulate NEA and privatesector companies conversely in

close surveillance.3. Government should

conduct proper research andsurvey upon the potential microhydro projects all over thecountry.

4. It is quite proper time toshift the priority towards smalland micro hydro projects ratherthan the mega one as a short termmeasure to resolve energy crisis.As a run-of-river project yieldsroughly 50 percent of electricityamong its installed capacity, it isnecessary to identify the microprojects with installed capacityof 1300 or more MW energy.Planned effort to develop some 40to 50 small and micro hydroprojects with 1 to 25 MW perproject capacity will be the keyto unlock power dilemma in next3 years.

5. Despite the fact that NEA isobliged to purchase power fromsmall projects up to 25 MWdeveloped by the privatecompanies, those projects arestill secluded from thedistribution pattern and nationaltransmission grids. Thusinvestment in the transmissionline targeting micro hydroprojects is essential now that willmake the PPA significant.

6. Developing a hydro powerproject is never possible withoutproper financing from the banksand financial institutions (BFIs). Asit is the venture that seeks hugeinvestment of capital, long termfinancing is must to accomplishany mega project. Nonethelessour banking system is modelled asso, if it is designed for easy moneymatters. Nepalese BFIs seemneither able nor eager to lendlong term loans in hydro powerprojects. Government has tofacilitate loan in the incentivisedinterest rate targeting the powerproducers those who will invest inmicro hydro projects. By thismeans, they will be able tocomplete their project in time asper their projection which willfinally corner the most hatredimpasses, ‘load shedding’.


Cover Chronicle

Economics is the science which studies human behaviour as a relationship between ends and scarce meansEconomics is the science which studies human behaviour as a relationship between ends and scarce meansEconomics is the science which studies human behaviour as a relationship between ends and scarce meansEconomics is the science which studies human behaviour as a relationship between ends and scarce meansEconomics is the science which studies human behaviour as a relationship between ends and scarce meanswhich have alternative uses - Lionel Charles Robbinswhich have alternative uses - Lionel Charles Robbinswhich have alternative uses - Lionel Charles Robbinswhich have alternative uses - Lionel Charles Robbinswhich have alternative uses - Lionel Charles Robbins

f the whole lot goeswell as mentioned inlatest budget speechpresented by former

finance minister Surendra Pandeyto initiate large and medium sizedreservoirs projects, Budhi Gandaki(600 MW) undoubtedly will fulfilthe urgent demand of electricityload. Nepalese consumers thoughdeadly suffering in the absence oflight, still hope for the full fledgedimplementation of paragraph 79 ofpublic statement on income andexpenditure of fiscal year 2010/11whatsoever the rest of other willbe. In an approach to initiateconstruction for large andmedium sized reservoirs projectsat least one in every developmentregion, government has targetedBudhi Gandaki (600 MW) togetherwith Naushyalgad (400 MW), 300Tamor (300 MW) and Aandhikhola(175 MW) projects to bring intooperation under the appropriatepartnership.

Budhi Gandaki is one amongthe most tempting projects dueto its proposed reservoir which isreportedly high potential toproduce electricity in the stableform. With its proposed territoriallocation amidst the mid rangeddistricts like Chitwan, Gorkha andDhading, the project will probablybe the largest project in thecentral development region.Nevertheless all it, whether theproject will count success relieson how these shall be mitigatedwith possible best alternatives,the effects of dam on surroundingresidents, localities and the bio-diversities. The issues of largenumbers of local villagers likely to

face displacement, wide range ofnatural resources likely to run intohazards and the myriads of biodiversity probably meeting anend point due to Budhi Gankaki’sreservoir are the most vibrantones seeking an immediatesolution. Thus the project shouldbe carried out following a longterm plan and in-depth studybased on ground reality.

Once again some publicoutrages have begun just after thefield visit of high levelgovernmental committee intendedto commence Budhi Gandaki hydropower project. The committeethat comprised Surendra Pandey,former finance minister, DineshChandra Devkota, member ofNational Planning Commission,Sitalbabu Regmi, Secretary forMinistry of Energy, Krishna HariBaskota, Secretary for Revenueetc visited the site on 2nd Feb.Proposed Budhi Gandaki Project

shall have an approximately 225metre high dam for the reservoirat some 2 kilometre north fromBenighat Point of Budhi GandakiRiver which flows in the borderbetween Dhading and Gorkhadistrict. ‘Storage with 225 metrehigh dam will occupy nearly tentimes area than Fewa Lake inPokhara’ insists a hydrologist,‘This project will have maximumpotentiality to generate up to800 MW energy’. AustralianCompany, Snowy MountainEngineering Corporation hadstudied the Gandaki Basin andthus identified the project with600 MW possible capacity. A trackroad is built so far to the entrypoint of project area, 2kilometres north from DhadingBenighat, Prithvi Highway. Theproject will directly affect twodozens of village developmentcommittees (VDCs) in Dhading andGorkha district which should bein the concern of majorstakeholders includinggovernment to assure the urgentsuccess of the project. Salang,Maidi, Khari, Chainpur, Jyamrung,Salyantar, Salyankot are some ofthe VDCs in Dhading likely to beaffected due to the project.Similarly, Durbung, Fujel,Namjung, Borlang, Ghyalchowk,Bungkot, Dhawa, Aaruchanaute,Aarupokhari are some other VDCsin Gorkha to share the same fate.Those VDCs are populated with15 thousand more local villagersand they will have to leave theirhomes and settlements to ensurethe success of Budhi Gandakihydro power. Fertile localterrains of levelled ground likeDurbungtar, Bhasbhasetar,Dhabetar, Harisinetar, Majhigaon,Kyamuntar, Ghatbesitar,Mahadevtar, Baluwatar, Aarutar,Shera, Jogitar, Pippaltar etc willbe submerged beneath thestorage dam where 55 thouandhectre jungle area will beaffected due to the project.

French Energy ProducerCompany, ‘Electricity de France(EDF) has shown its interest to

By Ramesh Lamsal

I

French EnergyProducerCompany,

‘Electricity deFrance (EDF) hasshown its interestto invest in Budhi

GandakiHydropower

Project.

Budhi GandakiBudhiDo not hang up 600 MW


invest in Budhi GandakiHydropower Project. Ithas proposed forcontract with NepalElectricity Authority(NEA) through a lettersent on ...Feb.According to thesource, EDF hasproposed to accomplishthe project in next 12years whereas some ofthe senior authoritiesin NEA claim the projectcan be completed inhalf of the term.

Earlier some Indiancompanies had showntheir interest to investin this project whileNEA called for theglobal tender in 2008.Tata Power, AES,C o n t i n e n t a lConstruction, JSWEnergy, KSK EnergyVenture etc were thoseof 21 Indian origins companiesalong with Pandechari Power, SunGroup, Nagarjun Construction

and so on. This is an evidencethat supports for what somefundamental critiques say about

‘Interest of South Bloc’concerning Nepal’shydropower whereapproximately 774million US dollar issupposed as theproject cost. Despitethe fact the amount isindisputably very highfor any Nepaleseinvestor to invest, It willbe more feasible tohave a national strategyto invest in this projectin a partnership model.G o v e r n m e n t ,institutional investors,local corporate houses,public investors andaffected local peopleshould given theparticipatory role inthe project along withthe foreign investor.Government shouldmake some effort to getsoft loan from global

financial institutions like AsianDevelopment Bank (ADB) or WorldBank.

Cover Chronicle

Every time in this century we’ve lowered the tax rates across the board, on employment, on saving,Every time in this century we’ve lowered the tax rates across the board, on employment, on saving,Every time in this century we’ve lowered the tax rates across the board, on employment, on saving,Every time in this century we’ve lowered the tax rates across the board, on employment, on saving,Every time in this century we’ve lowered the tax rates across the board, on employment, on saving,investment and risk-taking in this economy, revenues went up, not down - Jack Kempinvestment and risk-taking in this economy, revenues went up, not down - Jack Kempinvestment and risk-taking in this economy, revenues went up, not down - Jack Kempinvestment and risk-taking in this economy, revenues went up, not down - Jack Kempinvestment and risk-taking in this economy, revenues went up, not down - Jack Kemp


Cover Chronicle The Audi AltThe Audi AltThe Audi AltThe Audi AltThe Audi AltStakeholders in the

heer Himalayan waterfalls ndebates on hydropower. Apower producers and maperceptions and reasons be

developments of hydropower sector. the series of opinions in bullets and yothe logics are better to-do. Stakeholthose valued personalities who contrfor many many thanks and we hope tway outs. Panels are formed on thpresented and the presentation doesin the two different panels are the o

Ratnasansar ShresthaFCA, Water Resources Analyst

♦ Nepal is a wealthier nation simply in term of water resourceswhere per person can attain 9122 m3 water according to the dataprepared by Food and Agricultural Organisation (FAO), United Nationsin 2002.

♦ It is depressing Nepal is somewhat affluent in flood for the eightmonths, earn drought for the rest of the year, however potential aswell to produce ample hydropower in very low cost.

♦ Geography has gifted us with countless waterfalls at the steepaltitude, favourable to generate energy at low budget. Similarly,numbers of natural storage dams with a minimum cost of man-made wallat just one side are feasible which will benefit us at the same time,flood control in the wet season, full-fledged generation of hydropower and irrigation management for the dry season.

♦ We have a large section of market within our border where somemore than 28 thousand MW is necessary to substitute the conventionalenergy source, namely the firewood that occupies 78 percent ofentire energy source.

♦ Energy intensity of steel production is 6.3 KWh/kg but teaprocessing requires 4.5-12 KWh/kg. This data implies the denseindustrialisation, electrifying transportation and agriculture system willfurnish wide segment of power consumption market here.

♦ Nepal is getting only 2.5 percent royalty while exporting powerthus it is not feasible as Norway exports its mineral energy. Norway hasprovisioned for 50 percent special income tax, 28 percent regularincome tax plus 0.80 Kroner tax per litre carbon dioxide produced.Carrying out Norway’s modality to bind the capital within the countryis beyond the imagination in our context.

S

P

PANEL A

Ratna Sansar ShresthaJanardan Dev PantJyoti BaniyaAnanda Raj Batas


Cover Chronicleteram Partemteram Partemteram Partemteram Partemteram Parteme Public Witness-box

never end falling down and so do theAnalysts, policymakers, independentny stakeholders follow myriads ofhind their logics while foreseeing theHere ‘The Economic Sytem’ presents

ou all are the jury to prefer whatsoeverlders are listed in the two panels andributed their opinions to us are awfulthe expressed views will assist to seekhe basis of similarities in the logicssn't necessarily mean the stakeholderspponents. - Editor

Er. Gyanendra Lal PradhanExecutive Member, FNCCI

uzzlingowerolitics

♦ None of the governments till then have ever allocated properamount in the annual budget for hydropower development despite wewere first in South Asia to bring open policy in 1990 in this sector. 2percent of incentives in exporting hydropower is relatively inadequateto promote the production while the cost is inflated closely by 5percent or more.

♦ Power crisis has added the import of about 20 billion rupeesfrom India. 5 billion for batteries, UPS and inverters, 10 billion forpetroleum products and 5 billion for the electricity.

♦ State should handle the issue of power generation andjustifiable distribution of it as private entrepreneurs finally include upto 15 percent profit margin in their production. But how can webelieve the State mechanism where most of the dealings are madeunder table in the case of projects over 25 MW. Nepalese privateentrepreneurs can build up to 2000 MW project if power purchaseagreement (PPA) rate is justified.

♦ We have no other way to enhance the export oriented policyregarding hydropower because Nepal do not and even may not possessa market enough to consume something like 20 thousand MW energytill next 20 years.

♦ One cement industry consumes 20 MW of electricity in a yearwhereas a rope way only consumes 0.5 MW. According to the Indo-Nepal joint study team, proposed East-West railway can be operatedfor next 1 hundred years if a 127 MW project is managed for it. Thusour market may get through hardly 10 thousand or some more MWelectricity even if we will have lots of rail ways, plenty of industries andhundreds of ropeways. Mega projects should be built accordinglytargeting the neighbouring and international market.

PANEL B

Gyanendra Lal PradhanSurya Nath UpadhyayaDr. Swarna Das ShresthaDr. Jiwendra Jha

Read more on Page 34


Cover Chronicle

In economics, the majority is always wrong. - John Kenneth GalbraithIn economics, the majority is always wrong. - John Kenneth GalbraithIn economics, the majority is always wrong. - John Kenneth GalbraithIn economics, the majority is always wrong. - John Kenneth GalbraithIn economics, the majority is always wrong. - John Kenneth Galbraith

y far the most allencompassing articlethat I have ever readabout Nepal’s load

shedding crisis was written byRatna Sansar Shrestha andpublished in Hydro Nepal, January2010 issue. What I gained was anunderstanding that large scalehydro projects will never keep upwith increasing demand runningat 10.7% yearly. The reasons beingNepal Electricity Authority’s (NEA)delayed completion of projects,system mismatches in the seasonalvariation of water, infrastructureinadequacies and that far into2017 there will be severe loadshedding during the dry season.

The article goes on to detaileconomic losses from “plannedinterruptions” and knock oneffects in liquid fuel shortages asnow households and businessesburn fuel in generators that wasdestined for the transportationsector. These are the problems,where are the solutions?

My own solution to theshortages would be ‘if large scaledoesn’t work what about smallscale?’ Working with renewableenergy concepts over the lastseveral years I instantly thought ofGravitational Vortex Power (GVP)as a solution that could work inthis case. Let me explain how itworks. If you have ever taken a

GravitationalVortex Power :A Solution to

Light Nepal

32

1

1. Vortex Power Plant, 2. Vortex without turbine 3, Vortex model

By David DuByne

bath you will notice that whereyou pulled the plug from, whenthe water gets low it starts tospin at the drain hole. It actuallymakes a mini whirlpool as the lastof the water drains out of thetub. Scale that round basin upfrom something 12 cm in diameterto something with a 5 meterdiameter and you create a largeramount of spinning water with alarger amount of kinetic energy.Gravity does all of the work aswater flows, now add curvedblades to dig into the spinningwater, attach an electrical powergenerator and you have GVP. Therotational movement of water inthe shallow circular basin creates

If we use the same figure of $500 million for one large project that providesdiminishing electrical output as rains decrease from October to May each year, youcould build 50,000 GVP plants.

B

27HYDRO EDITIONwww.corporatenepal.com.npHenry Ford was right. A prosperous economy requires that workers be able to buy the products that theyHenry Ford was right. A prosperous economy requires that workers be able to buy the products that theyHenry Ford was right. A prosperous economy requires that workers be able to buy the products that theyHenry Ford was right. A prosperous economy requires that workers be able to buy the products that theyHenry Ford was right. A prosperous economy requires that workers be able to buy the products that theyproduce. This is as true in a global economy as a national one. - John J. Sweeneyproduce. This is as true in a global economy as a national one. - John J. Sweeneyproduce. This is as true in a global economy as a national one. - John J. Sweeneyproduce. This is as true in a global economy as a national one. - John J. Sweeneyproduce. This is as true in a global economy as a national one. - John J. Sweeney

Cover Chroniclea stable continuous gravitationalvortex, 24 hours per day, 7 days aweek. Viktor Schauberger fromAustria was one of the first tomake use of vortex dynamics from1929-1936 and his work influencedseveral inventors in Germany inour modern era. Zotloterer’scurrent design needs a 0.8 meterwater drop and a water flowrequirement of 2 cubic metersper second. That doesn’t soundlike a lot of water to producepower, but these GVP plants areproducing 57,000kWh per year or57 MWh. For comparison percapita usage of electricity inNepal was 78.5 kWh per year in2010 (Photius.com).

Kathmandu faces its own setof challenges while in thecountryside there another sets ofvariables are at work to limit theavailability and supply of power.So how do using small hydroprojects effect change in thenational grid? It boils down toeconomics and scale of rawmaterial input for targetedoutput. Let us look a single largescale project first, the ‘UpperTamakoshi HydroelectricProject’. The project cost isestimated at NRs.35.29 billionequivalent to US $441 million-excluding interest for five yearson the project (with exchangerate of 1US$= NRs. 80) and willhave a Maximum Output of 456MW per day during the monsoon.Cut that number by 60% or moreduring the dry season. Don’tforget to add in 132 kV HighVoltage Transmission Lines forfuture grid extension between$8000–10,000 per km and rising toaround $22,000 in difficult terrain.Sub-station construction andadditional road building at $20,000per km. This depends if it is onbudget, which by previousconstruction recordperformance, it won’t be. Let’sround off to $500 million andremember these lines will by-passmost rural communities on its wayto India in Power PurchaseAgreements (PPAs).

Comparing smaller GVP plantsusing local materials, the cost ofeach plant can comes in around$10,000 and does not dam thewater in order to operate. TheGVP plant merely uses the waterfor a few seconds as it flows outthe bottom on its way downstream. Just the environmentaladvantages to its usage warrantfurther investigation as a solution.GVP is designed to be installed inremote areas that would never seegrid expansion into local villagesand is designed to electrify a smallcommunity of up to 200 homes perplant under Nepaleseconsumption patterns.

If we use the same figure of$500 million for one large projectthat provides diminishingelectrical output as rainsdecrease from October to Mayeach year, you could build 50,000GVP plants. These plantsgenerating 57 MWh per year wouldequal 2,850,000MWh or 2,850 GWhannually fed directly to the localcommunities in remote locationsthat need it most. Here is where

the shocking part comes; theforecast annual energy outputfrom the ‘Upper TamakoshiHydroelectric Project’ is 2,281GWh. You generate more powerfrom GVP, save on the amount ofconstruction materials and do notneed to dam an entire river!

With Nepal’s special set ofcircumstances we must think ininverse terms. The usual train ofthought is electrify from themajor population centres out tothe countryside, but in Nepal’scase it needs to be the oppositeto reduce load shedding. Thiscountry needs to electrify fromthe countryside back into thecities as most cottage industriesare located outside large urbanareas. The economy is stagnatingfrom lack of power in these exactareas, so if they can generatetheir own power locally off themain grid then excess power notconsumed in smaller outlyingdistricts can be diverted intoKathmandu or other citieslanguishing in the dark.

Another benefit beyondrevitalization of the rural economywill be materials used for localconstruction will be boughtlocally and those living close tothe GVP plants will be able toupkeep and repair themselves notrelying on German engineersbeing flown in to Nepal to work ona damaged large scale generator.Electrical lines are minimal costand will be bought from localvendors and be strung up onalready existing electrical poles.This means revenue circulatesthrough a local area and mostpeople see direct benefit.

These ideas sprang to mindwhile I was walking home theother night and saw a sign thatproudly stated “Load SheddingSolutions” batteries, invertersetc.., I thought to myself, no way,GVP that’s a solution to loadshedding !

(Author is Advisor and Directorof Foreign Co-operation with EnergyResearch Nepal and can be contactedat [email protected])

Viktor Schaubergerfrom Austria wasone of the first tomake use of vortexdynamics from1929-1936 and hiswork influencedseveral inventors inGermany in ourmodern era.


The dramatic modernization of the Asian economies ranks alongside the Renaissance and the IndustrialThe dramatic modernization of the Asian economies ranks alongside the Renaissance and the IndustrialThe dramatic modernization of the Asian economies ranks alongside the Renaissance and the IndustrialThe dramatic modernization of the Asian economies ranks alongside the Renaissance and the IndustrialThe dramatic modernization of the Asian economies ranks alongside the Renaissance and the IndustrialRevolution as one of the most important developments in economic history. - Larry SummersRevolution as one of the most important developments in economic history. - Larry SummersRevolution as one of the most important developments in economic history. - Larry SummersRevolution as one of the most important developments in economic history. - Larry SummersRevolution as one of the most important developments in economic history. - Larry Summers

Cover Chronicle

ydropower and itsutility are seen asone of the mostcontroversial issues

to be addressed by theforthcoming constitution. It is notonly 16 to 18 hours load sheddingbut skyrocketing investment aswell in the hydropower sectorover the years prove theimportance of this matter inNepal’s general lifestyle,constitution and socio-politicalarenas. Nepal ElectricityAuthority (NEA) started issuingcommercial license to privatepower producers since 1992. NEAhas signed Power PurchaseAgreement (PPA) with severalprojects in the last 18 years.However, NEA has signed the verysame amount of PPAs in the lastseven months which it hadmarked in prior to date. In thesePPAs, investors are set to pourbillions of dollars in Nepal’s virginwater resources. When all these

address these all dotted issuesproviding the avenue to settlethese once and for all.

Hydropower project hasalways been the ‘hot cake’ inNepal whether it is hydro-electricity, irrigation or drinkingwater. Controversies surmountedalmost all big projects that wereenvisaged and contradictions aswell subsist yet in most of theprojects. Thus, controversieshave well secured their space inNepal’s constitutions and politicstoo. Besides, there are a lot ofconspiracy theories, built-in andaround these controversies pluscontradictions. Former primeminister and founder leader ofNepali Congress Matrika PrasadKoirala managed to sign KoshiTreaty with India and the sametreaty gave birth to a perennialcontroversies. The controversywent deep down to Nepalipolitics for several decades. Itwas also picked by the framers of

By Rudra Sharma Hydropower inConstitutionvis-à-vis politics of Nepal

projects and other projectswaiting PPA in the pipeline willproduce power, we obviouslyneed an adequate market to sellthe generated power.International market will benecessary since domestic marketwill not be enough for the same.Putting this sweet dream beneathour pillow, we, the people ofHimalayan soil, are compelled tosustain with up to 18 hours loadshedding per day. This being thecase, Nepal’s hydro-power is notmerely a matter of concern forNepalese but now it is a burningissue for those investors fromnext hemisphere, pouring millionsof dollar in Nepalese rivers.Moreover here is India in thesouth, adjoining neighboursupposed to buy Nepal’s surplushydro-electric power and China,the rising Asian Dragon, cautiouslywatching all the phenomena.Hopefully, the forthcomingconstitution is believed to

Hydropower project has always been the ‘hot cake’ in Nepal whether it is hydro-electricity, irrigation or drinking water.

H

29HYDRO EDITIONwww.corporatenepal.com.npIt’s called political economy because it is has nothing to do with either politics or economy. - StephenIt’s called political economy because it is has nothing to do with either politics or economy. - StephenIt’s called political economy because it is has nothing to do with either politics or economy. - StephenIt’s called political economy because it is has nothing to do with either politics or economy. - StephenIt’s called political economy because it is has nothing to do with either politics or economy. - StephenLeacockLeacockLeacockLeacockLeacock

Cover Chroniclethe 1990 constitution and itappeared in Article 126 of it. Thisarticle ensured the requirementof two-third majority of theparliament to dispose of anythingabout natural resources if anational treaty is signed with anyother country.

Former Prime Minister GirijaPrasad Koirala made a deal withIndia with respect to Tanakpurwhich is popularly known asTanakpur Treaty. Question wasraised over the treaty as thematter of disposing naturalresource of Nepal and the dealwas demanded to pass by two-third majority of then parliament.However, Koirala asserted that itwas merely an agreement betweentwo countries and was not atreaty, and therefore, was notrequired to pass it by two-thirdmajority. But, the Supreme Courtdeclared that it was a treaty andwas to be passed by two-thirdmajority of the parliament. As theerstwhile main opposition partyCommunist Party of Nepal UnitedMarxist and Leninist ruled thegovernment later, it reinstated theSharada Treaty and TanakpurTreaty in the joint form named as‘Unified Mahakali DevelopmentProject’ and divided over the issueof voting in favour or against the‘Mahakali Treaty’ while the rowentered into the parliament.

Arun III hydro-electricityproject made hue and cry all overthe nation. Madhav Kumar Nepal,erstwhile leader of the mainopposition party in the parliamentwrote to the World Bankrequesting not to invest in Arun IIIproject as they wouldsubsequently be holding thegovernment and they would makeit otherwise, if they invest withouthearing to them. Similarly,Communist Party of Nepal (Maoist)told some Indian investors inconnection to Upper Karnali andother projects that they shouldhear to them too, besides thegovernment, if they are willing toinvest in Nepal’s hydropower. As aresult some of the Indian

companies which were in thecourse to invest in hydropowergot into problems. It shows themajor political parties could nevercome into a consensus in terms ofutilizing and commercializing theimmense natural resource ofNepal – Hydropower.

Amidst such scenario, someargue on several conspiracytheories in addition with respectto investment in Nepal’shydropower projects. Some saythat the closest neighbour Indiawants to ensure that any biginvestment here will not hamperits interest over here. However itis not only India but many othercountries like China, United Statesof America (USA), Norway andother countries have their owninterest to invest here. These allinterest groups need to cope upwith the constitutionalarrangement in the new federalstructure of Nepal.

Investors are mulling over thepossible federal structure thatwill be endorsed in the newconstitution while the bankingsector and the central bankthemselves are in confusion howthey may run in the federalstructure. How the central bankdoes survive in federalism? As thenation is under constitutionalliability to be transformed into afederal state, the central bankvis-à-vis the whole banking sectorfinds a huge challenge how tosurvive and adjust itself in thenew structure. Supervision of allbanking and financial institutionsof the nation ultimately vestsupon the central bank (NepalRastra Bank ‘NRB’ if we name itexactly in our context). It may bewell argued that it is same orsimilar to the responsibility ofother regulatory institutions thatthe NRB has to do with. Butadditionally NRB will haveresponsibility of risk assessmentin federal structure for theprojects where banks will makeinvestment.

A bank invests into a projectthat goes 35 years down the line.

If a bank starts today thinkingabout investing into a project,the assessment of projectproposal and finalization offinance document may takecouple of years. Therefore, thebank needs to think of at least 37years down the line from thecommenced date in order toaccomplish a successful project.But there comes a big questionhow a bank at this point of timecan think of 37 years down theline and make assessment. If abank invests in a hydropowerproject these days, it will bequite unpredictable after thedivision of State, which Stategovernment will own the waterand stream on which the bank willbe investing into. The interimconstitution followed by theConstituent Assembly (CA) StateRestructuring Committee envisagefour layers of governments -central government, provincialgovernment, local governmentand special structure. The bankinvesting today into thehydropower need to analyse thepolicies of these governmentswhich themselves do not yetexist. What would be the policiesof those respective governmentsto govern the water and naturalresources under theirjurisdictions?

The CA committee reportsmention overtly overlappingscope of jurisdiction of the fourlayers of governments. Accordingto the reports the centralgovernment will have jurisdictionover central bank, financialpolicies, monetary policies,foreign grants, assistance, debts ,customs, excise duties, valueadded tax, institutional incometax, charges for passport, visafees, post office service charges,royalties received from naturalresources, central level largeprojects on electricity, irrigationand other projects. Similarly theprovincial government will havejurisdiction over bank andfinancial institutions, cooperativeinstitutions, foreign grant and


Cover Chronicle

If commerce is the engine of our economy, then advertising is the spark. Responsible advertisers are theIf commerce is the engine of our economy, then advertising is the spark. Responsible advertisers are theIf commerce is the engine of our economy, then advertising is the spark. Responsible advertisers are theIf commerce is the engine of our economy, then advertising is the spark. Responsible advertisers are theIf commerce is the engine of our economy, then advertising is the spark. Responsible advertisers are thedrivers who keep us on the right track, leading to a richer, more benevolent society. - Brian Philcoxdrivers who keep us on the right track, leading to a richer, more benevolent society. - Brian Philcoxdrivers who keep us on the right track, leading to a richer, more benevolent society. - Brian Philcoxdrivers who keep us on the right track, leading to a richer, more benevolent society. - Brian Philcoxdrivers who keep us on the right track, leading to a richer, more benevolent society. - Brian Philcox

Sashin Joshi, President,Nepal Bankers Association

assistance under consent ofcentral government, Personalincome tax, property tax,professional tax, land tax, tax onremuneration, house, landregistration fee, vehicle tax,entertainment tax, advertisementtax, taxes on tourism andagricultural income, servicecharge, royalty received fromnatural resources, electricity,irrigation projects of provinciallevel and other projects,electricity projects and irrigationprojects. Besides, the localgovernments will have jurisdictionover cooperative institutions,local taxes (Property, house rent,tax on vehicle etc.), servicecharges, tourism fees,advertisements tax, charges onland , royalties received fromnatural resources, distribution ofland, house ownership certificate.Further, the special structures willhave jurisdiction over propertytax, professional tax, land, houseregistration tax, vehicle tax, andentertainment tax, servicecharges on tourism, land revenue,agriculture income tax, royaltiesreceived from natural resources,electricity project, irrigationproject and other projects andincome received frommanagement of citizenship andpassports.

The above accountdemonstrate that the CACommittee reports have madearrangements for lesser power atthe centre of the fiscal federalismand more power to the provincialgovernment, local government andspecial structures. However, it isnot so easy to transfer the powerpresently being exercised by thecentre to the provincial and localgovernments. Experiences inother countries have it thecentral government exercisesmore powers than it is stated.Because, the centre needs tohandle the controlling mechanismand any jurisdiction whichhappens to be concurrentbetween two states or in a grayarea, goes to the centre. But, the

provincial and local governmentsare always assertive to exercisetheir powers. Thus, it sometimesends up in a mess and becomes ahome for disputes.

Financial sector whichcalculate every inch of risks withrespect to project finance andrate of return of a project, needto carry out extensive research onthese areas so that they can carryon their investment on projectfinance. But it would be almostimpossible if the presentarrangement of distribution ofpower as mentioned here above isnot further explained and clarifiederadicating overlappingjurisdictions and contradictions.There are many concurrent listson which all or more than onegovernments can exercise power.According to the present listmentioned above, incomereceived from natural resourcesfall under the jurisdiction of allfour governments. Financialpolicies and monitory policies fallunder the jurisdiction of centralgovernment whereas banking andfinancial institutions fall under thejurisdiction of provincialgovernments and cooperatives fallunder the jurisdiction of localgovernment. Property tax fallsunder the jurisdiction of bothprovincial and local governmentwhereas it seems that all fourgovernments can claim royaltyfrom mega projects. It may bedifficult to put a demarcationwhich project is big project andwhich project is small one. It willbe more difficult to figure outwhich project is of local level,provincial level or central level.

Central bank is well known asthe financial advisor of thegovernment and it functions asthe State coffer. However, therehave been some notices ofdifficulties in terms ofcoordination between the centralbank and the government. If thisdifficulty exists furthermore and isnot resolved before the countrymoves to federal march,hindrances may be furtherexasperated in federalism.Whether a federal Nepal shouldhave an independent entity of NRBor it will be limited to functionunder a certain ministry? Thisquery should be well settled assoon as possible. These issuesdeserve serious research in orderto ascertain modalities about theexistence and function of thecentral bank in federal structure.

The crux of this whole articleis this – how we can overcome theaforementioned issues in federalstructure of the forthcomingconstitution since article 126 ofthe 1990 constitution itself wastaking a heavy toll in constitutionaland political history of Nepal. If wetalk about conspiracy theory onthis, it can be told in this way.India was not feeling comfortablewith the article 126 of 1990constitution. This might probablybe one of the several reasons thatthe 1990 constitution met withuntimely death without anyamendments on it. If such is atruth, how India or anyone elsewith interest in Nepal’shydropower can manage with thechaotic structure? Therefore,there must be better work out indetail before the forthcomingconstitution will endorse a newambience for investment andutilization of natural resources inNepal. We have a lot of lessons togain knowledge of what is taughtby the legal and constitutionalpractices of article 126 of the1990 constitution.

(Author is Attorney- at-law LL.MUSA /Nepal and undergoing PhD onFederal Dispute SettlementMechanisms)

India was not feelingcomfortable with the

article 126 of 1990constitution. This

might probably be oneof the several reasons

that the 1990constitution met with

untimely death withoutany amendments on it.


Cover Chronicle

I have faith in the market when we get the rules right. - Kenneth LayI have faith in the market when we get the rules right. - Kenneth LayI have faith in the market when we get the rules right. - Kenneth LayI have faith in the market when we get the rules right. - Kenneth LayI have faith in the market when we get the rules right. - Kenneth Lay

eographically andeconomically similarsome Asian countriesare trying to build up

their nation through thedevelopment of hydroelectricityeven their production capacity islesser than Nepal. Countries likeLaos, Bhutan etc are shapingtheir economy through the waterresources. But in case of Nepal,water resources believed as aprone factor has not beencommercially exploited yet. Inhydroelectricity production,Nepal is potential enough toquench the power thirst of gianteconomy of India along with theown. Laos with the capacity of26000 MW is dreaming to becomea regional energy superpower. It

White Coalis yet to be made the most of it

L e a r n Fr o m t h e Ou t e r Wo r l dBy Khagendra Prasain

has the market around Thailand,Vietnam and China. Laos is alsoscarred by war and plagued bypoverty. But hydroelectricity withlong term plan and vision isnowadays its strategy to copewith different economicproblems. Similarly Bhutan hascapacity of 30000 MW and it is thebest example to show thesmartness of hydro production inSouth Asia. The very white coal isabandoned with severalreservations over it in Nepal.

More than one third ofpopulation is under the povertyline; more than two third isengaged in agriculture and it isNepal. But agricultural productenhances the economy only ataround 36 percent whereas

hydropower no-doubts attemptto be a milestone for prosperityof the Himalayan people. Althoughdifferent attempts are made upfor the development of thissector, no any handsomeachievement is received so far.

Policies Adopted by Laosand Bhutan

Government of Laos hasclassified hydropower projectinto two distinct categories. Firstis Domestic Generation Projects(DGP) which is operated byfinancing in concession byElectricite Du Laos (EDL). In thiscategory projects having capacityup to 100 MW are developed.Similarly, another category isExport Generation Projects (EGP)and implemented by IndependentPower Producers (IPP). Theprojects are large, generally inexcess of 100 MW. Due to itsenergy surplus and geographicallocation at the hub of GreaterMekong Sub-region (GMS) region,Laos is strategically positioned toplay a significant role inpromoting power trade. The GMScomprises Laos, Thailand,

G

Itaipu Hydro Power in Brazil


Everything is speeding up: politically, economically and technologically. - Javier SolanaEverything is speeding up: politically, economically and technologically. - Javier SolanaEverything is speeding up: politically, economically and technologically. - Javier SolanaEverything is speeding up: politically, economically and technologically. - Javier SolanaEverything is speeding up: politically, economically and technologically. - Javier Solana

Vietnam, Cambodia, Myanmar andYunnan energy reserves.

Similarly, Bhutanesegovernment, according to the2020 vision document is carryingon the production process of1000 MW project by 2012 andanother 2000 MW by 2017. It hasformulated Power System MasterPlan (PSMP) for sustainablehydropower development as 20years plan. United NationsDevelopment Programme (UNDP)and Norwegian donor agency,‘NORAD’ had provided technicalassistance for the preparation ofPSMP. The sustained techno-economic cooperation with Indiawhere Bhutan’s export marketlies is the key success factor fordevelopment of hydropower.Preparation of ruralelectrification master plan forachieving 100 percent electricityaccess by 2020 is another attemptof Bhutan.

Europe: On a Clean EnergyMission

Early in 2010, a new Europeanbody called ‘Friends of the Super-grid’ was launched in London. Itsmission is to promote a renewablefriendly transmission system thatefficiently interconnects thecontinent and makes best use ofnew resources such as offshorewind. Since it was first mooted,the Super-grid’s supporters havehighlighted the role of oneparticular source of backuppower to balance the grid andhelp compensate for wind’snatural variability.

Asia and Oceania: GoldenOpportunities

When the 1,070-MW NamTheun-2 hydropower facility inLaos began supplying electricityto neighbouring Thailand, itbecame the latest symbol of themassive potential of hydropowerin Asia. Hydro is booming acrossthe Asia and Oceanic region,providing the primary source ofgrowth in renewable energy andcreating exciting new

opportunities for equipmentsuppliers and providers oftechnology and services.

Latin America: InvestmentMagnet in Tough Times

Despite tough economictimes, Latin America continues toattract major investments for newhydroelectric projects. Theinvestments come in all shapesand sizes. Brazil’s 11,200-MW BeloMonte project on the Xingu Riverto the 8.5-MW El Encanto projecton the Veracruz River in CostaRica are the examplars. LatinAmerica has about 140,000 MW ofpotential hydropower capacitybut experts say the potential fornew hydropower capacity in theregion is more than four timesgreater than its existing capacity.

Africa: Hydro, a route fortransformation

A new study from World Bank

shows that almost half of the US$93 billion is needed to improveAfrica’s infrastructures. Thestudy assessed theinfrastructures in 24 countriesacross the continent and foundthat Africa’s greatest needs are inthe power sector and that thedevelopment of new hydropowerprojects may be the best way toincrease the continent’s totalcapacity. The study found‘mobilizing the benefits ofregional trade depends ondeveloping major untappedhydropower projects in theDemocratic Republic of Congo,Ethiopia, and Guinea.’

North America: A long Wayfrom ‘Tapped Out’

In North America, many of thelarger sites for hydropowerproduction have been developed.As a result developers are lookingat non-powered dams to add


Cover Chronicle

The industrialized countries need the economic recovery of the Third World, need these billions of humanThe industrialized countries need the economic recovery of the Third World, need these billions of humanThe industrialized countries need the economic recovery of the Third World, need these billions of humanThe industrialized countries need the economic recovery of the Third World, need these billions of humanThe industrialized countries need the economic recovery of the Third World, need these billions of humanbeings, potential buyers of our products. - Francois Mitterrandbeings, potential buyers of our products. - Francois Mitterrandbeings, potential buyers of our products. - Francois Mitterrandbeings, potential buyers of our products. - Francois Mitterrandbeings, potential buyers of our products. - Francois Mitterrand

generation. Also, companies are consideringincrease in the generating capacity of existinghydro plants, while others are pursuing newhydrokinetic projects. Meanwhile, thanks tonew tax credits, grants, and initiatives toreduce greenhouse gas emissions, that pushesscores of companies to submit plans for buildingsmall hydropower projects across United Statesof America (USA) and Canada.All theseexperiences on hydropower productionworldwide edify Nepal to adopt empiricalevidences and policies for smooth andsustainable growth.

Some world’s largest Hydropower plants

Name Country Year of Capacity

completion (MW)

Three Gorges Dam China 2011 22500

Itaipu Brazil/ 2003 14000

Paraguay

Guri (simon bolivar) Venezuela 1986 10200

Tucurui Brazil 1984 8370

Grand Coulee USA 1980 6809

Three Gorges Dam in China

Largest hydropower producers (at 2009)

Sn. Country Production (GW)1 China 196.792 Canada 88.973 U.S.A. 79.514 Brazil 69.085 Russia 45.006 India 33.607 Norway 27.538 Japan 27.229 Sweden 16.2010 Venezuela 14.62


The problem of Italy is not really a question of age. Japan has an older population, and it is now in fullThe problem of Italy is not really a question of age. Japan has an older population, and it is now in fullThe problem of Italy is not really a question of age. Japan has an older population, and it is now in fullThe problem of Italy is not really a question of age. Japan has an older population, and it is now in fullThe problem of Italy is not really a question of age. Japan has an older population, and it is now in fulleconomic recovery. The problem is that Italy is old in the structure of the society. - Romano Prodieconomic recovery. The problem is that Italy is old in the structure of the society. - Romano Prodieconomic recovery. The problem is that Italy is old in the structure of the society. - Romano Prodieconomic recovery. The problem is that Italy is old in the structure of the society. - Romano Prodieconomic recovery. The problem is that Italy is old in the structure of the society. - Romano Prodi

Cover Chronicle The Audi Alte...Continue from Page 25

♦ The existing hydropower policy is fairly successfulenough and what it pleases me is it has been encouragingthe private sector to invest in the hydropower, thesector which seems somehow complicated for privateinvestment in other countries too.

♦ Licensing issue is a bit sensitised since thegovernment has provided licenses without any kind ofsurvey and access to the transmission lines. Governmentshould endow for the initial study of the potentialprojects and then must bid the licenses for the optimumutilization of water resources.

♦ Stop all kind of farces as rights on resources,provincial rights, autonomous rights and the like tocanter the investment.

♦ Hydropower is one of the prone sectors, possiblycapable to boost the per capita income of Nepalese peopleto US $ 50 thousand in 2040 if the correct measures areemployed.

♦ Let us issue PRIDES (Preferred redeemable increaseddividend equity share) to assemble a national fund forinvestment in the infrastructures. The interest return onPRIDES should be mandatorily converted into the ordinaryshares and the fund can be named as Nepal DevelopmentCompany Ltd (NDCL).

♦ Proposed NDCL should apply the modality of tripartitepartnership in between government, strategic partner andpublic where 51 percent of share should be owned by thegovernment, 25 percent for a strategic partner and 24percent for public.

♦ If we imagine 1.5 million people are ready to invest 2hundred thousand rupees each, the sum will be 300 billionthat is 24 percent share. NDCL will have the total equity ofaround 1.25 trillion.

♦ You can invest 450 billion rupees for 4500 MWhydropower and the rest of the capital for infrastructures ina model like Rs. 200 billion for east-west mountain cable car,Rs. 50 billion for transmission lines and east-west electrictrain at Rs. 500 billion. Every Nepalese investor will bemillionaire by 2040 in the present value term selling theenergy generated through this model plan.

Surya Nath UpadhyayaFormer Secretary, Water Resources

Janardan Dev PantEconomist


Cover Chronicle

The exchangeable value of all commodities, rises as the difficulties of their production increase. - DavidThe exchangeable value of all commodities, rises as the difficulties of their production increase. - DavidThe exchangeable value of all commodities, rises as the difficulties of their production increase. - DavidThe exchangeable value of all commodities, rises as the difficulties of their production increase. - DavidThe exchangeable value of all commodities, rises as the difficulties of their production increase. - DavidRicardoRicardoRicardoRicardoRicardo

eram Partem

Dr. Suwarna Das ShresthaPresident,Independent Power ProducersAssociation of Nepal (IPPAN)

♦ Electricity act and electricity regulatory act areyet not endorsed in last decade though pledged in thehydropower development policy to bring them within 5years. Besides, proposed electricity act seemsirrelevant enough due to the lack of new phenomenonsuch as the concept of federalism or else.

♦ While NEA is importing electricity at Rs. 10.72 perunit (KWH) from India, PPA rate provided to the localprojects (1-25 MW) is Rs. 4 per unit in the wet seasoninterpreted as 8 months and hardly Rs. 7 per unit for the4 months that seeks an immediate scientific adjustment.

♦ We the independent power producers would liketo propose Rs. 5.99 per unit PPA rate with the base year2010/11 defining dry season as 6 months and 5 percentprice increment up to 9 years next to the 1 year afterthe base year.

Jyoti BaniyaMember,Electricity Tariff DeterminationCommission

♦ NEA has its annual loss of Rs. 5 billion and cumulativeloss of more than Rs. 19 billion nevertheless it is yet notready to implement the 15-points suggestions from thecommission.

♦ Government is itself dealing as an interest-keeperearning huge sum of interests from NEA providing it loans at8 to 10 percent for the same amount which is acquired assoft loan from World Bank at 1 to 2 percent.

♦ The revenue return rate for the supplied energyremains at 45-60 percent in NEA whereas this is over 80percent in the corresponding institutions in South Asia.

♦ Accounting and Auditing are not trustworthy in NEAwhere all of the non performing revenue are catagorisedunder the title of street lamps.

♦ NEA is still in the ad hoc status for last 26 years underthe chairmanship of minister for energy and the moment isyet far to knock its door calling for the first AGM.

♦ Tariff Commission does not see any reason to let NEAto increase tarriff rate for what it is providing theconsumers- uninterrupted blackouts for more than 16hours. Thus NEA should follow the guidelines and correctitself before any increment in tariff.


Cover Chronicle

Wall Street indices predicted nine out of the last five recessions ! - Paul SamuelsonWall Street indices predicted nine out of the last five recessions ! - Paul SamuelsonWall Street indices predicted nine out of the last five recessions ! - Paul SamuelsonWall Street indices predicted nine out of the last five recessions ! - Paul SamuelsonWall Street indices predicted nine out of the last five recessions ! - Paul Samuelson

Ananda Raj Batas Board Member, NEA

Dr. Jiwendra JhaManaging Director, NEA

♦ The proportion of purchased energy inthe total served volume is about to exceed halffor which average purchase price at generationpoint is more than revenue return rate.

♦ Purchase energy price escalates everyyear but NEA is bounded by the ElectricityTariff Determination Commission to adjust theretail tariff rates. Thus it is widening the gap inbetween the cost of service and revenuereturn rate.

♦ Present power crisis can be resolved nomore without development of storage projects;Budhi Gankaki (600 MW), Upper Seti (127 MW)and Nalsyaugad (400 MW).

♦ We should be clear enough that loadshedding in the valley won’t be wiped out evenafter the completion of Budhi Gandaki. It iscaused by the bitterly hard situation to standnew high tension lines or towers inside thevalley.

♦ U-turn is necessary within NEAmanagement where professionalism shouldguide the streamlining. Bold decisions aremore likely only if the politicalinterferences stop annoying the institution.

♦ NEA should provide its 20 percentshare to its staffs to increase overallefficiency ending the corruption.

♦ Since the international financialinstitutions have listed Nepal in the riskzone, foreign investors look like as if theyare in the mood to hold licenses for nextfew years. On the other hand, the unstablepolitical tugs and tows, uncertainframeworks of federalism, these all arerepelling the investment in hydropower.


Social Corporate

ust becausey o u rcompany isearning well,does notmean you arethe businessleader. Yes,business should be honoured in between thesociety and various stakeholders of communityalong with your customers. Hence, corporatesocial responsibility is the barometer to gauge yourtallness among the others. This is what UnitedTraders Syndicate (UTS), the sole distributer ofglobal automobile brand, TOYOTA has assimilated inits business and continuously sharing its momentswith pedestrians, children, women and someothers.

Giving due respect to recognise women, theirability and to encourage them to drive in everyaspects of challenges, UTS organised ‘ToyotaWomen’s Motor Rally’ dated 5th March with theAugust theme- ‘Women in the driving seat’.Executive women from diverse social sector tookpart in the rally that was commenced from VOITHcomplex Tinkune and end at the Gokarna ForestResort giving the passer by to see various models ofvehicles giving a colourful effect every minute withNepalese women with full of confidence.

Likewise, 15 child prodigies from variousschools were rewarded as the top 5 artists in threedifferent age groups to send their artworks in the‘Toyota Dream a Car’ contest to be held in Japan.Shristi Khadka bagged the ‘first’ title among the 13-15 age group while Bibisa Malla was first among the10-12 age group. Samriddhi Karmacharya got firstposition among the children below 10 years. ‘Alltotal 18 hundred 77 students send their artworksin the theme of your car: the car of the future’,said Sahara KC, marketing manager, UTS. Thecompany collected the artworks from Nov 1st 2010to January 31st 2010. Toyota Motors has beenorganising this programme in 64 differentcountries. UTS awarded WII, I-POD, Play Station,Laptop and Japanese Lunch and Dinner to thewinners from Nepal.

Inspiring Womenand Children

UTS's E. Director Mrs. Ritu S. Vaidya

J

Computers in the future may weigh no more than 1.5 tons. - Popular Mechanics, 1949Computers in the future may weigh no more than 1.5 tons. - Popular Mechanics, 1949Computers in the future may weigh no more than 1.5 tons. - Popular Mechanics, 1949Computers in the future may weigh no more than 1.5 tons. - Popular Mechanics, 1949Computers in the future may weigh no more than 1.5 tons. - Popular Mechanics, 1949


Management Meditationwith Kamal Gynwali

Management

Just, a venture is running all right, does not necessarilymean it is managed well. Management deals with severalconundrums in planning goals, doing business and finallyreaping the fruits to distribute it well. Good managerstoday perform for the better tomorrow. Accordingly,here ‘The Economic System’ has embarked on a new anda dynamic column to provide noteworthy managerial tipsfrom distinguished Nepalese manager cum bankingprofessional Mr. Kamal Gynwali, Managing Director, KISTBank Ltd. In this column, he will provide his valuableadvices on multiple managerial facets. – Editor

Do’s

1. Realise the problem asinstitutional rather than an individualand share it within your institution.

2. Pay attention to the viewsexpressed by your subordinatesregarding the emergency.

3. Find out where the crunch existsand why because crisis may possibly beavoided in the eleventh hour if theeffective measures are deployed.

4. Discuss on wide range of solutionswithin the managerial level andultimately, select the best option.

5. Review the entire crisis in acomprehensive approach so as to avoidsimilar nature of problems henceforth.

Do not’s

1. Do not get nervous and even donot hurry as the crisis appears becauseit may enter unexpectedly in theinstitution.

2. Since you are a chief, please donot express your views immediately uponthe agendas in dilemma.

3. Do not attempt to tackle with thecauses earlier than differentiating it -whether internal or external ones.

4. Do not let any information leakingoutside the institution concerning therecent crisis, till you decide to let itknow the public, officially.

5. Do not react shortly oversituation and keep on the normaloperations.

M a n a g i n gI n s t i t u t i o n a lC r i s i s

I think there is a world market for maybe five computers. - Thomas Watson, chairman of IBM, 1943I think there is a world market for maybe five computers. - Thomas Watson, chairman of IBM, 1943I think there is a world market for maybe five computers. - Thomas Watson, chairman of IBM, 1943I think there is a world market for maybe five computers. - Thomas Watson, chairman of IBM, 1943I think there is a world market for maybe five computers. - Thomas Watson, chairman of IBM, 1943


Management

Everything of value was once a dream.- Carl SandburgEverything of value was once a dream.- Carl SandburgEverything of value was once a dream.- Carl SandburgEverything of value was once a dream.- Carl SandburgEverything of value was once a dream.- Carl Sandburg

very company has aunique organizationalculture. Each has itsown business

philosophy and principles, its ownways of approaching problems andmaking decisions, its own workclimate, its own embeddedpatterns of “how we do thingsaround here,” its own lore(stories told over and over toillustrate company values andwhat they mean to stakehoIder),its own taboos and politicaldon’ts-in other words, its owningrained beliefs, behaviour andthought patterns, businesspractices, and personality thatdefine its corporate culture.Corporate culture refers to acompany’s values, beliefs,business principles, traditions,ways of operating, and internalwork environment. The bedrockof Wal-Mart’s culture is dedicationto customer satisfaction, zealouspursuit of low costs, a strongwork ethic. At Microsoft, thereare stories of the long hoursprogrammers put in, the

BUILDING A STRATEGY-SUPPORTIVE

CORPORATE CULTURE

emotional peaks and valleys inencountering and overcomingcoding problems, the exhilarationof completing a complex programon schedule, the satisfaction ofworking on cutting-edge projects,the rewards of being part of a teamresponsible for a popular newsoftware program, and thetradition of competing aggressively.These are reflections of Bill Gatesmarvellous leadership.

Where Does CorporateCulture Come From?

An organization’s culture is bredfrom a complex combination ofsocio-logical forces operatingwithin its boundaries. A company’sculture is manifested in the valuesand business principles thatmanagement preaches andpractices, in its ethical standardsand official policies, in itsstakeholder relationships(especially its dealings withemployees, unions, stockholders,vendors, and the communities inwhich it operates), in the traditionsthe organization maintains, in its

supervisory practices, inemployees’ attitudes andbehaviour, in the legends peoplerepeat about happenings in theorganization, in the peerpressures that exist, in theorganization’s politics, and in the“chemistry” and the “vibrations”that permeate the workenvironment. All these sociologicalforces, some of which operatequite subtly, combine to define anorganization’s culture, beliefs andpractices that become embeddedin a company’s culture canoriginate anywhere: from oneinfluential individual, work group,department, or division, from thebottom of the organizationalhierarchy or the top. Frequently,a significant part of a company’sculture emerges from the storiesthat get told over and over againto illustrate to newcomers theimportance of certain values andbeliefs and ways of operating.

(This text is thankfully extractedfrom ‘Strategic Management ‘published by The Institute ofChartered Accountants of India)

E


Life Style

Aviation products: you can get better, but you can’t pay more for it. - Steve EricsonAviation products: you can get better, but you can’t pay more for it. - Steve EricsonAviation products: you can get better, but you can’t pay more for it. - Steve EricsonAviation products: you can get better, but you can’t pay more for it. - Steve EricsonAviation products: you can get better, but you can’t pay more for it. - Steve Ericson

talian sedans andhatchbacks finallyget here in Nepalwith the due effort

of Batas Brothers MotorsLimited (BBML), authoriseddistributor of Fiat Automobilesin Nepal. The Fiat Grande Puntoand the Fiat Linea are here nowfor this summer to share yourmoments with.

The Linea Sedan is a tributefor the car lovers, jewelled withquality, safety and engineeringthat represents a marvel due tothe unique design, comfort,

Linea sedan and Grande Punto for you with your family and friends

FEEL THE

performance and features. Lineais produced in India, Brazil andTurkey and widely popular inmore than 50 countries acrossEurope, Asia, Central and SouthAmerica and Africa.

Likewise, Fiat Grande PuntoHatchback arouses strongemotions with its sleek,aggressive lines and conveys animpression of elegance andcompactness, the company said.The car is agile and probablydelivers the most enjoyable drivewith its Fully IntegratedRobotised Engine (FIRE) and

MULTIJET engines. It is certifiedwith EURO NCAP 5 star ratings inEurope.

The Grande Punto's sportyand muscular styling can beattributed to the 'Car Designer ofthe Century' Giorgetto Giugiaro.The strong character of theGrande Punto is defined by asleek and aggressive nose, whichconveys an incredibly realdynamism. Internationally,Grande Punto has an excellenttrack record and has producedand already sold One Mill ionunits across markets.

I


Life Style

The will to win is important, the will to prepare is vital. - Tee ShirtThe will to win is important, the will to prepare is vital. - Tee ShirtThe will to win is important, the will to prepare is vital. - Tee ShirtThe will to win is important, the will to prepare is vital. - Tee ShirtThe will to win is important, the will to prepare is vital. - Tee Shirt

Introductory PriceIntroductory PriceIntroductory PriceIntroductory PriceIntroductory Price

Global RecognitionsGlobal RecognitionsGlobal RecognitionsGlobal RecognitionsGlobal Recognitions

Linea sedan Grande Punto♦ Carro Do Anno 2008 in Brazil♦ Auto Interamericana 2008 - FIPA LatinAmerica♦ Melhor Compacto - Rivista “Carro” Brazil♦ Powercar 2008 a Grande Punto Abarth - Auto

Zeitung -Germany♦ Abarth- Production Car Hot Hatch♦ Most Popular Car - Best Private Car - Salone

Barcellona♦ Catalonian Car of the Year Award - Maggio 07♦ Best Cars 2007- Auto Motor und Sport -

Repubblica Ceca

♦ Autobest Award 2008, Istanbul Turkey♦ The Most Interesting Car Award 2008,

Katowice Poland♦ NDTV Profit Car & Bike Awards – Midsize

Car of The Year Award, 2010♦ Bloomberg UTV Autocar Awards 2010 Car

Advertisement of the Year♦ The Golden Steering Wheel (Auto Bild) –

Readers’ Choice Car of the Year Award,2010

♦ CNBC TV18 Overdrive awards 2010 – Storyboard Auto Commercial of the year

♦ Autocar – Car of the Year & Best Midsize Car of the Year, 2009

♦ Overdrive – Best Midsize Car ofThe Year, 2009

Linea 1.4 Active (Petrol) NRS 3205999Linea 1.3 Active (Diesel) NRS 3614999

Linea 1.4 Dynamic (Petrol) NRS 3220999Linea 1.3 Dy namic (Diesel) NRS 3665999

Linea 1.4 Emotion(Petrol) NRS 3519999Linea 1.3 Emotion (Diesel) NRS 3871999

Linea 1.4 Emotion Pack (Petrol) NRS 3661999Linea 1.3 Emotion pack (Diesel) NRS 4123999

Punto 1.2 Active (Petrol) NRS 2371999Punto 1.3 Active (Petrol) NRS 2791999

Punto 1.2 Dynamic (Petrol) NRS 2569999Punto 1.3 Dynamic (Petrol) NRS 2968999

Punto 1.2 Emotion (Petrol) NRS 2732999Punto 1,3 Emotion (Diesel) NRS 3180999

Punto 1.3 Emotion Pack (Diesel) NRS 3462999


Corporate Chat

You can never be too rich, too thin, or do too much research. - AnonymousYou can never be too rich, too thin, or do too much research. - AnonymousYou can never be too rich, too thin, or do too much research. - AnonymousYou can never be too rich, too thin, or do too much research. - AnonymousYou can never be too rich, too thin, or do too much research. - Anonymous

What are the reasons yousuppose, those stirringchallenges like abating netprofit and tight liquidity in ourbanking sector most recently ?

The most severe issue I feel isthe deficiency in spending thecapital expenditure that causessurplus of 28 billion or more ingovernment’s treasury. It is theprimary cause for the tightenedliquidity and banking sector isrunning so far within limitedtransactions due to the delayedprojects. On the other hand,public deposits are diverted fromthe banking channel because ofthe incorrect interpretation of‘Know Your Customer (KYC)’ and‘Anti Money Laundering (AML)’which strikes upon the entiresector.

Would you please tell uswhat sort of effects does yourbank experience due to thelatest move of central banklimiting the gap at 2 percentwithin various depositschemes ?

We had brought wide range ofdeposit schemes in oursuccessful running of 26 years butthere was no any privilege givento manage our schemes as Nepal

Rastra Bank (NRB) recently guidedto do so. This move has totallywiped out the competition inbetween the new banks and theolder ones. Usually newlyestablished banks offer for thehigher interest rate to attractdepositors and they do not haveproblems. However theestablished grown-up banks withhuge deposits mobilisation arenow compelled to yield lowinterests to their depositors.

How do you describe theposition of your bankespecially concerning on creditflow and investment inproductive sector ?

We have always an endeavourto invest in the productivesector to substitute import inlong term. Thus among the 36billion rupees credit flow, wehave committed up to 2 billion toinvest in hydropower projects.Similarly some 1.75 billion iscommitted to invest in cementindustries. These loans will besurged up to the next year.

What is your plan on expansionof branches to spread out yourbanking services ?

We have 49 branches now inoperation all over Nepal and we

Nabil will shortly ally with Nepal

Investment and Himalayan Bank

Æ…

Among the36 billion

rupees creditflow, we

havecommitted

up to 2billion toinvest in

hydropowerprojects.Similarly

some 1.75billion is

committed toinvest incement

industries.


Do or Do Not, there is no try. - YodaDo or Do Not, there is no try. - YodaDo or Do Not, there is no try. - YodaDo or Do Not, there is no try. - YodaDo or Do Not, there is no try. - Yoda

Corporate Chat

are planning to operate somemore in the feasible areas amongthe 22 districts registered asremote ones by NRB. Earlier,branches used to catch break-even position within 9 to 10months of operation but thesedays it takes minimum 14 monthsto reach at break-even due to theinflated cost and logisticexpenditures. Thus we are verycautious for branch expansion aswell.

And what do you think aboutbranchless banking ?

I think a nearby branch isreasonably necessary to operatethe branchless banking service inthe remote areas. We are on thephase of feasibility study to startthis service at some 3 or 4 places.

Amrit Charan ShresthaChief Executive Officer,Nabil Bank Ltd.

Moreover we are mulling over theconcept of creating a businessalliance between variouscommercial banks to providebanking services collectivelywithin mutual sharing ofinfrastructures and costs.Primarily Nabil is to take part in analliance with Nepal InvestmentBank and Himalayan Bank toprovide our customers, mutualservices on cards, cheques andbranches.

Do you intend to imply the‘business alliance’ needs to bean alternative to those banksunwilling in what the centralbank is encouraging as‘merger’ ?

Merger is yet an immaturematter in Nepal and I think it is

quite difficult to weigh the valueof different institution at a time.Equivalent banks do not seemlikely be able to handle mergerproperly due to various conflictingissues like hierarchy in betweenthe board members, managementsand staffs. Rather acquisition maysucceed in between the strongerand other feeble bankinginstitution if the weaker one feelsprestigious enough to dissolvewith the larger one. In the presentcontext business alliance is quitenecessary to lower the operatingcost and increase the efficiencyof commercial banks. Alliance canhave sharing in different servicesthrough a subsidiary company thatwill reduce the administrativehassles.

NRB's move has totally wiped out the competition in betweenthe new banks and the older ones.


It is a vulgar mistake to think that most people in Eastern Europe are miserable. - Paul SamuelsonIt is a vulgar mistake to think that most people in Eastern Europe are miserable. - Paul SamuelsonIt is a vulgar mistake to think that most people in Eastern Europe are miserable. - Paul SamuelsonIt is a vulgar mistake to think that most people in Eastern Europe are miserable. - Paul SamuelsonIt is a vulgar mistake to think that most people in Eastern Europe are miserable. - Paul Samuelson

Digi Market

ood newsfor touch screen lovers !

Samsung has made available newseries of capacitive touch screenGalaxy mobile phones inNepalese market. InternationalMarketing Services Pvt. Ltd. anauthorized distributor forSamsung Mobile in Nepal has

New series arrive on

Samsung Galaxyannounced thelaunch of the twonew models called“Galaxy S” & “GalaxyPop” powered by theAndroid v2.2 (Froyo)operating system.

New Samsung GalaxyPop is a 3G enabled phonefeatures with 3.14 inchesTFT touch screen display,

powered by the Android v2.2(Froyo) operating system alongwith 600 MHz processor. It hascustomized user interface calledTouch Wiz and Swype text inputmethod which enhances mobilecommunication on a whole newlevel.

The Samsung Galaxy Popcomes with internal memory of160MB and has micro SD card slotwhich supports up to 32GBmemory.3.5 mm audio jack, DNSesound enhancement,Accelerometer, 3.15 MP, camerawith Geo-tagging, Wi-Fi,Bluetooth with A2DP, FM radio,

Digital compass and socialnetworking support are somefeatures of Samsung Galaxy Popmobile phone. You can get this atRs 16250.

Similarly Samsung Galaxy Scomes with 1GHz processor and16GB internal memory onlywithout the 8GB version. TheSamsung Galaxy S has micro SDcard slot which supports up to32GB memory. Accelerometersensor,3.5mm audio jack, 5 MPcamera with Geo-tagging, touchfocus, face and smile detection,Wi-Fi, Bluetooth, FM radio, Digitalcompass and social networkingsupport are some features ofSamsung Galaxy SL with theoperating system of Froyo.

It has a Standard battery, Li-Ion 1650 mAh which enables to 15hours talk time on 2Gconnections (7.5 hours in 3Gmode) and standby time to 610hours (2G) and 550 hours (3G). Youcan have one or gifted it to yourbeloved at Rs 39000/-

anon, the leader inimaging technology iscurrently developing anew super telephoto

zoom lens targeting theprofessional shooters around theglobe. The new super telephotolens EF 200-400mm F4L IS USMEXTENDER 1.4x is scheduled to belaunched before the end of 2011.Meanwhile, Canon has launchedits four new EF lenses and onesuper telephoto zoom lens in themaking, with improved features tocomplement the next generationof DSLR cameras.

The EF-S18-55mm f/3.5-5.6 IS IIand EF-S18-55mm f/3.5-5.6 III arecompact and lightweight lenses

designed for users in need of anaffordable “go-to” lens that canbe used in almost all scenarios.Designed as the successors to theEF-S18-55mm f/3.5-5.6 IS andEF-S18-55mmf/3.5-5.6 IIlenses, thesenew versionscome withn e w l yr e d e s i g n e dexteriors that look more luxuriousand allow for simpler operation.

One dramatic improvementthat users can feel upon pickingup one of these lenses is thereduced weight of the lenses.

Through a combination ofadopting newmaterials like

fluoritel e n s

elements andmagnesium alloy body, and the

streamlining of parts, Canon wasable to reduce the weight of theEF500mm by 680g and the EF600mmby an impressive 1.44kg withoutany compromise to image qualityand durability of the lens.

Canon to develop super telephoto zoom lens

C


Drill for oil? You mean drill into the ground to try and find oil? You’re crazy. - Edwin L. DrakeDrill for oil? You mean drill into the ground to try and find oil? You’re crazy. - Edwin L. DrakeDrill for oil? You mean drill into the ground to try and find oil? You’re crazy. - Edwin L. DrakeDrill for oil? You mean drill into the ground to try and find oil? You’re crazy. - Edwin L. DrakeDrill for oil? You mean drill into the ground to try and find oil? You’re crazy. - Edwin L. Drake

he UKMinisterof Statefor

InternationalDevelopment AlanDuncan launchedDFID’s new operationalplan in Kathmandu amidhis most recent visit. Thisplan commits the UKgovernment to working inNepal over the next fouryears (2011-2015), with anallocation of £331 million,to support the peaceprocess, help strengthengovernance and improvesecurity, help excluded peoplebenefit from economic growth

and so on. The plan will befocused to deliver betterhealth and education services,help Nepal adapt to climate

oinciding with‘Nepal TourismYear 2011’, LalitMandap Travelsand Tours (P.)Ltd hassuccessfully

organised a Familiarisation(FAM) tour to the executiveboard members and regionalheads of World Fellowship of

Buddhist Youths (WFBY) atLumbini. ‘FAM tour is arrangedto introduce Nepal as a chiefdestination for the Buddhistpilgrimage tours’ said SurajShakya, executive chairman ofLalitmandap with the press, ‘We provide the visitors withthe exposure of manyunexplored and hiddensecrets of significant Buddhist

LalitMandap'sFAM TourinBuddha’sBirthplace

sites in Kathmandu, Lumbini,Taulihawa, Niglihawa etc.’

The tour is conductedfrom 23rd to 28th Feb in theleadership of Min BahadurShakya, well known Buddhistscholar expert. WFBY is anorganisation having itsheadquarter in Bangkok,Thailand and regional centersin 18 different countries.

C

Spotlight

Photo : Lalit Mandap Travels and Tours

DFID will spend £331 million in Nepal

T change, reducerisk fromdisasters,includingearthquake andimprove the livesof women andgirls.

The plan willcreate 230,000 jobs;reduce climatevulnerability of 3million poor people;lift 570,000 people outof poverty throughthe forestry

programme alone; avert 108,200unintended pregnancies; andprovide safe latrines for110,000 people.


Airplanes are interesting toys but of no military value. - Marechal Ferdinand FochAirplanes are interesting toys but of no military value. - Marechal Ferdinand FochAirplanes are interesting toys but of no military value. - Marechal Ferdinand FochAirplanes are interesting toys but of no military value. - Marechal Ferdinand FochAirplanes are interesting toys but of no military value. - Marechal Ferdinand Foch

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kmf]g g+= $!!)#@!, $!!)#@%O{d]nM [email protected]

j]j ;fO{6M www.sebonp.com


Medic Market

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Comparative Chart onPopulation vs. Medicines Brands

Country Population No. of Brands(In million) Companies

India 1,180 12,500 252,000

Bangladesh 155 275 11,800

Japan 135 360 11,400

Pakistan 170 316 12,200

Nepal 28 295 9,700

Description Domestic Foreign Total Domestic (%)

No. of Companies 45 250 295 15.25 %Annual Sales Amount 5100 7800 12900 39.53%

(Rs. in Million)Employment Generation 7,200 1,800 9,000 80.00%

(Direct/ N0. of Persons)Economic ValueAddition 320 126 446 71.75 %

(Rs. in Million)Export Expectation 500 - 500 100 %

for Next 4 Years(Rs. in Million)

Current IndexofPharmaceuticalMarket in Nepal

Source : ITC Publication 2009on Pharmaceutical Markets


The traveler, however virginal and enthusiastic, does not enjoy an unbroken ecstasy. - Bennett, ArnoldThe traveler, however virginal and enthusiastic, does not enjoy an unbroken ecstasy. - Bennett, ArnoldThe traveler, however virginal and enthusiastic, does not enjoy an unbroken ecstasy. - Bennett, ArnoldThe traveler, however virginal and enthusiastic, does not enjoy an unbroken ecstasy. - Bennett, ArnoldThe traveler, however virginal and enthusiastic, does not enjoy an unbroken ecstasy. - Bennett, Arnold

\[]

The Citizen Investment Trust has invested Rs.22.35 billion in various sectors. ExecutiveDirector of the Trust Rishi Ram Gautam informedthat an agreement was made with UpperTamakoshi Hydropower Project to buy 20 percent of its share at a time when theaccumulated savings of the Fund till the fiscalyear of 2065/66 has reached Rs. 175.5 million.Trust is working to provide the services ofretirement schemes, unit trust schemes andthe capital market service too.CitizenInvestment Trust was established in 1990 underthe special act "Citizen Investment Trust Act1990".

Nepal Investment Bank Ltd. (NIBL), one ofthe leading commercial bank, recently markedits silver jubilee while the management is underdeliberately considering on strengthening thebank through merger process.

According to the Chairman and CEO, NIBL,the shareholders fund has increased from Rs500 million to Rs 4.9 billion. The operatingprofit of the bank has inclined from Rs 150million in 2002 to Rs 2.2 billion at present. Thebank have been managed by the Nepaleseprofessionals since 2002 after the departure ofFrench joint venture. The bank was establishedin 1986 as a joint venture between IndosuezBank, Rastriya Banijya Bank, Rastriya BeemaSansthan and public stakeholders and wasnamed Nepal Indosuez Bank Ltd. Later thename was changed as ‘Nepal Investment BankLtd.’ The bank has also joined in an alliancewith China Development Bank (CDB) which in hiswords is ‘quite fruitful in long-term funds tofinance sizeable projects in the future’, statedPandey.

With the credit rating of ‘A’ from IndianCredit Rating Agency (ICRA) for last twoconsecutive years, NIBL stands in first positionin term of deposit base and numbers ofdepositors. The banks’ deposit base has grownfrom Rs 4 billion in 2002 to Rs 50 billion atpresent, along with an increase in customerbase from 25,000 to 400,000, making the bankthe largest private bank in Nepal in terms ofcustomer base and deposit base.

After French banking group Credit Agricoletook over Indosuez Bank Group in 2002, theFrench company sold its stake in the bank to aNepali group led by Pandey, who is heading thebank towards remarkable growth after 2002.The bank’s loan portfolio now remains at Rs40.95 billion. The bank has expanded itsnetwork to 41 branches. Also, the number of itsATMs have grown from two to 71.

NIBL in ‘Silver Jubilee’celebration

CIT invests aroundRs.22 billion

Kumari Bank Ltd. and Oxfam in Nepal hassigned a partnership agreement for creditfinancing under Oxfam in Nepal’s EnterpriseDevelopment Programme (EDP). This partnershipwill be yet another step of Kumari Bank towardsproviding access to finance to the deprivedsector. As per the agreement, the bank willprovide revolving credit facility, up to definedlimits, to the Agricultural Co-operativesidentified by Oxfam. To start with, the bank hasfinanced Pabitra Janakalyan Agricultural Co-operative from Surkhet District.

Kumari and Oxfam tiedfor credit financing

Corporate Corridor

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C.D.O Office Kathmandu Regd. No. 27/2067/68

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