With the worsening of the fuel crisis in the country, the government is all set to declare a state of emergency in the energy sector. This is not the first time the government has decided to declare energy emergency. A similar move was made in 2008, but the government could not introduce effective measures to address problems faced by the energy sector at that time. As a result, the country is still reeling under hours of loadshedding per day, while water resource has continued to go to waste. Rupak D Sharma of The Himalayan Times spoke to Deputy Prime Minister and Energy Minister Top Bahadur Rayamajhi on what the government plans to achieve by declaring energy emergency this time.

What policies and programmes is the government planning to introduce by declaring energy emergency in the country?

The earthquakes of April and May inflicted huge losses on the country. While the country was trying to make a recovery from these devastations, another disaster, in the form of blockade, has befallen us. The blockade has created acute shortage of petroleum products such as petrol, diesel, kerosene, aviation fuel and cooking gas. Against this backdrop, people have started talking about making the country self reliant in the energy sector, and they are expecting a lot from the Ministry of Energy (MoE). Talks about development of the energy sector have been taking place for the last 108 years. But as of now, the country’s total installed capacity stands at around 780 megawatts, which drops to around 300 MW during dry seasons. In contrast, the country’s peak electricity demand stands at about 1,400 MW. So to end loadshedding through domestic means, we need projects that can generate additional 1,100 MW of electricity even during dry seasons. I have already pledged to make loadshedding a history within a year. To achieve this target, my team is framing short-, medium- and long-term plans. To implement these plans we have to make amendments to various rules and regulations, radically change our working style and make various structural changes. We are still working on these plans and would disclose all the details within a week.

How do you plan to end loadshedding within a year?

We can convert a number of existing power projects, such as Kaligandaki A, into peaking power plants and produce 327 MW of energy. These projects will collect water for, say, 18 straight hours and will generate electricity only during hours when energy demand is high. We can also produce 106 MW of electricity from reservoir projects and 150 MW from run-of-the-river projects. In addition, new hydroelectric projects with installed capacity of 250 MW are expected to come into operation within three to four months. These projects will add more electricity to the national grid. Besides, we can import additional 100 MW of electricity — on top of 180 MW that we are currently importing — from India once construction of 400kV Dhalkebar-Muzaffarpur transmission line is completed. More electricity will also be added to the grid once projects damaged by earthquakes resume operation. Besides, we are planning to reduce leakage of around 10 MW of electricity. Also, plans are afoot to generate 250-300 MW of electricity through solar plants within a year. So, this is how we are planning to end loadshedding within a year. Further, we are planning to generate adequate energy required for the country solely through hydroelectric plants in the next two years. And in the next 10 years we have plans of generating 10,000 MW of electricity. To implement these plans we have to make radical changes in the way we do things. And I believe energy emergency that we are planning to declare will help us roll out these plans at a very fast pace.

Nepal has a long history of drafting ambitious plans and failing to implement them. Will things be any different this time?

We are formulating the plan by incorporating suggestions of internal and external energy experts and entrepreneurs working in the energy sector. The plan will also incorporate deadlines, which will define when each of the goals has to be met. And I will personally see implementation of the plan. However, I must acknowledge that the plan, which we will float soon, will not provide immediate relief to people facing shortage of various goods. I know the blockade has choked supply of various goods, created shortage of fuel and essential drugs, affected movement of people and barred children from going to school. If this continues, we will soon face a humanitarian crisis. To address these issues, the government has already decided to supply various types of fuel in an impartial manner and crack down on those engaged in black marketing.

Earlier you said the government intends to generate 10,000 MW of electricity in the next 10 years. How do you plan to mobilise funds to build these projects?

For this, we have to create an investor-friendly environment. Also, we will have to guarantee protection of investment made by domestic and foreign investors. I know red tape and other bureaucratic hurdles have emerged as biggest barriers to investment in the energy sector. We will rectify these mistakes and encourage domestic and foreign investors to invest in the energy sector. At the same time we will also facilitate investors, who have acquired licences to build hydro plants, to implement the projects as soon as possible. This will expedite project implementation.

Private investors, both domestic and foreign, are profit oriented. This means the government will also have to assure fair return for investors as well, isn’t it?

Of course. Private sector is profit oriented and it is natural for them to seek some returns. We are holding discussions in this regard and will come up with various modalities through which investments can be made in the energy sector.

Earlier, the MoE was framing a guideline to protect foreign investors from foreign exchange variation risk. It was said the guideline would allow foreign investors to sign power purchase deals in a mix of the US dollar and Nepali rupee. What is your take on this issue?

The issue on dollar-denominated power purchase agreement (PPA) came to my notice when I was a member of the Parliamentary Committee on Public Accounts. In fact, a sub-committee was formed under me to conduct a study on the issue. The report that we submitted had clearly said that foreign investors would be at the losing end if the government does not pave the way for signing of dollar-denominated PPAs. Currently, the MoE is not against the proposal of signing dollar-denominated PPAs. And we are holding discussions on ways to minimise losses that emanate from currency variation risk. We are currently weighing various options and will soon come up with a decision on the matter.

It is said there is a tussle between the MoE and the Investment Board Nepal (IBN), which has the mandate to oversee projects exceeding 500 MW. How do you intend to deal with this issue?

We are reviewing the relevance of the government’s decision to let the IBN oversee hydro projects exceeding 500 MW. If certain changes have to be made, then we will table proposals accordingly.

Does this mean you’ll review the project development agreements signed by IBN with two developers?

Yes, we are reviewing those decisions made by the IBN as well. I cannot say anything more on this matter, as we are still discussing the issue.

And what about the government’s previous decision to separate Nepal Electricity Authority (NEA) into three units. Are you reviewing that decision as well?

Yes, we are also reviewing the decision to unbundle NEA and create three different units that would oversee generation, transmission and distribution of electricity.

Are you in favour of unbundling NEA?

I cannot say anything on the issue now as it is still under discussion. At present we are looking at the pros and cons of splitting NEA into three different units.