The Private Sector at Risk

Kathmandu; The process of introducing a new Electricity Act has started as soon as the Hydropower Development Policy, 2058 was issued. The law has been neglected for years due to the controversy of removing and adding favorable issues by each government following different political parties. The act was being prepared during the tenure of the then king Gyanendra Shah.

After the People’s Movement (Jana Aandolan) of 2062/63 BS, a government was formed under the leadership of Girija Prasad Koirala. The government began to amend the draft of the monarchy, saying that the law should be prepared according to the spirit of the democratic republic. The Koirala government, which included the then UCPN (Maoist) and UML, returned the bill from the doorstep of parliament, saying it was from the time of the king.

Since then, there has been a lot of political turmoil. Dozens became Prime Ministers and as many Energy and Water Resources Ministers. According to the political interest, the draft of the Act used to come up for discussion and it used to vanish from time to time. After the first Constituent Assembly election, discussions took place in the Natural Resources Committee of the Parliament for a long time. CA members from Congress, UML and UCPN (Maoist) presented amendments on 142 points.

At that time, the licenses of most of the hydropower projects were in the hands of individuals and businessmen close to the UML. That’s why Water Resources Minister Bishnu Poudel had amended the draft according to the will taking it in the Party Office Balkhu. The revised draft was discussed in the Legislative Committee through the Council of Ministers. The committee could not pass the bill after objections from the Nepali Congress and the Maoists. Thus, the bill reached the parliament twice and returned.

When the country adopted federalism, there was controversy and dilemma over how to ensure the right to water and electricity according to ILO-169. The Electricity Act of 2049, the Hydropower Development Policy and the Rules of 2050 have different methods and procedures for constructing hydropower projects.

The Act stipulates that the license to be given to the first applicants (First Come First) on the basis of the contract. Competition has been given priority in the policy and licensing action plan. Acts, policies and regulations on government royalties, investment guarantees, foreign investment attraction, power purchase agreements in dollars and local rights are inconsistent.

The new act is envisaged with the objective of developing modern and quality power by maintaining uniformity in all these issues. There was also a plan to facilitate and manage the private sectors. Preparations were made to pass the bill by the Council of Ministers in Ashwin, 2071 BS and then take it to the Parliament. But it stopped suddenly.

After the local, state and federal level elections, discussion and consultation on amending the law started again. And, it was said that almost 18 years later, a federal bill was drafted. The same bill was submitted to the Council of Ministers by Ministry of Energy, Water Resources and Irrigation. It was passed from there and sent to Parliament on 8^th Chaitra, 2076 BS. After the discussions in parliament, it’s hoped to be discussed.

Analyzing the bill that has reached the Parliament in a broad way, it does not have any progressive provisions except controlling the licenses and restricting the private sector. In the 27-28 years that the private sector has been called upon for hydropower, the government has done more to torment the sector. Even Forests, environment, land reform and their sister organizations are the main obstacles to hydropower. From time to time, the Commission for Investigation of Abuse of Authority also gives trouble.

To date, the private sector has invested more than Rs.120 billion in hydropower. Now, it is investing six trillion rupees in the river. Thousands of people are employed. An additional Rs. 6-7 trillion rupees is expected in the next 4-5 years.

The private sector has been working by breaking down those government obstacles, evading them and sometimes unlocking them. The private sector has shown the achievements in just 27 years for which government took 109 years.

Today, the power generation from the private sector is more than the government. The role played by the private sector in ending the power crisis, the added royalty to the nation’s fund, the contribution of taxes and employment are commendable. The government has not given importance to this aspect. Let’s consider, what would happen today if there wouldn’t be the electricity generated by the private sector?

The banking industry, which is approaching its turn of the century, is not worth more than three trillion rupees. Tourism, cement, rods, agriculture, household and other industries are on one side and energy and hydropower on the other. In such a situation, it should be the responsibility of the nation to ensure the investment of the hardworking promoters who are contributing by adding small capital in power generation.

Based on this progress, the government needs to be flexible and welfare oriented towards the private sector. However, the bill did not show such signs. Moreover, if the promoter becomes incompetent due to delay, or problem due to non-compliance with the rules, the issue of taking control over the project management has become a priority. This work has been done by Nepal Rashtra Bank in monitoring financial institutions.

It cannot be said that there is no distortion, inconsistency or economic opaque activities in the hydropower sector. However, the solution to these problems is not to take control under management. If the government starts discouraging the promoters on various pretexts during the 30-40 years permit period, the way for domestic investment in the power sector will be blocked.

The bill also discriminates between domestic and foreign investors. It is mentioned that there is no need to compete if the government or government body builds the project in collaboration with a foreign company, institution or body. Foreigners cooperating with Investment Board, Hydroelectricity Investment and Development Company (HIDCL), Power Generating Company and Nepal Electricity Authority could easily get a permit.

Competition will not be enforced to the government itself. Now, the question arises, for whom is the competition? For those domestic promoters who build 30-40 MW or up to 100 MW projects? Is it appropriate for the nation to be so liberal in the case of foreigners and so rigid for the natives? The government’s policy of forcing natives people to build a project by tying their hands and feet in a room does not result in a positive way but only an accident.

Out of about 700MW generated by the private sector, only 200 MW has direct foreign investment. It also has 10-20 percent natives’ capital. What kind of policy is of the government to squeeze its promoters generating moves than 500 MW of electricity and suck the juice to foreigners?

The bill, drafted after nearly two decades, should have been properly matched with at least 100 years of planning, vision and goals. A prosperous nation should have been envisioned by untying the knot of existing complexities in the energy and hydropower sectors. There needed to be strong cooperation between the government and the private sector. In order for the nation to become self-reliant, the basis of native capital formation, mobilization and job creation had to be laid. But the bill seems to have turned blind eyes to it.

The problems of forest, environment and land have been the same in the construction of hydropower for decades. The process of land acquisition is becoming more complicated in the construction of transmission lines. The process of purchasing electricity and price is discriminatory between domestic and foreign companies. If the bill had addressed these aspects, it would have been felt that the government had taken a step forward in policy- making.

It is not mentioned ‘how to unite the knot of complexity of environment and forest.’ The demarcation of land tribunal for the project has been removed. But, it is not written ‘how to remove the local problems seen in the tribunals.’ Ways to ease the ‘right of way’ of transmission line are not suggested. There’s no word on how the state and local bodies would play the role in the problems while constructing the project.

There is no way to bring the projects under construction to the stage of power generation. While writing the bill, there must have been influence of the INGOs. Otherwise, there would not have been such biased sentences. In fact, the government is dreaming of generating 15000 MW of electricity in 10 years by irritating the private sector. Why is the government tying up to the private sector in various troubles even though the economy cannot survive without it?

Now, it’s up to the private sector:  Either to be ready to be cut with the sword that is put on the neck by the government or struggle to survive?  If necessary, the government is shaken by the federation of Nepal Chambers of Commerce and Industry (FNCCI), the umbrella organization of some home-based industries or sellers of cement, rods, cars, grocery items and others. Nepal Chamber of Commerce and Nepal Industries Council also stand together in need.

The banking industry is working closely with the government. Ironically, the country’s largest capital-generating industry (energy and hydropower), which has invested Rs. 6-7 trillion, is always forced to operate under government’s pressure. Even now, are the hydropower promoters ready to continue being looted from the nation in this way? If so, there is no solution.

If not, isn’t it time to raise the voice to secure own and public’s capital? As an umbrella organization of the private sector, there is Independent Power Producers Association of Nepal (IPPAN). But, now it is not playing any role as its leaders or officials are pursuing their own interests.

Under IPPAN’S umbrella, cottage industries are being run like greed, lust, jealousy and selfishness. If it is to work in the interests of the private sector as a whole and gather strength to unite against the injustices of the government, IPPAN officials and every promoter must leave those small self-interests. It is necessary to work together to find the role of the private sector in the new act that is coming after two decades.

The government will not listen to the voice of the private sector unless there is a group of individuals, organizations, bodies, contractors, consultants, or experts associated with the hydropower industry. That evidence was seen in the previous days. On the other hand, while discussing the bill in the parliament, the CAs have to consider the idea of a prosperous nation envisioned through hydropower. For this, half of the contribution of the domestic private sector should not be forgotten. Otherwise, the end of domestic private sector in hydropower is not far off.