Mills feel chill wind of power cut

"All five spinning mills in the country could meet

the same fate any time in the future"

THIRA L. BHUSAL & PRABHAKAR GHIMIRE
KATHMANDU, Oct 23

Enough is enough. For Jyoti Spinning Mills (JSM), already shattered by a series of problems, hours-long load shedding was the last straw.

A multi-million-rupee plant established 17 years ago in Parwanipur as one of the most advanced spinning mills in all of Asia, JSM is now on its deathbed.

Other problems could have been managed over time. But the intolerably long hours of power cuts devastated the mill's prospects, said Roop Jyoti, a major promoter.

Knocked flat by losses running into millions of rupees that accumulated over more than a year of power outages, the promoters eventually decided to shut it down.

JSM had a workforce numbering around 1,000, and its machinery needed to be in operation 24 hours a day to fully exploit the capacity of its 4 MW power supply.

"Inadequate and irregular power supply from Nepal Electricity Authority (NEA) to the Birgunj-Simara Industrial Estate inflicted a loss of Rs 160 million over the last year," said Jyoti, who is also a promoter of Jyoti Group.

"We had managed to keep the mill running despite various obstacles. But the load shedding we suffered during the last 18 months was too much," Jyoti said explaining why the mill, which was earning more than Rs 20 million in annual profits, had to be wound up.

JSM, whose annual turnover hovered around Rs 750 million, closed down saddled with liabilities totalling Rs 680 million. The company has 6,000 ordinary shareholders, and its total investment amounts to over Rs 800 million.

Jyoti said the mill's power situation worsened immediately after NEA began providing 10 MW supply to a new company in the already power-deficit area. Though JSM is the latest victim of this perennial problem, the erratic and insufficient power supply has taken a heavy toll on industries across the country.

Jyoti estimates that the Parwanipur area's power requirement is at least 40 MW, but it gets only 30 MW.

Parwanipur staggers under four hours of load shedding daily: two hours in the morning and two hours in the evening.

"We could have managed to stay afloat if the power cut had been limited to once a day," Jyoti said, "but NEA didn't listen to our pleas."

An NEA official said it could not change the load shedding schedule at the request of one consumer. "NEA can reduce power cuts to once daily if a customer seeking such a privilege makes arrangements for a separate supply system directly from a transmission line," Sher Singh Bhatt, director of NEA's system operations department, said. "Otherwise, we cannot cause trouble to other consumers just to satisfy one or two."

Reliance Spinning Mills is another factory that has recently been kayoed by power cuts.

"All five spinning mills in the country could meet the same fate any time in the future," Jyoti said. Nepal's industrial entities have been in deep trouble after NEA last year imposed load shedding of up to 48 hours a week.

According to the Federation of Nepalese Chambers of Commerce and Industry (FNCCI), the business sector alone contributed around Rs 107 billion in taxes during the last fiscal year.
Of the total Rs 13 billion income tax paid by the sector, more than 92 percent came from 350 big industries that are in trouble due to irregular electricity supply.

The business community has frequently drawn the attention of the government saying that power outages cause massive losses to the industry. They said power deficit had resulted in a 40 percent decline in productivity.

Solutions

Industrialists have concluded that the government has failed utterly to provide basic requirements including electricity, security and law and order. Now, they are thinking of finding solutions on their own, not to wait for the government to act.

"We are planning to start a thermal plant in the area as an interim arrangement because we can't wait until hydro projects get completed," Jyoti said. According to Jyoti, a thermal plant can start producing power in six months. The plan is at the feasibility study stage. Thermal power is costlier, but factory owners are unfazed.

"Industrialists would be happy to pay Rs 12 per unit," Jyoti said. Another option is importing power from bordering towns in India. Jyoti said it was a better alternative, but the government had to take the initiative.

THE KATHMANDU POST

Nepal has the power, India the market

T. N. Thakur is chairman of the Power Trading Corporation of India (PTC), a private-public partnership whose primary focus is to develop a commercially vibrant power market in India . Since 2006, Thakur has been actively involved in organizing the Power Summit in Kathmandu, which brings together top level government officials and private investors from Nepal , India and beyond. From its inception in 1999, the PTC has sought to provide services that address the sustainability of a power market model including intermediation for long-term supply of power from identified domestic and cross-border power projects, financial services like providing equity support to projects in the energy value chain, advisory services and forays into providing fuel linkages to power plants of various generators participating in the power market.

In the Weekly Interview, Thakur—who spoke with Purna P Bista and Thira L Bhusal of The Kathmandu Post —urged the government of Nepal to reform its power policies and invite investors for the benefit of both Nepal and India.

Excerpts: Q: How do you assess the third power summit held in Kathmandu last week?

Thakur: Until 2006, there was a lot of skepticism among the people in Nepal and India about who would benefit and who would lose out after we develop hydropower. What has been emerging out of the summit is that Nepal 's hydropower resources are its most valuable assets, and that it should tap this wealth for domestic consumption. Excess power will be consumed by India .
This is the third summit attended by government delegates and independent power producers from Nepal , India and beyond. The whole idea of holding the conference is to bring potential investors from India and Nepal closer. Basically, this is a platform where private investors and representatives of both the governments of India and Nepal meet exchange views and share knowledge to tap Nepal 's water resources.

I say that Nepal enjoys the right to consume the electricity produced in Nepal for its development. Naturally, surplus power will have to be sold to India . The revenue generated by exporting energy will be spent on other areas such as health, education and roads. You sell electricity because you need money for development.
In India , some states sell power to other states and earn good revenues. Himachal Pradesh , Sikkim , Arunachal Pradesh and Uttarkhand are examples. Bhutan also exports energy. You will be surprised to know that we are buying all the surplus power from these states, and they make a very good amount of money. Himachal Pradesh makes Indian Rs 14 billion (US 350 million) a year. It sells directly to us (PTC). Bhutan gets Indian Rs. 10 billion (US 250 dollars) a year. Smaller states in India generate revenue by providing power to power-deficit states. As a result, these states have been making rapid economic progress. For example, Himachal Pradesh is ahead of many states in education and health. We have a power market, and you have the power. So we thought and decided to hold a power summit to let the people and power producers in Nepal and India know that there is an opportunity in India .

Q: What is the current power deficit in India ?

Thakur: The peaking deficit is 15 percent and energy shortage is around 10 percent. The actual shortage will be greater than the figures I have just mentioned because they are based on the demand that comes into the market. Peaking hours are your requirement in terms of energy and your ability to supply it. The energy shortage is calculated on an overall basis, i.e., how much power is being demanded and how much is being supplied during a 24-hour period.
Our national grid has a capacity of 140,000 MW. We can supply power to any part of India The peaking hour shortage is more than 20,000 MW.

Q: How do you cope with such a huge power shortage? It must be affecting your economic development seriously.

Thakur: We have been unable to meet the peaking hour shortage. There is no power available. We have load shedding similar to what you have here. Sometimes, hydropower generators are shut down during off-peak hours and are operated during peaking hours only. Hydropower stations have the advantage of being able to generate power during peaking hours. We manage our load, but we are having energy shortages. As a result, we are ready to import or buy energy.

Q: You think that Nepal is an option to meet India 's energy demand?

Thakur: Yes, you have great potential. I hope you will exploit your hydropower in time so that it benefits both countries. We are trying to develop hydropower in Himachal Pradesh , Sikkim , Uttarkhand, Arunachal Pradesh and Jammu & Kashmir. Our Honorable Minister of State for Commerce and Power Jairam Ramesh said yesterday that we are trying to develop 50,000 MW of hydropower in the next 10 years, though we will need approximately 140,000 MW in that time.

Q: Many experts claim that developing hydropower in Nepal will be an expensive affair because of its terrain and other factors involved in power generation?

Thakur: It will be expensive and difficult, but not undoable. It is doable. We have similar terrain in Arunachal Pradesh , Sikkim or Himachal Pradesh. This kind of geology or geography you have in Nepal is similar to that of Himachal Pradesh, Jammu & Kashmir or Bhutan .
During the last power summit, I said that Nepal should set a target of producing 10,000 MW by 2020. It was my speech that made the government aware of your need for power. Many eyebrows were raised at that time whether it would be possible. They questioned my statement, but now everybody talks of how to meet the target. I am so happy that the government of Nepal has set a target of producing 10,000 MW in 10 years. So it is doable, but it is not easy because developing 10,000 MW will cost over Nepali Rs. 200 billion (US 2.75 billion dollars).

Q: How does Nepal get that kind of investment?

Thakur: Does the government have the capacity to spend so much money? From where are you going to get that kind of cash? You have to establish transmission links, build access roads and provide facilities for the locals. To find such huge sums of money, you have to look for potential investors. And the people who come from outside to invest here will have their own expectations and aspirations. That is why I have been stressing that you should have the right kind of environment, the right kind of policies and the right kind of institutions to get funding for hydropower projects.
If you could develop 10,000 MW of hydropower and sell 1,400 MW, you make revenues of Indian Rs. 14 billion (US $ 350 million) annually. If you consume 3,000 MW and sell 7000 MW, you get Indian Rs. 70 billion (US $ 1.7 billion) annually.

Q: Does Nepal have the right institutions to create the right kind of environment for the development of hydropower?

Thakur: You have to build some institutions. Today, I am very happy with the government and the politicians I have met, including the prime minister of Nepal . They have at least realized the need for developing hydropower. Prime Minister Pushpa Kamal Dahal is very forthright and businesslike. He has really given a lot of confidence to the people in India , saying that this is the right time to invest in Nepal . I met the Minister for Water Resources Bishnu Poudel and his secretary; I feel that they are eager to meet the target set by the government. I have also called on Deputy Prime Minister Bamdev Gautam and Finance Minister Dr. Baburam Bhattarai. Today, I see tremendous political will to go ahead with the plan to generate 10,000 MW.

Q: Obviously you have met many Nepali officials. What is your assessment?

Thakur: You should have the right kind of institutions here to further your hydropower projects. You have to make a number of institutional reforms and create the right kind of policies. Actually, 15 years ago we were in a similar situation. We invited investment, but private investors were unwilling to put money in India . So the government decided to develop a power market and set up the PTC at the national level. As a result, the PTC buys and supplies energy to power-deficit states as per their demand.
So, the whole thing is that people should feel confident and secure that if you invest in Nepal , the project will go ahead without any hassles and that investors will get their due return. If that sort of confidence is generated, investors will come forward. Otherwise, why would investors come to Nepal and invest when you do not have the right kind of environment and policies. Let us be frank, no investor will come here for charity. They will come here to earn money.

Q: How has Nepali leadership responded? Is it keen on institutional reforms?

Thakur: They are very keen. I have told them that we are ready to provide assistance with whatever Nepal requires to set up institutions like the PTC. We can make suggestions and provide expertise if needed. This is the way we should go. If Nepal wants to have something like the PTC, it is welcome. But we think that it should be a Nepali institution, not a copy of India 's PTC. Let the institution be Nepali and let it be a partner of India 's PTC. When you have a partnership, both partners must feel that they are benefiting.
If the smaller partner feels that it is not benefiting, then there is a problem. So let us be clear and assess thoroughly who is benefiting more. After all, India is not going to buy power at a cheaper rate. It will pay the market price. India is exploring all available options because our energy needs are growing at a rate of 9-10 percent a year. Unless you meet the energy demand, you cannot advance economic growth. By 2012, India will have more than 200,000 MW of electricity. In another five years, India will add another 100,000 MW.

THE KATHMANDU POST

Nepal, India ink 29-point deal

BY THIRA L BHUSAL
KATHMANDU, Oct 1

Major Agreements

- Establish Pancheshwor Development Authority
- Ministerial-level joint commission
- Restore Koshi embankment by March 2009
- Resolve Laxmanpur barrage inundation problem
- India to shun construction at Mahali Sagar
- Agreement to set up Joint Standing Technical Committee
- Pre-feasibility study on Naumure within 3 months

The Nepal-India joint meeting of top water resource officials concluded here today after reaching a 29-point agreement in which India reiterated it would not continue any controversial construction work along the Nepal-India border and to expedite implementation of past agreements.

In the agreement reached at the Joint Committee on Water Resources (JCWR) meet, India reassured Nepal that it would shun construction of new structures along the border which have been causing inundation problem in bordering areas of Nepal every year.

Nepali officials had expressed concern over the new construction work going on at Mahali Sagar in Kapilvastu district.

In reply, the Indian officials said the work has already been stopped. The JCWR then decided to make a joint field visit within one month and resolve the issue.

During talks at the Standing Committee on Inundation Problem (SCIP) held in the first week of October 2004 in Kathmandu, India had agreed not to continue any construction work at Mahali Sagar and other controversial sites until a bilateral agreement is reached.

To resolve the inundation problem caused by the India-built Laxmanpur barrage, the Indian side proposed that a structure should be constructed with a capacity to channel 40 cumec [cubic metre per second] of water to the Gandheli and Sotia canals through Kalkalwa Bund.

India is ready to implement the proposal. The Nepali side will send its comments on the proposed structure within a month. At least nine VDCs (40 square kilometres of Nepali territory) are submerged every monsoon due to the Laxmanpur barrage.
During bilateral talks at the High Level Technical Committee prior to the SCIP talks held in October 2004 in Kathmandu, the Indian representatives had agreed to give natural outlet to water blocked in Nepali territory.

The two sides have agreed to set up the Pancheshwar Development Authority at the earliest. The Authority will develop, execute and operate the Pancheshwar Multipurpose Project. Water resources secretaries of Nepal and India will co-chair the Authority.

The two governments, during the visit of Prime Minister Pushpa Kamal Dahal to India last month, had instructed the water resource ministries of both countries to expedite work on the project. For the 5,600 MW multi-purpose Pancheswar project, a treaty was signed between India and Nepal in 1996.

The Nepali side reiterated that the sill elevation of the head regulator for releasing water from the Tanakpur barrage to Nepal be lowered to 241.5 meters to ensure more water to Nepal.
The JCWR also proposed a Joint Ministerial Level Commission on Water Resources and another Joint Standing Technical Committee (JSTC) at Joint Secretary level. The JSTC will be coordinating all existing committees and sub-committees under the JCWR.

This decision was taken in the light of the top-level political agreement reached between the two governments during the prime minister's India visit to set up a three-tier mechanism, at the ministerial, secretary and technical levels. The two governments, in establishing the mechanisms, aim at pushing forward discussions on the development of water resources in a comprehensive manner including hydro-power generation, irrigation, flood control and other water-related cooperation.

The top officials, who visited the Koshi embankment breach areas on Tuesday as part of the three-day talks, committed themselves to completing the reconstruction of ravaged parts of the Koshi and turning the river back to its original course by March 2009. High level bilateral talks will be held over issues related to the Koshi embankment breach in the first week of November. The Koshi burst its embankment at West Kushaha in Sunsari on Aug. 18, displacing more than 35,000 people in Nepal and affecting around 2.5 million in Bihar state of India.

Regarding the 245 MW Naumure hydro project, the two sides agreed to jointly prepare a pre-feasibility report within three months. The Nepali side proposed to maximise the irrigation potential in the Rapti River basin and utilise a part of the flow in Kapilvastu district with the construction of necessary storage reservoirs at Naumure and Bhaluwang.

"The project will include irrigation facilities in Kapilvastu," Nepal's Water Resources Secretary Shankar Koirala told journalists upon the conclusion of the talks.

The government of Nepal assured the Indian side that it will guarantee the security of field investigations and studies for the Saptakoshi High Dam Multi-Purpose Project, said a statement issued by the Indian Embassy in Kathmandu.

The JCWR decided to extend by one year the tenure of the Joint Project Office established to study the project.

India's Secretary of Water Resources Umesh Narayan Panjiar described the talks as successful in achieving a positive outcome over long standing issues.

The next JCWR meeting is scheduled for February 2009 in Banaras, India.

THE KATHMANDU POST

Re-divert Koshi during Jan-March, expert says

BY THIRA L BHUSAL
KATHMANDU, Oct 1



Head of the technical committee constituted by the Bihar Government, Nilendu Sanyal Tuesday suggested topping water resource officials from Nepal and India to turn the Saptakoshi River back to its original course and plug the breached embankment between January and March when the water level falls.

During a briefing to Nepali and Indian Water Resource Secretaries, Indian envoy Rakesh Sood and other senior officials who visited the breached embankment site at Western Kushaha and adjoining areas, Sanyal suggested that every structure should be kept in a ready position beforehand but the river should be diverted back only between January and March.

Sanyal, a retired Engineer-in-Chief of the Water Resources Department of Bihar, was part of the team of engineers during the Koshi Barrage construction 47 years ago.

After arriving in the capital from an inspection of the site, Joint Secretary at the Ministry of Water Resources Shital Babu Regmi said that visiting officials from both countries listened carefully to what Sanyal had to say as he has thorough knowledge about the nature of Koshi.
Water discharge level in the Koshi during the three month period would be around 10,000 to 11,000 cusecs.

The Bihar government assigned the octogenarian Sanyal to manage the work on restoring the Koshi and plug the breach in the embankment.

The Koshi burst its embankment on August 18 and displaced more than 35,000 people in Nepal besides affecting around 2.5 million people in Bihar state of neighbouring India.

Water Resource Secretaries from Nepal and India Shankar Prasad Koirala and Umesh Narayan Panjiyar, Indian Ambassador to Nepal Rakesh Sood and joint secretaries among other experts and engineers from both sides had gone to Sunsari to inspect the embankment breached by Koshi.

Senior government officials from both countries reached the site as a part of three-day secretary-level bilateral talks, which started on Monday. The issue of the Koshi was one of the major agenda items during the talks.

THE KATHMANDU POST