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