Tariff hike or NEA's restructuring?
Instead of giving priority to hiking the electricity tariff, the initiatives taken to restructure the NEA should be taken to a meaningful conclusion.
Nepal Electricity Authority (NEA) has once again forwarded the proposal to hike the electricity tariff to the Electricity Tariff Fixation Commission (ETFC). Citing its ‘great loss’, the NEA has been forwarding the proposal to hike electricity tariff from time to time. Even the principle of trade does not say that any commodity should be purchased at a higher rate and sold at a lower rate. However, in least developed countries like Nepal, there is the practice of the government providing some subsidy in essential commodities like electricity.
As per the existing provisions, the ETFC can hike electricity or other tariffs once a year but not more than five percent at a time. NEA is trying to hike the electricity tariff based on this very provision. Especially, the NEA has cited reasons like the increased rate of power purchase agreements (PPAs) signed with private producers and the signing of PPA in US dollars for the need to hike the electricity tariff.
However, it hasn’t been even a year since the ETFC hiked the electricity tariff last time, as demanded by the NEA. Every time the electricity tariff is hiked, the restructuring of NEA is made a major agenda. However, once the tariff is hiked and the consumers start paying the increased tariff silently, the agenda of restructuring the NEA is back-burnured and preparation are started for hiking the tariff again.
When the electricity tariff was hiked by about 20 percent last year by categorizing the consumers into seven types, it was argued that the tariff won’t be reviewed for some time. At that time, the demand fee, energy fee and the off-peak fee of the time-of-day meter determined in 2012 for not only household users but also industrial, business and non-business users had been increased.
Though now the proposal has been forwarded to hike the electricity tariff for industrial users, the NEA has proposed to decrease the minimum electricity consumption from 30 units to 10 units for household users. This shows that even those consumers who use minimum electricity will be affected by the hike. Electricity tariff in Nepal is already the highest in South Asia. If it is hiked further, the consumers are going to bear the brunt. The per capital consumption of electricity is very low in Nepal. The fact is, we have not been able to use electricity for multi-purpose due to its scarcity. The available electricity is being used to light homes and has not been able to contribute to economic production to any significant level.
Availability of electricity, it tariff and industrial production are very closely interconnected. The industrial costs become very high if the electricity tariff is high but the commodity is not available for regular use. At present, the use of the installed industrial capacity of Nepal is not even 60 percent while the production cost is high.
Though industrial production has increased somewhat after measures to decrease load-shedding were employed last March, the situation is yet far from being satisfactory. Compared to big industries, the production cost of cottage and small industries is high. It’s not just the high purchase rate of electricity that has resulted in the high loss of NEA; the bloated NEA structure, overstaffing and low quality equipment and the electricity leakage of more than 24 percent are also responsible for NEA’s loss. Therefore, instead of giving priority to hiking the electricity tariff, the initiatives taken to restructure the NEA should be taken to a meaningful conclusion.