At a time when the government’s announcement to provide discount to industries on payment of electricity bills in the budget for upcoming fiscal year has garnered praise from business community and ordinary citizens, a possibility has been seen that the Nepal Electricity Authority (NEA) will land into financial difficulty due to the decision. NEA’s income is already under strain because of its inability to collect payments from customers and decline in electricity consumption due to the ongoing lockdown.

The government has announced to provide 100 percent discount to NEA customers consuming electricity up to 10 units per month. Among the 4.2 million customers of NEA, about 800,000 consume power up to 10 units monthly. The bill payment waiver for such customers will result in NEA losing Rs 80 million a month. Similarly, providing customers 10 percent, 15 percent and 25 percent discount on the basis of power consumption will lead to financial losses of nearly Rs 5 billion to the authority, NEA officials argue.  

The budget has also provisioned to provide discount on minimum demand charge of electricity on drinking water supply, agriculture and all types of manufacturing industries. 50 percent waiver of charges has also been announced on off and peak hours of power consumption for industries. These discounts will reduce income of the authority by Rs 6 billion, say NEA officials.  According to NEA Managing Director Kulman Ghising, the concessions announced by the government will lead to a total of Rs 12 billion in income loss for the authority.

NEA, which had faced significant financial losses in the past, has gone through a turnaround under Ghising. The authority is in profit for the last three years; its net profit totaled Rs 10 billion in the last fiscal year which is highest among state-owned enterprises.  NEA also targeted for a Rs 10 billion profit for the current fiscal year which now looks challenging due to the protracted lockdown and concessions on electricity bill payment announced by the government.

“We won’t be able to take the financial burden if the loss of our income is not compensated. We will ask the government to compensate us,” said Ghising. According to him, it will be difficult for NEA even to pay to private power plants on purchase of their electricity. NEA has been buying power from independent power producers to sell to its customers. As per the Nepal Electricity Act, the government can provide concession on electricity charges. The Act has provisioned that the government has to compensate NEA should the authority faces loss due to the concession.

The government is yet to decide on compensating NEA and the budget for upcoming fiscal year also hasn’t mentioned anything about it. Dinesh Ghimire, secretary at Ministry of Energy, Water Resources and Irrigation expects that proposal for compensation will come from NEA. “A meeting of NEA under the chairmanship of Energy Minister Barshaman Pun will be held soon to decide on the topic matter,” he informed.

 Nevertheless, private power producers are against the compensation. “Private power companies too should be recompensed in case they face losses,” said hydropower entrepreneur Gyanendra Lal Pradhan, adding that NEA can earn Rs 40 billion in profit after 18 months if the authority works in well-planned ways. From next year, 50 percent ownership of the Khimti Hydropower Project will be transferred to NEA and Upper Tamakoshi Hydropower Project will also be operational. “NEA will register high from project like these in the coming years,” said Pradhan.