I read the following news this morning:

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The state-owned Nepal Electricity Authority (NEA) marked the 21st anniversary of its establishment with a cumulative loss of 7 billion Nepali rupees (100 million U.S. dollars) by this year, a white paper issued Friday by the NEA said.

Unveiling the white paper, managing director Arjun Kumar Karki said the state power monopoly started incurring heavy financial losses after 2002 when privately-built power plants such as Khimti, Bhotekoshi and Chilime were connected to the national grid under the power purchase agreement (PPA).

This year alone, the NEA has suffered a loss of 2.47 billion rupees (35.28 million dollars). Karki blamed the exorbitant PPA with independent power producers (IPP), high interest rate of loans taken from the government (10.25 percent), pilferage of electricity,including technical and non-technical (24.70 percent) and non-adjustment of electricity tariff for the past five years for the NEA's loss.

He said the NEA had to pay 1.75 billion rupees (25 million dollars) to the three private power plants last year to purchase " flood energy" they produced.

Karki said: "Despite the losses, the NEA will go on as it is a government entity and it has good relations with international financial institutions."

Losses can be minimized if electricity tariff is raised and adjustment made in the pricing with IPPs and government interest rate is reduced to about 7 percent.

Earlier, Minister of State for Water Resources Gyanendra Bahadur Karki said water resources is the principal asset in laying the foundation of the country's modernization.

He said foreign investment will be encouraged for the export- oriented and big projects, while domestic investment will be mobilized for domestic consumption.

He also hoped betterment in the water resources sector, as the peace process is moving towards the right direction.

Source: Xinhua

http://english.people.com.cn/200608/18/eng20060818_294522.html

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Nepal Electricity Authority has to pay huge amount to these IPPs. Well it would be okay if it had to pay for the power it had utilized but during summer when NEA itself has more than sufficient power it has to buy from Bhote Koshi and Khimti.

Due to these uneven Power Purchase Agreement (PPA), done by some political influences, has left NEA into this stage.

I can see so many educated person visiting sajha. I would want to know from you all, what should be done so that NEA can go into Profit.

Please comment.

Thank you,

It's a shame.
A nation that is supposed to be a power house of Hydro electricity (2nd in the world in terms of hydroelectrical resources) has to resort to load-shading beginning this September and has incurred a loss of over 100 million USD since its inception. How can an entity make more loss by adding more power generators to the grid??

This is another classic example of poorly managed State corporation.

Is privatization an option? A publicly traded company with majority of its stock to the Nepali public might be ideal.
Should it continue to be a government entity? It has gone through numerous changes in its policy makers, result has been same.
NEA needs to be privatized, although the process should be very transparent and give priority to the domestic entities and investors; athough international involvement is inevitable and necessary also (due to the cost involved).

DWI,

You said it right. It's really a shame.

About privatization, I had heard that there was something going on in this process. NEA was subdivided into three parts as GENERATION, TRANSMISSION and DISTRIBUTION.

We have seen that Generation has gone a bit into Privatization as there are other small IPPs, which contribute to the power to the National Grid using NEA transmission network.

The distribution can also be privatized making it a profit center. This policy will be good for some industrial areas, but there are some place where people don't pay for the electricity they use. I think because of these things NEA has been unable to find the private distributors who can step up to take these place in contract.

I don't think the Transmission can be made private. It should be the government property as it requires lots of security, which only the government can provide.

But Still, No Matter how efficient NEA work, it's not gonna get profit. It is because most of the money it gets goes to Bhote Koshi and Khimti. And the amount is increasing because of the inflation of Nepalese currency to US Dollar.