The private sector has opposed a proposed power tariff hike for industrial consumers arguing that they would not be able to absorb the additional burden after the Nepal Electricity Authority (NEA) recommended to the Electricity Tariff Fixation Commission (ETFC) to jack up rates for power supplied to industrial users.

Speaking at a programme entitled Electricity for Industrial Growth organised by the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) on Monday, private sector leaders argued that an increment in the power tariff would lead to higher manufacturing costs and discourage new investments in the sector.

NEA, the state-run power utility responsible of generation, transmission and distribution of electricity in Nepal, had recently proposed to the ETFC to increase the power tariff by 20 percent. The ETFC had hiked the rate by an average of 19 percent in mid-September last year.

“Our electricity is already expensive compared to India and China. In such a context, how can we compete with them and increase markets for goods made in Nepal?” said FNCCI President Pashupati Murarka.

He added that the regular availability of electricity in recent days had attracted new ventures and thus there shouldn’t be hike in the power tariff. Gyanendra Lal Pradhan, chairman of the FNCCI’s energy committee, said that only 1.5 percent of the total energy generated was consumed by industries, and hence the government should not subsidize power by hiking prices for energy used by industries. “A family that spends around Rs500 a month for communication (phone and internet) pays just Rs80 for electricity. Subsidizing prices for them by increasing the tariff for industries isn’t a long-term solution,” Pradhan said.

He stressed the need to increase the base price of energy from Rs80 per month. At a time when a labourer’s wages have increased to at least Rs500 per day, it shouldn’t be much of an issue for the government to increase prices, according to him.

Rather than increasing energy costs, Pradhan urged the government to adjust the power tariff so that high load industries will be encouraged to operate at night when power demand is low.

While FNCCI leaders were of the view that the government shouldn’t increase the power tariff, Independent Power Producers Association Nepal (Ippan) President Shailendra Guragain was of the view that a low power tariff had made investments in the energy sector less rewarding, thereby discouraging developers from announcing new projects. 

NEA Managing Director Kul Man Ghising stressed the need to increase the power tariff to reduce losses to the state-owned power utility. “It is true that the electricity tariff was increased recently. But that hasn’t helped NEA much. And I don’t think we have charged industries much,” he said, adding that though the percentage of industrial users was low, they consume about 36-40 percent of the total energy supply. 

According to the NEA’s head honcho, they have made Power Purchase Agreements (PPA) with several hydropower plants having a combined capacity of around 3,000 MW. Among them, a number of projects with a total capacity of around 1,800 MW have completed financial closure.

“From 2018, there will be another 100-200 MW of energy in our system. We can reduce the tariff once these projects start generating energy. But at this point, it is everyone’s responsibility to help the NEA,” Ghising said.