Nepal’s gasoline imports fall as economy slackensSlow growth in the construction sector and a halt in development activities led to the decline, economists say.
Nepal's gasoline imports declined in the first four months of this year, central bank data showed, highlighting the slowed pace of construction and development activities.
In the first four months of the current fiscal year, the country imported gasoline worth Rs58.2 billion, down 15.5 percent year-on-year.
Economists say overall slackness in the economy, caused by a tepid growth in the construction sector and a halt in development activities, led to a decline in imports of petroleum products.
“Capital expenditure has been poor as always, and the construction sector is also witnessing a slowdown,” said economist Gyanendra Adhikari. “Because of that, petroleum imports have declined; and from July to August, the country also saw a halt in development activities owing to the monsoon.”
According to Adhikari, the fall in energy consumption suggests that the government has failed to stimulate the economy, and it would adversely affect the GDP growth target this year.
A marginal 9.19 percent of the total capital budget had been spent as of December, according to the Financial Comptroller General’s Office.
As per Nepal Rastra Bank, credit for residential construction increased by 4.1 percent during the first three months of the current fiscal year, compared to 8.7 percent during the same period in the last fiscal year.
Credit growth in the non-residential sector grew a mere 0.3 percent compared to a 3.3 percent growth in the corresponding period a year earlier. Credit growth in financing highways and bridges also decreased to 7.7 percent from 12.8 percent.
Economist Bishwo Poudel said that the fall in gasoline imports was caused by a slowdown in the construction sector and that, due to increased availability of electricity, factories might have cut back on gasoline consumption.
On the bright side, the country saved nearly Rs15 billion in gasoline and electricity import bills.
In the first four months of the current fiscal year, the country imported electricity worth Rs3.5 billion, down 34 percent year-on-year. Owing to the decline, Nepal saved Rs2 billion in electricity import bills. The country imported Rs5.3 billion worth of electricity in the first four months of the last fiscal year.
Despite an increase in domestic consumption, the fall in imports during the mid-July to mid-November period has been attributed to an increase in domestic generation.
As per the Nepal Electricity Authority’s data, power schemes with a combined capacity of 148 megawatts roared to life in just four months this year, taking the internal generation capacity to 1300 megawatts from 1152 megawatts while peak demand stood at around 1350 megawatts, a slight increase from the previous year.
“We are heading towards self-sufficiency in electricity generation, and that might materialise within a year. The fall in electricity imports is solely due to a rise in power output,” said Kulman Ghising, managing director of the Nepal Electricity Authority.
In an unprecedented event, the country also exported electricity worth Rs634 million to India during the peak monsoon as domestic consumption fell owing to floods in the southern plains and Nepal’s only reservoir scheme, Kulekhani, filled to the brim earlier than in previous years.
But electricity imports are expected to rise during the dry season as almost all power stations are run-of-the-river types, and production falls sharply between mid-December and mid-January when the water level in the rivers recedes revealing bare rock.
“Despite the fall in output in peak winter, imports will not be as high as they were last year,” said Ghising. “We expect electricity imports to go down by 30 percent this winter compared to the last year as a slew of power projects are nearing completion.”
It has been projected that Nepal will witness the generation of an additional 1150 megawatts of electricity from a batch of power projects including the much-touted Upper Tamakoshi (456 megawatts) in the current fiscal year.
Electricity projected to be generated within a year and a half can easily fulfil the peak domestic demand which stands at around 1350 megawatts.
In line with the surplus projections and the government’s target of increasing per capita consumption of electricity from 245 kilowatt-hours to 400 kilowatt-hours by the fiscal year 2021-22, the power utility has launched a strategic campaign targeting households.
But things are not looking bright for the state-owned power utility as the country is also witnessing a decline in the import of electrical vehicles, kitchen ware including induction cookers, ovens, toasters, coffee and tea makers and wall or window-mounted air conditioning machines.
If the state-owned utility fails to increase domestic consumption of power or export it to neighbouring countries, it will witness spillage of energy and disgorge billions in take-or-pay arrangements with independent power companies.
The power utility has entered into take-or-pay arrangements with private power producers operating run-of-the-river schemes with a combined capacity of around 5,000 megawatts. A planned tripartite meeting between Nepal, India and Bangladesh to fix the terms for cross-border power trade is still in limbo.