Clear thinking neededNepal must learn its lesson from the ongoing fuel crisis and formulate a new energy security plan
The present energy crisis in Nepal is a culmination of load shedding, fuel import bills and a blockade by India since September 2015. Therefore, we need to formulate a complete energy security policy and establish an accountable institution by taking regional and geopolitical, policy and strategic, corporate ethics and global risks into account. The Nepali people have scant faith in PM Oli’s promise to end load shedding in one year and the oil shortage soon. However, they have been keenly watching the government’s actions on a range of energy security issues like biomass, renewable energy, induction ovens, electric buses, public transport, hydropower, electricity authority and Nepal Oil Corporation (NOC). They are also looking closely at the policies designed to ensure integrated energy security and national dignity like oil treaties, market dynamics and illegal fuel trade.
Integration of energy-mix
The search for energy security could begin with a review of the work of the Water and Energy Commission Secretariat (WECS) whose job is to develop comprehensive energy security policies and programmes. Surprisingly, it has neither updated the Energy Sector Synopsis Reports 2010 to show a balance in the demand and supply of energy by fuel types and their uses, nor formulated a consistent economy-energy-environment framework. The government sidelined the WECS as a potential think tank. Thus the Energy, Commerce and Supplies, Forest and Home ministries, the Chambers of Commerce and Industry and civil society need to set up a taskforce to develop a comprehensive energy sector strategy and implement its pillars in order to sustain national development.
The energy demand parameters imply a number of lessons for an integrated energy policy. First, the authorities need to develop biomass productivity, technology and devices. We subsidised kerosene to replace fuel wood, and subsequently subsidised LPG to replace kerosene. This is like being a drug addict and living in scarcity. Second, we should have developed oil-saving means of production, transport and housing. The energy security policy thus has to build on growth of different forms of energy, inter-fuel substitution favouring indigenous resources, marketing based on cost, price and scarcity values, diversified international trade, and an energy-consistent economic growth strategy.
But even as the country is in the midst of an energy crisis, the Nepal Electricity Authority (NEA) remains directionless because it has not been able to hold its board of directors meeting for the last four months. The Deputy Prime Minister and Minister of Energy should gear up its constituents, namely the Water and Energy Commission, NEA, Department of Electricity Development and Power Tariff Commission. He should also call the ministries of Commerce and Supplies, Forest, Home and Industry to serve as a real one-window for independent power producers.
The Ministry of Energy should also accord priority to time-bound issues. First, by invoking the Essential Commodity Act, the ministry will be required to help independent power producers by providing construction materials. It should also announce a bonus for those who start delivering power ahead of schedule. Second, we need to unbundle the NEA into at least three segments, namely power generating agencies, national power grid authority and power distribution utilities. Third, the Department of Electricity Development should offer ready-to-build hydroelectric schemes with the necessary land acquired, forest cleared and transmission line erected to prospective power producers. Finally, the Electricity Regulation Commission should ensure that power tariffs reflect import prices, and prevent distortion of prices across fuel types.
Biomass energy provides an immense platform for inclusive growth as we have a multitude of agencies and under-utilised land to grow it. We should promote use of firewood, agri-residue, animal dung, urban bio-waste, sugar mill waste and so forth by transforming these materials into convenient energy packs such as wood, charcoal, briquette and biogas. Biomass-based factories will also help in partial substitution of energy-intensive imports such as steel or plastic furniture, construction materials or gas heaters.
Petrol from China
Much time has passed since Nepal and China signed a ‘framework agreement’ on October 28 to allow business-to-business oil trade pacts. In the meantime, India has diversified her energy sources beyond the Organisation of the Petroleum Exporting Countries by signing a four-country Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline deal on December 15 to import gas. Nepal’s energy trade treaty with China would blaze a trail for trans-Himalayan energy trade.
NOC officials have said that the difference in prices of Indian and Chinese gasoline is small if we adjust for differences in the standard of oil and taxes. If Nepal and China agree on tax issues, the price of Chinese petrol will drop from Rs 180 per litre to Rs 88 per litre. Similarly, the price of diesel would be reduced from Rs 155 per litre to Rs 84 per litre at Kyirong. We should not transfer the cost of India-Nepal-China road connectivity to petroleum only. As we have done with India on tax issues, Nepal and China need to sign a petroleum commerce agreement, and progressively settle fiscal and logistic issues.
Nepal must concurrently liberalise its internal oil and gas trading to the open market as done with coal earlier. There are already companies willing to import, transport and trade petroleum and gas. The character of the NOC needs to undergo a big evolution by creating a Petroleum Board, which will perform regulatory functions such as managing price ranges, regulating oil quality, building oil pipelines and buffer stocks, investing in petroleum at home and abroad and so on. In conclusion, the government has many opportunities to resolve the energy crisis by pursuing an independent country policy and petroleum trade agreements, integrating different energy sub-sectors, improving energy-related institutions, and relying on open, competitive and regulated markets for a new and integrated energy security paradigm.
Thapa is a former member of the National Planning Commission