InterviewPower lines NEA’s priority
MAR 01 - Mukesh Raj Kafle is managing director of Nepal Electricity Authority (NEA). He was appointed to the post on October, 2014, following a court verdict in his favour after the suspension of then chief Rameshwar Yadav for his alleged involvement in a procurement scandal. Sanjeev Giri of The Kathmandu Post caught up with Kafle to talk about his first four months at NEA.
You have completed four months as NEA’s chief. How do you review your work so far?
Let me first tell you that I signed a performance contract with the Ministry of Energy before taking this job. I have fixed Terms of Reference which guide me. When I stepped in as a NEA’s MD, the institution was in a troubled situation in many ways. In such a situation, I started up with shorting out administrative issues first. The staff members were demotivated. With several initiatives, I have created a proper working environment. Pending issues have been taken care of and have been largely executed. We have prioritised load-shedding management and I feel we have largely succeeded.
From the four-month experience, I can say NEA has competitive human resources. We have infrastructure and resources which are its strength. However, we lack capacity to make optimum utilisation of the resources. This is because of the lack of a proper leadership for leading a group of competent people.
In my first four months, I have adopted a policy of keeping the right man in the right place. We have established a trend of encouraging competent employees and sacking those who do not work. This is based on their performance. NEA is a big institution and bringing it back on track will take some time. I can say we are heading in the right direction. Our social and political culture as well as huge expectations from all for even petty issues are some weaknesses. And, these need to be countered.
What are NEA’s priorities for now?
We have prioritised the development of transmission lines. However, this does not mean other issues are less prioritised. I have a clear roadmap on executing ongoing projects in time, provided no unavoidable circumstances occur. The Trishuli 3A project does not have any problem at the moment and it will conclude on time; Kulekhani III too is on track. As for Chameliya, the contractor has suspended work and this project has become a ‘white elephant’. We have been urging all the stakeholders, including the Parliamentary Public Accounts Committee, to find a common way out. Apart from transmission lines, NEA also needs to focus on generation. We have prioritised four projects—Dudhkoshi, Upper Arun, Tamakoshi V and Uttar Ganga. Within four months, these projects have come back on track and we are hopeful about making some significant progress within the next one year.
Despite NEA’s priority to transmission lines, no significant headway has been made. What do you say?
I am quite optimistic about the development of transmission lines. There are several problems, but they are workable. We have prioritised the east-west trunk line, cross-border transmission line, Dhalkebhar-Muzaffarpur, Khimti-Dhalkebhar and Marsyangdi corridor and Trishuli-Chilime lines. These are important projects for us. We have talked about expediting work on Khimti-Dhalkebhar line which is being supported by the World Bank. We have talked with them about this and I have directed the authorities concerned to mobilise the contractor. The progress of the cross-border transmission line is quite satisfactory. The project has completion deadline of June, but we aim to complete it a month ahead. We don’t have much issues besides forest clearance on the East-West transmission line project. We can clear this project within nine months once the government gives the clearance. This is a matter that requires G2G (Government-to-Government) coordination, and I don’t think it’ll be a big problem. In my opinion, there will be a substantial progress in transmission lines in the next one and half years.
So there won’t be much problem in evacuating the power generated.
Let’s be optimistic about this. NEA is looking forward to generating a substantial amount of energy from its projects. The peak demand stands at around 1,300MW. Within a couple of years, we will be able to counter load-shedding through our own resources during the wet season if things go as planned.
When will the load-shedding end?
Ending load shedding within two years is something we can do. If things move ahead as planned, in the next two years, NEA will be able to manage load-shedding through internal generation during the wet season (eight months). In the dry season, generation capacity of our run-of-the-river projects drop 25-30 percent, and we need to increase imports from India. With cross-border transmission lines in place, we can import additional electricity.
The country is power-hungry, but NEA is accused of not showing urgency for Power Purchase Agreement (PPA) with large projects. The 750MW West Seti is one of the projects that has been affected. What do you say?
There are two aspects. It is true that we are power-hungry. At the same time, NEA is developing certain types of projects and calculation is done based on the projects’ capacity and completion time. West Seti is a large-scale project and since it is a storage-type project, the cost will be higher compared to run-of-the-river type projects. So we need to have more discussions and cost analysis. NEA is not against the development of projects. We can come to a conclusion by holding discussions with all the stakeholders.
The government has decided to unbundle NEA and form three entities —generation, transmission and distribution. What is NEA’s say?
The concept of unbundling is accepted worldwide. The concept is all about creating competitiveness. However, the concept in Nepal is a bit different. The issue of unbundling has come largely based on the concept that NEA has failed to develop transmission lines. So it is different here. A section of the people said Budhi Gandaki Hydropower Project would do well if it was disassociated with NEA and thus a development committee was formed. But no significant progress has been made. This is because of the lack of human resource and strong institution, among others. NEA does not have any reservations over the government’s decision. But we really need to look after the bases of sustainability. We are holding discussions on the issue of unbundling and we hope to reach a logical conclusion soon.
Don’t you think NEA’s unbundling would increase competence, benefiting the consumers?
I have already said unbundling is an accepted concept worldwide. The crucial thing is execution of that concept. If we had will power we could have achieved a lot in transmission line development. So more important is changing the working attitude. But since Nepal is not that stable nation, we need to be really careful about unbundling. Proper homework should be done. Our concern is only related to stability and sustainability of the institutions to be formed.
Projects executed by NEA’s subsidiaries have seen successes, while those being developed by NEA itself are making slow progress. Does this mean models like Chilime and Upper Tamakoshi need to be adopted for hydropower development?
We need to conduct a research before coming to a conclusion in any matter. Chilime model is a successful one. Upper Tamakoshi, a bit different model, too is successful. The interesting fact is NEA has stake in both the projects and are being commissioned by NEA staffers. The best knowledge from these projects is when you make a move through a participatory approach, you can achieve stability and sustainability. We cannot term these models right or wrong. NEA also commissioned Kulekhani, Lower Marsyangdi and Kaligandaki successfully. So the current context shows the participatory approach (PPP model) is best suited for hydropower development.
What do you say about the Electricity Act which is being amended? What kind of Acts and polices are required to expedite hydropower development?
The new Electricity Act is being drafted and a lot of suggestions have poured in, especially regarding the licensing regime. In my opinion, licenses should be issued based on competition among companies. There is also a need for changing Acts and policies regarding compensation. Billions of rupees is poured in hydropower development, and thus developers should not refuse to share benefits with locals. In the case of forest clearance, another important issue, there should be a clear understanding through Acts and polices. The government should fix priorities and we need to go into a one-window policy by setting up priorities. There should be a clear-cut provision about within how many days NEA should be given go-ahead for forest clearance if it is for the development of transmission lines or hydropower projects. If the issue is left under subject to judgment, things will differ person-to-person. And, this will hurt the development process.
The issue of tariff hike has always been crucial. Does NEA think tariff hike is the only way to reduce its losses?
We don’t necessarily think increasing the tariff is the only way for managing the account book of NEA. Inflation has increased over the past few years and I feel the cost should be adjusted by the government based on the same. NEA has an annual loss of around Rs 6 billion. If the tariff is increased by 15 percent, we can collect Rs 4 billion from it. Remaining deficit of Rs 2 billion can be countered by controlling electricity leakage, assets management and increasing employees’ efficiency.
Once the tariff is increased, NEA will reach break-even. Our say is the government should help bring NEA to a certain point. Once NEA is financially stable, things can move ahead in a different manner.
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