Nepal

Helpful provision

Jun 10, 2017
Buoyed by the government policy on the energy sector, various banks and financial institutions have signed financial closures with a number of hydropower projects generating around 500 MW of electricity recently. Such financial agreements were reached after the Ministry of Energy told the state-owned Nepal Electricity Authority (NEA) to follow the “take or pay” provision in the energy sector some four months ago. The “take or pay” provision will also be applicable to other projects which were being developed under the “take and pay” provision. 
 
The “take or pay” is a policy under which the NEA, the sole energy buyer, has to pay the developers even if it cannot sell the energy it purchases. Many projects have signed Power Purchase Agreements (PPA) with the NEA after the “take or pay” provision was introduced to give a boost to the energy sector under the “National Energy Crisis Prevention and Electricity Development Decade” which was endorsed by the cabinet in February 18, 2016. Almost all the hydel projects which had signed a grid connection agreement with NEA by February 18, 2016 have already started reaching financial closures, according to the Independent Power Producers’ Association-Nepal (IPPAN). The “take or pay” provision has ensured the private developers that their investment made in energy will be secure.
 
Investment in the energy sector had stagnated almost for two years after the NEA reversed its previous policy and resorted to “take and pay” policy, which means that the NEA would pay the private developers only for the energy it consumes. Such a decision had put a cap in the energy sector and the country had been reeling under power cut for hours. It was a regressive policy which had to be changed to attract more investment in the energy sector, the main driving force for economic growth. After the “take or pay” provision was rolled out, Nepal Rastra Bank said BFIs invested Rs. 53.73 billion by mid-April of this year as compared to Rs. 38.15 billion in the corresponding period of the previous year. The policy has given impetus to private developers who have signed the PPA for the production of around 3,000-MW of energy so far to come into operation within years.
 
Although some positive developments have taken place in the energy sector, the domestic developers still face hurdles in some areas. The domestic developers still get low tax incentives as compared to foreign developers who also get cent percent payment of their production. Some of the bottlenecks include the problems on land acquisition for access roads and other infrastructure, clearance of forests, local grievances and the NEA’s delay in constructing the transmission lines and their upgrades. The NEA has reached agreements with private developers to build the transmission lines in major river corridors where a number of hydel projects are under construction and some of them are under test-production. But the NEA has yet to complete its task as per schedule. If transmission lines are not completed on time the energy generated by the private firms cannot be evacuated to the national grid. The NEA must assure that things will move forward smoothly.
 
Stop exploitation
 
Workers in the informal sector are often deprived of many of the facilities and guarantees given by the constitution and the law. Girls and women are much more exploited. Female employees in such places as restaurants, dance bars, massage parlours and other entertainment businesses are particularly at the receiving end of ill-treatment, which includes not only very low pay and poor facilities but also the compulsion of most of them to submit to sexual abuse promoted or forced upon them by the owners of such set-ups. Voices have been raised for the government to move  effectively to minimize such abuses. But only sporadic efforts have been made towards this end. As a result, malpractices go on unabated.
 
Moreover, even minor girls are seen working there. In many cases, the girls are also compelled to drink and smoke without limit with the customers. The government has a set of directives on how to treat such female workers, and now the women development and children office, Kathmandu, has prepared a set of standards for treating informal sector female employees. That is good. But the rub lies in the failure to monitor the sector effectively and to take action against the guilty without fear or favour.
 
The Himalayan Times, June 10, 2017

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