Stuck in the Wires

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Like in most of the countries around the world, Nepal Electricity Authority (NEA) which is a public utility entity enjoys natural monopoly over construction of transmission lines. The Electricity Act 1992 opened up the sector for private players in generation which led to the production of more than 230 MW of electricity and more than 1586 MW have been in different stages of development. Most of the construction, however, has been halted due to transmission related problems, project infeasibility, and social or environmental issues.
Lack of timely construction of transmission infrastructure by Nepal Electricity Authority has created hindrances in hydropower development. For instance, construction of Khimti-Dhalkebar Corridor was supposed to be completed by 2010 but it has not been completed till date. The people of Sindhulimadi agreed to give land to the project if they were to be given a 100 percent compensation for their land and this sadly did not happen. Thankot-Capagaun Corridor has been under construction for more than a decade now. Similarly, Mai Khola Hydropower and Sipring Khola Hydropower, two power projects backed by independent power developers are about to start generation but the construction of transmission infrastructure has fallen behind schedule putting these projects’ future operation in quandary.
The congestion in the existing grid adds further woe to the situation as available power cannot be transmitted due to the problem of tripping. In Bhairahawa, expensive machines used for industrial production were damaged due to sudden cut of power due to tripping. The same problem has been experienced in certain areas of the Kathmandu valley time and again due to excessive load hardly supported by distribution network.
NEA, however, has not been able to construct transmission lines due to problem in land acquisition. It takes a long time to get clearance from Ministry of Forest for the construction of transmission lines in forest, national parks and conservation areas. Likewise, the process of land acquisition is very cumbersome because affected people demand 100% compensation with ownership right of land. However, the Land Acquisition Act ensures only 10% as compensation. Additionally, Rule 88 of Electricity Regulation, 1993 made a provision for the formation of a Compensation Fixation Committee to provide compensation in lump sum to people whose land was used for construction of transmission lines, but the provision doesn’t mention the percentage of compensation. Such ambiguity obstructs the construction of transmission lines.

In addition to this, Public Procurement Act, 2007 was promulgated with the intention of making procedures, processes and decisions relating to public procurement open and transparent to promote competition, fairness, and accountability in public procurement process. However, the tendency to follow the law to the letter rather than the spirit has handicapped decision-making in public institutions. The Act allows discretionary decision-making to chiefs of public enterprises only up to decisions that cost less or equal to NRs. 100,000. Any decision involving higher amounts has to go through a lengthy process as described in the Act. In addition to this, according to the Public Procurement Act, construction of transmission lines should be awarded to the party with the lowest bid. However, there have been many instances where parties have bid an amount too low to get the project contract. After winning the contract, they have been found to raise their claims later resulting in higher costs and thus delays in construction of transmission lines. Therefore, contracts should be given to those parties whose cost is 10 percent above or below the estimated cost under Engineering, Procurement and Construction (EPC) system. Only then, will a new ray of hope be ushered in the development of transmission lines.

Pramod Rijal

About Pramod Rijal

Pramod Rijal is a Research Associate at Samriddhi, The Prosperity Foundation. He is also a lecturer of Economics at Mega National and Unique College of Management and has contributed a number of articles in various national dailies.

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