Electrifying revelations

  • Chief Secretary Poudel throws light on energy, corruption and our collective future

Apr 26, 2013-

Speaking on a programme titled Nepal Sandarbha, which aired on April 17 on BBC Radio, journalist and social worker Rabindra Mishra asked Chief Secretary Lila Mani Poudel about one of the most pressing issues related to Nepal’s future energy market, “the corruption within the Nepal Electricity Authority (NEA), one of the biggest institutions when it comes to pubic finance and cash flow.”

One must congratulate the chief secretary for coming out explicitly on issues within the NEA. He said he had left the board because of a lack of experience in primary energy issues and a lack of time. The reason was a bit surprising, especially the lack of experience part, because his answers to Mishra’s questions spoke volumes of his knowledge of the sector. So the question remains if it was a personality clash with the current Energy Minister Umakanta Jha or rather the minister’s new strategy to have a few new faces sitting on the eight-member NEA board.

The interview touched upon such a sensitive topic as corruption within the NEA, and mentioned several areas where one can get kickbacks, the first area being procurement of transformers. Transformers using aluminium wire were found to have been used rather than those with copper wire. Since aluminium is cheaper than copper, procurement details are important to see who were involved in this case, which is currently seating with the Commission for the Investigation of Abuse of Authority (CIAA). According to the chief secretary, this could pose to be one of the biggest scandals in Nepal’s corruption history. A big layer of the NEA will be exposed if this case is investigated seriously. The risk of compromised transformers is immense as Nepal is moving from smaller energy systems (peak system loads below 1,000 MW) to larger energy systems. With the commissioning of more energy projects which will be integrated into the national grid, a poorly designed transformer can create malicious and accidental threats to the whole transmission system.

The second issue the interview led to was theft, which accounts for a major chunk of the losses in the NEA. Why was the NEA administration less willing to tackle the issue of energy theft until the chief secretary joined the board, despite its repeated pledges to reduce losses in its annual reports? Why has electricity supply not been shut down in areas from where there is maximum stealing? This is an area where the new board has to be very vigilant.

The third area that the interview covered was the massive corruption surrounding the transfer of employees. What could be the most sought after areas after procurement? The chief secretary mentioned that meritocracy was something he tried to introduce into the transfer policy. Priority has been given to public notice, and the track record of the person has to be well analysed for performance measurements. This policy which is in limbo right now has to be continued by the current board. The fourth area where there is corruption is hiring of consultants for projects.

The chief secretary was also clear on his position on foreign investment, contrary to media reports which said he was against it. He challenged the media to do a better study of energy issues before putting down their reports on paper. Since the source of such information lies within the bureaucracy or the private sector, there could also be a huge possibility of playing with media reporting to serve one’s interest. So unless the Right to Information Act is enforced and the presence of civil society at such negotiations is ensured, these shady deals will continue.

The chief secretary spoke at length on the area of exchange rates and its implication on energy development in Nepal. Let us assume that the NEA takes a loan in foreign currency to develop a project or signs a PPA in foreign currency at the exchange rate of Rs 87 per $1. If the dollar appreciates to, say, Rs 120, and if the NEA has to absorb all that risk, it is not a good deal. It depletes the government’s foreign currency reserves more quickly. Since the volatility of international markets affects the loan, the clause on who absorbs the risk of currency volatility is very important when business is being done in foreign currencies.

In many cases, the volatility of exchange rates can prevent projects from being completed. According to the chief secretary, the NEA, which has already incurred huge losses, has no clear strategy to absorb this sort of exchange rate volatility risk, and the lure of kickbacks could lead to signing hasty deals. So unless both parties agree to bear some risk, the NEA will bleed further. This is the lesson learned from Khimti and Bhote Koshi, both of which can be deemed to be “weak negotiations.” As per the secretary, Khimti supplies about eight percent of the total electricity in the grid and takes around 12 percent of the NEA’s revenue. The Bhote Koshi  supplies five percent of the electricity and takes seven percent of the NEA’s revenue. They are amazing deals from the point of view of the company, investors and shareholders; but from the national, governmental, institutional and finally, the taxpayers’ point of view, they are disasters. Who is accountable for such energy deals?

The most important part of the interview is the chief secretary’s willingness to be accountable for all the decisions that were made under his purview, if they are deemed to be not in the national, institutional or business interest. There is much to be discussed about the energy future of this country and the role of NEA, and the media has a crucial role to play. In the meantime, what is worth admiring is the statement from the chief secretary, “If I did something not to legal requirement, I can also be prosecuted.” He also challenged the NEA to release all documents that note the key decisions and signatories. Perhaps he was also hinting at the need for careful scrutiny of all the decisions being made on the NEA board and other departments of related ministries. But if the chief secretary, the man with the utmost power in the NEA, gives up, who is going to step forward to reform the NEA?

Dhakal is the COO of WindPower Nepal


Published: 26-04-2013 08:41

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