The World Bank (WB) has urged the government to improve the organisation structure of state-owned Nepal Electricity Authority (NEA) for the development of the power sector.

In its report titled “Nepal Development Update : Powering Recovery”, the lender has recommended a comprehensive reform programme for the reduction of the acute power crisis that has plagued the country for the last decade. 

“At present, the NEA is a vertically-integrated, government-owned monopoly which is very inefficient and unable to deliver sufficient power to consumer,” the report stated. “There is a need to restructure the NEA’s generation, transmission and distribution operations into separate businesses to make it more efficient.” 

According to the report, NEA should be transformed into separate commercially sustainable generation, transmission, distribution and power trading entities, along with strong and independent regulatory agencies with clearly defined roles and responsibilities.

Although the government has promised to unbundle NEA, reduce procedural delays and conduct legal reforms by introducing the new Electricity Act and Act on National Electricity Regulatory Body during talks with multilateral donors like the WB and Asian Development Bank (ADB), progress has been slow. 

The two multilateral lenders have expressed interest in extending $1 billion (Rs107.89 billion) in loan to Nepal under the Development Policy Credit in Energy (DPCE). The credit is provided based on policy reforms initiated and achieved by the government. 

Unveiling its 10-year Energy Emergency Plan in February with various reforms proposals, the government had asked the two lenders for the line of credit.

The WB also urged the government to kick-start the operation of the National Transmission and Grid Company that has remained defunct since its establishment more than a year ago. The company was set up in February 2015 as an entity that deals with the development and operation of electricity transmission lines.

The WB suggested the government develop a comprehensive time-bound power sector reform plan agreeable to all the stakeholders in order to address key sector issues.

Presenting the report amid a function here on Wednesday, Damir Cosic, senior country economist of the World Bank, said the current state of electricity in Nepal has been unreliable, insufficient and expensive and has been a major constraint to economic growth.