Monday, December 21, 2015

Nepalese Economy post embargo

Nepalese economy had expected a growth rate of 4.6 percent pre earthquake, the disaster mercilessly stuck Nepal on April 2015 causing an estimated loss of $371 Million. After the tragic incident, Nepal Rastra Bank targeted a growth rate of 3 percent just in case if the economic environment goes as expected. This time again, the negligence of government to hear the grievances of Terai led a fierce protest against draft of the new constitution resulting strikes for more than 4 months. On the other side, the tension resulted as unofficial economic embargo by the southern neighborhood causing cut off of the supplies- from gasoline products to raw materials for industries. The custom check points are almost paralyzed with no any significant collection of revenue and industries are shut down lacking raw materials for production. The recent four monthly economic survey 2073/73 reports the economic growth to be stagnant at 2 percent despite the expectation of 6 percent.

The situation is not so favorable for agriculture as well. Ministry of Agriculture reports the rice yield is likely to decline by 10 percent and buck wheat by 2 percent in comparison to that of previous fiscal year. However, production of Maize is expected to incline by 4 percent. If the embargo remains then production of wheat will ultimately fall down as there will be not enough chemical fertilizers and seeds for cultivation. Expectation of agricultural growth rate of more than 1 percent would be irrational in context to the current scenario.
Inflation
The year-to-year Consumer Price inflation reached to 10.4 percent at the end of Mid November 2015 which is 3.2 percent higher if compared to that the last year whereas the rate of inflation is 5.4 percent in India. The cut off of basic supplies has led to unhealthy growth of inflation as 11.4 percent in Kathmandu, 9.6 percent on Himalayan region, 9.1 at Terai region. Preceding year, the inflation growth rate at Kathmandu was 7.1 percent and 7.2 percent on both Terai and Himalayan region. The black marketing of the basic supplies has ultimately resulted in unsound and unethical rise in price of goods. Earthquake, Strikes on Terai and economic embargo are the main reasons for such increase in inflation rate.

External Sector

Foreign Trade

The merchandised export on Nepal decreased significantly by 29.1 percent to Rs.20.96 Billion in the first four months of 2015/16 compared to a decline of 0.2 to Rs. 29.55 Billion in the previous year. Such a fall in merchandised trade was resulted due to significant decline in trade with India, China and other nation 38.7, 67.9 and 7.8 percent respectively.

Similarly, the import rate too declined by 36.8 percent to Rs.160.99 Billion. Such imports had gone up by 22.4 percent to Rs.254.66 Billion. Blockade in supply of petroleum goods is one of the major factor such decrease in rate of import.

Transfer

The gross transfer receipt increased by23.2 percent to Rs.249.58 billion and gross transfer payment increased by 16.6 percent to Rs.835.9 percent. However the net total receipt increased by 23.2 percent to Rs.248.74 billion. Net transfer receipt had decline by 3 percent in the previous fiscal year 2014/15.

BOP Situation

The BOP surplus of Nepal amounts to Rs. 83.33 billion during the period of review period compared to that of Rs. 6.18 billion in the same period of previous year.

Foreign Reserve

The gross foreign reserve increased by 12.5 percent to Rs.926.79 billion at Mid-November 2015 from Rs.823.87 billion of Mid-July 2015. The foreign reserve had increased by only 2.4 percent in the previous year.

Money Supply

The broad money supply(M2) increased by 6.8 percent in the first four months of 2015/16 compared to an increase of 2.8 percent in the corresponding period of previous year. Narrow money supply (M1) which had decreased by 0.5 percent in the corresponding period of previous year increased by 14.9 percent in the review period.

Liquidity Management

Nepal Rastra Bank mopped up a total amount of Rs.242.65 billion through various instruments of liquidity management. These consisted of Rs.157.25 billion from deposit auction, Rs.76.30 billion from Reverse Repo and Rs. 9.10 billion from outright sales.
Similarly NRB injected net liquidity of Rs.154.28 billion through the purchase of USD worth Rs.1.48 billion from foreign exchange market. The NRB also purchased Indian Currency (IC) worth Rs.79.19 billion through the sale of USD 760 million till the review period.

Financial Broadening

Expansion of branch networks of Bank and Financial institution has widened to access the finance and for monetization of economy. The number of branches of BFI’s have reached to 3968 from 3617 of the previous year. The growth in the deposit and loan accounts has also contributed to broaden the financial access of the people.


                                             source: nrb.org.np



Wednesday, December 16, 2015

water resources in Nepal; Prospects and challenges

ABSTRACT
“The term paper elaborates on the immense potential of land water resources in Nepal from the perspective of hydropower production and development of irrigation networks. Nepal has comparative advantage on water resources which can be a base for economic boom and agricultural independency. The paper equally focuses on the current status, possible threats that arises from water induced hazards, efforts made by concerned authority and recommendations for better outcome in the days to come.”

                                                                                                       
Nepal, a small Himalayan country, covering an area of 1, 41,181 km² has immense potential of surface water resources. It is believed that around 225 billion m³ of surface water flows from its territory annually. Being a tiny nation between its giant neighborhoods Nepal has more than 6000 rivers and rivulets which ultimately drainages up with the holy Ganges River in India. The fast flowing rivers of Nepal carries enormous capacity for hydropower production. It is estimated that Nepal has potential to generate 83000 MW of hydropower however 42000 MW is considered as economically feasible. Water resources are present in the form of rivers, lakes, ponds, snow covers and ground water as well. Nepal bears comparative advantages over other big nations on water resources which is essential to be capitalized for its optimum utilization on hydropower, agro-based economy and tourism too.
With the establishment of hydropower plants on fast flowing rivers of Nepal, the country can be a large producer and net exporter of power to it’s both neighbors which are on the run to be world’s largest economy but badly facing the problem of energy crisis. At present, Nepal is able to produce only 680 MW of its total capacity. Reviewing back, the first hydropower plant was established at Pharping of Kathmandu with a capacity of 500 KW. By then several number of hydropower plants have been established in various parts of the country but lacking adequate fund and technology, demand is far higher than supply. The annual peak power demand of Integrated Nepal Power System was 1291.80 MW in 2014/15 with 585 MW load shedding. Out of the actual power supplied, 357.68 MW was contributed by NEA hydro, 124.71 MW by IPP hydro and the rest 224.41 was imported from India. Compared to the fiscal figure of previous year 1201 MW, the annual peak power demand in the current year is increased by 7.56%. Considering the dry season the load shedding time was predicted to be 12 hours however due to the efficient operation of Kulekhani reservoir.  Till date, only 40% of the total population have access to electricity whereas remaining 60% are still dependent of traditional way of firewood and kerosene oil.
On the another hand, neighbors like India and China are having a double digit economic growth and in such context Nepal can export its surplus electricity to these two country and boom up its economy. The total energy sales to India was 3743.75 GWh. The growth is by 7.08% in the sales figure of 2013/14. Sales to India however declined to 3.21 GWh from 3.04 GWh in the fiscal year 2013/14. There have been no any major achievement with China for trade of hydropower but the Chinese authority from time to time have been showing interest in making investment on hydropower sector of Nepal. Regarding the purchase of hydropower, even within the nation public are showing their willingness to consume it for household, industries or business firms. The total number of costumer at the end of fiscal year 2014/15 grew by 5.75% and reached 2.87 million at the end of fiscal year 2014/15. Out of the total number of consumer; domestic, industrial and other consumer category accounted for 94.34%, 1.48% and 4.18% respectively. However, in term of sales the corresponding share are 44.78%, 36.31% and 18.92% of total sales.
NEA’s electricity supply position is far away from the level of satisfaction resulting in heavy load shedding on daily basis. In order to cope up with the rising demand of hydropower, NEA have untaken the construction and upgrading of many hydropower projects. The private sector have also played a major role in the construction of new hydropower projects and it is more essential to encourage their investment in it. On another hand, capital for the development of new hydropower projects can be collected from the general public in the form of shares. Referring to some recent news appeared on newspaper, the application for obtaining share of hydropower is 80 times higher than the share demanded. Thus this helps us predict, the interest of people to invest on hydropower is maximum since they very well are aware about the potential of water resources for the generation of hydropower in Nepal. The following table presents the list of hydropower plants that are currently operation in Nepal:

SN
POWER PLANT
CAPACITY (MWh)
ANNUAL ENERGY      ( GWh)
OWNED BY
1
Trishuli
24
292
NEA
2
Sunkoshi
10
66
NEA
3
Gandak
15
53
NEA
4
Kulekhani I
60
164
NEA
5
Devighat
14
13
NEA
6
Kulekhani II
32
96
NEA
7
Marsyangdhi
69
519
NEA
8
Puwa
6
41
NEA
9
Modi
15
87
NEA
10
Kaligandaki
144
791
NEA
11
Andhikhola
5
38
BPC
12
Jhimruk
12
81
BPC
13
Khimti
60
353
HPL
14
Bhotekoshi
36
246
BKPC
15
Indrawati
7.5
51
NHPC
16
Syange
0.2
1.2
SHC
17
Chilime
20
101
CHC
18
Piluwa
3
18
AVHCO
19
Sunkoshi
2.6
14.5
SHPC
20
Chaku khola
1.5
-
Alliance power
21
Small hydro
12.5
26
NEA
22
Small hydro (isolated)
6.04
-
NEA
23
Micro hydro
14.5
-
-

TOTAL
568.7
-
-

Under Construction
SN
POWER PLANTS
CAPACITY (MWh)
OWNED BY
1
Middle marsyangdhi
70
NEA
2
Gamgad
0.4
NEA
3
Heldung
0.5
NEA
4
Rairang
0.5
Rairang HPD
5
Upper modi
14
GITEC
6
Khudi
3.5
KHL
7
Mailung
5
MPC

TOTAL

-

As like that of hydropower, the water resources of Nepal are suitable for enhancing agro-based production widely ranging from irrigational supplies for crops to fishery. The water that flows through the perennial rivers of Nepal can be scientifically utilized for irrigating the cultivable land of southern Nepal through the construction of irrigational canals in various places. Out of total 14.718 million hectare area of Nepal only 2.641 million hectare is cultivable and 1.766 million hectare is irrigable. 76% of the total irrigable area on Nepal lies in Terai region. The history of irrigation in Nepal before 1922 was all developed, operated and maintained by farmers called Farmers Managed Irrigation System (FMIS). From 1922 to 1957, government took some initiatives to develop the agricultural system within the country. Some of the major achievements of the mean time were Chandra Nahar, Judhha Nahar, Jagdispur jalasraya, Phewa Banda and so on. Post 1957 irrigation development got its highest priority and it is considered as the milestone of the beginning of periodic plan in Nepal.
Nepal being an agro based country engages majority of its population on agricultural activities. Development of irrigation system in Nepal through the construction of irrigational canals in perennial rivers will help Nepal to boost its agricultural yield. It will even ensure water supply for cultivation and production during off season which will provide a permanent water solution for the farmers and this will even be under the principles of sustainable development. Increase in the agricultural production will result in improvement in the lively hood of farmers.
Even today farmers in the Terai region are dependent on rain water for theirs crops as they lack other sources for irrigating their field. In this context, the importance of irrigational system development has increased a lot. Government must be able to initiate effective policies for its further development.
From the early period people have been utilizing the flood plains of rivers for settlement and agricultural cultivation. Due to abundant water resources people suffers from disasters caused by frequent water induced hazards. The induced hazards not only affect the crops of the region but significantly damages infrastructure such as hydropower plants and irrigational canals. These hazards are non-avoidable factors and integral part of the natural happenings in water system. The benefit of hydropower is tied up with the fast flowing water resources specially rivers. In spite of the benefits from water resources, the water flowing through perennial rivers and streams have proven to be catastrophic causing loss of human lives and infrastructure established in the periphery of risky and vulnerable zones. The monsoon rain associated with the flash flood in the rivers and streams are damaging newly constructed infrastructure of development. The destructive flood and debris flow caused by the monsoon of 2014, in the mid-western region of Nepal has created heavy casualties in the built up irrigation system causing loss of more than 20 million rupees. On the other side, Nepal is an earthquake prone zone and the earthquake that stuck Nepal on April 2015 caused loss of lives of more than 9000 people and severely damaged multiple hydropower plant situated in the prone zone. Since most of the hydropower plants are situated in hilly region of Nepal they are always volatile to disasters such as earthquake and landslides often blocks the water route which causes unsound accumulation of water and bursts causing damages to the nearby residential area.  The flood that occurred on 18th August 2008 at Koshi River caused significant damage in east west highway, koshi Tappu wildlife reserve and more than 8 VDCs. Kailali of western Nepal faced the similar problem on 3 April 2009 causing damage of 94 Katha’s of cultivable hand and damage on other infrastructure. In lack of proper Environmental Impact Assessment (EIA) before construction of any infrastructure, the risk of damage due to water induced hazards have increased to maximum level. The developmental activities carried out utilizing water resources always has the risk of unforcasted damages.
Despite the risk of the water induced hazards, Nepal has comparative advantage in water resources than any other nation. Through the development of water resources Nepal can achieve economic prosperity and get a permanent solution to water crisis for agro based sector. There are various plans and policies initiated to carry out developmental activities through utilization of water resources. Government of Nepal has formulated irrigation development policy 2070 so accelerate the speed. The main objectives of the irrigation development policy 2070 are listed as bellows:-

·         Utilize available water resources to promote agro-based sector through development of irrigation to ensure sustainable development.
·         Repair and maintain irrigation networks, proper management of water, upgrade and develop new irrigation networks all over the year.
·         Utilization of surface and underground water scientifically for irrigation.
·         Based on necessity, ensure the development of irrigation network in every part of the country.
In the past few years, Nepal have been successful enough to establish some irrigation projects of national pride which is aimed to benefit a lot of farmers. The Sikta irrigation project is targeted to irrigate 33,766 hectare of land in Banke and similarly Babai irrigation project will be benefitting total area of 36000 hectare in Bardiya district. Similarly various agreement have been done between donor agencies for the construction of irrigation projects. The financial assistance of $30 million by Asian Development Bank for the development of Community Managed Irrigated Agriculture Sector Project (CMIASP) is the latest example of it. The International Development Association (IDA) of the World Bank has agreed to provide a loan equivalent to NPr. 4.8-5 Billion for the implementation of irrigation and water resource management project (IWRMP-AF).
Efforts for the development of hydropower can be clearly observed in the present days since government of Nepal have encouraged public and private sector to invest on hydro power. Similarly Foreign Direct Investment (FDI) is also highly appreciated for establishment of new hydro power plants. The power trade agreement signed between the government of Nepal and the government of the Republic of India is another milestone for the development of hydro power utilizing the water resources on Nepal. The strategies of government of Nepal for the development of hydro power sector are listed as bellows:-
·         Develop large scale RoR Projects with foreign investment to serve both local and export market
·         Small scale project which can be developed more quickly and are more within the capability of local private sector to finance and build will be targeted on meeting Nepal need
·         Mid-scale project done by government in collaboration with private partners
·         Promote storage projects to enable seasonal peaking needs to be met from domestic resources-also multipurpose
·         Major investments in cross border and backbone transmission to enable imports throughout the year until export projects begin coming on, then serve for export and seasonal and peaking power exchange
Similarly realizing that the development and management of water resources should be undertaken in a holistic and systematic manner aimed at the sustainable use of resources, Nepal for the first time formulated Nepal Water Resource Strategy which works as a directional guidelines for the country in water development in coming 25 years. The target to be achieved by 2017 and to be achieved till 2027 have been set up. Government is also pursuing water resource development in Nepal from three different approaches. Firstly to develop small size and decentralized hydropower projects in the rural areas to meet up the local demands of people, secondly to develop medium size power project to meet the national demand within national grid including export of surplus energy and finally large scale multipurpose projects to meet the regional demand of food, energy and flood control. These three approaches were included on Hydropower Development Policy of 2001.
Threats can never be avoided fully but this does not mean with the possible chance of destruction and devastation the potential of the water resources on Nepal should be under-utilized. For this, before construction of any project it is very essential to carry out the feasibility study of the proposed area. Similarly another factor to be considered during the period of planning is Environmental Impact Assessment (EIA) to ensure that nature is not harmed or disturbed because of the developmental activities that is about to take place. Adequate information must be gathered by the planners through empirical research activity to make a right decision. Through this the level of risk can be determined and different alternatives, ranging from hazards resistant constructions can be carried out. It is very essential to know about the limitation of the resources along with its potential.
Similarly, there are a lot of things to be carried out for the promotion of hydro power and irrigation development in country like- Nepal. Being a country full of potential on water resources, Nepal badly lacks infrastructure and its economy is crawling to meet the demands of the people at local and regional level. Per capita income is low and a lot of youths are unemployed desperately seeking for job. This has resulted in the situation of brain drain in the country where human resources of all categories: skilled, semi-skilled and unskilled are flying off to other nation for opportunities. The recent natural calamity has pushed country couple of steps back destroying existing infrastructures.
In such scenario government of Nepal must focus on overall development of the country through the maximum utilization of water resources. For this it is essential to construct new hydro power plants as well as it is equally important to develop irrigation nationwide for enhancing the agricultural yield of the farmers. These activities requires fund and technology as well. There lies solution to this barrier as well, through encouraging Foreign Direct Investment (FDI) from international multinational companies and it can even be done by collecting shares through the general public. Coordinating with multinational companies ensures that they will hire best technocrats for successful accomplishment of the project. The long paper works must be simplified and government from time to time work in coordination with private sector in regard of how can more benefit be gained from those water resources.
Development of irrigation network means the plains of Terai can be used for agriculture and this will secure job of many youths. Along with this, government should encourage youths and people at local level to get involved on development activities as such because public participation will make the work a lot easier. On next side, youths are employed at different levels in hydro power plants and this will play a key role to minimize the flow of youths out of the nation.
There must be a controlling mechanism for the ongoing developmental activities since those projects may be hydropower or irrigation are facing rampant corruption. The fund allocated for the activity never reaches to the place it should be. Hence, government should formulate strict rules and regulations to minimize such mal practices had come up with a vision of economic boom in a very short time frame through utilization of available land water resources.
Mainly the concern should be made on following points:
·         Public Private Partnership (PPP) should be the effort of government for effectiveness and efficiency. In regard to this, Micro Hydropower plant in Ghandruk is a perfect example of Public Private Partnership
·         Adequate planning to ensure economic and social benefit through utilization of water resources
·         Strict implementation of Nepal water resource strategy
·         No any effect should be made on environment and ensure the safety of people residing in periphery area.
·         Manipulation of basic data and result on power development should be minimized
·         Strong commitment, priority and vision on hydropower development at political level




ABBREVIATION
KW= Kilo watt
MWh= Mega watt
GWh= Giga watt
NEA = Nepal Electricity Authority
BPC= Butwal Power Company
HPL= Himal Power Limited
BKPC= Bhote Koshi Power Company
NHPC= National Hydro Power Company Ltd
SHC= Syange Mini Hydro Power Company
CHC= Chilime Hydro Power Company
AVHCO= Arun Valley Hydro Power Development
SHPC= Sahas Hydro Power Company
GITEC= Gitec Nepal Private Ltd
MPC= Mailung Khola Hydro Power Company
KHL= Khudi Hydro Power Limited
ROR= Run of the River
CMIASP =Community Managed Irrigated Agriculture Sector Project
      
IWRMP-AF= Irrigation and Water Resource Management Project
VDC= Village Development Committee
KM= Kilo Meter
IPP= Independent Power Production




















REFERENCES

1.       Nepal Electricity Authority, “Annual Overview 2014-15”
2.       Water and Energy Commission Secretariat, http://www.wecs.gov.np/
3.       International Power Producers’ Association, Nepal,
4.       Department of Electricity Development, Ministry of Energy http://www.doed.gov.np/
5.       Department of Irrigation, Ministry of Irrigation,
6.       Department of Water Induced Disaster Prevention, Ministry of Irrigation,
7.       Old study reports by senior as reference