Business Proposal of Devighat
We have talked a lot about Napalm’s immense potential in hydrophone. Unless it is utilized, talks alone are not enough. To develop the hydrophone sector, we need foreign direct investment (FED) because Napalm’s own resources both in the public and private sector cannot meet the financial investment needed to do that. A large investment is required from foreign development agencies and private sector entrepreneurs. However, FED in itself is not a development but may act as a catalyst for the needed progress in the sector. The country has an estimated 83,000 megawatts (MM) of hydroelectric potential.
If Nepal more effectively harnessed its full potential, the country could meet its domestic demand for electricity as well as export electricity, thus boosting the national economy. Although though hydrophone generation received priority in every five-year national plan for many decades, the plans were poorly implemented. Lack of electricity remained a major constraint to economic development and poverty alleviation. Currently, Nepal is harnessing less than 1 percent of its potential hydrophone energy and the country depends on bio- fuels, mainly wood, to meet its energy needs. Read about emerging business environment in Nepal
It also spends a lot funds on petroleum products. This has had serious consequences
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With that backdrop in mind, in this paper, we try to examine the trends, constraints, benefits and Halloween regarding FED in Napalm’s hydrophone sector. Trends & Alternatives What is needed for Nepal to emerge itself as one of the richest countries in the region is to develop water and human resources simultaneously. In Bhutan, for example, a country of about half a million people, the development of hydrophone has been dramatically advanced by the construction of Just two hydrophone plants with a combined capacity of 1,380 MM. As a result, it is expected that the per capita income will go up from USED 760 to 1,320.
In Nepal, the impact 4 of hydrophone development may not be that dramatic, but it has been established hat it could be the driving sector in economic development and a major resource to alleviate poverty. A macro-economic study has concluded that in order to eradicate absolute poverty in households, the country needs to register 8% economic growth rate. This will help to bring the level of percentage of population below poverty line to 10% and by 2027 there will be no household in absolute poverty. No other sector of economy other than hydrophone is in a position to help achieve this goal.
Thus, the solution of poverty alleviation is closely linked with hydrophone development in Nepal. Water is an important natural resource of Nepal. The immense quantity of water available in the country and its potentiality to generate hydro-based power provide us the opportunity of overcoming the barriers of economic development as well as improve the environment. Nepal has some of the world’s largest potential for hydrophone generation. The availability of abundant water resources and favorable gee-political features provide ample opportunities for the development of hydrophone.
So far, the volume of FED in hydrophone of Nepal has been small with a level of electrification of 29% and FED in hydrophone has not been an important resource of aggregate investment finance and its impact on economic development has also been minimal. A comparison with selected high and low performing countries brings out the underperformed of Nepal in terms of FED inflows in hydrophone. The country has an estimated 83,000 megawatts (MM) of hydroelectric potential, with 43,000 MM having been identified as potentially economically feasible. Currently the country is generating only 561 MM, less than 1. % of its total potential. According to Nepal Electricity Authority (NEE), the installed capacity of hydrophone by ownership currently amounts to 561. 31 MM (389. 150 MM in public major projects, 69. 34 % of total capacity, 133. 113 MM in private power projects; 23. 72% of total capacity, 200. 00 MM in public-private Joint ventures, 3. 56 % of total capacity; and 189. 68 MM in small hydrophone projects, 3. 38% of total capacity). Even with this massive potential, Nepal has not been able to develop its hydro resources effectively and widespread hydroelectric potential is not effectively utilized.
This has caused financial loss to the country. Hydrophone projects can be developed by the NEE, local independent promoters and foreign direct investments (Fids). FED may be in the form of loan, contract, or as a grant aid. The purpose of FED may take a number of different forms, such as for the establishment of new enterprises in other countries- either as a branch or as a subsidiary, for the expansion of an existing overseas branch or subsidiary, and for the acquisition of overseas business enterprises or its assets. More than 500 hydrophone projects of different capacity have been identified in the country.
Both national and international developers have been engaged in developing hydrophone projects. 5 FED in hydrophone have a history of 97 years from 1911 and have increased rapidly nice 1970 with the availability of bilateral and multilateral funding sources. Prior to 1960, all the hydrophone stations were constructed through grant aid from friendly countries like the USSR, India and China. Since 1970, hydrophone development took a new turn with the availability of bilateral and multilateral funding sources. The major donor countries in the period were Japan, Germany, Norway, South Korea, Canada, Finland, Denmark, Sweden and USA.
The financial lending agencies were the World Bank, Asian Development Bank (ADS), Japanese Bank for International Cooperation OBIS), Saudi Fund for Development, Kuwait Fund, and others. The most recent private hydrophone development projects are almost all proposed by Indian or Indian-Nepal joint investors. This is an interesting change and merits a careful review. The Indian companies are perhaps best suited to operate in Nepal due to their proximity, cultural and economic understanding of the Nepal situation, and relatively low cost of their professional and other costs.
FED in Nepal began in 1911 with construction of Parking Hydroelectric Plant (500 K). I has increased rapidly since 1970 with the availability of bilateral and multilateral funding sources. From the asses, after the adoption of the policy of economic liberalizing, hydrophone development took yet another turn with the private sector entering the arena. Besides, the government can partner with private investors or there can be international partners involved with Nepal private sector, or the public sector like Chalice.
The government of Nepal has been proportioning hydrophone sector in its national plans for decades, and the recent budget has enlisted an even more ambitious plan of generating 10, 000 MM in ten years. But if the past is any indication, the government and foreign-aided hydrophone development have not been that successful, both due to large per unit cost (construction inefficiencies, graft), and problems of maintenance. Since 1992, the private sector development of the hydrophone was seen as the best approach to utilize Napalm’s most important economic potential while utilizing the private sector efficiency.
Although the previous few private power development were carried out by the US, Australian, Chinese and a few other companies, the most successful ventures have been the ones organized by the Nepal investors. Constraints The development of hydrophone in Nepal is a very complex task as it aces numerous challenges and obstacles. Some of the factors attributed to the low level of hydrophone development are: lack of capital, high cost of technology, lower load factor due to lower level of productive endues of electricity and high technical and non-technical losses.
There is a lack of commitment, priority and vision on hydrophone development at the political level and also lack of transparency in hydrophone planning and project preparation at the 6 bureaucratic level. Political instability, inadequate institutional capacity and lack of a competent and transparent regulatory mechanism are other factors. Although the Government of Nepal (GOON) is open to foreign direct investment, implementation of its policies is often distorted by bureaucratic delays and inefficiency.
Red tapes and policy ambiguities also serve as hindrances. For instance, the government has designated the Department of Electricity Development as the single window for power development. But it has not been able to function as a single window because of capacity constraints, which delay the whole process. This policy needs to be reviewed on the basis of past experiences, new technology, possibility of local and reign investments, and the availability of a market to sell hydrophone in neighboring countries.
The new policy should be clear, transparent, practical and friendly to both local and foreign investment. The policy should aid hydrophone development, not personal development of politicians and bureaucrats. Too often, government officials and investors make surveys, licenses and taxes a means to their personal development. Also, policy should be followed strictly. Though it is hard to obtain a survey license from the GOON, once received the license is rarely cancelled. We have bitter examples like Must Share Pot. Ltd. An unknown company) which was awarded the license for the largest multipurpose project of Nepal (Carnal Chaplain 10,800 MM) and West Seti Storage Project, and also Power Purchase Agreements (PA) for Upper Mood, Dram Kola, Alongshore and Maid. Their licenses have not been cancelled yet although they are unknown company. Such companies get involved in “Tender Bids” and get some money from other companies by taking out their tenders. Because of poor policy and corruption, there is no any incentive to revoke their licenses. However, recently, the government seems to be making some progress in analyzing such companies.
Benefits The construction of hydroelectric projects contributes not only to the economy of a region, but also its environmental and social development. The establishment of such projects also promotes local people’s access roads, schools, health centers, Jobs and trade opportunities. They can also buy some percentage of shares in the hydrophone project. In the long run, the project will help improve their living standards. Moreover, due to fast-rising prices of petroleum products, the hydrophone is becoming even more relevant to our lives.
Hydro- electricity also offers clean energy. As result, it reduces the green house gas emission and provides a long term alternative. There are other benefits relating to human resource development, transfer of technology, power export, etc. Some facts: Recipients of FED often gain employee training in the course of operating the new businesses, which contributes to human capital development in the host country. If we harness 10,MOMMY 7 construction phase and 32000 in operation phase, assuming 2000 person for 750 MM) can get employment.
FED allows transfer of technology? particularly in the form f new varieties of capital inputs? that cannot be achieved through financial investments or trade in goods and services. FED can also promote competition in the domestic input market. Profits generated by FED contribute to corporate tax revenues in the country. Indian’s demand for power would grow to 200,000 MM by 2018. If Nepal could fast-track projects to generate Just 10,000 MM in ten years, consume 2,000 MM itself and export the rest to India, it could earn $2. Billion a year. According to Nepal Oil Corporation (NCO), in the fiscal year 2010/11, Mrs. 2. 45 billion has been spent to import petroleum products. If the same amount of money were spent for developing hydrophone, we could generate 29. 9 MM hydrophone electricity (for instance, in Chile Hydrophone Project, 1 K production cost = $1 550 = Mrs.. 108500). Challenges Nepal must now expedite the process of hydrophone development. It must now correct past mistakes. First, policy stability and political stability should be maintained.
Second, long-term national strategies for export-oriented hydrophone development and genuine mutually beneficial partnership should be developed. Bhutan model may be useful in the case of Nepal, too. Project agreements should be based on selling electricity not on the sharing of water. India and Bangladesh are two major markets for hydrophone. It’s true that without Indian’s cooperation, Nepal cannot develop its hydrophone. India is the only possible viable market for Nepal: even we produces electricity with foreign aid, without India opening its market for us, there is nothing much we can do.
The role of India is therefore critical. Nepal should adopt a two-tier approach for the development of hydrophone. First, it should cater to domestic needs and second, export power for meeting regional markets. Emphasis should be on implementation of the projects based on the concept of Build, Operate, Own and Transfer (BOOT). And the hydroelectric power generated and produced in Nepal should be developed as an item of export. Now individual aid-funded projects are being replaced by projects that enhance our own technical and financial capacity to meet energy needs.
In recent years, three Nepal power projects like Chalice (20 MM) in Ursula, Pillow (3 MM) in Susquehanna and Shimmer (12 8 MM) in Python proved that Nepal can now generate cheap electricity with locally- built and locally-financed hydrophone schemes. Construction of smaller projects using local resources has been neglected and minimized by the politicians and policy makers because of the high-budget, glamorous, aid-funded projects. The cost of the construction of hydrophone projects in Nepal mostly depends on the financing modalities.
Past experiences show that per K construction costs of locally financed projects are lower than either large donor-funded projects or those funded by the with strings attached; they have to be designed and managed by international consultants and built by other contractors. Thus, a large amount of money goes back to the donors. Nepal engineers, economists and members of the civil society have concluded that only through locally-financed, locally-built and locally-managed smaller projects we can generate electricity with minimum cost. The local focus also provides for people’s ownership of the projects.
Critics have charged that development in Nepal has miserably failed so far because of various factors, such as over-dependence on foreign aid, failure of donors to ensure the proper use of their funds and effective coordination of their activities, centralization, widespread corruption and abuse of authority by bureaucrats and politicians. They argue that effective and positive roles for the private sector can be learned from the experience of countries like Sir Lankan also. To conclude, generating resources is an important factor in reducing poverty in developing countries, which underscores the need for efficient investment.