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Ahead of Prime Minister Pushpa Kamal Dahal’s visit to India, the Investment Board Nepal (IBN) has approved the draft of the power development agreement (PDA) of the Lower Arun Hydroelectric Project. A board meeting of IBN on Sunday endorsed the PDA draft to be signed with SJVN Lower Arun Power Development Company for the development of 669 MW Lower Arun HEP. The meeting chaired by Prime Minister Pushpa Kamal Dahal decided to approve the PDA and send it to the Cabinet for final endorsement. The IBN and the developer will sign the PDA agreement after the cabinet's endorsement. Earlier on April 13 this year, an IBN board meeting approved an investment of Rs 92.68bn proposed by the developer of the 669 MW Lower Arun Hydroelectric Project. The same meeting also decided to form a project development agreement (PDA) negotiation committee led by the IBN CEO. IBN on July 11, 2021, signed a pact with India’s state-owned Satluj Jal Vidyut Nigam to develop the Lower Arun Hydropower project in eastern Nepal. This is the second mega project undertaken by the SJVN after the $1.04bn 900-MW Arun-III hydroelectric project in the Arun River. As per the draft of the PDA, the project developer has to provide 21 percent of the total energy produced from the Lower Arun HEP to Nepal for free. The developer has been provided an income tax exemption for 15 years after the start of power generation. After the start of commercial production, the company will have to pay $11,000 per month to IBN. The IBN board meeting has also advanced the process of eviction of the Chinese company Power China from the 756 MW capacity Tamor Reservoir Hydroelectric Project. Providing a month's time, the meeting on Sunday decided to seek an explanation saying why the work is not progressing according to the agreement and action plan made by Power China to make the project together with the Nepali company HIDCL. “It has been decided to correspond with Power China regarding compliance with the Memorandum of Understanding dated 19 Jan 2020,” states a press statement issued by IBN. The HIDCL and Power China signed an agreement to develop the Tamor Project during Chinese President Xi Jinping’s visit to Nepal in 2019. Of late, HIDCL found it difficult to sell electricity in the Indian market while constructing the project in collaboration with a Chinese company, and it sent a proposal to the IBN to cancel this agreement. According to the IBN sources, the government decided to give one month's time to the Chinese company so that no legal dispute would arise later. Interestingly, the SJVN has shown interest in developing the Tamor Reservoir Project and has sought permission from the government.  

While the government has invested Rs 618bn in public enterprises (PEs), the returns have been minimal from such investments. The Annual Status Review of Public Enterprises published by the Finance Ministry shows the government received Rs 6.16bn in dividends from the PEs in FY 2021/22. According to the report which was presented to the federal parliament on Sunday, only 25 PEs are in profit while 17 are facing losses. The operating income of PEs has increased by 36.2 percent and reached Rs 575bn in the last fiscal year. However, compared to the previous fiscal, the net profit of PEs has decreased by 94.15 percent, according to the report. The net profit of PEs in FY 2021/22 stood at Rs 1.54bn only. In FY 2021/22, the net profit of 25 PEs increased by 33.65 percent while the net loss of 17 PEs rose by a staggering 610.96 percent. Among the PEs, Nepal Electricity Authority (NEA) earned Rs 13.37bn in profit in FY 2021/22 overtaking Nepal Telecom as the biggest profit earner; Nepal Telecom posted Rs 8.47bn profit in the last fiscal year. Meanwhile, Rastriya Banijya Bank, Citizen Investment Trust, and Deposit and Credit Guarantee Fund earned net profits of Rs 4.29bn, Rs 3.10bn, and Rs 3.01bn respectively. With PEs continuing to bleed taxpayers’ money, with no returns on the money invested from the state coffer, the government has put forward a plan to run PEs that are weak in terms of capital, and technology by the private sector. Finance Minister Prakash Saran Mahat made such a statement while unveiling the Economic Survey for FY 2022/23 on Sunday. “It is necessary to identify PEs that are not operating effectively and that do not need to be kept in the public sector. Such enterprises should be operated by the private sector with more capital technology and competent management,” said Mahat. The government in the third week of April this year, has also formed a task force to reform PEs under the leadership of former finance secretary Shankar Adhikari. The PEs in Nepal saw a drop in their profits post-Covid-19 pandemic, according to a recent report from the International Monetary Fund (IMF). While the total profits of PEs were largely unchanged in the initial stage of the pandemic (the last four months of FY 2019/20), the profits reduced by 0.5 percent of GDP in FY 2020/21, as almost half of PEs ran in losses that year. Except for the PEs in the financial services sector, institutions in trading, public utility, and services sectors saw a big drop in profits or an increase in losses in FY 2020/21. Compared with the pre-pandemic FY 2018/19, PEs’ contribution to fiscal revenue (income tax and dividends) declined by 0.16 percentage points of GDP in FY 2020/21 and 0.23 percentage points in FY 2021/22.  

As in the past years, Nepal again faces the risk of spillage of electricity in the monsoon season this year with India yet to approve exporting more than 452.6 MW of electricity from its northern neighbor. According to the Nepal Electricity Authority (NEA), the country’s power generation capacity has already reached 2,650 MW, while the projected peak domestic demand for power in the current fiscal year is 2,036 MW. A senior NEA official said the country is expected to see surplus energy of 700-800 MW in the late night time while there will be excess power production of 400-500 MW in the daytime in the wet season that starts in June and lasts till October. “So, there is an urgent need for us that the Indian government should provide approval to sell more power generated by more power projects in Nepal,” said the NEA official. “There may be some announcement in this regard during the Prime Minister’s visit to India.” Prime Minister Dahal is scheduled to visit India from May 31 to June 3. Cooperation in the energy sector is one of the major agendas of the Prime Minister’s visit to India, according to officials. After the then Prime Minister Sher Bahadur Deuba visited India in April last year, the southern neighbor had allowed Nepal to export 325 MW of electricity from 39 MW earlier. With the advent of monsoon, water levels in the rivers are expected to rise soon enabling Nepal’s run-of-river type projects to boost their energy production. “We may be able to export more power regularly if the country sees the continued rainfalls in the days to come,” said the NEA official. On Friday last week, NEA sold 100 MW of electricity in the evening as power production rose due to the rainfalls but exports were discontinued on Saturday and Sunday. Monsoon in Nepal typically begins in mid-June and the country will see excess production of power on a regular basis. NEA expects the country’s power generation capacity to rise to 2,853 MW by the end of the current fiscal year. By the end of the next fiscal year in mid-July 2024, Nepal’s electricity generation capacity is expected to rise further to 4,507 MW and to 5,251 MW by mid-July 2025. Nepal’s domestic demand for power is expected to grow to 2,280 MW in mid-July 2024 and 2,568 MW in mid-July 2025, NEA has forecasted. This clear disparity between domestic demand and the generation of power has forced Nepal to find the outside market as long as domestic demand grows substantially with increased economic activities and industrial growth. Nepal is seeking not only the Indian market but also the Bangladeshi market as well and seeking India's help to send Nepal’s power to Bangladesh too. A private sector developer said that even if India gives the approval to sell more electricity in the Indian market, the possibility of spillage of power continues. Currently, Nepal has been allowed to sell power only in the day-ahead market of India’s exchange market. The day-ahead market means that Nepal can sell electricity once quantity and price are determined a day ahead of the trading day. But Energy Ministry officials say that the southern neighbor is positive for Nepal's entry into its real-time trading market as well. In such a market, Nepal can sell electricity anytime when there is a possibility of excess power in the country. “In the real-time market and day-ahead market, buyers may not buy Nepal’s electricity or may seek power at a very cheap price depending on availability of power supply in the market,” said the private power developer. “That’s why, a long-term power purchase agreement with India buyers is a must to ensure that electricity is not wasted in Nepal.” NEA had sought to sell electricity in a six-month deal but it didn’t not sign any agreement citing the lower prices offered by the potential buyers. But it didn’t make any efforts to sell power under a long-term deal this year. According to the private power developer, NEA should have sought bids from the Indian companies for a longer-term power purchase agreement. NEA resumes electricity export to India Nepal has resumed electricity export to India after the surge in domestic power production. According to the Nepal Electricity Authority (NEA), it sold 600 MW hours of electricity to the day-ahead market of the Indian Energy Exchange on Saturday. With the water level in the rivers increasing with the start of pre-monsoon rainfall, the power generation from domestic hydropower plants has increased of late. NEA officials say the power generation from domestic power plants is currently around 1,300 MW. As most of the power production in the country is based on run-of-the-river hydropower plants, Nepal usually exports electricity to India during the wet season during which electricity production is at the fullest. Nepal has been selling electricity to India’s power exchange market since November 2021. NEA stopped power export to India in the second week of December last year following decrement in the water level in the rivers. The run-of-the-river type hydropower projects usually produce less than 40 percent of their installed capacity as water levels in the rivers decrease significantly during the dry season. NEA Spokesperson Suresh Bhattarai said that the power utility has resumed electricity export to the southern neighbor. “With the start of the pre-monsoon, power generation has been gradually increasing, enabling NEA to export excess electricity to India during night time,” he said. NEA has also stopped importing power from India from Friday. “The domestic demand has also been met due to the increase in domestic power generation,” said Bhattarai. NEA is targeting to export 1,200 MW this wet season to India. The authority has been selling electricity in the day-ahead market of Indian Energy Exchange Limited through daily bidding. Currently, the southern neighbor has allowed Nepal to sell 452.6 MW of electricity generated by 10 hydropower projects in the Indian power market. But the approvals given to the 10 hydropower projects need to be renewed every year. NEA has forwarded the list of additional projects including the 452 MW Upper Tamakoshi Project, the electricity of which it plans to sell to India. If the southern neighbor accepts the new list, the state-owned power utility will be able to export power according to its target. Nepal earned over Rs 11bn by supplying excess power to India from early June to mid-December, 2022. Nepal first started exporting power to India in early Nov 2021 through a competitive bidding process. But after exporting for a few weeks, Nepal stopped selling power to India in December amid a reduction in power generation in the dry season. Exports resumed in 2022 with the start of the monsoon in early June. The NEA has sold 1.35bn units of electricity to India since then and earned Rs 11.16bn. The power was sold at a rate between Rs 6.58 and Rs 12.15 a unit. NEA has reported that it earned Rs 2.83bn from exports from July to the end of the last fiscal year 2021/22 and an additional Rs 8.32bn since the start of the new fiscal year 2022/23. The authority has set a target of Rs 16bn within the current fiscal after resuming exports in May.

The gold is being traded at Rs 108, 100 per tola in the domestic market on Monday. According to the Federation of Nepal Gold and Silver Dealers’ Association, tejabi gold is being traded at Rs 107, 600 per tola. Similarly, the silver is being traded at Rs 1, 360 per tola today.