So, how much alterative energy sources and equipment Nepal is importing due to load-shedding? According to FNCCI’s estimate it is Rs 35 billion last year and might reach Rs 100 billion this year. Now, it is an entirely wild guess. I will have to check out the figures out when I am free. But, the overall message is true: Load-shedding is increasing demand for diesel generators (which has doubled the demand for diesel, in turn incurring huge losses to NOC thanks to state subsidies), solar panels, batteries, invertors, and the equipment used in them.
Increasing imports of alternative energy sources and equipment means widening trade deficit, which is already at unsustainable level (about 22 percent of GDP). It will further drain forex reserves and increase deficit. First, Nepal will have to cough up more forex reserves to finance imports (which in turn means spending the remittance income). Though reserves are at record level right now, it might surprisingly come down if growth of remittance inflows slowdown and imports rise unabated. It might put the balance of payments in the red again (happened in 2009/10 and 2010/11). Second, the increase in load-shedding hours means high demand for fuel to run generators. Since diesel and LPG are subsidized to such an extent that the NOC, which is helplessly left to shoulder the burden, is incurring loss of over Rs 1 billion each month. NOC officials estimate that at present diesel generated electricity is to the tune of 500 MW. Ultimately, the Ministry of Finance (MoF) will have to take care of the balance sheet mess of NOC. It will get reflected in the country’s expenditure-revenue sheet—meaning pressure to widen fiscal deficit (at 3.8% of GDP now).
Now, why would this trend persist despite such ominous situation? Because, households are barely feeling the pinch as a result of increasing remittance income (at 20% of GDP now—around US$4 billion).
Until I compute the actual figures, let me list the FNCCI’s guess of imports of goods that are imperfect substitutes of hydroelectricity.
- Generator: Rs 5 billion (imported from India, China, Taiwan, Vietnam, among others)
- Solar panel, electricity import from India and coal: Rs 4 billion
- Battery: Rs 5 billion
Solution to multiple macroeconomic problems: generate enough hydroelectricity!
Nice and let me tell one thing that it not my hobby to post comment on other blogs but this is very well so i made up my mind to post comment.
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I think if only our society and leaders had a little bit more of the grey matter inside their cranium; this load-shedding crisis could be used brilliantly to jump right into a modern economy that is based on renewable where the whole of the developed world is moving towards.
ReplyDeleteThe absolutely crushing reliance on fossil fuel imports is just not sustainable or at least I just can't see our nation growing leap and bounds until we are so dependant on it.
Hydroelectricity is definitely the big one to solve it but nation also needs to think how to get out of the fossil fuel reliance. Might sound crazy given the last minute short-term panic stricken fix it approach common in us Nepalese but until we start thinking how to stop relying on fossil fuel, I just see us going nowhere.