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VOL. 28, NO. 20, Jan 23, 2009 (Magh 10 2065 B.S.) |
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Stunted
Growth
The government had expected that the Gross Domestic Product (GDP) would increase by 7 percent this year. Finance Minister Dr. Baburam Bhattarai, while unveiling the Maoist-led government's maiden budget, had claimed that the economy will leap-frog from what he called as years of sluggish growth. But already hamstrung by incessant trade union disruption led by unionists affiliated to his own party and further paralyzed by lack of adequate peace and security, the imposition of up to 16 hours of load shedding a day is poised to strike a fatal blow to his plans. As industries and businesses struggle to operate due to energy scarcity, even optimists are now calculating that the GDP growth rate this year would not cross four percent.
By SANJAYA DHAKAL
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Trisuli Hydropower: No water |
When Finance Minister Dr. Baburam Bhattarai presented the budget
belatedly in September this year, he had emphasized on the high growth
trajectory. In his own words, the economy would leap-frog instead of
snailing like a reptile.
He had predicted that this year the economy would grow by seven
percent, and after three years, it would start growing in a double
digit figure.
In fact, his sights were not at all ambitious, given the low base of
Nepalese economy and the enormous potential it held to start
leap-frogging after having wallowed in abysmal growth for a number of
years during the decade-long conflict. Furthermore, two neighboring
countries with whom Nepal's economy is closely linked – India and
China – have been growing in stupendous rate for the last couple of
years. As such, Nepal did look poised to travel on that trajectory.
But nothing is working like Dr. Bhattarai had wanted.
Even before the Nepal Electricity Authority (NEA) had announced
crippling hours of load shedding, which progressed rapidly from 8 to
10 to 12 to now 16 hours daily, the economy was not in the best of
health.
"The militant trade unionism had thrown the industrial life out of
gear a lot earlier," said an economist.
The prospects for investment – either domestic or foreign – had never
looked bleaker. The industrial corridor in Sunsari-Morang had been
suffering from bouts of strikes. Businessmen in Parsa corridor
centering in Birgunj were a scared lot as they turned into sitting
ducks for all kinds of violent groups from petty extortionists to
kidnapping ring to different rebel outfits.
There was not an iota of industrial environment. The Colgate Palmolive
packed its bag from Hetauda, the Dabur Nepal, UTL and other similar
multinationals became confused lot as they ran from pillar to post
demanding answers.
There were some affects from the global economic crisis. Till date,
the direct loss suffered by Nepalese businessmen due to sudden fall in
the price of raw materials they had already ordered in higher prices
has been calculated at Rs 2 billion.
Tourism, remittances and investment are likely to be hit in the coming
months due to the global meltdown.
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Thamel's Cybers: Out of electricity |
The morale of the private sector is at an all-time low. Their
expectations of economic recovery have not been fulfilled. They have
been giving cold response to the government's call for Voluntary
Disclosure of Income Scheme (VDIS). As less than a month remains for
the scheme – under which anybody can disclose hitherto untaxed income
and pay flat ten percent tax – only Rs 58 million income have been
disclosed.
Amid all these circumstances, the business environment was gloomy.
And then came the shattering schedules of load shedding.
Load shedding
The Nepal Electricity Authority (NEA) has imposed 16 hours of daily
load shedding since January 11.
As regular electricity is available for eights hours – in two windows
of four hours each – once in daytime and once in night time – the
normal life, including business has been turned topsy-turvy.
The NEA has said that it is unable to reduce the 16 hours of daily
load shedding for next one and a half month.
"However, since we have started random test of Middle Marsyangdi and
it is expected to come into commercial operation in next few days and
provide 30-35 Mw of power, we remain hopeful that we will not have to
increase load shedding hours anymore from 16 hours daily," said Sher
Singh Bhat, chief of system operation department at NEA.
He said that once the transmission tower damaged by Kosi inundation is
repaired and 80 Mw of power is imported from India within next one and
a half month, the load shedding will then be reduced by 6 hours."Otherwise we will have to wait till April/May when snow starts
melting in the mountains for load shedding to come down considerably,"
he said.
Most of the Nepal's run-of-the-river hydro projects depend on water
flow from snow-fed rivers for their power generation.
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Industrial sector: Industries without power |
During the winter dry season, all of these projects run in around
fifty-percent capacity even as demand increases at the same time.
Furthermore, the country's only storage-type hydroproject – which can
be used as and when there is more demand – the Kulekhani this year
faced historic low collection of water in its reservoir.
"We are currently facing peak demand of 800 Mw while we can only
supply 250 Mw," said Bhat.
As he pointed out, the considerable relief from load shedding this
year will come only if the transmission tower damaged by Kosi is
repaired on time. But, it is unclear if the repair works have even
started or not on the Indian side.
Growth Scare
Economists have said that due to the crippling power outage, the
overall growth will suffer.
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Highway: Empty truck |
"In fact, the seven percent growth projection was never realistic.
With this load shedding, it will be surprising if the growth will
touch four percent, and, that too, if the agriculture sector grows
like it did last year," said Dr. Shankar Sharma, economist and former
vice chairman of National Planning Commission (NPC).
Dr. Sharma said that the load shedding has hurt all the three sectors– industries, trade and service industries.
"Look at how the communication sector has suffered," he said referring
to the reports of slump in advertisement market and the declaration of
transmission emergency by private television operators.
The five private television channels – Kantipur TV, Image TV, Avenues
TV, Sagarmatha TV and ABC TV – have decided to stop their transmission
for five hours a day between midnight till 5 am.
Commercial banks have also hinted that they want to have holiday on
Sunday to cut the working hours as the use of invertors and generators
have escalated their running costs.
Even private hospitals are feeling the heat. "We are bearing high cost
in using generators. Soon we will end up stopping the use of operation
theatre, ICU, refrigeration and so on," said Dr. Bhola Rijal,
president of Association of Private Health Institutions.
However, the government has expressed confidence that it will attain
the targeted growth rate.
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FM Dr. Bhattarai: In trouble |
"Till now, we have not seen any indication that there will be lesser
growth rate," said Krishna Hari Baskota, Revenue Secretary at the
Ministry of Finance.
He said that the government till Poush end (mid January) has collected
Rs 59 billion revenue, which he said is in line with the target. "The
load shedding has also worsened just now, otherwise, the industrial
growth was normal. We intend to improve the load shedding situation in
next few weeks, so I hope the industrial growth will not suffer."
The government has aimed at over four percent agricultural growth and
nearly eight percent of non-agricultural sector's growth. Even if the
energy crisis hits the non-agro sector, the government is confident of
handsome returns from the agriculture.
"This year there has been good monsoon, the government has also
invested a lot in irrigation. We expect a bountiful harvest this year.
And it will help us attain the growth target," said Baskota.
Despite his optimism, economists and businessmen are not so
enthusiastic. "The industries' have faced up to eighty percent decline
in their output due to energy crisis and other reasons," said Kush
Kumar Joshi, president of Federation of Nepalese Chamber of Commerce
and Industry (FNCCI).
"There is no way the government can reach high growth target this
year," said Surendra Bir Malakar, president of Nepal Chamber of
Commerce (NCC).
As such, given such an atmosphere of divergent opinion, the economic
growth rate is bound to be stifled due to the extended hours of load
shedding. It remains to be seen how much this rate will be stifled,
though.
