Nepalnews.com Mercantile Connumications Pvt. Ltd.

When Butwal Power Company (BPC) was at the final stage of privatisation two years ago, people doubted if the Nepali private sector was mature enough to handle such a big project. The company, however, in the very first year of privatisation, distributed 60 percent dividend to its shareholders while its share price soared to over Rs. 400 within weeks of being listed in the stock exchange making it the fourth largest market capitalised company today.

Though the responsibility for these achievements can be attributed to several factors, the leadership of Gyanendra Pradhan, the Chairman of the Chief Executive Committee of the company, should definitely be given some credit.

An electrical engineer by qualification and involved in a number of businesses related with energy and hydropower, Pradhan (45) loves to be identified as an advocate of the principle that Nepal’s economic development will be the fastest if the country pays sufficient attention to hydropower development. Some of his ideas are quite revolutionary.

Management Credo

# Be innovative and different in a better way than others.

# Think of every job as your own and put your heart and soul into it.

# Local management is better than foreign because the person who knows the local environment better always has a critical advantage.

#“To make the business grow, delegate as much as possible, except some key issues. Review the status of the business frequently with the management. This keeps them alert as well as inspired.”

# Paying bribes to get the jobs done? “I’m not 100 percent pure, but I’m among the purest. Even gold has only 999.999 percent purity.”

#“Simply engineering knowledge is not enough, analytical thinking is the key to success.”

# Analyses his daily work at midnight.

He argues that Nepal should stop thinking in terms of hydropower export, as the per capita power use of the Nepalis will be less than that of Singapore even if all the hydropower potential is immediately exploited and used within the country itself. That means, if our dream is to become a country like Singapore, we must increase per capita power use and for that we need to consume all the hydro-power potential ourselves. But if we must export power, there is no point in wasting time by haggling over the complications with India, the only potential importer of power from Nepal in the present circumstances.

The best way would be to follow the Bhutanese model, he suggests. The reason - India will not be able to ask for a price lower than what it is paying Bhutan. According to him, that is not such a bad price because by accepting that very price, Bhutan has already achieved the highest per capita power use in South Asia. So, even if we give some projects of around 5,000 MW to India for such a low price, the benefit we receive due to the development of that much capacity will be compensated several times over in the long term, he argues.

According to his estimation, Nepal uses nearly Rs. 700 billion worth of energy calculated in terms of electricity price. If the calculation is based on the ongoing price of petroleum, it comes to about Rs. 200 billion. Compare this with the total annual national budget of the country, which stands at around Rs. 100 billion. “Such an important sector is still being neglected, and whatever plan the government has for this sector is a total failure,” he says. The government has targeted to increase electricity generation to 700 MW by the end of the Tenth Plan, but the only big ongoing project is Mid-Marsyangdi (70 MW), and that too is unlikely to be completed within the planned period as there has been frequent stops in the work.

The problem is more serious than it appears. If the country does not pay attention to developing hydroelectricity, it will become bankrupt because all the foreign exchange earning of the country will then be required to foot the petroleum import bill.

A present problem with hydroelectricity is its high cost, which makes it out of reach for the people who live below or slightly above the line of absolute poverty. To address this problem, Pradhan says that a lot of efficiency improvement can be introduced in the present system to save about four or five billion rupees worth of electricity being wasted.

In this regard, he shows some examples from the BPC. The company has formed electricity users groups who read the meters and collect the payments from their members. For this, the user groups get a 10 percent commission, thus ensuring that the company gets 90 percent of the billed amount. At the same time, pilferage is nil and simple maintenance is looked after by the user group itself. And the company receives good support form the local community as this practice has helped in generating employment at the local level. But the Nepal Electricity Authority (NEA), which accounts for over 90 percent of the total electricity sales in the country, sends its staff to remote villages to read meters and collect payments. In this way, the cost of NEA comes up to seven times more that the money collected. This does not make any economic sense, as it not only causes additional cost in collection but also fails to control pilferage.

Pradhan’s dream about BPC is to make it a model utility company in South Asia. For this the company is at present in negotiation with the government to get the electricity distribution business in 11 districts including Kaski, Rupandehi and Nawalparasi. The consumer price will be cheaper and the employee will receive better benefit if these areas are handed over to BPC, says Pradhan. According to him this was something that was already agreed between the government and the Shangri-La Energy during BPC’s privatisation.

In fact, hydroelectricity should be the cheapest form of energy, argues Pradhan. The reason is that the payback period in any hydropower project is not more than seven years while the normal project life is 50 years or more. After the initial capital invested is recouped, the only cost is the tax, as the raw material cost is zero and other operating costs are only about one percent.

These economic reasons were not the only factors that attracted Pradhan to the power sector. He says that he was fascinated by electricity from his early childhood. “I did not spend my pocket money in buying toffees like my friends, but to buy batteries and bulbs. I used to put off the oil lamp and read under the light of an electric bulb. My family house at Bandipur still has the same wiring that I had fixed when I was in fourth grade,” he recollects with a twinkle in his eye.

Personal Side

# Married to Dr Bimla, a dentist. Has a daughter and a son.

# Goes to bed early (around eight pm) and gets up at around one am to read till around three am. Still he is an early riser (five am). “It takes me an hour in the night to read through a material that I would need days to read during normal office hours.”

# Spends lot of time with his family. Loves to travel oversees with family at least twice a year.

# Has faith in God, but believes in karma rather than faith.

# Sponsor of the first Nepal standard award, Rotary Ama Sama Kumari Old Age Home, Santu Devi Health Post, Shanti Ashram (18 Tharu homes) for the landless, schools, temples and more than 20 annual scholarships to children.

# Follows his grandfather’s exhortation he learnt from his father: “Business is like a green crop which has to be protected by a fence. Contribution to social causes is a fence to protect business.”

# Believes in and has good knowledge of Vastu and birth chart.

# Visits Aryaghat, Pashupati area, at least once in a fortnight to realise that you have to leave everything one day.

But the most important opportunity for Pradhan to try out his ideas came up in 1997 when the government decided to privatise BPC. And it was also the most challenging. For four years there were battles fought inside the government ministries and departments and also in the press and various public forums not only about the price of the BPC shares, but also on the modality of the sale and whether it should be sold to Pradhan’s team or some other party.

Shangri-la Energy Ltd. was set up in 2002, with the initiation of Pradhan, with the specific purpose of acquiring BPC by enlisting the participation of a number of prominent business houses and personalities to arrange enough funds needed to acquire the company, which is the largest to be privatised so far in terms of value. With this consortium, Pradhan was able to convince a Norwegian investor to partner with Shangri-la to jointly bid for the Butwal Power. Participation of a foreign party in the consortium was made compulsory by the conditions put in the bid requirement. During the four years of the government’s dillydallying, the Maoist insurgency escalated in the country and one of the victims was BPC. Its plant was blown off by the insurgents when the third bid was going on. As a result, the Norwegians reduced their share in the consortium from 83 percent at the beginning of the bidding process to only 6 percent at the financial closure. Anyway, BPC came under the Shangri-La’s fold and that was a happy moment for Pradhan.

But the challenge of making the bombed plant operational was present. It was submerged in water making it very difficult to estimate the cost of repair and the time needed for such repairs. Pradhan volunteered to lead a project and the deadline given was 15 months. But it was completed in a record time of eight months.

Now he thinks that he has the opportunity to realise his dream to see a developed Nepal through development in hydropower in his lifetime.

Born in Bandipur, a traditional business centre in Western Nepal, in a traditional Newar business family, business was in Pradhan’s blood and he learned business by watching his father, Hira Lal Pradhan, at work. He used to be fascinated by the stories about his grandfather, Khardar Lal Prasad Pradhan, who had the business of minting coins for the government. Pradhan recalls that the only way he wasted money during his childhood was by trying to sow coins because somebody had convinced him that the coins would grow into plants and bear coins as fruits. He says with a smile that he is still waiting for the coin plant to grow in his native town.

Pradhan started his technical career as a civil overseer with Rs 435.00 (USD 20) as his starting monthly salary in 1979; and recalls with pride that he was the cultural ambassador to meet the then Indian prime minister Late Mrs. Indira Gandhi. After his graduation in Hydro Power Electrical Engineering with distinction, he joined the Nepal Electricity Authority. As he felt he could not utilise his zeal for technical work while in this job, he left the organisation after three days and joined a power transformer manufacturing company, as a junior engineer and was promoted to the post of the chief engineer in the next two years in recognition of his contribution to the three fold increase in the productivity of the company. Then he started his own business of electrical construction and successfully completed a number of projects including the Asian Development Bank funded 132 KV transmission lines, under Pokhara valley electrification project.

Being a family oriented person, he was not happy with such a business that required him to be away from home for long, so he opted for a single station business and thus set up the Trishakti Cable Industries in 1992. Trishakti became a brand leader in the market within five years, he recalls, and was the first to receive the Nepal Standard 344 in its category. Over the years he has added more innovative business, importing items from the newly emerging Chinese market and pioneering energy audits in different establishments. Trishakti Wire Industries (P) Ltd., a manufacturer of copper rods, is another unit set up by Pradhan and it is distinct in the sense that it was the first of its kind to use direct online casting system.

Seeing the failure of corporate culture to develop in the business community of the country, Pradhan says that he wants to do something to uplift such culture. He has started this with Shangri-La Energy itself. “The failure of many joint stock companies is due to the difference in the financial interest of the promoters,” he views. So, Pradhan opted for equal shares among investors in his Shangri-la Energy Ltd. “Major interest of any investor in a joint-stock company is finance and being equal in terms of stake holding solves 90 percent of the differences. The remaining 10 percent is for power and positions, which is negligible,” he says. Though many of his friends left after joining the company not believing that Shangri-la would be able to take up BPC, he proved himself right and soon got the prized possession in his fold, boosting his confidence further.

Let’s hope he is successful also in his future ventures and leading the country’s economic development through hydroelectricity development from the private sector.