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Monsoon rains have begun. Water levels in rivers are rising, and so is power generation. The Nepal Electricity Authority (NEA) is instructing the private sector to reduce energy generation, citing low consumption. This indicates that there is adequate electricity in the system. However, households and industrial consumers have been experiencing intermittent power cuts for the past many months. Suresh Bhattarai, the spokesperson for the NEA and chief of the Load Dispatch Center, said intermittent power cuts are due to voltage issues and problems in several transmission lines. “Because of this, the energy generated in the country is going to waste,” he added. Nepal generates 800 MW of hydropower in the dry months. The country is currently generating 2,100 MW. The present demand is around 1,700 MW, which makes a surplus of 400 MW. Of that, NEA is exporting around 300 MW to India. NEA is allowed to export 452 MW to India. Citing the rise in energy generation, NEA verbally asked power producers to reduce generation about a week ago. The Independent Power Producers Association of Nepal (IPPAN), on the other hand, says that about 500 MW of hydropower generated by independent power producers is going to waste. “Some 500 MW generated by 29 plants of independent power producers is going to waste,” IPPAN President Ganesh Karki said. While the energy generated in the country is being wasted, the NEA hasn’t been able to provide sufficient electricity supply to industrial corridors in Banke and Birgunj. The sudden power cuts are affecting industrial productivity, says Anil Patwari, the president of the Birgunj Chamber of Commerce and Industries. “This has been the situation for the past many months. It would be easier for us if NEA cuts power supply by publishing a schedule,” he added. NEA has also not stopped electricity imports from India. According to NEA, it is importing a maximum of 87 MW from India at present. Mukesh Kafle, former executive director of NEA, said the utility has failed to synchronize its generation, transmission, and distribution system. “While making forecasts of electricity consumption, NEA needs to make investments to build transmission and distribution infrastructure,” he said. “We have already started to see problems.” NEA has already accepted that it was facing problems in distribution due to ‘structural issues'. Addressing an event recently, NEA Executive Director Kulman Ghising said although demand has increased, there have been problems in electricity distribution due to a low-capacity distribution system. “We can manage somehow this year, but our existing system cannot cope with the increased production and demand of the next year,” he added. According to Ghising, an investment of Rs 60m over five years is needed to improve the distribution system in the Kathmandu Valley. Similarly, Rs 500m would be needed to upgrade the distribution system all over the country. NEA needs around Rs 800bn over the next five years to upgrade distribution and transmission systems, according to Ghising. NEA has been saying that it has invested Rs 100bn to upgrade its distribution and transmission systems over the past three years. Despite this, the power supply hasn't been dependable. The cost of building a kilometer of a 400 kV transmission line comes to around Rs 100m. Similarly, it costs Rs 5bn to build a 400 kV substation and Rs 2bn to build a 125 kV substation. “Since we need to build infrastructure like these all over the country, a big investment is needed,” said Ghising. NEA has been signing power purchase agreements (PPAs) under the ‘take or pay’ system. But it has been signing ‘emergency’ PPAs with projects citing a lack of transmission lines. Under this arrangement, NEA pays for the power producer only if its alternative system supports the evacuation of power generated by hydropower projects. Such agreements have been signed for the purchase of a combined 500 MW. However, NEA is buying only around 250 MW at present. According to IPPAN Deputy General Secretary Prakash Dulal, power plants on the Dordi corridor are affected the most due to a lack of transmission. “NEA may not buy if its alternative transmission system doesn’t work,” he added. NEA has signed PPAs under ‘take or pay’ for 5,000 MW generated by independent power producers, while the process to sign PPAs for another 1,500 MW has begun. Plants having a combined capacity of 120 MW have been affected by floods and landslides. IPPAN has been saying that such ‘emergency’ PPAs won’t be acceptable to them. “NEA signed an emergency PPA two years ago, stating that it was for a few months only. But it is continuing the agreement for this year as well,” said IPPAN President Karki.

The disbursement of loans by banks and financial institutions (BFIs) to the country’s industrial sector has dipped in the first half of FY 2022/23. As industries across the country grappled with the prolonged liquidity crunch and interest rate volatility in the first six months, they took fewer loans from the BFIs. According to the Half Yearly Economic Activities Report (Integrated) 2022/23 Report made public by the central bank The BFIs’ loan disbursement to industries decreased by 6.9 percent to Rs 1343.37bn in the first half of the current fiscal year compared to the growth of 19.4 percent during the corresponding period of FY 2021/22. In the first six months of the last fiscal year, BFIs disbursed a total of Rs 1443.19bn to the industrial sector. According to the report, of the total loans, Bagmati Province has the highest share of 67.21 percent. The BFIs disbursed Rs 902.87bn in loans to the industries in Bagmati Province while Karnali Province has the lowest share of 0.39 percent (Rs 5.28bn). Of the total industrial loans disbursed during this period, 39.6 percent went to the non-food manufacturing industry, 20.1 percent to the agriculture and beverage industry, 20 percent to the electricity and gas industry, 13 percent to the construction industry, six percent to the metal industry and 1.3 percent to the mining industry. The disbursement of loans declined because industries’ overall capacity utilization took a beating in the first half of this fiscal. The interest rate volatility and surge in the prices of raw materials have hit the country’s industrial output in the first half of the current fiscal year. Industries in Nepal saw their average capacity utilization falling in the first six months of FY 2022/23 compared to the same period of FY 2021/22. According to the Half Yearly Economic Activities Report (Integrated) 2022/23 Report made public by the central bank, the average capacity utilization of industry in the first half of this fiscal stood at 43.07 percent compared to 48.3 percent in FY 2021/22. The central bank report shows the electricity, chocolate, and processed tea industries' capacity utilization was the highest during this period. The capacity utilization of the electricity industry stood at 93.19 percent, while that of the chocolate industry and processed tea industry stood at 85.59 percent and 85.39 percent respectively. The increase in the cost of doing business due to rising interest rates along with the decline in market demand has badly affected the operational efficiency of industries across all seven provinces. The report shows industrial production in three provinces housing the country’s major industrial corridors—Koshi, Madhes, and Lumbini -remained weak this year compared to last year. Except for Karnali Province, the capacity utilization of all six provinces remained below 50 percent while Bagmati and Sudurpaschim provinces' industries' efficiency increased marginally in this fiscal. The capacity utilization of industries producing vegetable ghee, mustard oil, soybean oil, rice, wheat flour, animal feed, biscuits, noodles, alcohol, soft drinks, synthetic fabrics, processed leather, paints, tablets, capsules, ointments, liquids, soaps, plastic goods has improved in the first half of FY 2022/23. Similarly, industries manufacturing cement, concrete, iron rods and sheets, aluminum products, electric wires and cables, tires and tubes, and leather shoes were better than the last fiscal. However, industries producing processed milk, sugar, chocolate, processed tea, beer, cigarettes, yarn, pashmina, garments, jute goods, raw leather, paper, rosin, dry syrup, bricks, steel products, GI wire, and GI pipe decreased during this period. Box 1 Industrial Loan Disbursement (First Six Months)

The price of gold has dropped by Rs 600 per tola in the domestic market on Thursday. According to the Federation of Nepal Gold and Silver Dealers’ Association, the yellow metal is being traded at Rs 109, 400 per tola today. It was traded at Rs 110, 000 per tola on Wednesday. Meanwhile, tejabi gold is being traded at Rs 108, 900 per tola. It was traded at Rs 109, 500 per tola. Similarly, the silver is being traded at Rs 1,370 per tola today.

Just a week ago, the Chinese carrier Sichuan Airlines made history by conducting a chartered flight at Pokhara International Airport, marking the first international flight in Pokhara. The flight was not only about launching an international route but also about establishing a business connection between China and the city of Pokhara. As an initial step in furthering business connections between the two countries, the Nepal-China International Dragon Boat Race Festival was organized in Pokhara recently. The festival took place over two days on Fewa Lake. All the passengers on the first international flight to Pokhara were participants and officials attending the Chinese cultural show. The Dragon Festival, a Chinese historical and cultural event, is held annually for three days based on the Chinese Lunar Calendar. This year, the Nepal Tourism Board hosted the festival. According to the Chinese Embassy, the boat race festival has been organized in nearly 50 countries, and this was the first time it took place in South Asia. The event involves rowing dragon boats on water, employing specific boating techniques. Sixty players with eight dragon boats participated in the game, including teams from China and Singapore. The Nepali players, who had trained for a week, competed against the experienced international teams from China and Singapore. During the festival, various stalls were set up to showcase traditional Chinese cuisines. More than 3,000 visitors, including foreign tourists, gathered at Hallanchock on the shores of Fewa Lake to observe the boat race. According to local tourism entrepreneurs, around 500 tourists, with more than half of them from China, attended the event. “Almost all the hotels around the Lakeside were fully occupied during the festival,” said Pom Narayan Shrestha, the chairperson of the Pokhara Tourism Council. The Dragon Boat Race Festival was jointly organized by the Nepal Tourism Board, the Chinese Embassy in Nepal, the Pokhara Metropolitan City, and several local organizations, including the Pokhara Tourism Council. Commenting on the event, Dharan Raj Acharya, the mayor of Pokhara Metropolitan City, said the Chinese Embassy was very positive about assisting the local government in strengthening mutual welfare through further tourism initiatives. In the closing ceremony of the festival, Chinese Ambassador to Nepal Chen Song presented the dragon boats brought from China for the festival as a gift to the Mayor of Pokhara Metropolitan City. Speaking on the occasion, Ambassador Song said that China was willing to organize more such events and strengthen the cultural, social, and economic bond between China and the tourist city of Pokhara. Robin Sharma of the Nepal Tourism Board said that the Chinese Embassy covered more than half of the total expenses for organizing the boat festival. Excluding the cost of the chartered flight, boats, shipping charges, and accommodations for the nearly 300 Chinese guests, the estimated cost of the event was Rs 7m. “The actual expenditure will be three times higher if all the expenses borne by the Chinese Embassy are also included in the organizing cost,” he added. The Pokhara International Airport, built with China’s loan assistance, has been operational for a year but has not yet received any international flights. “The interest shown by the Chinese government to promote Pokhara will encourage international airlines to operate flights to Pokhara,” Ganesh Timilsina, the chairperson of the National Assembly, said. Timilsina said he held discussions with Chinese stakeholders on establishing direct flights between Pokhara and different Chinese cities. Bikram Gautam, the chief of the Pokhara International Airport, expressed optimism that the chartered flight and the important international cultural show in Pokhara have paved the way for stronger market ties with China. Informal discussions with Chinese stakeholders about starting flights to Pokhara are ongoing, he added.