Most industries, in Nepal purchase electricity from Nepal Electricity Authority and some also generate electricity for their own use fuels that they purchase and/or the residues from their industrial processes.

Within the industrial sector, manufacturing accounts for the largest share of industrial energy consumption, generally followed by mining, construction, and agriculture.

The eternal nature of rivers and the incline topography provide ideal conditions for the development of some of the world’s largest hydroelectric projects in Nepal. Hydro power in Nepal is comparatively an advantageous sector. The only commodity Nepal can sell the world is hydro power. It is an exportable trading commodity and billions of fuel import bills would be also curtailed by exporting it. Moreover, the widening trade deficit could be narrowed down through export of electricity to neighboring countries.

Currently, during dry season, general consumers as well as industries in Nepal are facing acute shortages of electricity. And they are using imported high-cost petroleum products, coals and imported electricity from India. There is around 400MW deficit of energy during dry season.

However, Nepal will have surplus energy of 400-500MW in the wet season. Moreover, after completion of couple of hydro projects in a year, Nepal will be self-sufficient in power production and will also be able to export electricity to India and Bangladesh throught the year.

Nepal has very bright and encouraging prospects to transform its economy through development of hydro power. The energy sector plays a vital role in economic development as evidence shows that the expansion of the electricity sector has contributed economic growth in many countries. For instance, during the independence of Bangladesh, its per capita income was parallel to Nepal, but now its economy has been oversized many folds than Nepal’s economy and energy was one of the factors to support high economic activities there.

According to a study conducted by the World Bank, it estimates that Nepal could have lost US$11 billion value of GDP in nine years between 2008 and 2016 due to electricity load shedding—an amount almost equal to the country’s GDP in 2008.

If we go through history of our hydro power sector, it has been, slow and time consuming. It took us more than a century to produce around 2200 MW of electricity. Generation of such a small quantity of electricity, itself portrays a picture of economy in an initial stage. Nepal has possibility to consume high volumes of electricity by its industries if its policies go well to develop industries, which could reduce signigicant volume of import of goods from abroad.

As result of power shortages and load shedding, since decades industrial capacity and their contribution to national GDP continuously declined. The deteriorating industrial production have caused surge in import of goods, and it has affected negatively balance of trade and foreign currency reserves as well.

However, in contrast, currently there is high prospectus to run industries in full capacities as they are getting surplus electricity in reliable and cheap prices. A message of surplus and cheap electricity would certainly attract investors also from abroad.

Nepal’s neighbors are facing acute shortage of power and they are more dependent on coal and other fossil fuels. As Nepal has vast potentialities of hydro power, it could support them to fulfil their power shortage through supply of surplus hydro power electricity.

Now, the good news is that India, which was previously reluctant to buy electricity, now interested to buy power from Nepal. The power prices rising sharply there due to coal shortage and purchasing electricity from Nepal would be less expensive for it.

Currently, Nepal Electricity Authority is exporting 37.7 megawatts of electricity to India produced from Trishuli and Devighat power stations. Moreover, recently 140 megawatts of electricity has been also started to export there from Kaligandaki power station in near future.

In addition, Nepal has also forwarded a proposal to India to export additional 456 mw of electricity from Upper Tamakoshi Hydropower Project.

It must be in mind of policymakers that Nepalese consumers and industries should not be overcharged electricity tariffs compared to export. Selling at a cheap rate abroad will limit Nepali industries’ competitiveness and create resentment. Nepal must follow dual policy to transform its economy, through exporting electricity to neighboring countries and supplying cheap and reliable power to domestic industries at the same time.

However, there are still long way to go to make power sector more reliable and efficient. Some problems in power sector in Nepal must be corrected and reformed which are - delayed and overpriced hydropower projects, outdated and insufficient energy infrastructure, transmission and distribution losses, energy theft, deficient energy management, lack of energy conservation, low efficiency of equipment, unsustainable energy pricing strategies and unsatisfying energy market regulations.

A survey done by CNI, on average, the industry capacity utilization across the four sectors of industry was only 64.8%. Presently, 60% of Nepal’s power generation comes from the private sector, which is leading the energy sector. They must be allowed in power trading by constructing their own transmission lines. Moreover, it must upgrade the network of power transmission for dependable, qualitative and constant supply of power in the industrial area.

NEA must have accurate statistics of current power deficit in industrial sectors by region, yearly growth demand projections, and supply ratio between domestic consumption including industries and export must be pre ascertained.

We must be aware of that for better supply of power through shorter transmission lines our big industries should not be scattered in several remote locations, a concept of industrial corridors or industrial parks or clusters must be implemented for reliable supply of power. Besides manufacturing sectors, household users other sectors of production in economy should get cheap and reliable power supply equally as well.

Nepal must develop storage-type projects to ensure not to face power crisis and continue power export even in dry season.

And finally, there is no confusion that Nepal is in process to produce excess electricity in near future and the development of hydro power sector in Nepal is not only limited up to domestic consumptions and exports, but it is also linked with other multiple benefits such as flood control, facilitating for navigation and irrigation and the opening possibility of the new cycle of economic growth in the poverty-stricken areas of the flood plains of the Ganges Basin.

(Shrestha is a former Under-secretary at the Ministry of Finance, Nepal, and an Expert in UNDP Africa)