Report on Nepal's Energy sector

Prepared by Union of Public Sevrices in Nepal (UPSIN), presented at PSI South Asia Trade Union Forium on ADB Energy Policy, New Delhi, India, Nov 2010

PSI Subregional Trade Union Forum on ADB Energy Policy & Projects (Nov 2010, Delhi)

  The PSI Subregional Trade Union Forum on ADB Energy Policy and Projects (Nov 20-21, 2010) aims to provide a forum for PSI electricity unions to exchange information about their campaigns related to ADB/IFI-supported power sector reforms and initiate a subregional campaign platform.  A total of 21 participants (4F, 17M) attended the workshop.

NEPAL: West Seti Hydroelectric Project (WSHP)

West Seti Hydroelectric Project (WSHP) involves the construction and operation of 750-MW hydroelectric power plant on Seti river in far western region of Nepal on BOOT basis for 30 years. Project sponsor is Australian-based Snowy Mountains Engineering Corporation (SMEC); West Seti Hydro Limited (WSHL) is 100% subsidiary of SMEC. Construction will be by China Machinery & Equipment Import and Export Corporation under lump sum price turnkey contract signed in April 2005; construction period is for 5 years.


NEPAL WATER news 2005- Jun 2007


NEPAL POWER UPDATES (2005) from "Energy Briefing - Asia Pulse"

How ADB water projects affect PSI unions

Corral, Violeta P. (Feb 2009), PSIRU: ADB’s Water Policy – How it affects PSI Unions in Philippines, Indonesia and Nepal, and similar Reforms in Japan and Korea.

ADB’s Power / Energy Projects in Asia-Pacific (as of May 2008)

Asian Development Bank (ADB) extends loans and provides technical assistance to its developing member countries for a broad range of development projects and programs. ADB identified core sectors for its assistance as road transport, energy, urban infrastructure, rural infrastructure, education, and financial services. In recent years, ADB has increasingly placed more emphasis on its private sector operations. In 2007, ADB approved $10.1 billion of loans, $673 million of grant projects, and technical assistance ($243 million). Private sector operations totaled $1.7 billion, significantly above recent levels. Most assistance went to the operational sector, with 39% of total loans (or $3.9 billion) going to transport and communications, more than double the amount in 2006.

ADB-funded Power Projects in Nepal

The power sector in Nepal is dominated by the Nepal Electricity Authority (NEA), a vertically integrated, government-owned and -controlled utility, with several independent power producers, some of whom also distribute power in areas adjacent to their plants. In order to attract and motivate local and private palyers in the electricity sector, the Government of Nepal (GON) adopted Hydropower Development Policy 1992, Electricity Act 1002, and the Electricity Regulations 1993. GON also promulgated the Industrial Enterprises Act and Foreign Investment and Technology Transfer Act in 1992 which allow private entities to build, own, and operate small and medium scale hydropower schemes including transmission and distribution facilities.

Nepal water privatizaton and employees struggle

The credit of starting the drinking water service in Nepal goes to Rana Prime Minister Bir Shumsher JBR. Around 100 years ago, the work of distributing water pipes was carried out in Kathmandu. Later, Water Goswara, Water Supply Development Committee and Water Supply & Sewage Corporation were formed respectively to work in the field of water supply. In 1989 the issue of Nepal Water Supply Corporation Act led to the establishment of NWSC which has been performing the task of supplying pure drinking water to public and maintaining sanitation services across the nation. The corporation is currently providing services to 28 municipalities and neighboring villages from its 42 offices at municipal, zonal, regional and central level. 250,000 water taps are serving people in different locations. It is also working in the field of sewage system management. Currently, 1650 permanent, 602 contract based and 200 wage based employees (total 2452) are working in the corporation. From the service, the corporation generates yearly revenue of around $10 millions. The revenue is spent on salary of employees, maintenance of water pipelines, electricity bill and further extension of the services. The main problem of the corporation is financial crisis. As no strong financial support is provided by the government; the corporation has to manage and mobilize its own resources to meet the running cost. The corporation is getting worse due to lack of government investment and political interventions which hinders the autonomous performance of the corporation. Due to these reasons, the corporation is on the edge of privatization.

Nepal water privatization & ADB

Private sector participation (PSP) or the privatization of water supply services in Nepal is a conditionality of various loans and technical assistance projects of the Asian Development Bank (ADB), with co-financing from other donors such as the Japan Bank for International Cooperation (JBIC) and the Nordic countries. In December 2000, the ADB approved a US$ 120-million loan to finance the controversial Melamchi Water Supply Project (MWSP) which will divert 170 million liters daily (MLD) of water from Melamchi River via a 26 km long tunnel to a water treatment plant and distribution facility yet to be constructed in the Kathmandu Valley. The ADB-funded project aims to introduce PSP through a performance-based management contract. Three years later, ADB approved an additional loan of US$ 15 million for the Kathmandu Valley Water Services Sector Development Program (KVWSSDP) that will, among others, restructure the public water utility and “rightsize” the new water entity.

ADB and Water-WSS

ADB's Water Policy, approved in 2001, describes water as a “socially vital economic good”. ADB water policy covers water utilities, sanitation and other water infrastructure (e.g. irrigation). It promotes full cost recovery, water entitlements and “tradable water rights”, and private sector participation. The policy also ushered a “new generation” of water projects for the Bank. These include water policy reforms that promote private sector participation (PSP) in water supply/sanitation (WSS) in such countries as Sri Lanka, Nepal, China, Indonesia, Cambodia, Laos, Pakistan, Vietnam and Philippines. According to ADB, private sector participation (PSP) or public private participation (PPP) seeks to fuse the skills, expertise, and experience from the public and private sectors to deliver high standard services to customers. The public sector offers expertise in governance, responsibility to the electorate, access to funding, appreciation of local cultural sensitivities as well as a local workforce, many with long years of service. The contribution from the private sector includes operational efficiencies, innovative technologies, international managerial experience, access to additional finance, and risk sharing. "There are several PSP models and no single model will suit all situations," says Kallidaikurichi Seetharam, ADB senior water supply and sanitation specialist. "PSP must be tailored to meet local infrastructure, affordability, cultural norms, etc. ADB does not advocate PSP exclusively. It advocates efficient, reliable, accessible water supply and sanitation services for all, which may require the involvement of private sector expertise."

Stocktaking of Water and Sanitation Sector and Private Sector Involvement in Selected Asian Countries

This background note is part of a wider program carried out by the OECD on “Sustainable financing to ensure affordable access to water and sanitation.” The program includes the development of practical guidance for governments wishing to engage the private sector in the development and management of water and sanitation infrastructure, based on the newly released OECD Principles for Private Sector Participation in Infrastructure.

ASIA: Workers campaigns vs water privatization

ADB plays a lead role in water sector reforms in the Asia-Pacific region. Sri Lanka was among the first of ADB’s ’guinea pig’ as a prime candidate to lead South Asia into private sector participation/PSP in water supplies’; in 1997, ADB provided assistance to change Sri Lankan water law. In 2000, ADB helped prepare a PSP management contract in Nepal as precondition for its support to the controversial US$464-million Melamchi Water Supply Project, with co-financing from JBIC and other donors. In 2005, ADB organized a forum in Bangalore (India) to draw up PSP action plans in India's urban water supply for the states of Kerala, Karnataka, Madya Pradesh, Uttaranchal and Jammu-Kashmir; target participants are from State Water Utilities in India and overseas private water companies. In 2009, ADB will approve a new $50M loan in the Philippines for a Water District Development Sector Project that aims to promote a ‘bankable’ sector investment program and capacity development for government-owned and -controlled water districts. ADB has also provided technical assistance and other forms of support to the two private water concessionaires in Manila (privatized with WB-IFC financing in 1996). Last May 2007, PSI organized a forum on ADB’s Water Policy at ADB’s 40th Annual Meeting and People’s Forum on ADB in Kyoto (Japan) where PSI water affiliates from the Philippines, Indonesia, Nepal, Japan and Korea raised awareness of harmful impacts of water privatization and argued for public sector solutions. Below are highlights of their presentations.

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