Nepal Electricity Authority Faces Backlash as Lines disconnect, Industries Protest

KATHMANDU:  In a controversial move backed by Prime Minister Pushpa Kamal Dahal, the state-owned Nepal Electricity Authority (NEA) has disconnected the power lines of various industries across the country. The Authority cites outstanding bills amounting to billions of rupees and is severing electricity connections to industries facing reduced manufacturing activities due to the economic downturn, jeopardizing thousands of jobs.

NEA has already cut the lines of nine industries in pursuit of disputed tariff spanning several years. Managing Director of the NEA, Kul Man Ghishing, said he took the decision following directives from various agencies including the Electricity Tariff Fixation Commission. He seems to have got the support of Prime Minister Dahal.

However, Finance Minister Dr. Prakash Sharan Mahat, a Cabinet member overseeing the country’s economy, has raised objections to the Authority’s policy. Dr. Mahat, who represents Nepali Congress party in the coalition, said that cutting power lines to industries during ‘challenging economic times’ was not justified.

The ongoing dispute reveals a lack of consensus among ministries indicating a broader challenge in coordinating economic policies.

The NEA has already disconnected lines for nine industries, including major players like Jagdamba Steel, Reliance Spinning Mills, Ghorahi Cement, and Arghakhanchi Cement. The NEA claims these industries owe significant sums as arrears.

In response, industrialists argue that the NEA has not provided sufficient evidence to support its billing claims, demanding transparency in the form of consumption data or Time of Day (ToD) meter records. The dispute threatens not only the affected industries but also the broader economic stability and employment landscape.

Pawan Golyan, founder of the Reliance Spinning Mill, highlighted that the NEA had previously instructed them to follow general household load-shedding schedules when provided with dedicated meters. Compliance with NEA directives was consistently maintained, aligning operations with national energy guidelines.

End of loadshedding

The government’s declaration of the end of nationwide load shedding in May 2018 brought relief to the industrial sector. However, ongoing disputes have arisen, prompting the formation of a committee in 2018 to address the matter. The committee, chaired by Bhakta Bahadur Pun, found no outstanding dues from Reliance Spinning Mills related to dedicated lines and suggested a two-year payment plan for electricity tariff.

Despite the committee’s recommendations, industrialists insist on obtaining consumption data or Time of Day meter records before making payments. Golyan argued that the NEA’s insistence on billing without providing such evidence is a one-sided perspective aimed at bolstering the Authority’s balance sheet.

Industrialists including Sahil Aggarwal of Jagdamba Steel and Bishnu Neupane of Sarbottam Cement, assert their willingness to pay based on transparent billing practices. The disagreement has led to economic repercussions, with the NEA’s actions resulting into rendering thousands of employees and workers ‘jobless.’. The ongoing standoff underscores the need for a fair and evidence-based resolution that considers the economic impact on industries and employment.

NEA Fails to Provide TOD Meter Data in Court

The Nepal Electricity Authority (NEA) has come under scrutiny as it failed to furnish Time of Day (TOD) meter data to the court in an ongoing case concerning the dispute over dedicated and trunk lines.

Kul Man Ghising, Managing Director of the Authority, is seeking an additional fee from 61 industries for the utilization of extra electricity through dedicated and trunk lines during the load shedding period. In response, some industrialists have taken legal action against the Authority, resulting in the NEA cutting off the lines of nine industries for non-payment of the additional fee.

In the legal proceedings initiated by the industrialists, the court has sought TOD meter data through various NEA offices. However, the relevant offices have informed the Court that they are unable to provide the TOD meter data as it has been deleted.

A case involving Shivam Cement against the NEA is currently pending in the Makwanpur District Court. The court had requested TOD meter data from the Authority on August 15, 2023.

In its response to the Makwanpur district court on September 4, NEA stated that it was unable to provide the requested data as TOD records couldn’t be maintained for an extended period.

Impact on Employment amidst Industry Power Cuts

The recent action by the Authority to disconnect the power lines of around a dozen industries within the last week has not only affected industrialists but also left workers and employees grappling with the repercussions. The targeted industries currently facing line cuts are primarily engaged in manufacturing, where electricity accounts for more than 25 percent of total raw material usage.

Prominent industries such as Jagdamba Steel, Ghorahi, and Arghakhanchi Cement find themselves on the list of entities undergoing significant disruptions. With hundreds of employees and labor associations associated with these large industries, the cessation of industrial activities due to the power cuts has adversely impacted workers. Furthermore, the halt in manufacturing could potentially disrupt the market’s supply chain.

According to NEA, a total of 61 industries collectively owe more than 25 billion rupees, inclusive of interest and fines, for the trunk and dedicated services availed during the load shedding era. Despite the initially modest amounts owed, the ongoing dispute between industrialists and the authority has led to accumulating interest, reaching billions over the years. The Authority aims to collect over 25 billion rupees from a total of 61 industries across the country, with plans to disconnect the power lines of the remaining 52 industries.

“Our primary objective is to collect the outstanding bills from the industries,” said Ghishing adding, “if the industrialists donot pay the due amount, the penalty is likely to double. I request the industrialists to pay the outstanding bills on time for the fair business and trade with us.”

The NEA’s decision has, however, drawn widespread criticism from industrialists, who contend that the Authority’s actions are unjustified and have led to widespread unemployment. The ongoing standoff highlights the need for a balanced approach to address outstanding bills while safeguarding economic interests and preserving jobs in the country.

The recent actions of the Nepal Electricity Authority (NEA) against industries, particularly the Reliance Spinning Mill, have raised concerns about their impact on the country’s economy. With over 5,000 direct employees and a focus on export-oriented production, the Reliance Spinning Mill plays a crucial role in contributing revenue to the nation.

What’s the Source of the Dispute?

In the current scenario, where demand exceeds domestic production, trunks and dedicated lines serve as mechanisms for electricity authorities to meet industrial electricity needs by importing power from India. The Authority had established a system to supply electricity to industries, offering 20 hours on the trunk line and 24 hours via the dedicated line at a tariff up to 60 percent higher. However, the dispute arose two years after the load shedding stopped when the Authority invoiced the industry.

What do industrialists say?

Vishnu Agarwal, Chairman of the Confederation of Nepalese Industries (CNI), asserted that industrialists consistently fulfill their electricity payment obligations and emphasized that they are not only settling disputed premium bills. He expressed concern that an abrupt disconnection of power without dialogue would send a negative message globally, disrupting the investment environment.

Dhurba Raj Thapa, President of Nepal Cement Producers’ Association, criticized the government’s decision to cut power lines in areas earmarked for drainage, resulting in the shutdown of industries. He found the government’s move regrettable and emphasized that customers using dedicated and trunk lines diligently pay their monthly bills based on readings from industry meters, even during disputes.

Jagdish Agarwal, President of the Sugar Producers’ Association, criticized the government’s seemingly hasty decision, predicting challenges for both the market and industry. He affirmed the industries’ commitment to settling legitimate bills but insisted they would not pay for fake invoices. Agarwal urged the government to establish a high-level committee to resolve the dispute.

What is the Government’s Objectives?

Recently, the government received approval from the Supreme Court to levy taxes on FPOs related to mergers, acquisitions, and premiums. The government’s stance involves waiving fines if the tax is paid by mid-December 2023 through the current financial year’s budget. Despite opposition from 16 banks and financial institutions, the Supreme Court ruled in favor of the government, leading to over 13 billion in taxes being paid to the government treasury.

Buoyed by this development, the government is now inclined to settle trunk and dedicated line dues. Although some cases are still pending in court, with both district and high courts urging the Authority to resolve the dispute, the government, led by Prime Minister Dahal, seems determined to collect funds from the industry.

The government’s analysis indicates that extracting Rs 25 billion from the industry will marginally improve revenue targets. Consequently, the policy of collecting funds from industrialists aligns with the preferences of both the NEA and Prime Minister Dahal.

However, the main opposition leader, KP Sharma Oli, opposed the idea of collecting electricity bills for unconsumed power, advocating against cutting off industry power lines. Oli had previously sought an explanation from Kul Man Ghising when lines were severed from Reliance Spring Mills, expressing concerns about fund collection during the leadership of Dahal government.

Reports say Nepali Congress President Sher Bahadur Deuba – a coalition partner- and Mr Oli – discussed the issue with Prime Minister Dahal this week. As the government is coming under pressure from within and without, it’s likely it would look for some sort of reconciliation with the industries. But industrialists say the way NEA abruptly resorted to power cuts has scared them.