Category Archives: Fuel Crisis Nepal

A twist in the pipeline: Nepal’s Fuel Crisis and It’s Foreign Policy Conundrum

Feb 22, 2016- Nepal’s recent fuel crisis originated from the unofficial Indian blockade. The country’s subsequent attempt to cement closer ties with China brought more domestic and foreign policy riddles to the country. Recent turn of events pose a number of questions. How would the KP Oli government have dealt with the Madhesi protestors had the blockade not been there? Would PM Oli have visited China before India? What different measures would the Madhesi protestors have adopted to show their dissent over the recently promulgated constitution, if the country was completely energy sufficient? There are no easy answers to all these questions, but they are all entangled in Nepal’s sole dependence on India for petroleum imports and its long-standing inability to exploit domestic energy potential.
While the Madhesi issues primarily stemmed from the dissatisfaction over the proposed federal division of the states and power-sharing in the country’s new constitution, Nepal’s crisis grew deeper when India sided with the protesters by tightening the fuel supplies. India is by far the largest trading partner of Nepal accounting for 64 percent of its foreign trade. The Indian Oil Corporation (IOC) is the sole supplier of petroleum products to Nepal. As it started cutting off supplies to Nepal, the fuel crisis started to hurt the economy severely, giving rise to black marketeering, a sudden hike in commodity prices and eventually a decline in development activities. Various sectors of the economy as well as reconstruction efforts suffered under the crisis.

Help from the north
Despite Deputy Prime Minister Kamal Thapa’s trips to New Delhi to persuade it to lift the blockade, IOC continued to slash supplies. As the Nepal government was heavily criticised for failing to abate the crisis, it was left to seek every potential alternative and assistance from every possible direction. Despite the abundant potential of home-grown generation with arguably over 40,000 MW of hydropower potential from its water resources alone, Nepal’s energy situation is quite depressing. Around 30 percent of the population still does not have access to electricity and even those with access suffer from as much as 15 hours of power cuts a day. On the other hand, supply side constraints and policy inconsistencies are putting stress on hydropower projects under construction. The message is clear: Nepal lacked the ability to deal with the recent fuel crisis without external assistance.

China came to Nepal’s rescue, providing 1,000 metric tones of oil in grant as a symbolic gesture to cope with the gloomy fuel situation. Nepal on its part was more willing to explore possibilities of obtaining fuel from China on a long-term basis and keen to enter an oil trade agreement to import as much as one third of its fuel supplies. Many applauded the move as an attempt to end the Indian dominance on petroleum supplies to Nepal. And, that stirred new foreign policy debates in both Nepal and India. Certain section of Indian parliamentarians, media and foreign policy experts in New Delhi accused the Indian government of pushing Nepal closer to China while unnecessarily trying to micromanage Nepal’s internal affairs.

However, the difficult mountainous trade routes, logistic hurdles and high cost of trade made it hard to bring in fuel from China. On the other hand, the Nepal government’s distress was visible, as it was also worried that a new deal with China might worsen its ties with India, which could impose a tighter blockade.

Dependence continues
The likes and dislikes of Nepal’s southern neighbour are often speculated to be the fulcrum of the stability of every government in Nepal. Evidently, more than dealing with the Madhesi leaders at home, the Nepal government was busy sending its envoys and using its diplomatic channels to woo New Delhi. China may also have been a little sceptical of Nepal’s aberrant diplomatic exercises and political inconsistencies and assumed that Nepal would eventually return to the status quo. Nepal energy’s crisis turned out to be a new triangular foreign policy conundrum between Nepal, India and China.

When viewed in light of Nepal’s long-time fuel dependence on India, the recent crisis, however, is less surprising. It is reminiscent of a similar episode of 14 months of Indian blockade of Nepal in 1989. Nepal had a relatively moderate growth rate of over 7 percent in 1988, which later dropped to about 4.3 percent in 1989. But Nepal had relatively smaller fuel dependence in 1989 than it has today. That gave a bit of a breathing space to the then Prime Minister Marich Man Singh Shrestha to negotiate bilateral issues with India and was probably the very reason Nepal somehow managed to survive a blockade for over a year. A lot has changed in between. There has been an increase in Nepali population by 10 million and a four-fold rise in per capita petroleum consumption-from 0.01 kg to 0.04 kg of oil equivalent—since 1989.

With the recent 80 MW power import deal with India and plans to import an additional 580 MW by next year, this huge energy dependence will continue to constrain Nepal’s ability to negotiate any bilateral issues with India and could further limit its capacity to maintain a balanced relationship between China and India. The bleak energy situation at home and the dependence on India would neither allow Prime Minister Oli to comfortably negotiate past treaties and agreements with the southern neighbour, nor discuss other bilateral issues, let alone question the recent blockade. Like most of the previous visits of Nepal’s prime ministers, it will be another ‘friendly visit’, which the Nepal government will invariably claim as having set a new milestone in the history of Nepal-India relations.

A Twist in the Pipeline: the article was originally published in The Kathmandu Post on 22.02.2016

Nepal: Panel Discussion- Role of renewables need new orientation

Nepal’s current energy crisis is hitting the headlines, both nationally and internationally. The disruption of supplies of petroleum products especially after the series of protests from Madeshi Morcha -consortium of political parties of Terai region,stating their reservation on Nepal’s new constitution promulgated on September 20, 2015 triggered new debates on energy in the country. Regular power cuts from the state operated NEA in the country is not new. Given the lack of adequate electricity supplies, many of the  industries, enterprises that relied on diesel operated systems to run their businesses and operation at the expense of high operation cost are now suffering further with the disruption of supplies. Households and businesses are now urgently looking for alternatives. Slowly, talk of renewable as alternative measures to lessen the country’s burden on imported fuels started gathering pace. Government of Nepal is receiving a massive criticism for not being able to abate the growing energy crisis in the country  obliging them to seek every possible available alternatives. People and policy makers are now contemplating whether development of indigenous renewable energy resources could be the panacea. If timely planned and adequate resources are invested, renewable energy options provide exciting opportunities to provide the huge energy supplies and in lowering the cost of services. Leveraging private sector finance, exploring the potential RET investment opportunities, setting the right policies and institutions ready is more pressing. Now the debate goes- What NEXT? What policies, institutions, collaborations can led us to the new energy secured future?

After the success of past episodes of Renewable Energy Weeks in 2013 and 2014 in creating considerable renewable energy awareness among people and in persuading them to adopt these technologies, Alternative Energy Promotion Center (AEPC) just concluded with the another episode of Renewable Energy Exhibition 2016 that ran three days starting  the 1s of January 2016.

Considering the exhibition to be a right platform that can be seized to take opportunities to discuss the new prospect of renewable energy and it’s the changing role in the debate of energy security, AEPC hosted a policy debate on the last day of the exhibition with the key sector leaders, policy makers, professionals, think tank, media, private and other civil society actors working in RE industry.  The event highlights few of the challenges and opportunities for scaling up renewables in the country. Here are some of the quick quotes from the panel discussions.

“AEPC lacks sufficient mandate to promote renewable energy in urban areas, structural reforms needed” MR. Ram Prasad Dhital, Executive Director, AEPC. Further says – “a higher level coordinating entity among government agencies working in energy is a must for improved coordination in the sector”

“lack of clear licensing policies & conducive frameworks and guidelines is hindering  private sector investment in renewables”- Kumar Pandey, FNCCI

“Existing ‘RE delivery mechanism’ a major bottleneck in delivering renewable energy services, needs a massive overhaul’. Khimananda Kandel, Water and Energy Consultants’ Association (WECAN)

“Government of Nepal is willing to increase subsidies on renewables” says, Mr. Biswendra Paswan. Minister, Ministry of Population and Environment.

Feed in Tariff policies for different types of renwables can be a ‘game changer, its all about setting right policies and demonstrating tangible commitment and willingness from the policy makers  in scaling up renewables in Nepal‘- Mr. Surya Kumar Sapkota, Assistant Director, AEPC

“AEPC shouldn’t loose its focus on off grid rural villages while attempting to cater the urban energy needs, there’re still many unserved communities to reach as many still lack the basic modern energy access”. Mr. Madhusudhan Adhikari, National Advisor, AEPC