Nepal's economy suffers amid surge in energy prices

Kathmandu, March 26 Nepal has failed to import electricity from India as electricity prices in the neighbouring country have been rising lately.

Nepal's most bids for power from the India have failed recently because other buyers outbid the Nepal Electricity Authority (NEA). On Wednesday, Nepal was forced to cut power to its industries for several hours, Xinhua news agency reported.

"The electricity prices in India have been rising because of growing input costs for thermal power plants to produce electricity amid high fuel prices globally," Suresh Bahadur Bhattarai, the NEA's Spokesman, told Xinhua.

Nepal is facing ripple effects of the current Russia-Ukraine tensions, "as it is being forced to pay higher prices for electricity than the usual market prices," he added.

The NEA, the sole power utility body in Nepal, buys electricity from India in the dry season when Nepali hydropower plants produce insufficient power because of reduced water levels in the rivers.

In Nepal, the peak hour demand for power is around 1,600 megawatts (MW), while the power plants are producing around 650MW of electricity currently. In the monsoon season, it produces more power than it needs and sells the surplus energy to India.

As the NEA is now paying a higher amount for power purchases than it charges customers, Bhattarai fears a serious consequence for the financial health of the power utility body.

Worse is the financial situation facing the Nepal Oil Corporation (NOC), the only importer of petroleum products in Nepal, which is suffering massive losses due to rising prices of petrol, diesel, cooking gas and other fuels.

While hiking the petroleum prices at home to offset rising import prices, the NOC has continuously been subsidising diesel, petrol and cooking gas as well. As per the latest price adjustment on March 17, its estimated fortnightly losses stand as high as 4.66 billion Nepali rupees ($38 million).

The NOC is now on course to incur losses of more than 9 billion Nepali rupees ($74 million) a month, said Sushil Bhattarai, Deputy Managing Director of the NOC.

"If this situation continues, and we cannot hike the fuel prices to make up for the losses, or the government does not support us financially, the solvency of NOC will be at stake," he added.

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