Monday, March 7, 2011

Power crisis breaks backbon of economy

Regular power outage has increased cost of production of domestic industries that have already been hit by the rising interest rates hard.
The cost of power intensive industry has risen by four times as they have to pay Rs 24 per unit of energy produced by diesel/petrol instead of hydropower generated Rs 6 per unit electricity.
"The country is fast losing its competitiveness due to rising cost of production,” said president of Federation of Nepalese Chambers of Commerce and Industry (FNCCI) Kush Kumar Joshi.
Nepal’s core competency was energy and labour till some years back, he said, adding that the rising cost of production has brought the contribution of the manufacturing sector to the economy down.The contribution of the manufacturing sector to gross domestic product (GDP) has declined to six per cent in the current fiscal year from 9.03 per cent in the year 2000-01, according to the Central Bureau of Statistics (CBS).
The central bank has revised the growth forecast downwards to 4.7 per cent from its earlier projection of 5.5 per cent due to low manufacturing output.
According to vice-president of Confederation of Nepalese Industries (CNI) and MD of Janata Pharmaceuticals Hari Sharma, the total cost of production has increased by 25 per cent in the pharmaceuticals industry alone.
Nepal depends largely on hydroelectric generation for its electricity. It currently meets half the demand at 392 megawatts (MW) – of electricity of the total demand of 980 MW – including electricity generated from rivers, thermal power and solar plants.
The country's water resources possess the total capacity to generate 83,000 MW of electricity. However, technical and economic feasibility stands at only 42,000 MW of electricity generation.
The number of electricity consumers in the country is estimated to have increased by 12 per cent to 1,879,000 by the end of the fiscal year 2009-10, according to Economic Survey of 2009-10. "Around 45.52 per cent of electricity was consumed by households, while 42.52 per cent is consumed by industrial sector in 2008-09."
Constructions of additional power plants were firstly hampered by the country’s decade-long conflict, and secondly by political bickering. The industrial corridors across the country have been experiencing long hours of power outages reducing the production in the industrial corridor by almost 50 per cent.
"About 50 per cent of the labourers lost their jobs due to the current power woes,” according to umbrella organisation of the private sector.According to Joshi, the power crisis has repealed the investors that have led to the closure of industries bringing the rate of employment down.
Some 400,000 unemployed youth enter the job market annually and half of them are consumed by the foreign employment. "And the country can not consume remaining half that could lead to the social unrest," according to sociologists.
With $35.31 billion, Nepal ranks in the 102nd position in the GDP (purchasing power parity 2011 Country Ranks) and as long as the country cannot provide energy -- the engine of economic growth -- to the manufacturing industries, the country cannot achieve the double digit from current 3.5 per cent in average in last one decade.

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