Power cuts, diesel crunch clobber economy

Power cuts, diesel crunch clobber economy
eKantipur.com, 1-Feb-08
BY MILAN MANI SHARMA

Extended hours of power cut and an unprecedented shortage of diesel - the major industrial fuel - have threatened almost all vital sectors of the economy.

Energy crisis has forced some transport, manufacturing and service units to close down and compelled many others to operate below capacity. Hoteliers lamented that they are finding it tough to keep the guests warm and in illuminated surroundings.

As the country reels under eight hours of daily load-shedding, Rakesh Rawat, general manager of Everest Hotel, said he had to invest additional money and manpower to arrange diesel for the generator to light up the hotel, operate the lifts and keep the central heating system humming.

"Worse, load shedding hours are increasing steadily and it is difficult to obtain diesel," Rawat told the Post. His hotel currently requires 500 liters of diesel a day to keep itself going.

The problem runs equally deep for other hotels, said Prakash Shrestha, president of Hotel Association Nepal (HAN). HAN officials added that some hotels and resorts are organizing city tours for their guests to tide over the cold hours and organizing candlelit dinners in an attempt to make those times 'exciting'.

Almost all of manufacturing industry has cut production and rescheduled operating hours. Some outfits like state-owned cement manufacturer Hetauda Cement Factory and Reliance Spinning, a manufacturing unit in Biratnagar, have closed down operations.

Arati Strips, a leading export-oriented industry in the eastern region, has curtailed production hours.

"The problem has hit all of manufacturing industry -- small to large -- equally," said Kush Kumar Joshi, second vice president of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI).

The crisis has not spared development activities either. According to Shakuta Lal Hirachan, president of Nepal Contractors Association, large scale construction work has been put off due to the energy crisis.

"It threatens to raise the cost of construction by 20 percent," he warned.

As the shortage of diesel has become really severe over the past week, the number of vehicles plying the roads has gone down - both in Kathmandu Valley and on the major highways. Many were seen queuing up at petrol pumps at Bhadrakali, Baneshwor, Naxal, Pulchowk and Kalimati Friday.

Nepal Transport Entrepreneurs Federation (NTEF), which has issued strike threats, says strike or no strike, no public vehicle and goods carrier can ply the roads if the shortage persisted.

Still more unnerving, NOC says it has just about two days' supply in stock. "At the Thankot depot, we are down to our emergency stock," said an official there.

NOC deputy chief Umesh Dahal said it was running low on major petroleum products-especially diesel- as the corporation has not been able to make payments in time to ensure that adequate oil shipments kept arriving regularly.

Although the government on Thursday released one billion rupees to NOC to finance immediate imports, officials said that with losses amounting to Rs 600 million a month, the money wasn't going to bail the corporation out of the current crisis. At best, it will stave off the crisis for a few weeks.

The government did try to trim the deficit by raising prices for diesel, kerosene and cooking gas last Monday, only to backtrack within 48 hours following violent demonstrations.

With its diesel stocks depleted and the corporation strapped for cash to finance regular imports, NOC over this week supplied just about half the volume of normal diesel demand in the Valley. "Load-shedding has put extra pressure on us," said Ichchha Bikram Thapa, NOC spokesperson.

While sluggish hydropower development has made power-cuts an inevitable phenomenon, lack of prudent policies and shelving of plans to liberalize the petroleum sector till the Constituent Assembly election are certain to keep the country staggering from one fuel crisis to another.

"The government has to work on a sustainable way out. It simply cannot let the problem deepen and affect the economy," said HAN president Shrestha.

The only solution at present seems to be pouring in more money from government coffers. "That will cause a crack on the fiscal front," say Finance Ministry officials. But they also acknowledge that there seems to be no alternative, at least in the short run.