BBC Interview with Minister of Supplies on Oil Price Hikes

BBC's Ms. Rama Parajuli interviews Minister of Commerce and Supplies Mr. Lekh Raj Bhatta on the impact of recent hikes in prices of petroleum products on 25-Jan-2012.

Global Prospective: Energy in India

Energy in India
The Economist, 21-Jan-2012
[Full Link]

[Coal is to India what hydro is to Nepal - lot of potential but not much to show for it. Nepal can learn a thing or two from India's experience]

Power is essential for India’s long-term growth. But electricity is unlikely to flow fast enough

STAB a finger at the middle of a map of India and you will hit Nagpur. Some 20 miles (32 kilometres) north-west of the city is a sloping tunnel bored into the rock. Ride two miles down into the gloom, hanging from a wire, and after a torch-lit hike past underground streams and conveyor belts you arrive at a black wall. Sweating men are rigging it with tubes of explosives and wire detonators. Soon they will blast it apart, and down should tumble tonnes of India’s most important commodity: coal.

In coal India has something as abundant as people. As more Indians enjoy the trappings of middle-class life and the country industrialises, demand for coal-fired electricity will continue to rise smartly, roughly in line with economic growth. India may not have much oil or gas to call its own but it has the world’s fifth-largest coal reserves. And it has successfully raised a mountain of the other raw material needed to turn carbon into sparks: capital. Some $130 billion has been ploughed into the power industry in the past five years. Of that, $60 billion or so has come from the private sector—probably the largest-ever private-sector investment India has seen.

Possessing coal and capital is no guarantee that India’s energy boiler will work properly, however. It also involves multiple states, government ministries, regulators, mandarins, politicians, tycoons, environmentalists, villagers, activists, crooks and bandits. There are the usual gripes of an emerging economy: blackouts (during peak hours the system delivers 10% less electricity than customers want) and an inadequate grid that does not reach some 300m people (although it has improved a lot in recent years).

There is also a risk that India cannot deliver the long-term increase in electricity generation that its economy needs to fulfil its potential. On January 18th a group of influential businessmen gathered in Delhi to bend the prime minister’s ear on this very matter.

The problem is partly one of design. Coal is dug up by a state-monopolist that has failed to boost output significantly in recent years, unlike China (see chart 1), and so cannot keep up with demand. Power is distributed to homes and firms by publicly owned grid companies that are often bankrupt, their tariffs kept too low by local politicians. Trapped in the middle are the firms that run power stations. In desperation they are importing pricier foreign coal, but the grid companies cannot afford the power it produces. With too little coal and wobbly customers, the private firms that have built new power stations are in financial trouble. Another wave of private investment looks unlikely.

In India, though, no one expects perfect design. The economy sits somewhere between the old command-and-control approach and the new ways of markets and private capital. What is worrying is that India’s talent for improvisation—a collective ability to muddle through—has deserted it when it comes to providing electricity.

The problem has been clear for ages. A circuitous blame game is taking place. Ministries squabble but no one knocks heads together. If you trawl round the offices of industry bosses the livid letters they brandish trace their incandescent correspondence with each other. Power, so vital for growth, is India’s biggest bottleneck. The danger is that it becomes a metaphor for the whole economy: many fear that the muddle-through approach of the past two decades of boom has diminishing returns.

One dam thing after another

It wasn’t always all about coal. Jawaharlal Nehru, the country’s first prime minister after independence, was obsessed with hydroelectric dams, calling them the “temples of modern India”. It would have been good for India’s environment, and the world’s, had many more temples been raised. The fad for hydro trickled away and it now provides only 14% of India’s power compared with up to a half in the 1960s.

That seems unlikely to change—India is too chaotic and free a place to manage the feats of national machismo that allowed China to build the Three Gorges dam. Although new projects are planned in places such as Kashmir and neighbouring Bhutan, harnessing Himalayan rivers to power all of India is for now a dream, not a policy.

The subcontinent has plenty of sun and wind, and states including Gujarat and Tamil Nadu are keen to encourage investments in renewable energy. These are likely to be niche sources of power, thanks to problems getting land and their high cost.

As for nuclear power, India’s attitude has long been hyperbolic on paper and ambivalent in practice, despite striking a civilian nuclear deal with America in 2005. Foreign companies are put off by the prospect of unlimited liability in the event of an accident. Nuclear plants face opposition from hostile state governments and protesters. Events in Japan have not helped. “By the time people forgot Chernobyl, along came Fukushima,” says one industry bigwig.

The result is that, as in China, fossil fuels will dominate the energy mix (see chart 2). Carbon emissions will rise in tandem, by about two-and-a-half times between 2010 and 2030 according to McKinsey, a consultancy. The growth of India’s power industry—assuming it is built and largely fired by fossil fuels—would contribute about a tenth of the total global rise in emissions over the period. Most Indians do not feel too guilty, arguing that dirtier rich countries, not poor ones, should show restraint. India’s emissions will remain far below those from America and China both in absolute terms and per head.

Fossil hunting

India has some oil and gas, mainly offshore and in Rajasthan, although production has been faltering. It lags China in developing pipelines from energy-rich Central Asia. Coal, then, is key. India’s is not of a high quality—it contains too much ash—but there is lots of it. The British started swinging picks in earnest in the mid-19th century, to meet the demand of a burgeoning railway system, and undertook geological surveys in Bengal. Today east India remains coal’s heartland and control of the sooty stuff lies with one of the most important companies that most people have never heard of: Coal India.

It is a mighty odd beast. Its blood is of the public sector, with modest buildings, 375,000 staff, an empire of largely opencast mines and company towns, and even its own song. Its managers are proud scientists and engineers. And prices are fixed by the state, at far below international levels. Yet its brain has some capitalist cells.

After privatisation in 2010, a tenth of its shares are listed (the rest are owned by the state) making it India’s third-most-valuable firm, worth $44 billion. It makes a huge return on equity of over 35%, has $11 billion of unused net cash and reinvests only a fifth of its gross cashflow. It even has a financial gnat on its hide in the form of TCI, a London-based activist hedge fund famed for its stagy belligerence.

What is beyond doubt, though, is that Coal India is not digging fast enough (see chart 3). Output has been flat for the past two years—a dire result. India’s ratio of production to reserves is middling by global standards and is well below China’s. Assuming production picks up and grows in line with the long-term average, a vast shortfall in production will still stunt growth in power generation.

From his office in Kolkata, outside which street vendors boil vats of soup on coal stoves, the firm’s outgoing chairman, N.C. Jha, says that Coal India is being made a scapegoat. The lag in production partly reflects one-off factors, such as bad weather, but is mainly the result of a deliberate clampdown by the central government on new permits for buying and clearing land, and an explosion of red tape. “Give me land, and I will give you coal,” says Mr Jha.

This complaint is reasonable. At Gondegaon, a vast opencast mine in the Nagpur field, engineers need more space to dump the earth and rock that is dug up with coal. A map shows the pit hemmed in by villages and scrub land. Acquiring the land, compensating the villagers and making sure they shift poses a challenge harder than geology, says the company. “We do not have a magic wand in our hand to increase production,” says D.C. Garg, boss of the Coal India unit responsible for the area. In east India the firm faces another problem: most reserves are in remote areas where Maoist guerrillas operate.

Yet for all the hurdles it faces, many say Coal India is part of the problem. A senior government official says it is riddled with trade unionism and gangs who steal coal—something the private sector would resolve by sending in “the toughest son of a bitch” they could find. The boss of one smallish state-owned electricity generator details how local Coal India employees collude with middlemen to steal his fuel. He says that its local chief is “hugely compromised” by corruption.

And no one really knows what Coal India’s mission is, thanks to its hybrid status. Should it maximise profits and the dividend it pays to a cash-strapped government, despite the fact it is a near-monopoly and unregulated? Or is its job to deliver cheap fuel for the nation and accept lower returns by investing more on new mines?

Let’s burn Australia instead

Private generating firms are not waiting to find out the answer to this identity crisis. Instead they have assumed that the state will not deliver enough and are prepared to import vast amounts of coal to fire their plants, either by acquiring it from wholesalers or by buying foreign coal mines. Some $7 billion has been spent in the past six years on pits in Australia, Indonesia and Africa. Gautam Adani, a Gujarat-based tycoon, is building a private network of mines abroad that feeds ports and power stations in India.

Amish Shah of Credit Suisse reckons that by the year to March 2017 domestic coal production will meet only 73% of demand, leaving a gap of some 230m tonnes, almost five times the level of 2012. Include other industries that use coal, such as steel, and some analysts calculate that India’s total imports by 2017 could reach some 300m tonnes. That is on a par with the current exports of Australia, or those of Indonesia, South Africa and Canada combined.

Even if India could improve its ports and already stretched railways, and adapt its power plants to burn alien coal, can it afford to import so much? Coal prices have soared in recent years (the benchmark price is some 50% above its average in 2009), partly due to Chinese demand. Indonesia has imposed new rules that hamper foreign mine owners from exporting coal at below market rates. So, adjusted for quality, foreign coal is perhaps four times pricier than the local stuff. The cost of shopping abroad could be as much as $20 billion by 2017—or 1% of today’s GDP.

That would swell India’s overall annual energy-import bill. Include coal used for purposes other than power, liquefied natural gas and oil and it could rise by $65 billion or so by 2017, compared with the year to March 2011, according to Sanjeev Prasad of Kotak, a broker. That would put a huge strain on the balance of payments. Even if India can afford to import all this coal, the next question is whether it can persuade its population to fork out for the electricity it produces.

Torture boards

Electricity meters are installed in unexpected places. Power in Dharavi, a giant Mumbai slum, is now largely tolled, with meters nestling next to curing factories piled with goat skins and people melting down used plastic cutlery. But the city, where power is distributed mainly by two private firms, is an exception: almost everywhere else state electricity boards operate the grid, usually badly. They typically lose about a third of the power they buy through theft or inefficient kit, and one executive reckons that up to another third is delivered legally to rural customers who pay subsidised prices or get it free. The result is that a small proportion of customers foot the bills.

Although tariffs are notionally set by regulators, local politicians often hold sway and keep them low to win votes. The legislation that governs power is reasonable but unenforced. The electricity boards haemorrhage cash as a result. They lost $11 billion, excluding any subsidies, in the 12 months to March 2010—the last year for which reliable figures are available.

The consequences are twofold. First, there is not enough money to upgrade the network: up to $200 billion of capital investment is required. And second, if the cost of the power rises because of the expense of imported coal, these outfits are neither strong enough to absorb the financial hit themselves nor capable of easily passing it through by raising prices to customers. That means it is their suppliers, the generating companies, that get squashed.

“I can see if someone is sleeping on the job,” boasts Arup Roy Choudhury, the chairman of NTPC, the country’s biggest electricity generator. In the floor above his office in Delhi a CCTV studio allows him to spy on his empire. He can zoom in on a giant construction site in Mouda, near those mines in Nagpur, where in March a new plant will fire up, fuelled by coal produced by Coal India. NTPC is likely to get the coal it needs partly because it is state-owned and big.

Another power firm in the same state with a new plant coming on line in March expects to get only half the fuel originally promised by Coal India. Private-sector firms with plants coming on line often assume they will be last in the queue for domestic fuel. If they substitute imported coal for domestic coal they worry that they may not be allowed to pass on the costs and that if they are, the electricity boards won’t be able to pay.

Generation should be a success story. After a false start in the 1990s, during which even Enron was briefly and disastrously tempted in, mainly local firms, including Tata Sons and Reliance Group, have piled in once more. Special rules were created to fast-track “ultra-mega power plants”, among the largest in the world, with their own captive coal supply and exemptions from some red tape. Total capital investment (including NTPC) has been perhaps $60 billion in the past five years. Yet now share prices have slumped and the central bank has been forced to reassure financial markets that a wave of defaults in the sector will not hurt the banks, which have about 7% of their loans to the power industry, mainly to generation firms.

The true cost to the country is not a few bad debts but a reduction in long-term investment plans as confidence wanes. Across the industry “projects are taking a hit, due to a lack of fuel among other things,” says J.P. Chalasani, the chief executive of Reliance Power, a generation firm. For the economy to expand at 8-9% it will need to add large amounts of generation, consistently. “We are nowhere near that unless immediate action is taken. At some point all this will hit our GDP growth.”

In theory there are two solutions to the looming power problem. One is to privatise the electricity boards, end Coal India’s de facto monopoly or break it up, create new regulators and give teeth to existing ones, and then hope that market forces raise standards, tariffs and production. The other is to resort to command-and-control, with a single authority breaking heads.

Either of these approaches might be better than today’s squabbling and passivity. Unfortunately, neither is likely. Privatisation is too politically sensitive, as is allowing private firms, let alone foreigners, to run riot over India’s coal beds. And the mesh of states, law courts, ministries and coalition politics means iron fists come out only in a crisis.

Watch while we juggle

That leaves an alternative approach of administrative fiat and improvisation. It hasn’t worked so far but there are some grounds for hope. A recent court ruling has prodded many electricity boards to raise tariffs. Crafty ways are being cooked up to allow private miners to do the digging while Coal India retains its notional title to the coal, and to grant permission for more “captive” mines where a private generator digs up its own fuel.

Banks seem to have been given the nod by the central bank to ease the terms of their loans to power firms without booking losses. Government officials talk of spreading the cost of imported coal across all firms, so it is not borne by a few, and dream of open access where a power station could bypass the state grid operators and plug into customers directly.

It is a safe bet that India’s skills of improvisation will recover—helped by stern words from the prime minister. The lights will not go out anywhere for long enough to annoy voters unduly, and by historical standards there will be decent improvements in the reach and availability of electricity. Companies which need reliable power supplies, including India’s technology giants, will carry on building their own generators just to be sure. Those states that can guarantee power supply, such as Gujarat, will attract the majority of energy-intensive investment, such as car factories.

If the test is avoiding a national catastrophe, India’s power sector will pass it. But if it is delivering the infrastructure that can allow the economy to grow at close to a double-digit pace and industrialise rapidly, India is failing.

UCPN (Maoist) is the Richest Political Party with Rs 90 Million Income

Maoist is the Richest Political Party with Rs 90 Million Income
TKP, 13-Jan-2012
By BHADRA SHARMA,KAMAL DEV BHATTARAI

UCPN (Maoist), which emerged as the largest political party in the 2008 Constituent Assembly elections, is also the most resourceful of all, with its annual income and expenditure reaching as high as Rs 90 million.

The income and expenditure details submitted by political parties to the Election Commission (EC) as of Friday reveal that the Maoist party ran the largest financial portfolio followed by the Nepali Congress (Rs 49 million) and the CPN-UML (Rs 30 million) in the fiscal year 2010/11.

As the parties failed to voluntarily submit income/expenditure details every year as per legal requirements, the EC had given all the registered parties till Friday to submit their latest and pending financial reports since the 2008 elections.

The parties are required to make public their sources of income and expenditure within six months after the end of a fiscal year.

Of the 80 parties registered with the EC, only two—Rastriya Jana Morcha and Hindu Prajatantrik Party—had submitted their property details of the last four years.

The UCPN (Maoist), NC and UML submitted audited financial reports of the last four years only this week.

A number of global anti-corruption watchdogs, including Transparency International, have named political parties as the “most corrupt” institutions in Nepal. The 2011 TI report said the parties in Nepal were the most corruption-prone area as they remained largely unregulated.

The financial reports submitted by the parties show that they have identified donations and membership fees as the major sources of income and rallies, organisation building and other official work as areas of expenditure.

The Maoist party’s financial report, for instance, stated that the party spent all the Rs 90 million in the fiscal year 2010/2011 that was collected through party membership, regular levy received from lawmakers and other party members, donations from well-wishers and ministers and other occasional support from donors. The Maoist party collects Rs 10,000 from each of its total 238 lawmakers.

NC’s financial reports show that it generated Rs 49 million and spent Rs 9.8 million in the year 2010/11. Likewise, in the fiscal year 209/2010, it earned Rs 3.8 million, but spent Rs 4 million. NC Chief Secretary Basanta Gautam said levy collected from lawmakers, active and general members and support from various donors were major sources of income.

Similarly, the UML spent Rs 80 million, an all-time high for the party in 2008/09, the year it organised its General Convention. The party’s expenditure in 2009/2010 stood at Rs 50 million. UML’s report submitted to the EC stated that the party was running at a loss. Acting Chief Election Commissioner Neel Kantha Uprety said the parties were asked to submit the details to make them more transparent. Though the EC’s deadline expired on Friday, it is mulling extending the same.

Government Loses Rs. 10 billion on 3G Frequency Auction

Government Loses Rs. 10 billion on 3G Frequency Auction
KTM, 8-Jan-12
By Ramesh Shrestha

The government’s decision to provide 3G frequencies to leading GSM mobile operators without going through the auction process has caused a revenue loss of Rs 7-10 billion. This is what the parliament’s Public Accounts Committee (PAC)’s Frequency Allocation Investigation Sub-committee’s report has suggested.

The report prepared after a year of investigation categorically states that government agencies, especially the Ministry of Information and Communications (MoIC) and Nepal Telecommunications Authority (NTA), were responsible for the ‘illegal’ allocation of 3G frequencies.

According to the report, 3G frequency allotted to Nepal Telecom and Ncell and 2G frequency awarded to non-GSM mobile service operators were provided directly at different times either by an adhoc decision of the ministers for information and communications or the NTA chairmen.

The then NTA chairmen assigned 3G frequency to Nepal Telecom and Ncell without holding consultations with the Radio Frequency Policy Determination Committee, according to the report. This caused a revenue loss worth billions of rupees to the country, the report said.

The report has recommended that 3G and Wimax frequencies be allocated through auction process henceforth and a fee be set for 3G spectrum based on the auction price. “The government should then charge the fee for the allocated 3G spectrum from Nepal Telecom and Ncell,” recommends the report. “Auctioning frequency is a must as it can generate huge revenue to the government.” The then NTA Chairman Dinesh Kumar Sharma assigned 10 MHZ frequency each to Nepal Telecom and Ncell temporarily for one year on May 29, 2006, and July 29, 2007, respectively.

Pasi Koistinen, chief executive officer of Ncell, said the company received the frequency for both 2G and 3G services as per the NTA guideline and regulations. “There is no licence provision for 3G here. 3G is the evolution of 2G technology and we have already obtained its licence,” he said.

The report also said MoIC and NTA have time and again flouted the rules while issuing licence for limited mobility service. NTA, according to the report, provided GSM spectrum to small telecom operators—Smart Telecom and STM Telecom—although the provision of limited mobility and mobile frequencies were not included in their licence conditions. The definition of basic telephone service was amended while awarding licence to Nepal Satellite Telecom. “The regulator allocated frequency to Nepal Satellite Telecom with a capacity of 2.8 million subscribers. What is the rationale behind providing GSM 900 and GSM 1800 frequency bandwidths to the company that has only acquired licence for Mid-Western Nepal?” report questions.

The sub-committee that submitted its report to PAC Chairman on Sunday has come with 22-point conclusions and suggestions, including further investigation by the Commission for Investigation of Abuse of Authority (CIAA) and stern action against MoIC and NTA officials involved in telecom frequency allocation. The report has recommended that all NTA decisions made after January 14, 2011 (when the sub-committee was formed) be scrapped. NTA, during this period, allocated GSM frequencies to Smart Telecom, made permanent the 4 MHz spectrum allocated to Ncell temporarily, and provided International Long Distance (ILD) Gateway to Nepal Satellite Telecom and Smart Telecom.

Prakash Chandra Lohani, coordinator of the sub-committee, said radio frequencies were allocated in the past without keeping in mind that they could generate huge revenue. “This report will work as a guideline to curb irregularities and help provide quality service to consumers by creating competition among service providers. The report will be discussed in the full committee and ratified accordingly before issuing directives to the government.


What the report says
• Government lost revenue worth Rs 7-10 billion revenue in 3G spectrum allocation
• NTA’s move to renew Nepal Telecom mobile licence flawed
• GSM spectrum allocation to Smart Telecom and STM Telecom violates licence conditions
• Telecommunications Radio Frequency Distribution and Price Policy 2011 be scrapped
• MoIC take steps for telecom infrastructure sharing provision
• Royalty, licence renewal fee and committed royalty fee cannot be waived
• A policy be devised to allocate spectrum in a scientific manner

Footage from 1950-58 by Toni Hagen During His Geographical Fieldwork in Nepal

BBC Discussion on Opaqueness of Finances of Nepal's Political Parties

BBC's Mr. Narayan Shrestha moderates a public discussion on opaqueness of finances of Nepal's political parties with Mr. Agni Sapkota (Maoist), Mr. Nara Hari Acharya (NC) and Ghan Shyam Bhusal (UML) in Uppwalachowr in Baglung district.

News Roundup: Highlights from H2 2011

Roundup of Nepali Economic and Business News for May 1-Dec 31
By: NepaliEconomy.com
Archive: Roundup of Economic and Business News

The JNK government unveiled 2011/12 budget amounting to Rs. 385 billion in early July. One of the provisions was the increase in salaries of public servants by a whopping 30%-43%. On August 29, 2011, Dr. Baburam Bhattarai became the PM of Nepal, the 36th in Nepal's short history.

Nepal's economy continues to chug along with a small segment of the society enjoying opulence while the significant majority struggling with the daily living. The case in point is the wedding costs in the capital. If you want to host one at a fancy location, prepare to pony up at least Rs. 1,100 plus tax per person. If you want to welcome the new Gregorian year, be ready to fork out at least Rs. 1,700 per person. Given the increased demand from high-end consumers, the retail giant Bhat-Bhateni Group is increasing its footprint in Kathmandu and expanding into Pokhara - you can even order online at bhatbhatenionline.com.

The average folks have to deal with rising food inflation, which is likely to persist for a foreseeable future if the famed investor Jim Rogers is right. He is super-bullish on agricultural commodities. In Nepal, the number of food deficit districts in Terai, the bread-basket of the country, has increased to 10. Food price are up across the board - chicken (Rs. 160 per kg), mutton (Rs 600 per kg), fruits (Rs. 130 kg for apple, Rs. 60 per kg for orange), sugar (Rs 75 per kg), imported coffee, noodles and mustard oil (Rs 135 per liter). The good news is that ag production is rising - Nepal is self-sufficient in paddy for the first time since 1990 - and poultry output is also on the rise.

Energy policy in Nepal is a mess. The NOC continues to incur massive losses. It has implemented price hikes, diesel and kerosene recently but not enough of offset rise in global prices and had to get government loans to pay off its debt. That's resulting in shortage of diesel. Government is trying to attract private investment in the fuel sector but the investment necessary is huge (Rs. 20 billion for crude oil & refinery, Rs 10 billion for refined products and Rs. 3 billion for LPG). Shortage of electricity continues with load-shedding increased to 69 hours per week. The government is trying to alleviate the problem by increasing import of electricity from India to 245MW by 2013 from 100MW currently.

On the macroeconomic front, the BoP surplus swelled to Rs. 34 billion in Q1 2011/12 on the back of Rs. 76 billion in remittances. The NLSS 2010 is set to declare 13 percent poverty rate in Nepal. Poverty is defined as less than 2,200 calorie consumption per day.

Tourism is a relatively bright spot with introduction of skydiving and expansion of paragliding in Pokhara, and enlargement of Nagarkot resort. Annapurna area saw 100K visitors during 2009/10. On the flip-side, Oberoi Group has sold Rs. 123 million stake in the Soaltee Hotel to NE Group.

Telecom is another hot area. MoF's Economic Survey confirms the strength of the sector. Around 42% of the population has access to telecom service (90% of that is mobile). Not surprisingly, NT's daily revenue has reached Rs. 90 million.

Investment climate in Nepal is not conducive and that's a well known fact. Bhrikuti Paper and Pulp Limited closed after 25+ years in service. Also more than 32 factories have closed in the Sunsari-Morang Industrial Corridor. One of the problems is militant labor but an agreement between FNCCI and big trade unions on no-work-no-pay could help towards solving that issue. Government is also trying too enable investment by establishing SEZ in different parts of the country - Panchkhal (Kavre) and 12 other locations.

Interesting tidbits - Nepal TV is going digital by 2017. Khetan Group sold 22% stake in Bottlers Nepal to Gorkha Brewery for Rs 725 million. Now you can order your daura Suruwal online from a variety of vendors. Biratnagar has the first apartment complex but ready to pay Rs 2.2 milion for 470 sq ft "hole in the wall".

US firms bullish on Nepali IT sector but wary of attrition

US firms bullish on Nepali IT sector but wary of attrition
Republica, 5-Nov-11
By SAMIKSHA KOIRALA

The number of IT companies in the country working for American companies has significantly gone up. In recent months, some of the local companies have been acquired by the US-based companies and also the number of new companies with tie-ups with American companies is on the rise.

Chief Executive Officer of Software Paradigms International Group (SPI), Nepal, Yajurendra Shrestha said the growth can be attributed to lower cost compared to neighboring countries and a growing pool of software engineers in Nepal.

SPI, Nepal, which was operating under the brand name of WorldLink Technologies was acquired by Atlanta-based software solution provider SPI about six months ago.

Sudesh G C, Chief Executive of Traffic Geyser, Nepal, with its headquarters in San Diego, opined the growth in the IT sector is thanks to availability of IT experts with necessary skills. " The number of skilled IT professionals has gone up," G C further echoed Shrestha, adding that Nepal is more cost-effective compared to other countries specially in human resources.

Although there is no definite figure about the number of America-based IT companies in Nepal, professionals say there are over a dozen of such companies and they came into operation in the last two years. Some of these companies are active in BPO sector while others are making products for their parent company.

The BPO sector companies are not limited to call centres. Rather, they work on making out application for renowned companies like Apple, Google, Hollywood and also for social networking sites like Twitter and Youtube.

Overwhelmed by the response, most companies claimed to have doubled their staff strength in recent years and are positive about hiring deserving IT professionals.

President of Verisk Information Technologies Amrit R Pant said his company is employing over 300 engineers, which is one of the largest recruitments for a software company in Nepal. The company which claims to be the only CMMI Level 3 certified is an offshore company of America-based Verisk Analytics Inc.

Incessant Rain Animation Studios (IRAS), which started in 2008 with 15 animation and graphics artists, has now 135 employees. The company produces a range of computer generated animation projects for television, home and theatrical production including several Hollywood projects. "With our new division of visual effects, we have been able to bag several Hollywood projects including features and TV series," Robina Maharjan, head of production at IRAS, told Republica.

Verisk Information Technologies is mainly working on projects of 15 companies listed under its parent organization. The works include software development, software quality and performance, production, data analysis and others. "We are also working with newer technologies such as System Virtualization, Development in the Cloud, Large Data Systems and mobile application," Pant said.

SPI, Nepal, had decided to add 250 more professionals after being acquired.

The biggest challenge for these companies is to retain highly-skilled employees. In order to overcome this, companies claim to be offering lucrative incentives and international level benefits to their employees.

Pant at Verisk said, "We invest heavily in building expertise and keep our team members up-to-date with required programs. Medical benefits include regular visits of doctors to our offices in the US as well as extra-curricular activities like sponsored weekend trips."

G C at Traffic Geyser said the major challenge is to retain employees. "We are offering good salary and benefits but the immense opportunity outside this country puts us in a spot," he said adding.

Nepali Economic Forum Quarterly (Dec 2011)

Nepali Economic Forum Quarterly
December 2011, Issue 7
Nepali Economic Forum
Editor: Pranab Man Singh
Archive

Open publication - Free publishing