PM Dahal resigns, leaves behind a healthy economy

May 25, 2017

The Kathmandu Post, Rupak D Sharma, 25th May 2017, Kathmandu

Prime Minister Pushpa Kamal Dahal stepped down on Wednesday, as per the deal reached earlier with the coalition partner Nepali Congress, drawing praises for eliminating power cuts from major cities, ending confusion over construction of Kathmandu-Tarai expressway and keeping the economy in a healthy state.

Dahal’s biggest achievement during his almost 10-month tenure was making loadshedding a history in the Kathmandu Valley and major cities across the country. 

“When I joined office, power cuts of 18 to 20 hours per day were considered normal. This had destabilised the industrial sector and made people’s lives miserable,” he said in his last address to the nation. “I then launched an ambitious campaign called ‘Ujyalo Nepal’, changed the management team at Nepal Electricity Authority (NEA), effectively conducted on-site inspection of big [hydro] projects and streamlined electricity imports.”

These measures have produced positive results, putting an end to the era of living in darkness even in the cities. 

Load management skills of NEA Managing Director Kul Man Ghising, who was installed by the outgoing government, did play a key role in eliminating power cuts. “But we probably wouldn’t have been able to make loadshedding a history had we not raised imports from India,” Senior Economist Posh Raj Pandey said. “So, this is not the time to celebrate, because we are still vulnerable.”

Nepal is currently importing around 350 MW of electricity from India, which is almost 40 percent of the total supply of state-owned NEA. The rest of the electricity is generated by NEA and domestic private power producers.

“The focus now should be on ramping up electricity generation by tapping our hydro potential. This is essential because India may reduce supply anytime, as its states of Uttar Pradesh and Bihar are in need of electricity themselves.”

Although problems in the energy sector are not over yet, steady supply of electricity has eased problems down the supply chain, giving a big relief to cottage, small and medium enterprises that generate a big chunk of jobs in the country. If electricity supply remains stable in the coming days, the country’s industrial capacity utilisation, which currently hovers around 54 percent, will improve. This will help enhance productivity.

“The elimination of loadshedding will have a big economic impact,” outgoing PM Dahal said. “But there is more to that. End of power cuts has lifted confidence of everyone and rekindled hopes for a better future.”

To give momentum to this initiative, Dahal said, groundwork has been laid to generate 200 megawatts of electricity in the next one year, 600 MW in the next two years, and 1,200 MW in the next three years. “This will be a step towards establishing Nepal as an electricity exporting country,” outgoing PM added.

If Nepal can generate electricity of this quantum, one of the binding constraints for higher economic growth will be removed. This will help Nepal’s economy to grow faster, helping the country to graduate to middle-income nation by 2030.

In fact, Nepal has started gearing up for higher trajectory of economic growth, as it is likely to attain 23-year high growth rate of 6.9 percent in the current fiscal year. Outgoing PM Dahal, while delivering his speech, quickly took credit for this achievement. But that’s an overstatement.

“The country’s economy is likely to expand at 6.9 percent this fiscal year because the base had shrunk to 0.01 percent in the last fiscal year, which is way lower than average growth rate of 4 percent per year [in the last 45 years],” said Pandey. “Had the economy grown at historical trend of around 4 percent in the last fiscal year, our growth rate wouldn’t have reached 6.9 percent in the current fiscal year.”

Another reason for high economic growth this fiscal year was good monsoon, which helped the country to secure a bumper harvest. This lifted economic growth because agricultural sector contributes to around 30 percent of the gross domestic product.

But the dependency on skies will not help the country in the long run, as agricultural yields in Nepal are rising at the slowest pace in South Asia. 

To increase productivity of the agricultural sector and commercialise farming, outgoing PM Dahal launched two programmes in Kailali and Jhapa under Prime Minister Agricultural Modernisation Programme. But the effectiveness of these programmes is yet to be seen. 

Another area where Dahal played a key role was in ending the confusion over construction of 76-km Kathmandu-Nijgadh expressway, which is expected to reduce travel time from the Capital to the southern plains to less than an hour from over six hours. As per the decision made by the Dahal-led government, the project would now be built by the Nepal Army (NA). 

“So, in a nutshell, PM’s tenure, from the perspective of an economist, was satisfactory,” said Pandey.