Renewable energy perspective plan of nepal 200-2020 an ... - SNV

Participation of other banks (Nepal Bank Limited and Rastriya Banijya Bank) in
financing BSP programme is another achievement. However, their participation is
limited.
Landless households owning animals have not been able to take advantage of subsidy
policy in biogas plants mainly due to lack of physical collateral.
It is argued that only farmers with cattle and physical property benefit from the
subsidy. It should be seen as an investment on environment, saving of forest and
supplementation of chemical fertilizers. Since the biogas subsidy has long term
benefits as compared to other subsidies, e.g. fertilizers subsidy, the subsidy policy for
biogas programme can be justified.
2. Micro Hydro
The micro hydro technology existed long before, but its extensive use began only
after the Agricultural Development Bank got involved in its promotion and supports
in the form of debt financing and HMG/N subsidy. In mid-seventies, ADB/N started
to promote micro hydro for agro-processing in rural areas. The provision of subsidy
for rural electrification has helped in faster dissemination of microhydro plants, which
was introduced in 1985.
The present subsidy policy includes subsidy only on the cost of electrical equipment
and transmission and distribution system. The amount of subsidy is 75 percent in
remote mountainous districts and 50 percent for the remaining districts. In case o\'
peltric installation subsidy is also provided in the cost of polythine pipe used as
penstock up to 100 meter in length. The present subsidy policy does not differentiate
between stand-alone and add-on plants. The subsidy, therefore, is correctly labeled as
subsidy for rural electrification rather than micro hydro as such.
In addition to financing. Agricultural Development Bank is also the subsidychanneling
agency. Foreign donors have also been assisting the micro hydro projects.
The present subsidy policy does not take into account the remoteness of scheme sites
and the transportation costs. The only districts that get 75% subsidy on electrical
components are Solukhumbu. Manag. Mustang. Humla. Jumla. Kasikot. Mugu and
Dolpa. The present subsidy system excludes subsidy facilities for self financed
projects since subsidy is channeled through ADB/N for loan financed projects only.
The borrowers are required to provide land and building as collateral to be eligible for
bank loan. The entrepreneurs ma)' not have sufficient land or the land value may be
low in rural areas to cover the cost of micro hydro project. It has been noted that lack
of physical collateral has affected entrepreneurs to take advantage of subsidy policy.
The current subsidy policy covers about 20-40% of total plant cost. It is worth
mentioning here that generally subsidy allocated for MHP was not fully utilized.
3. Solar PV and other Solar Energy
HMG/N has introduced subsidy for household PV systems from 1996/97. It provides
50 percent capital subsidy not exceeding NRs. 15.000 on 36 peak Watt solar home
systems. Financing terms for loans from ADB/N are about 16% over a period of 3