Ministry of Commerce And Supplies - Enhanced Integrated ...

N T I S2010transport network are considered serious infrastructure constraints by investors. Statistical evidence suggeststhat removing the electricity supply constraint would have the biggest positive impact on per capita income.This particular constraint can be overcome as opportunities for hydropower are enormous. Even thoughsome capacity increases are planned, further action is required to accelerate construction and installation ofadditional hydropower capacity to make Nepal’s power tariffs competitive in the region.Inadequate, Unreliable, and Expensive Electricity Supply: Currently, the highest tariff rate in the region, due to inefficiencies in the power sector and vast butlargely untapped hydropower potential estimated at 80,000 mega watts (MW); Shortfalls in electricity supply and frequent power outages (reportedly up to 20 hours a day during drymonths, which is effectively half of a year) due to seasonal variation in power generation. Low watersupply in winter and lack of water storage capacity reduce Nepal’s power generation capacity in certainseasons.As a consequence, industries, at times, are forced to downsize production and/or face substantial increase inenergy-related and overall production costs.Inadequate, Unreliable, and Expensive Transport Networks: Underdeveloped road network, characterized by a low density and poor quality of existing roads(only 38 per cent of roads blacktopped). The World Bank estimates that upgrading and expanding theexisting road network requires an investment of at least 2.5 per cent of GDP to sustain a GDP growthrate of 6.0 per cent; Lack of alternative routes and frequent occurrence of strikes, landslides, and other possible disruptionsmake transport of goods and people unreliable and unpredictable, leading to loss in trade andsometimes shortfalls in essential commodities and inputs; In 2007/08, fuel shortages also greatly impacted the flow of goods and people in Nepal. Although lessof an issue today, it has the potential to again become a major constraint to investment and trade,should the oil market and supply conditions become volatile again in the future.Insufficient Irrigation infrastructure:Various existing studies point to the need for expanding the irrigation infrastructure in order to maintainand grow agriculture production and output. Given the unpredictability of annual rainfall and the sizeablecontribution of this sector to GDP growth (approximately 2.0 per cent contribution to GDP growth in 2007/08)this is a major constraint to increased trade and investment growth. Investments in irrigation infrastructure have been slow. Total cost to irrigate the remaining irrigableland is estimated at US$3.3 billion, or roughly one-third of Nepal’s GDP in 2007/08; The existing irrigation infrastructure is poorly maintained and inefficient. Rehabilitation of farmermanagedirrigation schemes urgently requires another US$360 million in investment.NEPAL TRADE INTEGRATION STRATEGY 2010BACKGROUND REPORT149