TRIBHUVAN UNIVERSITY

INSTITUTE OF ENGINEERING
PULCHOWK CAMPUS

A CASE STUDY IN ORGANIZATIONAL ANALYSIS AND DEVELOPMENT OF

NEPAL ELECTRICITY AUTHORITY (NEA)

BY :
SUJAN DHAKAL (076BME045)

SUBMITTED TO :
DEPARTMENT OF MECHANICAL AND AEROSPACE ENGINEERING
INSTITUTE OF ENGINEERING
PULCHOWK CAMPUS

LALITPUR, NEPAL
AUGUST 2022
Table of Contents:
1 Introduction: ............................................................................................................................ 1
1.1 Overview: ......................................................................................................................... 1
1.2 Limitation of study: .......................................................................................................... 1
1.3 Objectives:........................................................................................................................ 1
2 Literature review...................................................................................................................... 2
2.1 Organization structure: ..................................................................................................... 2
2.2 NEA annual report FY 2020/21 ....................................................................................... 3
2.2.1 Availability of energy: .............................................................................................. 3
2.2.2 Energy utilization and sales: ..................................................................................... 3
2.2.3 Growth of consumers: ............................................................................................... 4
2.2.4 Revenue: ................................................................................................................... 5
3 Discussion and conclusion: ..................................................................................................... 7
4 References ............................................................................................................................... 8
1 Introduction:
1.1 Overview:
Nepal Electricity Authority (NEA) is a government entity working as the generator, transmitter,
and distributer of electricity in Nepal. NEA was formed on August 16, 1985 under the Nepal
Electricity Authority Act, 1984, through the merger of the Department of Electricity of Ministry
of Water Resources, Nepal Electricity Corporation and Electricity Development Boards. To
remedy the inherent weakness associated with these fragmented electricity organizations with
overlapping and duplication of works, merger of this individual organization became necessary
to achieve efficiency and reliable service. Nepal has immense potential of hydropower only to
replace domestic energy requirement fulfilled by firewood, liquid oil and gas, agro-products,
etc., but also to export power to her neighbors.
The primary objective of NEA is to generate, transmit and distribute adequate, reliable and
affordable power by planning, constructing, operating and maintaining all generation,
transmission and distribution facilities in Nepal's power system both interconnected and isolated.
In addition to achieving above primary objective, NEA's major responsibilities are:
a. To recommend to Government of Nepal, long and short- term plans and policies in the
power sector.
b. To recommend, determine and realize tariff structure for electricity consumption with
prior approval of Government of Nepal.
c. To arrange for training and study so as to produce skilled manpower in generation,
transmission, distribution and other sectors.
Hydropower projects are no doubt capital intensive projects requiring huge initial
investment. It is almost impossible for the government to finance all hydropower projects from
its internal resources. Therefore, the government has allowed private as well as foreign
investment in this sector. As a result, private sector has invested in many power projects
dedicated to power generation. But still the transmission and distribution functions solely lie with
NEA. To carry on these functions along with generation, it is very essential for NEA to remain
financially sound. In this context, this study aims to analyze the financial strength and
weaknesses of NEA.
1.2 Limitation of study:
Limited availability of time, data and resources will be a major hurdle in the path of
accomplishment of our study. Most of the data and statistics used are from primary source i.e.
mainly from NEA official site. while some of them are from the secondary source like research
papers, third party sites and other.
1.3 Objectives:
• To study the organization structure.
• To make critical analysis on NEA annual report 2021
• To study the financial position of NEA and provide suggestion to improve it.

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2 Literature review
2.1 Organization structure:
The organizational structure of NEA is shown below:

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2.2 NEA annual report FY 2020/21

2.2.1 Availability of energy:

NEA's hydropower plants, including micro plants, generated a total of 2,810.74 GWh of
electricity in 2020/21. This is down slightly by 6.96% from 3021.04 GWh of production in
2019/20. This is due to the dry season and monsoon floods that forced many power plants to shut
down, as well as long shutdowns of power plants for maintenance. Total electricity procured
from Independent Power Producers (IPPs) in Nepal was 3,241 GWh, an increase of 8.36% from
2,991 GWh in 2019/20. Total energy imported from India increased by 63.45% to 2,826.21 GWh
in 2020/21 compared to 1,729 GWh in 2019/20. Total system energy increased by 14.68% to
8,877.95 GWh compared to the corresponding figure of 7,741 GWh in 2019/20. Of the total
available energy, NEA's own generation accounted for 31.66%, while imported from India and
domestic IPPs accounted for 31.83% and 36.51% respectively.

2.2.2 Energy utilization and sales:

In the fiscal year 2020/21 a whopping 82% of electricity are used in internal sales and sadly
around 17% are lost due to system failure while 0.6% was exported to India. If we look at the bar
graph of electricity sales then it is observed that over the years the domestics sales has increased

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significantly. Moreover around 44 GWh energy was sold to India in 2021 which is less than half
the sale that was made in 2020 which was 107 GWh. The sales growth rate of 15% was achieved
in FY 2020/21.

2.2.3 Growth of consumers:

The number of electricity consumers of NEA has been increasing gradually over the years. The
number of consumers increased by 7.37 % in the year gone by from 4.22 million to 4.53 million.
The figure does not include the consumers under Community Rural Electrification, which is
serving about 0.55 million consumers in rural areas. Hence the total consumers served has
reached 5.08 million. As has been in the past, the domestic consumer category with 4.21 million
consumers remained the largest sector with 92.93% share of the entire electricity consumers.
Domestic and industrial consumer category contributed 39.57 % and 38.84 % to the gross
electricity sales revenue respectively. The effect of the lockdown is attributable for the lesser
revenue from the industrial sector. Rest of the consumer category accounted for the remaining
21.59% of the gross sales revenue. The total population with access to electricity based on the
number of consumers has reached 85% of total household in FY 2020/21. Similarly, this is
calculated as 90 % on the basis of the available electrical infrastructure.
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2.2.4 Revenue:

Total revenue from energy sales for the fiscal year 2020/21 amounted to NR 70,967 million,
down 6.59% from NRs 75,329 million for the fiscal year 2019/20. NEA's operating expenses
were NRs 68,453.4 million, representing an increase of 10.96% from the previous year's NR
61,872.98 million. The power purchase cost alone in FY2020/21 reached NRs 41,460.79 million.
This is an increase of NRs 6,340.52 million from 35,120.27 million in 2019/20. In the year
2020/21, NEA's total adjusted net profit including other income was NR 80,355.73 million while
operating expenses were NRs 68,653.4 million and operating profit was NRs 11,712.33 million
and operating profit was NRs 23,743.07 million. decreased by 102.78% from the value of
Equivalent to millions in 2019/20. Energy purchases accounted for 68.34% of total available
energy and NEA paid 58.83% of net income from NR's 70,473.05 million electricity sales for
this purpose. The total cost of purchased electricity increased by 18.05% in 2020/21 compared to
2019/20.

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NEA experienced reduction in its operating performance as compared to last financial year. Net
profit before tax for the year 2020/21 decreased by 54.72% to reach at NRs. 6,008 million
(Provisional) from NRs. 13,794 million in FY 2019/20.The expected profit for the FY 2020/021
was NRs. 10,900 million. However, the reduction in the power generation by NEA plants due to
low water discharge in the dry season, increased in system loss from 15.27% in FY 2019/020 to
17.18% in FY 2020/021 and power import at expensive rate from India contributed to the decline
in the profit of FY 2020/21.

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3 Discussion and conclusion:

After critically analyzing all the data from the annual report of FY 2020/21 provided by NEA,
there are some areas where NEA should invest more time and economy to further improve the
organization efficiency. The major problem that has hugely affected the growth of NEA is
problem in technical sector which has resulted huge loss in power. So Electricity Loss Reduction
division should follow its responsibility sincerely to control the electricity theft, energy leakage
and loss. Division should conduct activities like random as well as planned inspection of energy
meters and field raid operation wherever required. Division should be dedicated towards
supporting additional revenue generation by controlling electricity theft, pilferage, tampering,
demand leakage, CT/PT outage, loss due to oversized ,transformers in LT consumer, wrong MF
calculation and energy meter connection.
The department should conduct several campaigns to create public awareness on energy
efficiency and loss reduction. Though Television commercials were prepared but still it doesn’t
seem to be effective so ads using animated characters and popular celebrities for creating public
awareness on use of energy efficient appliances and electricity theft/loss control should be
broadcasted so that it gets proper attention and people starts showing some interest.
The other thing is that the internal audit department should continuously make efforts in
enhancing the level of economy, efficiency and effectiveness of the audit work performed. For
that, The department should be provided with adequate skilled and competent manpower,
Adequate training programs should be conducted to refine the knowledge of the auditors. The
organization should introduce system of providing incentive, as a motivational factor, to attract
and retain good auditors thereby increasing the effectiveness of internal audit of NEA.
Emphasis should be given to the fast deployment of automation and digitization in their
businesses. The use of automation system to monitor, control and manage the power system from
generation to distribution network should remain their priority for facilitating the reduction of
operational cost and providing better services to the customers.
With the continued addition of hydro plants, including the just commissioned Upper Tamakoshi
in the system, sale of energy is going to pose a serious challenge to NEA in the coming years.
Marketing arrangements and options should be explored for NEA’s overall financial
performance. Both domestic and cross-border power markets should be explored to cope with the
emerging situation of high domestic generation. Further, NEA should be focusing on increasing
domestic demand through the promotion of using electrical appliances to gradually switch to
electric cooking, electric vehicles by building charging station infrastructures etc. For supplying
increased demand in industrial and urban areas, the strengthening and expansion of transmission
and distribution infrastructures should be continuously carried out on a high priority basis.

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4 References
Nepal Electricity Authority. (2021,08,18). A YEAR IN REVIEW FISCAL YEAR 2020/21. Retrieved from NEA:
https://www.nea.org.np/annual_report

Nepal Electricity Authority. About Us. Retrieved from NEA: https://www.nea.org.np/aboutus

Rijal, N. (2019). Performance Scrutiny of Nepal Electricity Authority using DuPont Analysis. PYC Nepal
Journal of Management.