Impact of rural electric cooperatives in reducing financial loss of distribution center of Nepal Electricity Authority.

Abstract

Low electrification rate, huge financial loss of power providers and many hours of load shedding are found to be evident in developing and underdeveloped countries. Every year Government of Nepal set aside budget for funding Rural Electric Cooperatives (RECs), This study investigated impact of Rural Electric Cooperatives in reducing financial loss of distribution center of Nepal Electricity Authority (NEA). The empirical strategy used for this study is Fixed Effect Instrumental Variable method. The variable REC is suspected to have endogeneity so road length and total number of cooperatives in each district of Nepal have been used as instrumental variables. The control variables of this study are employee expenses, distribution line expenses, equipment repair expenses, meter repair expenses, transmission line expenses, per capita income, Gross Domestic Product (GDP), literacy rate, Human Poverty Index (HPI) and total repair and maintenance. Overall, the results suggest that the subsidies and budget for these RECs are justified on the ground of positive externalities. Hence, the estimates of this study suggest that the rural cooperatives of Nepal have lowered financial loss of distribution center of Nepal Electricity Authority.