Published by Winrock International

Policy Analysis in Agriculture and Related Resource Management

A Review of the Biogas Programme in Nepal

Bishnu Bahadur Silwal

RESEARCH REPORT

NOVEMBER 1999

SERIES NO. 42

A REVIEW OF THE BIOGAS PROGRAMME IN NEPAL

BISHNU BAHADUR SILWAL

Winrock International Policy Analysis in Agriculture and Related Resource Management

Bishnu Bahadur Silwal is a freelance agricultural and rural development consultant. Views expressed herein are the personal opinions of the author and do not necessarily reflect those of HMGN, Ministry of Agriculture/Winrock International, or either of the donor agencies supporting the Program (viz USAID and the Ford Foundation). Winrock International acknowledges the generous help received from Mr Felix EW ter Heegde, Programme Manager, BSP/SNV-Nepal in preparing this report.

Price: Rs 100

Winrock International Policy Analysis in Agriculture and Related Resource Management PO Box 1312, Kathmandu, Nepal Telephones: 255109/255110/254687 Fax: 977-1-262904 E-mail: winrock@wlink.com.np Anil Shrestha, Language Editor Printed in Nepal at Mass Printing Press. November 1999.

TABLE OF CONTENTS

List of Tables List of Maps List of Figures List of Abbreviations and Acronyms

v V v vi

I.

HISTORICAL DEVELOPMENT AND CURRENT STATUS OF BIOGAS IN NEPAL

Historical Development Current Status of Biogas Programme in Nepal ROLE OF TA-SUPPORTED BIOGAS SUPPORT PROGRAMME IN DEVELOPMENT OF BIOGAS IN NEPAL Advent of External Support for Biogas Programme Biogas Support Programme Advent of Biogas Support Programme BSP: Project Design Current Status of the BSP: Evaluation Findings ROLE OF PRIVATE SECTOR IN BIOGAS DEVELOPMENT IN NEPAL Entry of Private Sector Construction Companies BIOGAS QUALITY CONTROL: CURRENT PRACTICES AND ITS SUSTAINABILITY Current Practices Aspects of Quality Control Quality and Uniformity of Design Quality of Construction Quality of Operation and Maintenance by the Users Present Practices of Quality Control Agreement of Standard Agreement on Penalty Process of Quality Control Sustainability

1-2
1 2 2-11 2 7 8 8 10

II.

III.

12-17 12

IV.

17-21 17 17 17 17 18 18 18 18 1:9 20

V.

SUBSIDY, ITS ROLE IN PROMOTION OF BIOGAS PLANTS, PLAN FOR PHASING AND POSSIBLE EFFECTS
History of Subsidy to Biogas Plants Economic Rationale for the Subsidy Impact of the Subsidy on Installation of Plants Plan for Subsidy Phase-out Possible Effects of the Phase out of the Subsidy

21-25
21 22 23 24 25 25-27 28-32 28 29 30 32-35 35-40 35 39 41-42

VI.

FINANCING OF BIOGAS

VII. INSTITUTIONAL ARRANGEMENTS Biogas Companies Weaknesses and Problems of Companies Association of Biogas Companies VUI. IMPACT OF BIOGAS PLANTS IX. SUMMARY AND RECOMMENDATIONS Summary Recommendations

Annex Number of Biogas Plants Installed up to 31 August 1999 Annex List of Recognized Biogas Companies in Nepal BIBLIOGRAPHY

43-44

Winrock International Policy Analysis in Agriculture and Related Resource Management List of Publications 45-49

LIST OF TABLES
Table 1: Trend in the Share of the Private Sector 9 Table 2: Classification of the Companies and their Corresponding Shares in the Total Plant Construction in FY1997/98 10 Table 3: Market Shares of the Companies Participating in the BSP 11 Table 4: Biogas Plants Installed under Various Subsidy Schemes by Year t9 Table 5: Subsidy Rates for 1999/2000 (2056/57) 20 Table 6: A Typical Costs Structure Trend for 10 M Biogas Plant (1991/92-1996/97) 22 Table 7: Finance and Financing Sources for the Biogas Plants Constructed under BSP 22 Table 8: Percentage of Solely-Equities Financed and Equities and Loan Financed Plants 23 Table 9: Trend in the Entry of Companies 24

LIST OF MAP
Map: Biogas Plants Installed in Nepal by Districts 3

LIST OF FIGURES
Figure 1: Annual Biogas Plant Installation Figure 2: Cumulative Biogas Plant Installation Figure3: Number of Biogas Companies in Nepal 4 5 6

LIST OF ABBREVIATIONS AND ACRONYMS

ADB ADBN AEPC AEPDF BSP cu.m. DGIS DM EIRR FIRR FY GGC ha HMGN KfW It MT MTR NBE NBPG NGL NGO O&M R&D RBB Rs SFDP SNV TA TCN UMN UNCDF UNDP UNICEF USA1D

Asian Development Bank Agricultural Development Bank, Nepal Alternative Energy Promotion Centre Alternative Energy Promotion and Development Forum Biogas Support Programme Cubic Metre Directorate General for International Co-operation Deutsche Mark Economic Internal Rate of Return Financial Internal Rate of Return Fiscal Year Gobar Gas Company hectare His Majesty's Government of Nepal Kreditanstalt fuer Wiederuafbau (German Financial Cooperation) litre Metric Ton Mid-term Review Nepal Bank Limited Nepal Biogas Promotion Group Netherlands Guilder Non-government Organization Operation and Maintenance Research and Development Rastriya Banijya Bank Rupees Small Farmer Development Programme Netherlands Development Organization Technical Assistance Timber Corporation of Nepal United Mission to Nepal United Nations Capital Development Fund United Nations Development Programme United Nations Children's Fund United States Agency for International Development

A Review of the Biogas Programme in Nepal

I. HISTORICAL DEVELOPMENT AND CURRENT STATUS OF BIOGAS IN NEPAL

Historical Development
The first biogas plant in Nepal is believed to have been installed in Godavari School in the year 1955- After that, a few plants were installed on an experimental basis in various parts of the country. Following the energy crisis of 1973, biogas drew some attention of the authorities concerned and in the fiscal year (FY) 1975/76a year designated as the Agriculture Year, some 290 plants were installed with interest-free loans from the Agricultural Development Bank of Nepal (ADBN). Encouraged by the results, the authorities established the Gobar Gas Company (GGC) as a subsidiary of the ADBN and the Fuel Corporation of Nepal in 1977, with a mandate to promote biogas technology in the country. Subsequently, a need for offering incentives to the plant owners was realized. This led to the provision of a subsidy of Rs5,500 per plant in FY1982/83 as part of a special rice programme in four Tarai districts. Planned efforts were introduced from the Seventh Five-Year Plan (1985-1990), which had a target of 4,000 plants, and provisioned 25 per cent subsidy on investment costs and 50 per cent subsidy on bank loans. The programme, however, was not regularized, and, as a result, the subsidy was provided only during the last two years of the plan period. The GGC was somehow able to construct 3,862 plants during the plan period. With the restoration of democracy in 1990, biogas was able to draw greater attention of the authorities, who .by that time had recognized the importance of the sector and were committed to initiating measures to accelerate the pace of plant installation. As the first step in this direction, the provision of a consistent subsidy was considered to be an appropriate tool. So, in 1991, His Majesty's Government of Nepal (HMGN) announced a subsidy scheme, which has been in effect until now. The rate of subsidy, initially, was Rs7,000 for the Tarai and Rsl0,000 for the hills. Since 1995/96, a subsidy of Rsl2,000 has been added to the hill districts whose headquarters are not connected with road. From FY1999/2000 onwards, the subsidy rates have been reduced by Rs 1,000: to Rs6,000 in the Tarai, Rs9,000 in the hills and Rs. l 1,000 in the remote hills. However, the 15 m3 and 20 m3 plants are not eligible for the subsidies.

To farther promote plants of smaller sizes, an additional subsidy of Rsl,000 has been offered for 4 m3 and 6m3 plants.

Current Status of Biogas Programme in Nepal

As to the current status of the biogas programme in Nepal, the following aspects are noteworthy: About 60,321 plants have been installed in 64 districts of the country (see map, figures 1 and 2, and Annex I). A total of 50 companies are engaged in the installation of the biogas plants (see figure 3 and Annex II). The Alternative Energy Promotion Centre (AEPC), responsible for promotion and extension of all alternative energy, including the biogas, has been established. The Biogas Support Programme (BSP), created as a part of external assistance, has protected the interests of the plant owners through the implementation of quality control.

II. ROLE OF TA-SUPPORTED BIOGAS SUPPORT PROGRAMME IN DEVELOPMENT OF BIOGAS IN NEPAL

Advent of External Support for Biogas Programme

With the increasing realization of importance of biogas as an alternative source of energy, external sources of assistance were explored, i n i t i a l l y for the provision of subsidy. In this process, the first external assistance was obtained from the United Nations Development Programme (UNDP) for the community biogas plants under the Small Farmer Development Programme (SFDP) of the ADBN (Silwal, et al 1995). Later, some community plants were also funded through the United Nations Children's Fund (UNICEF), United States Aid for international Development (USAID) and United Mission to Nepal (UMN). The first external assistance for household level biogas plants was received from the United Nations Capital Development Fund (UNCDF), which provided 25 per cent subsidy on the investment costs of 6 m3 and 10 m3 plants. Similarly, an Asian Development Bank (ADB)-funded forestry project also incorporated a component to provision subsidy for about 5,000 plants.

7 All these assistance offered subsidy to the biogas plant owners on their capital investments as well as on interests on loans taken from the ADBN. These instances of assistance, however, were characterized by irregularity and lack of concrete policies. Biogas Support Programme Established in 1992 as a part of the BSP project supported by the Netherlands government, the BSP is a project staffed and operated by two expatriate experts and 1819 trained Nepalese personnel, and is responsible for the overall implementation of the biogas programme in Nepal. Advent of Biogas Support Programme Notwithstanding the establishment of the GGC in FY1976/77 for the development of biogas and its modest achievement in terms of number of plants installed, the progress was considered to be far below the potential. Therefore, some concrete actions were felt necessary. In this context, the ADBN, through HMGN, approached the Netherlands Development Organization (SNV) for some technical assistance and, in response, the latter made available the services of two development associates to the GGC. After working a l it t l e over one year, the development associates in 1990 offered their conclusions and recommendations, among which, the following highlight the present status of the biogas sub-sector in Nepal (Van nes 1997): Major cost reduction through research & development (R&D) was not further possible without compromising on the quality of plants; and Reduction in private costs was possible only through provision of subsidies.

Although subsidies on investment costs and on interest on bank loans had been in effect since FY1975/76, their efficacy remained questionable due to their irregularity as well as inconsistency of policy. By the end of FY1990/91, the number of biogas plants installed in the country totalled 6,615, most of which were owned by richer farmers located in the Tarai. Another interesting study concluded by the development associates was on the biogas potential in Nepal (Van nes 1992). Considering the cattle and buffalo populations and their distribution, the study estimated the technical potentiality of about 1.5 million biogas plants in the country. This means, in the beginning of the 1990s, only 0.4 per cent of the potentiality was exploited. Similarly, a number of studies carried out by both individual researchers and institutions indicated a need for framing plans and implementing projects to exploit this vast potential. As a result, the development associates in co-operation with HMGN, ADBN and GGC, prepared a proposal, namely

8 Biogas Support Programme (BSP), and submitted it in May 1991 to the Directorate General for International Co-operation (DGIS) of the Government of Netherlands for financial support. Thereafter, in November 1992, an agreement was concluded between the Ministry of Finance on behalf of the HMGN and the SNV-Nepal on behalf of the DGIS. This is considered to be a milestone in the history of biogas in Nepal. BSP: Project Design The first BSP had, among others, the following long-term objectives: Reduce environmental deterioration by substituting fuelwood and dung cake by biogas. Improve the health and sanitation conditions of the population by substituting the smoke stoves by smokeless biogas stoves as well as by reducing the time spent in collecting fuelwood. Increase agricultural production by increasing the nutrients contents of the slurry obtained from the digester.

The total cost of the BSP was estimated at Rs492 million, of which Rs202 million was granted by the Government of Netherlands and the rest was borne by the farmers either in the form of equities or by borrowing loans from the bank. The first grant from the Netherlands government was utilized for providing technical assistance as well as subsidies to the plant owners. The project was designed in such a way that it accelerated the pace of biogas installation through the involvement of the existing GGC and the ADBN in the installation of plants and in making loans to the borrowers respectively and at the same time it allowed the participation of the various private companies willing to construct the, plants as per the standards and norms of the project. Similarly, series of negotiations, seminars and workshops were held with the commercial banks, specially the Nepal Bank and the Rastriya Banijya Bank, for providing credit access to the potential biogas plant owners. In order to achieve these objectives, the project was divided into two phases. BSP I, implemented from November 1992 to July 1994, had the following specific objectives: Construction of 7,000 plants. Make biogas more attractive to the smaller farmers and farmers in the hills. Conduct necessary 3tudic3 to induce the participation of the private sector In the construction of biogas plants.

9 The first two objectives were met through provision of a flat rate of subsidy of Rs7,000 for the Tarai and Rsl0,000 for the hills. Higher subsidy in the hills was meant for covering the higher transportation costs incurred in the transportation of construction materials and appliances. The objective of participation of private sector was met by instituting studies through consulting firms, which provided in-depth analyses of the existing scenarios and offered recommendations (Karki, et al 1993a and 1993b). Based on those studies, series of workshops, seminars and meetings were conducted, and necessary arrangements were made for the participation of the private construction companies. In the meantime, a mid-term evaluation carried out in May 1994 (HMGN & SNV-Nepal 1994) offered the following recommendations: Instead of a single GGC, the BSP should try to develop the biogas sub-sector as a whole. More banks should be inducted in loan access. Research and standardization of biogas should be apart of the project. Training of masons and staffs of the companies and banks should be emphasized. In order to make the best use of the slurry obtained from the biogas digester, extension work should be initiated and implemented immediately. Monitoring and evaluation of the programmes should form an important part of the project,

BSP II had the following objectives: Construction of 13,200 plants. Make biogas more attractive to the smaller farmers and farmers in the hills. Support the establishment of an apex body to co-ordinate the different actors in the biogas sector. Encouraged by the results of Phase I and Phase II of the BSP, Phase III was designed in 1995 and proposals submitted to the governments of Netherlands and Germany. Unlike in the past, where all the technical assistance and the subsidies were borne by the Government of Netherlands, Phase III has been designed to involve the Government of Germany as well. The overall objectives of Phase III of the BSP are as follows (HMGN/SNV 1995): Develop a commercially viable, market-oriented biogas industry. Increase the number of biogas plants by installing 100,000 additional plants during the project period.

10 Ensure the continued operation of the installed plants. Help in the production of quality gas valve, tap and lamp. Help in the establishment and strengthening of institutions related to the biogas subsector for rendering sustainability to the biogas programme in the country.

An agreement was signed between the HMGN, Kreditanstalt fuer Wiederaufbau (KfW) of German government and SNV-Nepal on 17 May 1997. The agreement laid down arrangements for the funding of the programme until July 1999. Further extension to meet the set target is contingent upon the findings of the recently concluded evaluation study (de Castro, et al 1999). According to the above-mentioned agreement, the funding arrangements are as follows: HMGN will contribute 10 per cent of the financing of investment subsidies in the first year of the programme (FY1996/97) and increase it by 2 percentage points annually to reach 20 per cent in the last year of the project, ie FY2001/02. For Part I (first three years) of BSP III, KfW will contribute up to DM14 million, of which DM7.1 million will be used for providing subsidies to the plant owners and DM6.9 million will be made available to ADBN for onlending to the borrowers for installing plants. SNV-Nepal will contribute up to NGL11.23 million, of which NGL8.83 million will be used for technical assistance and the rest for providing the subsidies.

Current Status of the BSP: Evaluation Findings A recently concluded mid-term review of Part I of BSP III has come up with the following findings (de Castro, et al 1999): Numerical Objective There has been some lag in the installation of plants during Part 1 of Phase III of the BSP. As against the target of 35,500 plants by mid-July 1999, the production over that period has been only 29,304 plants83% of the target with a lag of 6,169 plants. The study attributed the low demand for biogas plants to the economic recession that has been creeping for the past few years. Size of the Biogas Plants Invariably, all the past studies have pointed out the need to reduce the average size of the biogas plants. Phase III has duly incorporated measures to address this objectivethe flat rate of subsidy being one of the most effective ones in this regard. In turn, the average size of the biogas plants is found to be decreasing. In 1990, the average size

11 was found to be 12.86 m3, which declined to 9.6 m3 in 1993. This, obviously, was the result of the flat rate of subsidy, which encouraged plants of smaller sizes, as the net cost to the owners decreases with the decline in the size. From 1995, another strategy adopted by the BSP to encourage plants of smaller sizes was the introduction of bonus to the companies that constructed plants of smaller sizes. This resulted in further reduction of the average size to 8.2 m3 in 1997. During 1998/99, the average plant size has come down to 7.39 m3. Technical Quality of the Plants Quality of plants constructed under the BSP has been receiving due consideration for the overall sustainability of the biogas programme in Nepal. Quality of biogas plants implies a package of benefits perceived by its user in terms of the total costs incurred in its installation. The determinants of technical quality include: (a) quality of design, (b) quality of construction, (c) quality of operation and maintenance of the plant by the users, and (d) quality of after-sales services rendered by the construction company. The evaluation study, based on various annual surveys, has concluded that the design of the plan was satisfactory to 88 per cent of the users. Similarly, 92 per cent expressed their satisfaction over the location of the plant. Regarding the materials used in the construction of the plants, 96 per cent of the users viewed that they were up to the standard. After-sales services provided by the construction companies were satisfactory to 95 per cent of the users. In sum, the present quality standard fixed by the BSP is believed to be up to the standard. The evaluation has also pointed out that the overall success of the biogas programme has been possible because of: Provision and continuity of subsidy for the plant owners. Creation of a conducive policy environment for the entry of significant number of private construction companies. . Protection of the interests of the plant owners through the provision of quality control of the plants constructed by the companies, including the GGC. and Building of the institutional capability of the various actors involved in the biogas programme in Nepal.

12 III. ROLE OF PRIVATE SECTOR IN BIOGAS DEVELOPMENT IN NEPAL

Entry of Private Sector Construction Companies Although the GGC played a pivotal role in the dissemination of biogas technology in the country, its capacity to meet the demand was considered inadequate since not long after its establishment in 1977. Being a subsidiary of the ADBN, the only source for channelling the subsidies provided under various programmes, the GGC, however, enjoyed a monopoly status and displayed inherent weaknesses in its operation, especially in terms of work-force, cost of plants and flexibility in pricing. The pace of progress that the GGC was recording necessitated some thoughts on the entry of private companies to provide competitive atmosphere and hence explore the vast potentiality that existed in the sub-sector. Recognizing this fact, some private companies were approaching the ADBN for getting permission to construct plants and avail of the subsidies. What was lacking was a mechanism to establish standards and norms to be applied to the private companies and monitor their work in terms of design, construction, pricing, after-sales services, and repair and maintenance. Experiences from other sectors and sub-sectors were enough to warn the illusive nature of private sector entry in activities that lacked well-defined standards and norms. Very often, the motive was to reap benefits from certain packages and then switch over to some other business. In spite of these weaknesses of the private companies, the ADBN had started issuing permission to a couple of companies to install plants from FY1989/90 on an experimental basis. Their work, however, was found to be flawed in a number of ways and the Bank even detected cases of fraud. With the implementation of the BSP, however, the subsidy was effectively controlled by the BSP and it did not issue permission until the privatization studies were carried out as per the agreement between the HMGN and SNV-Nepal (BSP 1991). An independent consulting firm carried out the studies (Karki, et al 1993a and 1993b) and it was closely steered by a committee composed of representatives from the ministries, departments, banks and relevant agencies. Following the recommendations made by the studies, private companies were invited to participate in the BSP since the beginning of BSP II. Of the various rules and regulations laid down by the studies and confirmed by the mid-term evaluation carried out in May 1994 (HMGN/SNV-Nepal 1994), the following are the major aspects that the companies, including the GGC, are to follow:

13 Establish a standard design to be adopted by all companies, including the GGC1. Ensure the provision of trained masons for the construction. Guarantee quality appliances. Provide guarantee on structure and appliances. Submit plant completion report and annual maintenance report to the BSP. Visit the plants annually. Comply with the quota of construction based on office network and availability of trained work-force.

The entry of the private companies, which number 50 at present, has had a positive impact on the progress of the biogas plants. As can be seen, from a mere annual average of approximately 400 plants constructed by the GGC since its inception to 1992/93, the numbers since the entry of private companies have averaged at approximately 6,000. This is, indeed, a remarkable achievement of the BSP programme. With the entry of the private construction companies, there has been a steady decline in the share of the GGC, a para-statal organization. The market shares of the private companies and the GGC over time are presented in Table 1. Table 1: Trend in the Share of The Private Sector Year Up to 92/93 93/94 94/95 95/96 96/97 97/98 98/99 91/92 3 321 846 4 167 80 20 100 3 508 2 145 5 653 62 38 100 2 952 2 165 5 117 58 42 100 3 267 3 894 7 161 46 54 100 2 369 6018 8 387 28 72 100 2415 7 454 9 869 24 76 100

Category

Total

In Number GGC 8 824 Private 96 Total 8 920 In Percentage GGC 99 Private 1 Total 100

2 203 28 859 8 844 31 462 11 047 60 321 20 80 100 48 52 100

Sources: Van nes 1997, SNV-BSP and. As can be seen from Table 1, the private sector has gradually built up its share in the total plants. With a mere share of 1 per cent until 1991/92, it has been able to increase its share to 80 per cent by the end of 1998/99. Numerically, this is a welcome

All the companies at present are to follow the model, namely GGC2047.

14

measure. In order to explore the vast potentiality that exists in the biogas sub-sector, the participation of the private sector is extremely important. Of the total 60321 plants installed up to the end of 1998/99, the private sector's share is approximately 52 per cent. There are, however, certain aspects regarding the private sector companies that need some discussion. Based on the performance index, the Annual Report 1998 (BSP 1999) has classified all the companies, including the GGC, into five categories, ie A, B, C, D and E, The performance indicators are measured in terms of number of plants constructed, average size of the plants, average defaults, average penalty and feeding of the plants. For FY1997/98, the categories and the corresponding numbers were as shown in Table 2. Table 2: Classification of the Companies and their Corresponding Shares in the Total Plant Construction during FY1998/99 Category Percentage of Plants Constructed by the Distribution of Type Companies by Category Companies by Type Number of Companies 18 8 4 6 2 38* Per cent 47 21 11 16 5 100 Number of Plants Per cent of the Constructed Plants Constructed 8 808 80 1 402 13 445 4 333 3 57 11 045 100

A B C D E

Very Good Good Average Poor Very Poor Total

Sources: BSP 1999b and BSP. * Data for BGG Company was not available. This analysis has been carried out to indicate the quality of the plants constructed by the private companies that emerged in response to the privatization efforts made by the sub-sector. The findings also indicate as to what extent the interests of the plant owners as well as those of the exchequers are protected. The percentage of companies falling into the very good and good categories was 68, while that belonging to the average was 11. Similarly, 21 per cent belonged to the poor and very poor categories. Now, in terms of percentage of the plants constructed by these companies, the very good and good categories together constructed 93 per cent, while the average category shared 4 per cent. Similarly, the poor and very poor categories shared 3 per cent of the total. Now, if average is considered as within the acceptable range, then 97 per cent of the plants constructed by the GGC and the private companies are within the

15 range of acceptance, and only 3 per cent calls for some corrective measures. Thus, overall the performance of the companies involved in biogas can be considered to be highly satisfactory. Although one of the major factors attributable to the success of the biogas programme in Nepal is the rational decision regarding its privatization (especially for the work of plant construction), the rapid entry of a large number of companies raises some doubts regarding their sustainability. At present, the companies are finding the business lucrative because there are demands for the plants due to, on the one hand, provision of subsidy and, on the other hand, the safeguarding of the interests of the plant owners by the BSP through its quality control activities. Once the subsidy and BSP are phased out, the companies will have to work under a perfect competitive market, ie (a) in the absence of subsidy the demand for plants will decrease and their corresponding shares in the market will decline; (b) in the absence of a strong institutional mechanism to substitute the existing quality control work of the BSP, credibility towards the mushrooming companies will diminish. In order to answer the question: "Will all the companies working at present in the biogas sub-sector be able to sustain their business after the subsidy and the BSP are phased out?," an attempt has been made to measure their current strength in terms of their volume of business in the sub-sector. Based on a recently concluded study (de Castro, et al 1999), it is assumed that companies that are installing less than 100 plants per annum are either weak or need a lot of efforts to sustain themselves. For analytical purposes, the companies that installed less than 100 plants have been classified as small ones while those with 100500 plants and more than 500 plants have been classified as medium and large respectively. The market shares of participating companies are given in Table 3. Table 3: Market Shares of the Companies Participating in the BSP, FY 1998/99 Size of the Companies <100 Plants (Small) 100-500 Plants (Medium) > 500 Plants (Large) Total Source. BSP 1999b. As can be seen from Table 3, of the 39 companies operative during FY1998/99, five major companies were able to occupy 58 per cent of the market. Eighteen companies had the market share of 35 per cent, the remaining 7 per cent being shared by 16 smaller Number of Companies 16 18 5 39 Percentage Total Number of of Construction Companies 41 775 46 3 819 13 6 453 100 11 047 Percentage of Total Construction 7 35 58 100

16 companies. This shows that despite the rapid increase in the number of companies the main business is still in the hands of about 23 companies. The study also shows that about 40 per cent of the existing companies were not breaking even in the business. Moreover, two companies are reported to have exited from the business. It is likely that more will do so in the near future. In this regard, the findings of the mid-term evaluation of Phase III, Part I (de Castro, et al 1999) has classified the companies into: (a) public sector companies (GGC is the only public sector company owned by ADBN) (86% share) and Timber Corporation of Nepal (TCN) (14% share); (b) private sector companies - (i) big players, (ii) small and medium players, and (iii) 'fly-by-night operators'. /. Public Sector: The GGC is the oldest company in the sub-sector. Its share has gradually been decreasing over time (see Table I). The company has been passing through a number of problems, including political interference, over staffing, high staff turnover and lack of staff motivation. 2. The Big Players: This includes a small group of companies that have demonstrated rapid growth in their volume of business. This group, however, lacks required managerial capability, as 'technicians' previously working with the GGC own most of the companies. 3. The Small and Medium Players: This group also seems to have strong commitment to remain in the business. But, like their big competitors, they also have management weaknesses. 4. The Fly-by-night Operators': The mid-term review draft has observed that there are several companies among the 39 recognized ones with very few staff and little office facilities. They are believed to have been established to reap the benefits that they saw in the business. They do not have long-term strategy and are likely to switch over to other businesses once the sub-sector stops offering good opportunity, ie once subsidy and BSP are phased out. Mere establishment of companies does not ensure their sustainability. Sustainability in simple terms can be defined as the capacity/ability of an organization that enables it to continue even under an unfavourable situation. In case of most companies, the ability seems to be lacking. Their volume of business as reflected by the market share is small;

17

managerial capability is weak; they are most vulnerable to the adverse situation of subsidy phase out.

IV. BIOGAS QUALITY CONTROL: CURRENT PRACTICES AND ITS SUSTAINABILITY

Current Practices Of the various factors attributable for the overall success of the biogas programme in Nepal, the quality control implemented by the BSP, perhaps, has been instrumental in achieving the current status of the programme to a greater extent. Since its implementation, the BSP has paid special attention to ensure the quality of the plants constructed under the programme. The objectives of the quality control programme are as follows: Protect the interests of the plant owners. Ensure proper utilization of the subsidy. Enable the companies to become competitive and hence sustainable Level the playing field for the involved companies.

Aspects of Quality Control In order to achieve the stated objectives of quality control, the BSP follows the following aspects of quality control: Quality and Uniformity of Design Although initially there had been some debate regarding the design of the biogas plants, the BSP has adopted the GGC2047 model. All the companies wishing to construct plants under the BSP projects are required to strictly comply with the standard and failure to comply with the standard results in heavy penalty. Quality of Construction In order to follow the design, the construction needs to be based on the design and all the materials need to be up to the specifications, such as size and quality of

18 bricks, rods, cement and sand. Use of sub-standard materials leads to heavy penalty in the quality control check. Quality of Operation and Maintenance by the Users The masons during the construction give basic instructions on the maintenance of quality of the operation and maintenance to the users. As the users gain experience over the first six months of operation, they are further given a one-day training. So, the companies that employ untrained masons, who in turn are unable to instruct the users properly, which would result in poor performance of the plant, would again invite a penalty. Present Practices of Quality Control Based on the annual programmes and budget of the BSP and the institutional capability of the recognized companies, quota is fixed for the latter, for which the process is as follows: Agreement on Standard The BSP and the companies first enter into a co-operation agreement containing area of operation, quota for biogas installation, plant sizing, subsidy and channelling mechanism, after-sales and maintenance requirements, quality aspects, staff development, reporting requirement, termination and suspension clauses. Then the company also needs to enter into an agreement with the BSP. Plants that are constructed outside the agreement cannot avail of the subsidy provided under the ongoing BSP project. Under the agreement, the company should strictly follow that: No family has more than one biogas plant. It offers guarantee for certain appliances and at the same time ensures after-sales services, at least for six years. Plant is not fed with night soil only. Design is based on the GGC drawing, 2047. All the construction materials are up to the standard. Construction is up to the engineering standard. All the fittings are properly done. After-sales services are carried out routinely as well as on as and when needed basis.

Agreement on Penalty Upon agreeing on the quality standard, the next agreement between the company and the BSP is regarding the penalty to be paid by the former in case it fails to comply with all

19 or some of the covenants reached in the agreement. BSP thinks that the word 'penalty' is not essentially a penalty. It is just a mechanism to withdraw that part of the subsidy that has not been properly utilized or in other words has been misused (Lam & Van nes 1994). The penalties are based on the type of default. The defaults are broadly categorized into three: Defaults causing withdrawal of all subsidies. Default causing a penalty. Defaults not causing a penalty. No default and improved performance earning a bonus.

The defaults such as (i) construction of second or third plant in a family, (ii) plant owner has no cattle/buffalo and the digester is fed with night soil only, (iii) no provision of the one-year guarantee on appliances, (iv) absence of the six-year warranty on structure, (v) lack of after-sales services for six years, (vi) plant constructed by untrained/uncertified masons, and (vii) design not consistent with the GGC2047 are liable to be barred from subsidy. Similarly, defects in the construction materials and appliances as well as errors in construction lead to penalty. Defaults that are not liable to penalty include aspects regarding the construction materials and construction that are less serious in nature. Process of Quality Control As per the agreement, the BSP carries out a detailed quality check of about 5 per cent randomly selected plants. During this act, all the points related to the general information, the specification of the plants, construction technique, operation, gas output and so on are thoroughly verified by the BSP technicians who have been trained by the expatriate and Nepalese technicians in this field. With a representative of the construction company, the technical staff visit the sample plant and verify each point as outlined in the agreement. Defaults are listed, discussed, agreed on right in the field so that no controversy remains. Based on the default, penalty is calculated and charged to the company, and deducted from the subsidy amount to be made available to it on behalf of the plant owner. Regarding the quality control activities, the mid-term review (de Castro, et al 1999) observes that it has the following advantages and disadvantages: Advantages It allows a very high level of construction.

20 Because of after-sales services provision, the operative continuity of the plant is ensured. It is used for the accreditation of the companies. Frauds regarding subsidy are minimized.

Disadvantages Most of the companies still feel it as unnecessary imposition from the BSP. It is a very expensive procedure. Similarly, about the design, the mid-term review considers that because of the standard, it has been less complicated. Had there been more than one design, the work would have been rather very complicated. The one-model approach has greatly simplified the work. It is, however, not devoid of criticisms. The main reason is the blockage on the development of less costly technology. Experts believe that the GGC2047 offers little chance for cost reduction. In this regard, the mid-term review 1994 (HMGN/SNV-Nepal 1994) has made some recommendations, which are still valid. The mid-term review states: Biogas plants being installed in Nepal as part of the BSP are of fixed dome type having a fiat cement concrete bottom/floor, a brick or stone masonry cylindrical tank and a dome shaped cement concrete roof an inlet pipe connecting the digester with feeding tank and a rectangular outlet tank. The fact that cement concrete and brick masonry structures have much lower tensile strength than their compressive strength indicates the possibility of either making the biogas plants stronger or reducing their costs by employing shell structure for the digester and gas storage (the so-called Deenbandhu model). A few plants of this design that have been developed in India having segments of two spheres of different radii of curvature joined at their base to form the digester and the gas storage have already been installed in Nepal by an NGO (South Asia Partnership-Nepal) at lower costs.
..

Sustainability

Undoubtedly, the adoption of the one-model approach by the BSP has simplified the process of quality control in reaching the present status to a great extent. The model has helped in establishing uniform standard and norms to be followed by all the players in the sub-sector. It can be considered as a very prudent measure in the beginning. Had there been more than one model, the quality control process would have been rather cumbersome and more expensive than the present one.

21 The model, however, is considered to be more expensive as compared to one mentioned above. Failure to offer alternative to this model could considerably reduce the demand in future once the subsidy is phased out and the richer strata of the population are saturated with biogas plants. Studies show that until now, almost all of the plant owners belong to economically richer strata of society (CMS 1999; Dev part 1998; East Consult 1994; Lam & Van nes 1994). And, there is nothing wrong with this result. It is quite in concert with the stated objective of the biogas programme, ie check the environmental deterioration by substituting fuelwood, agricultural waste and dung cake to meet the rural energy demand. The programme is notand should not be as long as there is enough demandpoverty-oriented. At the same time, the BSP also has a very important objective of developing the biogas as a market-oriented viable industry. This means, all the interventions, ie subsidy and external assistance, would cease sometime in future. This would increase the cost of the GGC2047 model, considered to be already expensive and out of the reach of the poorer strata of the population. In order to make the present biogas programme sustainable, there is needed some R&D work so that the technology becomes cheaper and within the access of the poorer people in the rural area.

V. SUBSIDY, ITS ROLE IN PROMOTION OF BIOGAS PLANTS, PLAN FOR PHASING AND POSSIBLE EFFECTS THEREAFTER

Quality control work and subsidy on investment combined with privatization of the plant installation are considered to be three major factors contributing to the overall development of the biogas sub-sector.

History of Subsidy to Biogas Plants

Application of definitional subsidy to the biogas plants began in the Agriculture Year (1975/76) when the government provided interest-free loans to about 290 plants. Similarly, in FY1983/84, an incentive of Rs5,500 per plant was provided under special rice crops launched in four Tarai districts2. Planned efforts to develop the biogas beganfrom the Seventh Five-Year Plan (1985-1990) when some 4,000 plants were planned for the plan period and 25 per cent subsidy on investment and 50 per cent subsidy
2

In order to promote the biogas, it was a linked up with the special rice crops in the four

22 on interest were provided. This, however, was implemented only during the last two years of the plan period. The subsidy on capital investment received continuity after the implementation of the BSP.

Economic Rationale for the Subsidy

The economic rationale for any subsidy scheme for production of goods and services lies in the benefits that accrue to society as a whole from the activities undertaken. Because of the existence of price distortions and lack of perceived benefits from the goods and services, private benefits fall below the social benefits and do not become attractive to the private entrepreneurs, while from the social point of view, production of such goods and services yields benefits exceeding the costs and becomes desirable for society as a whole. Such activities require external inducement so that the private sector takes up the activity and the social benefits are maximized. In case of biogas, the economic rationale for the subsidy was investigated in a study conducted in 1991 (Silwal 1991). As usual, the presence of price distortions, absence of perceived benefits, such as the value of the increased nutrients content from the slurry obtained from the digester, resulted in financial internal rate of return (FIRR) lower than the prevailing market rate of interest and an economic internal rate of return (E1RR) higher than the social opportunity costs of capital, which justified the subsidy. Another study, which was conducted to evaluate the effectiveness of the ongoing subsidy, came up with the following findings and recommendations (Silwal & Pokharel 1995): Due to the presence of a distortive pricing mechanism and lack of perceived benefits, FIRRs for all sizes of the plants were lower than the market rate of interest. The prevailing rates of subsidy (Rs7,000 in the Tarai and Rsl0,000 in the hills) resulted in FIRRs ranging from 15.89% to 33.35%. The average E1RR for all sizes was 23.82% and hence the subsidy was rationalized.

In addition to rationalizing the ongoing subsidy, the study also recommended one more subsidy to the inaccessible hill districts at the rate of Rs 12,000 per plant. Similarly, a recently conducted study (Kandel 1999) has the following findings:

districts of Terai.

23 The EIRR is higher than the FIRR mainly because of the subsidies on kerosene and urea, and the low pricing of firewood. The other benefits that are s till missing in the private benefits stream are the health benefits accruing from the use of the biogas.

The benefits accruing from the improvement in health, however, are not easy to quantify. Both the studies have strongly rationalized the subsidy. Impact of the Subsidy on Installation of Plants The impact of the subsidy on increasing the number of plants has been remarkable. Even before the BSP was implemented, the subsidy showed its distinct role in the promotion of the biogas, ie there was direct correlation between the number of plants installed and the provision of subsidy. Table 4 shows the impact of subsidy on installation of the biogas plants before the BSP. Table 4: Biogas Plants Installed under Various Subsidy Schemes by Year Year 86/87 87/88 88/89 89/90 90/91 91/92 Up to Number of Plants Source: BSP. As can be seen, there was a gradual increase in the number of plants installed over time, for during this period there was some type of subsidy except during 1990/91 when a capital subsidy of 25 per cent was provided on plants of 6 m3 and 10 m3 only. Then, from 1991/92, the number of plants installed picked up as the newly elected government of the Nepali Congress announced the subsidy at the rate of Rs7,000 for Tarai andRsl0,000 for the hills. In this way, the present programme is a subsidy-driven one. With the implementation of the BSP and continuation of the subsidy, the effect has been quite satisfactory. Besides the increase in the number of plants over lime, another desirable impact of the subsidy has been the tendency towards installing plants of smaller sizes. Because of the flat rate for a particular geographical region, ie Rs7,000 in the Tarai, Rs10,000 in the hills and Rs 12,000 in the hilly districts not connected with road, the plant owners have been found to be inclined towards installing smaller plants as this reduces their 85/86 2 166 405 676 1 108 1 403 862 2 304

92/93 4 173

24 costs considerably. For instance, the average size of plants during 1989/90 was 13.7 m , which decreased to 9.6 m3 during 1992/93 and further declined to 8.2 m3 during 1996/97 (de Castro, et al 1999). The current subsidy scheme, however, is not without defects. For instance, all the villages of Kathmandu, Bhaktapur and Lalitpur receive subsidy at the rate of Rs7,000 whereas Pokhara receives Rsl0,000. This is reported to be discriminatory against the people of remote areas of the former districts (there are places in Lalitpur requiring two to three days of trekking).

Plan for Subsidy Phase-out

The general policy of the government has been to phase out all the subsidies that are currently in effect. In this regard, subsidies on fertilizer and irrigation have been reduced considerably. As to the biogas subsidy, no timeframe has been laid down for the phaseout. The mid-term review (de Castro, et al 1999) considers that the present level of subsidy is reasonably high enough to attract the users who have not yet perceived the benefits. Once they perceive the benefits, the programme can keep on going even when subsidy is gradually phased out. The subsidy rates for 1999/2000 for all the three geographical regions are shown in Table 5. Table 5: Subsidy Rates for 1999/2000 (2056/57)

In Rs
Size (cu.m.) 4 6 8 10 15 and 20 Source: BSP. In terms of discouraging larger sizes, the implementation would be able to achieve its goal to a great extent. This will minimize the current problem of underfeeding of the plants, which is reported to be very common among the larger plants. Better-off farmers consider the larger plants as status symbol and insist on installing them despite the limited availability of dung that they get from their animal stock. It must, however, be noted here that the amount of subsidy for the larger sizes and invariably installed by better-off farmers will be so small and meaningless that they would hardly opt for it. Tarai 7 000 7 000 6 000 6 000 No Subsidy Hills 10 000 10 000 9 000 9 000 No Subsidy Remote Areas 12 000 12 000 11000 11 000 No Subsidy

25 Instead, they would construct from their own resources, including bank finance. In this case, they will be out of the quality control fold and the market may be distorted beyond control. Instead of provisioning very little for the larger sizes, it would be better to ban altogether installation of plants of sizes of 15 m3 and 20 m3. Then the four sizes, ie 4 m, 6 m3, 8 m3 and 10 m should get the flat rate of subsidy as at present. This arrangement would natural would naturally bring down the average size to less than 8 m3, which is the target of the present BSP. In the context of the government policy of gradual phase-out of the subsidy for all the sectors of the economy, it would be very rational on the part of the biogas programme to formulate a policy of phase-out by certain period of time. The timeframe would provide time for preparation for all the stakeholders.

Possible Effects of the Phase-out of the Subsidy

As no timeframe has yet been decided for the phase-out, it would be premature to assess the impact of the phase-out. No matter what timeframe is decided, the reduction/phaseout of subsidy in the absence of proper R&D leading to cheaper technology, ie considerable reduction in the existing costs of biogas plant, could adversely affect the biogas sub-sector, especially in terms of demand. If the mid-term review-recommended reduction of subsidy is implemented, it would reduce the demand for the biogas plants. A total phase-out would further decrease the demand. So, the phasing out should not be implemented before models of technical competence and lower costs are developed.

VI. FINANCING OF BIOGAS

Biogas installation, under the current technology, is not a cheap proposition. A typical costs structure trend for a 10 m biogas plant over a period of six years is given in Table 6. The figures are for the total costs. The sources of financing these costs are three: equities, subsidy and loans from the ADBN. Some farmers may bear some costs in the form of equities, while others may prefer to borrow all the costs less the subsidy from the banks. Table 7 provides information on the amounts of equities, subsidy and loans for all the three phases of the BSP.

26

Table 6: A Typical Costs Structure Trend for a 10 M Biogas Plant (1991/92-1996/97) InRs
Item/Year To be managed by farmers Cement Other building materials Unskilled labour To be managed by company Pipes and appliances Overhead + 1 year service Additional service period Total 91/92 4 180 5 500 1575 4 696 3 950 1 150 21 051 92/93 4 180 5 500 1 575 5 277 3 950 1 150 21 532 93/94 3 990 5 500 1 575 4 945 3 950 1 050 21 185 94/95 4 465 5410 1 575 5 070 4018 1 000 21 713 95/96 5 320 6 340 2 100 96/97 6 080 8315 2 100

4 696 5 460 4 600 4 800 1 000 1 500 24 056 28 255

Source: Van nes 1997. Table 7: Finance and Financing Sources for the Biogas Plants Constructed under BSP In Rs Million
Phase Year 1992/93 1993/94 1994/95 1995/96 1996/97 1997/98 1998/99 Equities 2.56 6.20 Phase I Subsidy Loans 28.60 30.48 49.38 37.64 14.90 29.96 11.85 44.17 61.86 10.04 53.95 77.96 5.77 51.00 74.00 80.00 63.27 90.17 84.96 120.88 94.27 129.94 Equities Phase II Subsidy Loans Phase III Part 1 Equities Subsidy Loans

Notes: (I) Equities calculation is based on actual cash/loan shares and assumption of net cash investment being approximately 85% of net loan investment. (2) Subsidy calculation represents actual subsidy expenses. (3) Loan calculation is based on average estimated net loan amount by ADBN of NRs 20,667 per plant and actual loan/cash shares in production. Source: Castro, et al 1999; Van nes 1997; BSP.

In the first year of Phase I, the total investment was Rs80.54 million, of which 3.17 per cent was financed from the equities, and subsidies and loans contributed to 35.5 per cent and 61.30 per cent respectively. In the second year of Phase II of the BSP, the total investment amounted to Rsl69.78 million. Of this, 17.64 per cent was equities financed, and 36.43 per cent and 45.91 per cent were financed from

27 subsidies and loans respectively. Similarly, in the third year of Phase III Part I, the total investment was Rs.5304.21 million, of which 26 per cent was financed from the equities, 31 per cent and43 per cent from the subsidies and loans respectively. Thus, over the three phases of the BSP programme, the share of equities has increased while the shares of subsidies and loans have declined. The analysis on the financing discussed so far is based on the amount of finance from different sources. In order to assess the percentage of plants that have been financed from the different sources, Table 8 has been constructed. Table 8: Percentage of Solely-Equities Financed and Equities and Loan Financed Plants In per cent Year/Types 1992/93 1993/94 1994/95 1995/96 1996/97 1997/98 Solely Equities-financed 6 16 23 30 40 42 Source: Castro, et al 1999; Van nes 1997. Being applicable to both the categories, ie equities-financed and equities plus loanfinanced, all the plants are subsidized and hence there is no need to indicate them separately. Regarding solely equities-financing, the trend is quite impressive. There has been a general tendency towards financing the plant from equities plus subsidy. Loan does not seem to be a constraint for the plant owners (CMS 1999; Devpart 1998; East Consult 1994; Lam & Van nes 1994). Moreover, since the second phase of the BSP, besides ADBN, NBL and RBB also are providing loans. On the repayment front also, the performance is reported to be satisfactory. ADBN, being the pioneer of biogas promotion in Nepal, is still found to be the most favoured source of credit, and over 90 per cent of the loans to the biogas are disbursed through this bank. Despite the higher rate of interest charged by the ADBN (16%), plant owners preferred to have loans from it than from NBL and RBB, which charge 11.5% and 15% respectively. The latter two are relatively new in this field and have to establish themselves as friendly banks among the rural borrowers, especially in case of biogas loans. Equities- and Loan-financed 94 84 77 70

60 58

28

VII. INSTITUTIONAL ARRANGEMENTS

The first institutional set-up for the promotion of biogas technology began with the establishment of the GGC, an undertaking of the ADBN, TCN and UMN, back during 1976/77. Over time, there has been a gradual growth in the institutional aspects, Besides the BSP, the following types of institutions are involved in the biogas sub-sector: Biogas Companies On the supply side of biogas, the companies are the major stakeholders operating as a business entity in a competitive manner. With the implementation of the BSP, there has been a steady increase in their number. Table 9 provides information on the number of companies working in the biogas sub-sector. Table 9: Trend in the Entry of Companies In Number Year Working with BSP Working outside BSP Phase I 1992/93 1993/94 Phase II 1994/95 1995/96 1996/97 Phase III 1997/98 1998/99 1999/00 Source: BSP. The number of companies at present is 50, including the GGC. One of the guiding objectives of the privatization of the sub-sector has been to bring in private companies working in a competitive way so that the potential plant owners have a choice in constructing the plants from the company they consider appropriate. This objective seems to have been met to a great extent. 1 1 17 23 36 41 39 50 6 10

29

Weaknesses and Problems of Companies

Except the GGC, which has been in the business for more than 20 years, the emergence of private companies is relatively new. When staff working in the GGC saw an opportunity in the sub-sector, they decided to form companies in line with the BSP requirements. Similarly, the private companies also started losing some of their staff and workers, who, after working for sometime in the companies they were recruited, saw it more profitable to establish their own companies. In this way, most of the staff and workers of the existing companies have had some links with the GGC or the private companies established in the beginning. And there does not seem to be anything wrong about it. In an open and democratic society this is a proper way of developing institutions. These companies, however, are reported to be facing the following problems at present (Castro, et al 1999; Van nes 1997):
' : -

Biogas Companies in General One problem of biogas companies in marketing their product is the fierce competition. Especially in the traditional biogas areas in the Terai (Bharatpur, Pokhara, Butwal) where a relatively high number of biogas companies are operating in an increasingly saturated market, this has in a number of cases led to unhealthy and intolerable practices. Examples documented are companies slandering each other, robbing of loan applications submitted to the bank by another company, up to the point where the farmer has been pursued to change company after construction has commenced. Another serious problem is the weak liquidity position of many companies, hampering a smooth and continuous operation. The capital base of many (smaller) companies does not allow taking loans from banks, and even larger companies are found to be unable to obtain adequate loans to cover their working capital requirement. The new subsidy channelling procedure, introduced with the start of FY2056/57, is aggravating this problem. SNV/BSP, recognizing the dilemma, is therefore with the start of this fiscal year providing working capital to companies. The eligible amount depends on the preceding year's production of the company in combination with its performance quality, and companies are required to cover the advance with a bank guarantee. Despite being the oldest company, the GGC has been facing a series of problems. One of the serious ones has been the frequent change in the chief executive. Other problems include bureaucratization, overstaffing, high turnover of the staff and lack of staff motivation.

30 The steady slide in the market share is a clear indication of the problem (see Table 1)

Association of Biogas Companies

Nepal Biogas Promotion Group An entity, namely the Nepal Biogas Promotion Group (NBPG), consisting of representatives of all the biogas companies, was established in the year 1995. Since it was a democratically established entity for promoting the biogas technology and at the same time protecting the common interests of its members, the move was very much welcomed from all corners. Some of the identified activities for the NBPG include: (a) facilitate the import of biogas appliances, (b) solve the problems with the banks, (c) avoid unhealthy competition among the member companies through preparation and implementation of a code of conduct, (d) gradually take over the activities of the promotion of biogas, training and extension activities being carried out by the BSP. Because of a serious division among the members, since not very long after its establishment, the organization has shown little performance; staff is not empowered adequately and lack desired level of dynamics (Van nes 1997). Strengths of the NBPG include: (a) it is recognized as an agency by the AEPC, BSP and other related agencies, (b) it has been associated with BSP and has received technical assistance for its institutional capability building, (c) it has a separate secretariat manned by full-time staff, (d) it has initiated some of the work of BSP such as quality control and after-sales services, (e) its membership is larger than that of AEPDF, and (f) it has aimed at gaining Financial autonomy through import of some appliances, membership fees and consultancy services. As discussed above, the organizations also have certain weaknesses, which is likely to threaten their sustainability. They are: (a) clash of interests among the members has already resulted in its downsizing through division, which may occur in the future as well, and (b) it lacks trained manpower and other necessary facilities to take up the work of quality control and after-sales services and at the same time run the group as a business entity. Alternative Energy Promotion and Development Forum (AEPDF) Although it would be premature to evaluate the strengths and weaknesses of this new entity at this juncture, some of these aspects have been outlined by the mid-term review. On the strength front, the organization is reported to have been able to attract over 30 companies out of 50 working in the sub-sector up to 1 November 99. It has also indicated some possibility of working in the field of biogas promotion, training and even some

31 quality control work. Regarding the weaknesses, prominent one is its dispute with the NBPG. Another serious weakness is the 'dual loyalty' of its members, ie members of this organization are also the members of the NBPG. Alternative Energy Promotion Centre (AEPC) Based on the mid-term evaluation (mid-term review), May 1994 (HMGN/SNV-Nepal 1994), which recommended that "HMGN should establish as soon as possible an apex institution for the development of the biogas sector. As long as such an institution is not established, ADBN and SNV/Nepal should work closely together for the implementation of the Programme,' after much discussion and debate, the Ministry of Science & Technology in August 1996 formed the Alternative Energy Promotion Centre (AEPC) under the Development Board Act. As the name implies, it is related to all the alternative energy sectors, including biogas. The AEPC's functions include the following (HMGN & SNV 1995):. Analysis of policy issues and advice on policy matters. Co-ordination with other sectors and ministries. Preparation of sector-wise plans and targets. Elaboration of regulatory frameworks: setting of standards and guidelines, criteria for registration and licensing of companies. Mobilization of funds and liaison with donors. Review/approval of annual work plans in respect of donor-funded projects in alternative energy. Monitoring of development in the alternative energy sector as a whole. Organize and/or participate in programme and project evaluations.

A recent evaluation (de Castro, et al 1999) shows that being an entity established under the Ministry of Science & Technology and funded by the government, it has a number of advantages in becoming an effective organization for the promotion of alternative energy in the country, including biogas. On the strengths of the organization, the noteworthy aspects include: (a) government's commitment is reflected through its provisioning of budget for the operation of the centre, (b) being a new entity, it does not have a history of incompetence, (c) all stakeholders have recognized it as a national body for policy formulation, (d) it has gradually started taking up some of the BSP's work like some quality work and monitoring and evaluation, (e) it has qualified and competent staff to run the centre, (f) being a government undertaking, it has easy access and links with the NPC, l i n e ministry and donors, which other stakeholders do not have, (g) it has recently

32 entered into an agreement with DANTDA for institutionalization and capacity building of the AEPC so that it can take up more and more responsibilities in future, (h) it has the potentiality of attracting more donors in future. It is also not without weaknesses. They include: (a) being a government undertaking, it needs to comply with the rules and regulations that are not flexible enough to allow it to run the centre, (b) like other government organizations, it may face political interference, (c) the low salary and incentive structure may cause high turnover. Institutionally, the biogas sub-sector cannot be considered as a strong one. Leaving the BSP aside, it remains with three organizations, ie AEPC, AEPDF and the NBPG, which have not been able to demonstrate the desirable capacity. The BSP is just a project office and temporary in nature, which will be phased out in future. At present, it has been playing a vital role in the promotion of biogas in the country. It initiated, designed and got government approval on a number of policies, including the subsidy and the privatization. It has been implementing the most acclaimed work of quality control, which has been a key to the overall success of the biogas programme. Once the BSP is phased out, there needs to be a strong entity to take up the work of policy formulation, regulation, and monitoring and supervision.

VII. IMPACT OF BIOGAS PLANTS

The BSP, through its consultants, conducts periodic surveys of the users. The main objectives of the surveys are to assess the overall impact of the biogas plants, mostly in terms of fuelwood and kerosene saving, saving on time that would have been required for collection of fuelwood and cleaning of utensils used for cooking in fuelwood in the absence of the plants. In order to know the impact of the biogas plants on its users, five studies have been found to be relevant. Their findings are summarized as follows: The User Survey 1994 (East Consult 1994) conducted in the year 1994 revealed the following 'other' benefits that were reported by the users, among others: On an average a plant saved an equivalent of 3 metric tons (MT) of fuelwood and 40 litres (It) of kerosene annually.

33 Time savings from the collection of fuelwood and cleaning of utensils averaged 3.10 hours per day. Respiratory diseases very common among the fuelwood users were reported to be low among the biogas user households.

Some of the recommendations made in the study are: Increase the frequency of training of construction masons and operation and maintenance (O&M) training to the users. Improve the after-sales services. Introduce a consistent policy to incorporate small and marginal farmers in the biogas programme. Provide additional subsidy to cover extra transportation costs in the far and remote areas. Conduct research to ensure adequate gas generation during the cold season. Induct other banks to disburse biogas loans. Conduct R&D to replace the concrete dome in the hills.

Similarly, the 1995 survey (Lam & Van nes 1994) revealed the following impact: The majority of the biogas owners were medium or large farmers. As against the national literacy of 40 per cent, literacy among the plant owners was 80 per cent. On an average, use of biogas saved 3.5 MT of fuelwood and 56.6 It of kerosene per plant per annum. More than half of the plants were underfed, ie there was no sufficient dung to put into the plants.

It recommended:
3

GGC's after-sales services should be enhanced3. Masons should not be allowed to construct too many plants. GGC should open branch offices to provide services to the potential owners. ADBN's practice of charging interest on subsidy until it is adjusted in the borrower's account should be discontinued. User training should be initiated. Until this survey, the sample included plants constructed by the GGC only.

34 Provision of incorporating small and marginal farmers should be introduced.

Similarly, the User Survey 7998 (Devpart 1998) reported the following findings: Unlike the findings of the previous survey, the users also consisted of a few small and marginal households. Literacy among the plant owners was 77 per cent. In all 36 per cent of the plants were attached with latrines. The O&M services provided by the construction companies were considered to be satisfactory in most of the cases. Altogether 68 per cent borrowed from the banks (64 per cent from ADBN, 4 per cent from RBB) and the rest constructed on cash down payment. Compared to other types of loans, the repayment of biogas loans was good. Saving of fuelwood and kerosene was reported to be 1.6 MT and 24 It respectively. Recommendations made by the same survey are: For maintaining the current reliability and efficiency of the biogas plants, BSP should continue the current practice of monitoring. Social awareness programme is necessary to maximize the social benefits from the plants. For maintaining the current reliability and efficiency of the biogas plants, BSP should continue the current practice of monitoring. Efforts to downsize the plant should be continued so that cases of underfeeding are minimized. Problem of after-sales services could be minimized by the companies through involvement of local NGOs. The BSP should consider inducting the staff of government line agencies so that they can participate actively. The User Survey 1999 (CMS 1999) reported the following findings: The literacy rate of the sample households was about 75 per cent. Altogether 69 per cent of the plant owners used dung as the primary feeding material for bio-digester and 27 per cent of the plants were attached with latrines. In all 77 per cent of the plants were installed for cooking conveniences due to shortfall of fuelwood. A total of 86 per cent of the users reported of sufficiency of gas for cooking and lighting. Quality control was found to be satisfactory by about 95 per cent of the plant owners.

35 Altogether 48 per cent were found to be using the slurry after making compost. About 98 per cent of the plant users reported to have savings on time after the use of biogas. Decrease in respiratory diseases by 53 per cent was reported. Approximately 55 per cent expressed their satisfaction over the bank loan procedures.

Surprisingly, the latest survey has not quantified the amount of fuelwood and kerosene saved from the use of biogas plants. From all these findings, it can be safely concluded that biogas has been a very useful technology that has impacted the life of its users in a positive way.

IX. SUMMARY AND RECOMMENDATIONS

Summary History of Biogas and Advent of BSP Although the history of biogas in Nepal dates back to 1955, HMGN's efforts began only from the Agricultural Year (1975/76) when some 290 plants were installed with interest free loans from the ADBN. With the restoration of democracy in 1990, biogas was able to draw greater attention of the authorities, who by that time had recognized the importance of the sector and were committed to initiating measures to accelerate the pace of plant installation. So, in 1991, the HMGN announced a subsidy scheme, which has been in effect until now. Initially, the rate of subsidy was Rs7,000 for the Tarai and Rsl0,000 for the hills. Institutionally, there is one parastatal and 38 private construction companies engaged in the plant installation. An apex body, namely Alternate Energy Promotion Centre (AEPC), has been established with the responsibility of overseeing the overall development of alternate energy, ie biogas, micro-hydro, solar, etc. The Biogas Support Programme (BSP), a Netherlands government-assisted project, has been carrying out a l l the activities related to the promotion and selection of biogas companies, subsidy administration, quality control, and monitoring and supervision of the biogas programme. Recent evaluation studies have revealed that, on numerical aspect, the BSP

36 implementation so far has been able to meet the target. On the average size of the plant also, there has been a steady decline since 1993. The average size in 1990 was 13.7 nr, which decreased to 9.6 m3 during 1993/94, 8.2 m3 during 1997/98 and 7.49 m3 during 1998/99. All this is due to the flat rate of subsidy, which has decreased the total cost through adoption of plants of smaller sizes. Entry of Private Sector Construction Companies Implementation of a sensible and consistent subsidy policy combined with the development of a liberalized policy and procedures for private sector participation triggered the entry of the private sector in the construction of biogas plants. This has had a significant impact on the progress of the number of plants. With a mere 1 per cent share in the total plants constructed during FY1990/91, the private sector continued to record higher share, which reached 80 per cent during 1998/99. In aggregate the GGC and private companies are found to have about equal share in the total plants installed so far. None of the 8 companies engaged in the plant construction is found to be up to the mark. BSP classification has (a) very good (47 per cent), (b) good (21 per cent), (c) average (11 percent), (d) poor (16 per cent) and (e) very poor (5 per cent). Quality Control ; The quality control aspect is a well-steered programme that has protected the interests of the plant owners and hence elevated the image of the programme to a credible position. The quality control process is quite lengthy and hence costly. Once the BSP is phased out, its continuity may pose some problem, as other institutions have not demonstrated required institutional capability to handle the job. Another serious aspect of the present quality control is the need for strict adherence to a single model of the biogas plant, which has seriously blocked the possibility of development of cheaper and affordable models through R&D. The socio-economic status of the owners of the existing plants warrants that until and unless low cost models are developed and implemented, the aim of making the plant accessible to the poor may remain just a dream.

37 Subsidies The driving force behind the entry of the private companies is the provision of subsidy. The phase-out of the subsidy at any point of time may have some adverse effects on the survival of the private companies, as there will be a drastic reduction in the demand for plants. Studies have shown that the EIRR is higher than the FIRR, which justifies continuation of the existing subsidy. The impact of the subsidy on increasing the number of plants has been remarkable. Even before the BSP was implemented, the subsidy showed its distinct role in the promotion of the biogas, ie there was direct correlation between the number of plants installed and the provision of subsidy. The present programme is a subsidy-driven one. With the implementation of the BSP and continuation of the subsidy, the effect has been quite satisfactory. Besides the increase in the number of plant over time, another desirable impact of the subsidy has been the tendency towards installing plants of smaller sizes. The current subsidy scheme, however, is not without defects. For instance, all the villages of Kathmandu, Bhaktapur and Lalitpur receive subsidy at the rate of Rs7,000 whereas Pokhara receives Rs 10,000. This is reported to be discriminatory against the people of remote areas of the former districts. Within the framework of the government's policy to phase out subsidy to all sectors, the BSP also is planning to reduce subsidy on plants of larger sizes from FY1999/00, with an objective of discouraging larger size plants. It is, however, necessary to give a timeframe for the phase-out of the BSP subsidy. As no timeframe has yet been decided for phase-out, it would be premature to assess the impact of the phase-out. No matter what timeframe is decided, the reduction/phase-out of subsidy in the absence of proper R&D leading to cheaper technology, ie considerable reduction in the existing costs of biogas plants could adversely affect the biogas subsector, especially in terms of demand. It should, however, be noted that the achievements made in terms of the number of plants installed so far and the impact on the life of the users, the biogas programme can be included among the few successful programmes in Nepal. Moreover, of the various subsidized programmes, biogas has multiplier effects. It not only substitutes fuelwood and saves the nutrients lost through the use of dung cakes, but also has effects on the reduction in the fuelwood consumption, thereby reducing

38

environmental degradation, and reduction in the respiratory diseases. Use of biogas for lighting facilitates the children to study at night and helps rural men and women to carry out some cottage industries. Financing of Biogas Plants On the financing front, there has been a very encouraging trend on the proportion of equities-financed plants. For instance, during the first year of the BSP (1992/93), the number of equities-financed plants was reported at 6 per cent, which increased to 30 per cent during 1995/96 and to 42 per cent during 1997/98. Regarding the source of credit, the ADBN has been playing a pioneer role. Until the BSP I, it was the only source. Now, some loans are reported to have been disbursed through NBL and RBB as well. Despite lower rates of interest on biogas loans offered by these two commercial banks, the borrowers' preference is reported to be still the ADBN, which disburses more than 90 per cent of the total annual biogas loans. The apparent reason for this is the simpler procedure and more familiar atmosphere. Institutions Institutionally, the biogas sub-sector cannot be considered as a strong one. Leaving the BSP aside, it remains with three organizations, ie AEPC, AEPDF and the NBPG, which have not been able to demonstrate desirable capacity. The BSP is just a project office and temporary in nature, which will be phased out in future. At present, it has been playing a vital role in the promotion of biogas in the country. It initiated, designed and got government approval on a number of policies, including the subsidy and the privatization. It has been implementing the most acclaimed work of quality control, which has been a key to the overall success of the biogas programme. Once the BSP is phased out, there needs to be a strong entity to take up the work of policy formulation, regulation, and monitoring and supervision. Impact of the Biogas Plant on the Life of its Users There has been a remarkable impact of the biogas plant on the life of its users. Surveys have revealed that the tangible impact in terms of savings in firewood, kerosene and savings in time that would be required in the absence of biogas plant, and the intangible benefits such as the reduction in the respiratory diseases plus other benefits

39 ail are perceived to be quite significant by the users. Recommendations Although very encouraging in absolute terms, the number of biogas plants may not be considered commensurate with the efforts and resources being geared towards this subsector. So far, the total number of installations in any year has not crossed the 10,000 mark, indicating the maximum capacity of the existing mechanism. The present supply capacity consisting of an apex body (AEPC), 50 construction companies and the BSP project office, has been able to install a maximum of 11,047 plants during FY1998/99, which is only 3 times of the plants installed single-handedly by the GGC during FY1993/94 (3,508). So, the BSP target of installing up to 25,000 plants a year remains doubtful. In order to achieve the achievable, there needs to be some improvement in the existing institutional structure and policy. For this the following recommendations are made: Programme for Institutional Capacity Building of the AEPC Institutionally, the AEPC is placed at the apex and is to carry out the work of both policy formulation and regulatory and facilitative work that the BSP is doing at present. The BSP is a project based office, which will be terminated once the external assistance ceases to flow. In this regard, the AEPC should embark upon building itself as an institution that is capable of taking over the activities currently undertaken by the BSP. Considering the state of the private companies and their associations, ie NBPG and AEPDF, it will take quite sometime before they can be treated as self-controlled entities which do not fail to comply with the standards and norms set for the plant. Initiate R&D and Introduce Flexibility in the Plant Model Need for strict adherence to the GGC2047 model has definitely enhanced the quality of the plant. At the same time, it has seriously limited the scope for developing low cost models appropriate for the poorer sections of the population. Models that have been developed elsewhere could be adapted first and their suitability evaluated, Announce Timeframe for Subsidy In order to exploit the potentiality in biogas, the subsidy needs to be announced with a timeframe and the steps in phasing it. It would provide the potential owners with a vision for installing the plants. The proposed phasing of the subsidy, however, should be carefully implemented since very little of the potentiality (a little over 50 thousand out of the 1.3 million potentiality) has been achieved to date. Moreover, the EIRR calculated by all the studies (Silwal & Pokharel 1995; Silwal 1991; Kandel 1999) have been found to

40 be quite higher than the FIRR, indicating that the subsidies need to be continued for sometime until the distortion in the prices of fuelwood, urea, kerosene, etc are corrected to reflect the competitive pricing system. So, an abrupt decision to discontinue the present subsidy may seriously jeopardize the BSP, which has gained momentum to a satisfactory level. Develop Village Level Masons and Suppliers of Appliances The present practice of contracting the private companies to construct biogas plants does not allow an adequate coverage of the potential plant owners and at the same time the after-sales services of the companies are not profitable, leading to non-compliance with the contract. Tt would be a better proposition to train the masons at the village level so that they can work as the agents of the biogas companies and at the same time also open small shops with supplies of appliances and spare parts. This would increase the outreach of the programme and the progress could be faster. Concentrate the Plants so that Services become Cheaper The current practice of installing biogas plants in a scattered manner has resulted in an increase in the costs of services, especially the after-sales services, and this in turn has further led to even non-compliance with the contract for guarantee of after-sales services, as it may be cheaper to pay the penalty for non-compliance than to comply and provide the services. So, it is recommended that efforts be made to construct the plants in a pocket area approach. Make the Subsidy Rate Uniform for Similar Areas There have been cases of non-uniformity of subsidies in similar areas. This needs to be avoided in future and subsidies made consistent.

41

Annex I: Number of Biogas Plants Installed up to 31 August 1999

S.N. 1, 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31, 32. District Achham Arghakhanchi Baglung Baitadi Banke Bara Bardiya Bhaktapur Bhojpur Chitwan Dang Dailekh Darchula Dhading Dhankuta
Dim n lisa

Total Number of Plants 3 366 149 32 446 801 1206 43 104 5 279 1 918 65 6 750 505 256 92 18 3 210 540 434 3 623 2 1 520 S78 668 6 750 494 690

S.N.

District Mahottari Makwanpur Morang Myagdi Nawalparasi Nuwakot Okhaldhunga Palpa Panchthar Parbat Parsa Pyuthan Ramechhap Rasuwa Rautahat Rukum Rupandehi Roipa Salyan Sankhuwasabha Saptari Sarlahi Sindhuli Sindhupalchok Si raha Sunsari Surkhet Syangja Tanahu Taplejung Tehralhum Udayapur

Dolakha Doti Gorkha Gulmi Ham Jhapa Jajarkot Kailali Kanchanpur Kapilbastu Kaski Kathmandu Kavre Khotang Lalitpur Larnjung

33. 34. 35. 36. 37. 38. 39. 40. 41. 42. 43. 44. 45. 46. 47. 48. 49. 50. 51. 52. 53. 54. 55. 56. 57. 58. 59. 60. 61. 1 62. 85 63. 2 287 64. Total

Total Number of Plants 519 2 889 3 158 33 2 119 1 136 7 1588 62 259 198 448 219 3 397 42 2 870 4 32 49 152 1 328 1 036 286 408 1 454 704 1 938 4 088 1 624 1 049 60 321

42 LIST OF RECOGNIZED BIOGAS COMPANIES For 2056/57 (as per 26 October 1999) Name of the Company Address Branch Offices All Nepal Biogas Company Banepa-9, Kavre Banepa (Pvt) Ltd Batabaran Tatha Urja Bikash Biratnagar, Morang Biratnagar, Dhankula Company (Pvt) ltd Phone: 02-30484 Biogas Bistar Company (Pvt) Bharatpur, Chitawan Chitawan, Gorkha, Ltd Phone: 056-23554 Bardiya, Lahan Butwal Gobar Gas Company Butwal-12, Butwal, Tansen (Pvt) Ltd Basecamp, Rupandehi Phone: 071-41973 Bageshori Gobar Gas (Pvt) Putali Bazar-1, Syangja, Pokhara Ltd Syangja Bhairabi Gobar Gas Udhyog Chaughada Bazar, Chaughada, Melamchi Pvt Ltd Nuwakot Phone:010-69257 Baikalpik Urja Bikash Bharatpur, Chitawan Bharatpur Company (Pvt) Ltd Phone:056-21708 Centre for Alternative Energy Dhankuta Bazar-7 Dhankuta Promotion (Pvt) Ltd Phone: 026-20638 Fax-026-20099 Chandikalika Gobar Gas Putali Bazar-1, Syangja Company (Pvt) Ltd Syangja Dhor Baralii Gobar Gas Naudada, syangja Syangja Company (Pvt) Ltd c/o Nishan Cold Store, Naudada, Syangja Deurali Gobar Gas Company Banepa-10, Kavre Banepa (pvt) Ltd Phone:011-63054 Dhawalagiri Gobar Gas Company, (Pvt) Ltd Gobar Gas Tatha Krishi Yantra Bikash . (Pvt) Ltd Baglung Bazar, Mahendrapath, Baglung Phone: 068-20254, 20141 New Baneshor, Kathmandu Phone:01-484082, 484083 Baglung

S. No. 1. 2. 3. 4.

5. 6. 7. 8. 9. 10.

11. 12.

13.

Bharatpur, Birgunj, Rangeii, Birtamod, Butwal, Ghorahi, Gajuri, Dhangadhi, Hetauda, Kathmandu, Panchkhal, Lahan, Lalbandi, Nepalgunj, Pokhara, Surkhet, Tansen, Tikapu

43 Mahendranagar Damauli, Dumre Gorkha (GOR) Bharatpur, Birendranagar, Surkhet, Dhangadhi Kumroj Bharatpur, Hetauda, Kawasoti Kulbi, Bara Bharatpur,Damauli, Besishahar Bidur, Sindhuli

14. 15. 16. 17. 18. 19. 20.

Gramin Gobar Gas Tatha Urja Bikash . (Pvt) Ltd Gorakh Kali Gobar Gas Tatha Urja Bikash Company (Pvt) Ltd Himalayan Gobar Gas Tatha Gramin Sewa (Pvt) Ltd Integrated Energy Development Company (Pvt) Ltd Jansewa Gobar Gas Company (Pvt) Ltd Janta Gobar Gas Nirman Tatha Baikalpik Urja Bikash Anusandhan Kendra Janabhavana Gobar Gas Udyog Pvt Ltd Janapriya Gobar GasCompany Pvt Ltd Kamana Gobar Gas Company Pvt Ltd Khanal Gobar Gas Sewa Kendra Pvt Ltd Kishan Gobar Gas Udyog Pvt Ltd Kamala Gobar Gas Company (Pvt) Ltd Krishi Bikash Gobar gas Company Pvt Ltd

Dumre, Tanahun Phone: 065-80016 Gorakha Bazar, Gorkha Phone:064-20194 Bharatpur, Chitawan Phone: 056-20955/ 22063 Kumroj, Chitawan, 056-20224 Post Box No. 11701, Bharatpur, Chitawan Phone: 056-21503 Bharatpur, Chitawan Phone: 056-24987 Bidur-4,Nuwakot Phone:010-60123 Fax-010-60126 ADB/N Barkalpur, Imiliya, Kapilvastu Phone: 076-60293 Bhoteodar, Lamjung Dumre, Phone: 06629444/ 29304 Damauli, Vyas Nagarpalika, Chapaghat, Tanahun Phone: 065-60421 Bidur, Nuwakot Phone :010-60435 Anarmuni-4, Birtamod, Jhapa Tel. 023-41094, 41186 Kanchanbari Airport, Biratnagar Phone:021-28799 Tamghas, Gulmi

21. 22. 23.

Tamghans, Kopahawa, Kapilbastu Bhoteodar, Dumre Damauli, Rampur, Palpa

24. 25.

Dhading, Bidur, Parsakhaireni, Chitawan Birtamod, Ham, Urlabari

26.

27.

Laligurans Gobar Gas Company (Pvt) Ltd

Biratnagar Damak, Dhankuta, Itahari, Lalbandi, Indrapur Range li, Fattepur, Jirikhimti Tamghas

44 28. Lamjung Gobar Gas Nirman Tatha Gramin Batabaran Samrachhyan Pvt Ltd Lokpriya Gobar Gas Tatha Saurya Shakti Bikash (Pvt) Ltd Manaslu Gobar Gas Company Pvt Ltd Maheshmati Gobar Gas Uddhyog (Pvt) Ltd Mankamana Gobar Gas Sewa Kendra Pvt Ltd. Mechi Gobar Gas Company (Pvt) Ltd Nepal Biogas Company Pvt Ltd Nepal Gobar Gas Bistar Tatha Bikash Company Pvt Ltd Nil Kamal Gobar Gas Company Pvt Ltd Panchthar Gobar Gas Company (Pvt) Ltd Paschimanchal Dhaulagiri Gobar Gas Tatha Sewa Pvt Ltd Public Gobar Gas & Rural Development Company Pvt Ltd Besisahar, Lamjung Phone: 066-20205/ 20224 Benighat- 1, Malekhu, Dhading Phone: 010-29163/ 29188 Damak, Jhapa Phone: 023-80397 Dharke Bazar, Dhading Phone:010-29119 New Road Block No. 9/271, Pokhara No. 9, Kaski Phone:06127232 Urlabari-4, Morang New Baneswor, Kathmandu Phone:01-470062 Dumre, Tanahun Phone:065-80016 Bharatpur- 10, Chitawan Phone: 056-23688 Phidim-1, Panchthar. Phone:024-20212 Aanandaban-3, Manigram, Rupandehi. Phone:071-60691 Butwal, Rupandehi Phone:071-43122 Besisahar

29.

Malekhu, Nilkantha, Dhading Damak Dharke Pokhara, Kusma Syangja, Beni Urlabari Biratnagar, Birtamod Kathmandu, Lalbandi Bharatpur, Dumre Bharatpur, Hetauda Phidim Manigram, Rupandeh, Gulariya, Bardiya, Tansen, Palpa Khajura-1 Banke, Butwal Birtamod, Urlabar, Tamgha, Pokhara, Sandikhark, Ghorahi Beltar, Bharatpur Dhulikhel, Bayarban Terhathum, Okhaldhunga, Siraha, Dhangadhi Damauli, Pbkhara, Tansen Kawasoti

30. 31. 32.

33. 34. 35. 36. 37. 38.

39.

40.

Pragati Gobar Gas Sewa Kendra Pvt Ltd

Main Road, Damauli, Tanahun Phone: 06560311 Fax-065-60037

45 41. Rapti Gobar Gas Company (Pvt) Ltd Huprachour, Hetauda4, Makawanpur Phone:057-21825 Bharatpur, Chitawan Phone:056-21563, 056-23867 Hetauda, Simara, Rautahat Nawalpur, Fattepur Bharatpur, Butwal, Ghorahi, Dumre, Hetauda, Guleri, Pokhara, Tansert, Chandranigahapur Syangja Fikkal Gageda, Kapilvastu Birtamod, Fikkal Kawasoti Chanauta

42.

Rastriya Gobar Gas Nirman Tatha Sewa Pvt Ltd

43. 44. 45. 46.

Shiva Shakti Gobar Gas (Pvt) Ltd Sital Gobar Gas Company (Pvt) Ltd Sana Krishak Samudaik Gobar Gas Company (Pvt) Ltd Tribeni Gobar Gas Company Pvt Ltd

Fikkal Bazar, Ham Gajeda, Kapilvastu AnarmuniA Birtamod, Jhapa, Phone: 023-40594 Kawasoti, Nawalparasi Phone: 076-60300

46

BIBLIOGRAPHY
BSP. 1991. Implementation Document Biogas Support Programme. May 1991. BSP. 1998. Agreement with Recognized Biogas Companies 1998/99: Example. Biogas Support Programme. May 1998. BSP. 1999a. Annual Report 1998. Biogas Support Programme. January 1999. BSP, 1999b. Quality Management; Performance on Quality on Construction & After Sales Service by 39 Recognized Biogas Companies-2055/56FY. Biogas Support Programme. CEDA. 1998. A Study on Effective Demand for Biogas in Nepal. Centre for Economic Development & Administration. June 1998. CMS (Consolidated Management Services). 1999. Biogas Users Survey 1998/99. HMGN Ministry of Science & Technology. April 1999. de Castro, JFM, et al. 1999. Mid-term Review of the Biogas Support Programme: Part I of Phase III (Draft Report), Netherlands Development Organization of Nepal (SNV/N). June 1999. Devpart Consultant. 1998. Biogas User Survey-1997/98. Biogas Support Programme. June 1998. East Consult. 1994. BSP Biogas Users Survey-1992/93. Biogas Support Programme, ADBN, SNV, GGC. April 1994. HMGN/SNV-Nepal. 1994. Mid-Term Evaluation of the BSP I. May 1994. HMGN/SNV. 1995. Proposal for Biogas Support Programme: Phase III (Draft). December 1995. ______ __. 1997. June. Kandel, NR. 1999. An Evaluation of the Biogas Subsidy Schemes (Draft). March 1999. Karki, AB, et al. 1993a. Present Structure of Biogas Sector in Nepal. SNV-Nepal. June 1993. Karki, AB, et al. 1993b. Proposal for Future Structure of Biogas Sector in Nepal. BSP/SNV-Nepal. September 1993. Lam, J and Van nes, WJ. 1994. Enforcement of Quality Standards Upon Biogas Plants in Nepal. Biogas Support Programme. March 1994. New Era. 1995. Survey of Users of Biogas Plants in Nepal. Biogas Support Programme, July 1995. Pokharel, RK. 1990, Impact of Biogas Plants on Environment Stability, Unpublished MS Thesis. Philippines: University of the Philippines at Los Banos.

47

Silwal, BB and Pokharel, RK. 1995. Evaluation of Subsidy Scheme for Biogas Plants. Biogas Support Programme, SNV/Nepal. December 1995. Silwal, BB. 1991. Biogas Plants in Nepal: An Economic Analysis. HMGN-MOA/Winrock International. October 1991. Van nes, WJ. 1992. Technical Biogas Potential Per District in Nepal. Gobar Gas Company, Research Unit. September 1992. Van nes, WJ. 1997. Biogas Support Programme: Phase I and II (development through market, SNV/Nepal. June 1997. . .

48

LIST OF PUBLICATIONS
(Listed by Series Name/Author's Name/Title/Year)
A, 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. RESEARCH REPORT SERIES Pradeep M. Tulachan, "Socio-Economic Characteristics of Livestock Raising in Nepal", December 1985. Ram Bahadur K.C., "Land Reform: Progress and Prospects in Nepal", July 1986. Michael B. Wallace, "Food Price Policy in Nepal", June 1987. Shiva Prasad Sharma, "Agrarian Change and Agricultural Labor Relation: Nepalese Case Studies", June 1987. Michael B. Wallace, "Community Forestry in Nepal: Too Little, Too Late?", June 1987. Michael B. Wallace, "Forest Degradation in Nepal: Institutional Context and Policy Alternatives", March 1988. Hari K. Upadhyaya, Keijiro Otsuka and Cristina C. David, "Differential Adoption of Modem Rice Technology and Regional Wage Differential in Nepal", October 1988. Ganesh P. Shivakoti and Bhola N. Pokharel, "Marketing of Major Crops in Chitwan: A Case Study of Six Village Panchayats", March 1989. Vishwa Nath Tiwari, "Farm-Size and Productivity in Nepalese Agriculture: A Case Study of Nawal Parasi District", March 1990. Jeannette Denholm and Min Bahadur Rayachhetry, "Major Agro-Forestry Activities of Non-Governmental Organizations in Nepal: A Survey", September 1990. Jane Gronow and Narayan Kaji Shrestha: "From Policing to Participation: Reorientation of Forest Department Field Staff in Nepal", October 1990. Devika Tamang: "Indigenous Forest Management Systems in Nepal: A Review", November 1990. Mahendra Raj Sapkota: "Cheese Production in Nepal: Lessons from the Past, Lessons for the Future", May 1991. Bishnu Bahadur Silwal: "Biogas Plants in Nepal: An Economic Analysis", October 1991. Parimal Jha: "Organizational and Managerial Aspects of Indigenous Irrigation Systems in Kavre", December 1991. Gerard J. Gill: "But How Does it Compare with the Real Data? (Lesson from an RRA Training Exercise in Western Nepal)", January 1992 (reprint from RRA Notes No. 14, December 1991; International Institute for Environment and Development, London). Elizabeth Cromwell and Terry Green: "Seed Diffusion Mechanisms in Small Farmer Communities: A Case Study from Eastern Nepal", February 1992 (excerpted from Seed Diffusion Mechanisms in Small Farmer Communities: Lesson from Asia, Africa and Latin America, edited by Elizabeth Cromwell, Overseas Development Institute, London, 1990). Ganesh Shivakoti, Kadak Giri and Elinor Ostrom: "Farmer-Managed Irrigation Systems in Nepal: The Impact of Interventions", March 1992. Devika Tamang: "Indigenous Soil Fertility Management in the Hills of Nepal: Lesson

18. 19.

49 20. 21. 22. 23. 24. 25. 26. 27. from an East-West Transect", April 1992. Sibesh Chandra Regmi: "Women in Forestry: Study of a Women's Fores Committee in a Nepalese Village", May 1992. Padam Lai Devkota: " Traditional Systems of Forest and Pasture Management: A Case Study from Central Nepal", June 1992. Navin K. Rai and Man B. Thapa: "Indigenous Pasture Management Systems in HighAltitude Nepal: A Review", January 1993, Ganesh Thapa, Keijiro Otsuka and Randolph Barker "Effect of Modern Rice Varieties and Irrigation on Household Income Distribution in Nepalese Villages", May 1993. Ganesh B. Thapa: "Public Resource Allocation and Agricultural Performance in Nepal", May 1994. Bijaya Bajrcharya: "Gender Issues in Nepali Agriculture", June 1994. Shankar Sharma: "Economic Liberalization and Agricultural Development in Nepal", July 1994. V. Jaiswal, Michael A. Rechlin and Gerard J. Gill: "Growing Food or Fibre? A Case Study on the Economics of Fuelwood and Food Production in the Nepal Terai" August 1994. Susan Lowe Baker and Bishnu K. Gyawali: "Promoting Proper Pesticide Use in Nepal", November 1994. Ganesh B. Thapa, Govind P. Koirala, Gerard J. Gill and Man B. Thapa: "Constraints on Agricultural Marketing in Nepal", March 1995. Ganesh B. Thapa and Mark W. Rosegrant: "Projections and Policy Implications of Food Supply and Demand in Nepal to the Year 2020", May 1995. Gerard J. Gill: "Fertilizers and Foodgrains in the Nepal Tarai", August 1995. Gerard J. Gill: "Agriculture and the Environment in the Mid Hills of Nepal: A Case of Mistaken Identity", September 1995. Milan Adhikary: "Women Graduates in Agriculture and Forestry Development in Nepal", October 1995. Govind P. Koirala, Ganesh B. Thapa and Ganesh R. Joshi: "Can Nepalese Farmers Compete in the Domestic Market?", November 1995. Gerard J. Gill: "Nepal's Agricultural Trade in the New World Trading Order", November 1996. Govind P. Koirala and Ganesh B. Thapa: "Food Security Challenges: Where Does Nepal Stand?", June 1997. Gerard J. Gill: "Globalisation and Nepal's Agricultural Export Prospects", November 1997. Suman R. Gautam and Prem B.Shrestha. "Technological Constraints to the Optimum Utilisation and Expansion of Groundwater Irrigation in Nepal Tarai", December 1997, Govind P.Koirala. "Clogs in Shallow Groundwater Use", December 1998. Medini Bhandari, Kamal Banskota and Bikash Sharma. "Roads and Agricultural Development in Eastern Development Region: A Correlation Analysis", September 1999. Birendra Bir Basnet. "Meeting the Fertilizer Challenge: A Study on Nepal's Fertilizer Trade Liberalization Programme", October 1999.

28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40.

41.

50 B. 1. 2. 3. 4. 5. 6. 7. 8. 9. RESEARCH SUPPORT SERIES Govind Koirala and Gerard J. Gill, "Union List of Periodicals on Social Science and Natural Resource Management in Nepal", December 1989. Navin K. Rai and Gerard J. Gill, "How to Prepare a Research Proposal", April 1990. Jennifer A. McCracken, Jules N. Pretty and Gordon R. Conway, "An Introduction to Rapid Rural Appraisal for Agricultural Development", May 1990. Lorna Campbell and Gerard J. Gill: "Participatory Rural Appraisal for Nepal: Concepts and Methods [A Guide to the Slide Presentational", February 1991. Navin K. Rai and Krishna Rimal (editors): "An Introduction to the Ministry of Agriculture and its Affiliated Agencies" (in Nepali: compiled by the Evaluation and Project Analysis Division, Ministry of Agriculture), February 1991. Govind Koirala and Gerard J. Gill: "Union List of International Periodicals on Social Science and Natural Resource Management in Nepal", Second revised and enlarged edition by Devika Tamang, September 1991. Lorna Campbell and Gerard J. Gill; "Participatory Rural Appraisal for Nepal: Concepts and Methods [A Guide to the Slide Presentation]", (Nepali edition, translated by Shibesh Chandra Regmi), October 1991. Devika Tamang and Gerard J. Gill (editors): "Proceedings of a Training Workshop on Participatory Rural Appraisal: Kavre-palanchok, February 1992. Gerard J. Gill: "Policy Analysis for Agricultural Resource Management in Nepal: A Comparison of Conventional and Participatory Approaches", July 1992.

C. 1. 2.

OCCASIONAL PAPERS SERIES Navin K. Rai (Compiler and Editor): "Policy Issues in Agriculture, Natural Resource Management and Rural Development: A Discussion Paper", January 1991. Champak P. Pokharel and Gerard J. Gill (Editors): "Proceedings of a Consultative Workshop on Perspective Planning for Agriculture and Related Resource Management" (Jointly published with HMG National Planning Commission), March 1993.

D. 1. 2. 3. 4. 5. 6. 7. 8. 9.

NEPAL AGRIBRIEF SERIES "Smallholder Tea Production in Nepal: Problems and Prospects", July 1992. "Sugar and Sugarcane Production in Nepal", December 1992. "Rural Poverty in Nepal", February 1993. "Indigenous Management of Nepal's Natural Resources", February 1993. "Production and Marketing of Tomato in Sarlahi District", May 1993. "Non-Formal Credit in Rural Nepal", June 1993. "Policy Analysis as an Aid to Agricultural Development: The Case of Tomato Marketing", July 1993. "Seasonal Agricultural Labour Migration in the Nepal Tarai", October 1993. "Veterinary Medical Services and Pharmaceutical Supply in Rural Nepal", November

51 10. 11. 12.* 13. 14. * 15* 16.* 17.* 18.* 19.* 20.* 21 .* 22 * 23.* 24.* 25.* 26.* 27.* 28.* 29.* 30.* 31.* 32.* 33.* 34.* 35.* 36.* 37.* 38.* 39.* 40.* 41. 1993. "Fish Farming in the Nepal Tarai", December 1993. "Integrated Pest Management in Indonesia; Lessons for Nepal?", January 1994. "Gender Issues in Nepal's Agricultural Development", February 1994. "Cheese Production in Nepal: Building on Success?", June 1994. "Food and Agriculture in Nepal: A Review of Past Policies", June 1994. "Promoting Proper Pesticide Use in Nepal", June 1994. "Constraints on Agricultural Marketing in Nepal", November 1994. "Lessons From a Participatory Action Research Project: A Learner's Notes", March 1995. "Irrigation Development Issues in Nepal", May 1995. "Employment Prospects for Women Professionals in Agriculture and Natural Resource Management in Nepal", July 1995. "Import Substitution Prospects for Wool in Nepal's Carpet Industry" September 1995. "Agriculture as a "Priority" Sector in Nepal", November 1995. "The Tarai Research Network", January 1996. "Are We Supporting Our Agriculture Better than Our Neighbours?", March 1996. "Agro-Forestry Activities of NGOs in Nepal: A Follow-up Survey", June 1996. "Our Market, Their Products", June 1996. "Foodgrain Production in the Nepal Tarai: Trends and their Causes", July 1996. "Is Agriculture Destroying the Environment in the Mid Hills?", October 1996. "Strategic Reforms in Nepal's Fertiliser Policy", April 1997 "Meeting the Hunger Challenge", May 1997. "Official Intervention in Nepal's Cereals Market" November, 1997. "Sapta and the Prospects for Nepal's Agricultural Exports", February 1998. "Trade in Non-Timber Forest Products from Nepal", May 1998. "Technological Constraints in Groundwater Irrigation", June 1998. "The Pocket Package Approach to Agriculture-Led Growth Under the APP", July 1998. "Boosting Cold Storage Facilities in Nepal", November 1998. "Improving Access to Irrigation: The Groundwater Market in Nepal Tarai", December 1998 "A Fresh Look at Fertilizer Trade Deregulation in Nepal", January 1999 "Women Change Agents in Agriculture and Natural Resources", April 1999. "Die-Back Disease of Sissoo in Eastern Tarai of Nepal", May 1999. "Highlights of APP", June 1999. "Research and Development Needs of Coffee in Nepal", June 1999.

* Also available in Nepali language.

E. 1. 2.

BOOKS Donald A. Messerschmidt and Navin K. Rai (editors); "Readings in Social Forestry and Natural Resource Management for Nepal", 1992. Devika Tamang, Gerard J. Gill and Ganesh B. Thapa (editors): "Indigenous Management of Natural Resources in Nepal", 1993.

52 3. 4. Gerard J. Gill, Ganesh B. Thapa, Govind P. Koirala and Paul K. Balogun (editors): "Agricultural Statistics in Nepal: A Users' Assessment", 1994. Gerard J. Gill: "Maintaining the Granary: Foodgrain Production and Productivity in the Nepal Tarai", 1996.

F. 1. 2. 3.

POLICY OUTLOOK Gerard J. Gill, Peter R. Hobbs and Madan L. Shrestha "Possible Impact of the Current EL Nino Event on Nepal's 1998 Paddy Crop", Series 1 July 7 Ram P. Yadav. "Equity Consideration in Agricultural Extension Services in Nepal", Series 2 November 1998. Govind P. Koirala and Suman R. Gautam. "Shallow Tube Well Irrigation in Nepal: Expansion and Utilization Issues", Series 3 December 1998.

G. 1. 2.

POLICY DIALOGUE John W. Mellor. "Why Has Foreign Aid been So Ineffective in Reducing Poverty?" January 1999. Shoaib S. Khan. "Poverty Eradication through Social Mobilization", May 1999.

53

About the Program ... Operating under the auspices of the HMG/Nepal Ministry of Agriculture, the Policy Analysis in Agriculture and Related Resource Management program aims to strengthen the capacity of Nepalese individuals and institutions to conduct empirical research in areas that are relevant to policy formulation in agriculture and related areas of natural resource management (forests, water, soils, rangelands). It does this primarily through training, research and professional support. The Program is supported by generous grants from the US Agency for International Development (USAID) and the Ford Foundation, and benefits from the logistical support of the Agricultural Projects Services Centre (APROSC), Kathmandu. This Research Report Paper is one of a series which reports the findings of policy analysis conducted in Nepal with the support of the Program. Winrock International Institute for Agricultural Development is a US-based non-profit executing agency established in 1985 by the merger of three specialized agencies all supported directly or indirectly by the Rockefeller family. Winrock's main objective is to help reduce poverty and hunger through sustainable agricultural development, by helping strengthen institutions, assisting in the development of human resources, designing sustainable agricultural systems and strategies and supporting improved policy formulation for agricultural and rural development. Headquarters: 38 Winrock Drive, Morrilton, AR 72110-9537, USA