Power Trade Agreement

Hydropower is regarded as one of the major sources of clean energy. As a source of clean energy, it can contribute for cleaner environment and to generate thousands of jobs. It is the only source of energy that Nepal can produce to meet her demand and make a source of foreign earnings. Hydroelectricity is now taken as the most potential commodity that can largely contribute to the national economy in reducing trade deficits through export boosting and import substitutions. Nepal has recently started exporting surplus electricity mostly in monsoon season. Nepal Electricity Authority (NEA) has exported electricity worth more than Rs. 15 billion during last monsoon season. The government of Nepal has formulated an Energy Development Strategy with an aim to generate 28,000 MWs electricity in next 12 years. More than half of the electricity generated is expected to be exported in the market of neighbouring countries.  For this, the government is making continuous efforts in developing transmission infrastructures and making power trading agreements with neighbouring countries to ensure the market for its surplus electricity generation.

In this regard, there has been a crucial power trade agreement between Nepal and India during the seventh Nepal-India Joint Commission meeting held in Kathmandu.  The pact signed on a long-term electricity trade between two countries will enable Nepal to sell about 10,000 Megawatts of electricity to India in a decade. This deal was signed in materialising the Memorandum of Understanding (MoU) signed between the two countries during the visit of Prime Minister Pushpa Kamal Dahal ‘Prachanda’ to India in May-June last year. Energy   secretaries   of    Nepal   and   India Gopal Sigdel and Pankaj Agrawal respectively, signed the agreement in the presence of Minister for Energy, Water Resources and Irrigation Shakti Bahadur Basnet. The Joint Commission meeting was co-chaired by Minister for Foreign Affairs, NP Saud and India’s Minister for External Affairs, Dr. S Jaishankar. 

In addition, an MoU for co-operation in the renewable energy development between Nepal Electricity Authority (NEA) and India’s NTPC Limited has also been signed during the JC meeting. According to   the   Ministry of Foreign   Affairs (MoFA), two foreign ministers have jointly inaugurated, in virtual mode, three 132 kV cross-border transmission lines between Nepal and India. Inaugurated transmission lines include: the second circuit of Raxaul-Parwanipur line, the second circuit of   Kataiya-Kusaha line, and the New Nautanwa-Mainhiya line.  These power infrastructures will facilitate seamless flow of electricity between the two countries. Being the nearest market as well as power-hungry and developing bordering states of Bihar and Uttar Pradesh, India, is   the   most   favourable   destination   for Nepal in terms of energy trade although   discussions   are   underway also with Bangladesh and China. Bangladesh has been expressing interest to invest in a project worth US$ 1 billion and import electricity from Nepal. 

With the current power trading agreement signed with India and completion of the construction of ongoing transmission line between the two countries, it will pave a way for the export of electricity of Nepal to India. In addition to this, it will create a favourable environment for attracting more investments in power sector of Nepal as it guarantees the long-term market for the electricity generated in Nepal. In order to make further progress in the power generation and its export, the government should also take initiative to explore other markets of the region. As Bangladesh has already shown its interest to invest in Nepal’s hydropower and importing it, the government should make efforts to materialise it by taking India into confidence. Despite the territorial difficulties, we should focus on developing cross-border transmission line also with China to expand market avenues of its clean energy.