India has paved the way for Nepal's electricity trade beyond the framework of the South Asian Association for Regional Cooperation (SAARC) and the announcement of the Bay of Bengal Initiative for Multisectoral Technical and Economic Cooperation (BIMSTEC).
Although Nepal has been trying for a long time to sell the electricity wasted during the rainy season in the regional market, it has not been successful. During Prime Minister Sher Bahadur Deuba's visit to India, the two countries have agreed to increase mutual cooperation in the energy sector by issuing the 'India-Nepal Joint Vision'. With this, the long-standing desire to enter the regional market of Nepal is now taking shape.
The Prime Ministers of Nepal and India agree on the Joint Vision as the biggest achievement in the energy sector so far and paving the way for easy export of surplus electricity to India and Bangladesh.
Named Joint Vision, the agreement stipulates that some of Nepal's major projects will be developed with the joint investment of Nepal and India, construction of interstate transmission lines, and appropriate access based on market demand. The announcement that the BBIN, a sub-regional organization, would include the member countries is important in itself.
India's latest agreement has increased the certainty that excess electricity in Nepal will not be wasted. Now it has been ensured that Nepal's electricity reaches the market of Bangladesh. Another important achievement is the Indian Prime Minister's public commitment to buying Nepal's electricity.
The sideline talks between Minister for Energy, Water Resources and Irrigation Pampha Bhusal and her Indian counterpart Raj Kumar Singh, who was part of Prime Minister Deuba's delegation, also marked a significant achievement in the development of Nepal's energy sector.
Since last October, Nepal had exported 39 MW of electricity from two Indian-funded projects in Nuwakot. Nepal has been demanding permission to enter the exchange market for a long time.
In the last monsoon alone, about 500 MW of electricity was wasted. According to the Nepal Electricity Authority, about five billion rupees worth of electricity was wasted. Due to the compulsion to take electricity from private sector projects, NEA had to close its power plants or produce less.
Mohan Dangi, vice-president of the Independent Power Producers' Association of Nepal (IPPAN), said that he was happy with the announcement of the Indian Prime Minister to buy Nepal's electricity and give access to BBIN-affiliated countries as well. According to him, Nepal's long-running effort to export electricity has paid off. Nepal's private sector has also been trying to sell electricity internationally.
Nepal Power Exchange Limited (NEPEX) is trying to sell electricity. However, NEPEX has not been allowed to sell electricity.
IPPAN said India's recent acceptance and commitment by the top political leadership would pave the way for a long-closed power purchase agreement (PPA). NEA has not been doing PPA for the last three years. However, the PPA of semi-reservoir and reservoir projects was not stopped.
Bangladesh has already announced to import 9,000 MW of electricity from Nepal by 2040. During the visit of the then Minister of Energy, Water Resources and Irrigation Barshaman Pun to Bangladesh in August 2018, a Bangladeshi official said that Nepal's electricity was necessary for them. During the visit of the President of Bangladesh, Prime Minister and Minister of State for Energy to Nepal, a commitment was also expressed that the project could be constructed with joint investment.
Similarly, it was decided to hold joint discussions with Bangladesh at the Energy Secretary level meeting of Nepal and India held in Bangalore, India on September 12 and 13, 2018.
Even though the total capacity of Nepal is equal to 83,000 MW, the message has been spread during Prime Minister Deuba's visit to India that there is no need to rush to find a market for generating 43,000 MW of electricity which is considered economic potential.
With the construction of the transmission plant, 1,300 MW of electricity will be added to Nepal's system in the current fiscal year. Currently, the system has 2,150 MW of electricity. However, there is a crisis in Nepal during the winter.
Prakash Dulal, an energy entrepreneur, says that the government's efforts to increase consumption in Nepal in the long run and explore regional markets for electricity are gaining momentum. Stating that the declaration made at the level of the Prime Minister will be implemented, he said that the situation of wastage of electricity will end if the administrative machinery of Nepal works hard now.
Stating that the agreement reached at the highest political level of the two countries has opened the door for electricity trade, he expressed confidence that even the long-delayed PPS would be reopened.
For the first time, India has mentioned in its talks with Nepal on water resources and energy that it will be done on the basis of mutual equality and respect. Similarly, the structure of mutual cooperation will be prepared and expanded in Bhutan, Bangladesh, India and Nepal. From this, it can be taken to mean that Nepal's electricity has paved the way for sale in Bangladesh.
As India did not agree to use its own transmission system, the way to bring Nepal's electricity to Bangladesh was not paved. An agreement has already been made to take 500 MW power of the Upper Karnali Hydropower Project to Bangladesh.
According to the latest agreement, the issues of bringing each other into the transmission system of another country, construction of cross-border transmission lines, and import and export of electricity from both sides have been included. Energy entrepreneurs believe that this will have a huge and positive impact.
NEA spokesperson Suresh Bhattarai said that apart from Nepal's efforts to enter the Indian exchange market, it was a good thing that consensus was reached on other issues as well.
The six-point 'Vision Statement' jointly issued by the two countries during Prime Minister Deuba's visit to India states that one country will cooperate with the other in the field of electricity on the basis of equality and mutual respect. Experts say that this is another important issue.
The latest agreement has paved the way for the construction of cross-border transmission lines. Recently, the government has given approval to NEA to invest Rs. 1 billion for the construction of the second interstate transmission line New Butwal Gokharpur. The transmission line with a total capacity of 400 kV is 140 km long. Construction of the 20 km transmission line towards Nepal and 120 km towards India will start in the near future.
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