Nepal awaits India’s decision on hydropower trade, faces delay in approvals

Despite initialling a 25-year-long inter-governmental framework agreement on selling Nepal’s electricity to the southern neighbour, the agreement is yet to be signed.

With India delaying approvals as Nepal had expected, the country is witnessing a partial spilling of power. 

Nepal is awaiting India’s decision on a number of hydropower-related issues as restlessness grows in the country over the southern neighbour’s continued delay in taking decisions.

Despite initialling a 25-year-long inter-governmental framework agreement on selling Nepal’s electricity to the southern neighbour during the state visit of Prime Minister Pushpa Kamal Dahal to India from May 31 to June 3, the agreement has not been signed yet. The agreement would have guaranteed long-term market access for the Nepal-generated electricity to the Indian market.

Likewise, Kathmandu has also long been awaiting the approval from the relevant Indian authorities for selling the power generated by Nepal’s hydel of projects in the Indian market on a short and longer-term basis.

With the southern neighbour delaying approvals as Nepal had expected, the country is witnessing a partial spilling of power.

Nepali officials were expecting a swift signing of the long-term inter-government agreement since it was initiated at the energy secretary level during the Prime Minister’s visit to New Delhi.

Even though Nepal wanted to sign the agreement during the meeting, it could not happen at the time since India’s cabinet had not endorsed the deal.

“During the recent conversation with the Indian side, I was told that the draft of the agreement has been sent to India’s cabinet,” said Madhu Bhetuwal, spokesperson for the Ministry of Energy, Water Resources and Irrigation. “We have received no further notification about any progress on the matter.”

There was widespread euphoria in Nepal, particularly among the stakeholders in the power sector, when the Indian Prime Minister Narendra Modi announced that the southern neighbour would import 10,000 megawatts in 10 years from Nepal during a joint press meet with Prime Minister Dahal on June 1.

Energy Secretary Dinesh Ghimire had earlier told the Post that once signed, the 25-year agreement would pave the way for the signing of a power purchase agreement for five years or more within the framework of the 25-year umbrella agreement.

Nepali officials say that the long-term agreement would ensure guaranteed access to the Indian market for the long term which would help increase investments in Nepal’s power sector. Nepal also expects to earn a significant amount in foreign currency through electricity trade.

Nepali officials said the delay has dampened their initial euphoria. “We have to be optimistic that the agreement will be signed soon because it has already been initialled at the energy secretary level,” said Bhetuwal. “We are also discussing here about organising a signing ceremony.”

Similarly, Nepal also faces a prolonged delay in receiving India’s approval for exporting power generated from 18 projects whose combined capacity is more than 1,000 MW. Some of the projects were sent to India for approval as early as August 2021. Neither have any investment from China, a condition that India has set to buy power from Nepal, according to officials of the Nepal Electricity Authority (NEA).

Nepal has got approval to sell as much as 452.6 MW generated by 10 projects in India’s day-ahead power market, where the price of power is determined a day ahead of trading.

In late June, an agreement between the Nepal Electricity Authority and the PTC India Ltd was signed, enabling Nepal to use Bihar’s transmission infrastructure to export 300 MW.

Earlier, on May 23, the NEA and the NTPC Vidyut Vyapar Nigam Limited (NVVN) of India signed a five-year power sale agreement, in the first-ever longer-term power trade deal, paving the way for export of 200 MW to India. NEA has proposed five projects—Solukhhola (Dudhkoshi), Super Madi, Upper Balephi ‘A’, Dordi Khola and Upper Chaku ‘A’ whose generated electricity is to be sold under a five-year deal, according to NEA.

These deals are outside the 452.6 MW being allowed to be sold in the Indian market, according to NEA officials.

“All these agreements either for selling power in India’s day ahead market or long-term market will have no meaning until India grants export approval for our projects,” a senior official of NEA previously told the Post.

Furthermore, besides seeking details about the projects, India has made criteria even tougher for the export of Nepal-generated electricity. Now India has also sought details of financial closure—how the projects were financed, including the financial institutions and other agencies involved in the projects.

Source: The Kathmandu Post