March 15, Kathmandu. The way is open to export Nepal’s electricity to India. With the issuance of a procedure by India to implement the directive on inter-country electricity trade, the legal hurdle of selling electricity from Nepal to India has been removed.
At the Nepal-India Energy Secretary level meeting held on 11 January 2075, it was agreed to allow Nepal’s electricity to enter the Indian power exchange market. India has issued this document only two years after it committed to formulate procedures for that soon.
Due to the lack of this procedure, the Nepal Electricity Authority was not able to sell electricity in the power exchange market of India even when it was wasted during the rainy season. After the procedure came, all avenues have been opened legally to sell electricity to Nepal in India.
Nepal Electricity Authority (NEA) has reached an agreement with NTPC Power Trading Corporation (NVVN), India’s nodal agency, to take its electricity to India’s power exchange market. However, due to lack of procedures for the implementation of the MoU, up to 200 MW of electricity was wasted daily in Nepal during the rainy season and could not be exported to India.
The government has already given permission to Nepal Electricity Authority to sell surplus electricity consumed in Nepal in the power exchange market of India and Bangladesh.
In India, there are two online trading exchanges, the Indian Electricity Exchange (IEX) and the Power Exchange India Limited (PXIL). The electricity required for this market can be booked one day in advance.
Those who want to sell more electricity to themselves offer to sell it in the exchange market. India’s inter-country electricity trade directive has paved the way for selling imported electricity in such day-ahead or term-ahead markets.
Electricity Authority Executive Director Hitendra Dev Shakya says that no formal information has been received about the issuance of the procedure. “If the procedure comes, we can sell the surplus electricity directly to India after April, just as we can sell it,” he said. “We were trying to send the surplus electricity to India through bilateral talks next year.
Barriers to third country investment
Some of the provisions in the procedure brought by India are such as to discourage Nepal’s energy producers. India has stated in its rules of procedure that only electricity generated by investors in countries with which it has an electricity trade agreement can enter the power exchange market. India has made similar arrangements for the import of electricity.
The procedure stipulates that electricity generated from projects with neighboring countries bordering India, which does not have an electricity trade agreement and is invested and controlled by a third country person or company, will not be purchased. This makes it clear that India will not buy electricity from Chinese-invested projects in Nepal. So far, India has only signed energy cooperation agreements with Bangladesh, Bhutan and Nepal.
Due to this, the electricity generated with the investment of third country companies could not be sold directly in the Indian market. India, which appears to be somewhat liberal in the directive, has again refused to take the electricity generated in the neighboring country to India without fulfilling the preconditions.
A former energy ministry secretary said India’s move would discourage Chinese investment in hydropower. He said that investors would invest in the Indian market as there was no immediate possibility of electricity trade with China.
“It is clear that such an arrangement has been made to curb Chinese investment in Nepal’s hydropower,” he said.
The new guideline also stipulates that neighboring countries can trade electricity using India’s transmission line by reaching an understanding at the government level.
This arrangement has now opened the way for Nepal’s electricity to be sold to other countries through Bangladesh and India. Indian company GMR plans to sell electricity generated in Upper Karnali to Bangladesh. The Bangladesh government has agreed.