POWER TRADING WITH INDIA
Nepalis are divided into two schools of thought on hydropower generation. Whether the generated power should be utilized for domestic purposes or exported as envisaged in Hydropower Development Policy 2001, continues to perplex us. But one thing is certain: if Nepal can come close to meeting its hydropower potential, not all of the power generated can be consumed by Nepalis.
India, as a country with high power demand—especially in summer—is attracted to Nepal as a country with high hydropower potential. Nepal’s rich hydropower potential could someday lead to the creation of SAARC Market for Electricity, SAME, in South Asia, much like the Nord pool in Europe and Southern African Power Pool (SAPP) in Southern Africa. Cross-border transmission lines at 400 KV levels between Nepal and India (140 km Dhalkebar-Muzaffarpur line to be completed by 2015 in the first phase) will eventually help not only long-term power exchange between Nepal and India, but also in providing crucial links to a regional SAARC grid. After the completion of this line, other 400 KV cross-border lines—Butwal-Gorakhpur, Duhabi-Purnea, and Anarmani-Siliguri—will be constructed on need basis.
At present, Nepal’s cross border transmission infrastructure is very weak and cannot handle over 180 MW of power. In fact, this network was not constructed for power trade between the two countries. Its only purpose was to carry power to border towns under power exchange programs, and the possibility of an acute power shortage in Nepal was not even imagined during those years. Nepal is currently importing about 115 MW power from India through this network. Nepal expects to import an additional 55 MW from India in the near future, as requested by President Ram Baran Yadav during his recent India trip. Though India agreed, technicalities including transmission constraints need to be worked out. It is high time existing lines associated with this transmission are reinforced to import additional power.
In the past, Nepal did not care much beyond the quantity of tradable electricity, but besides quantity, price is also an important issue. Unless the pricing is as beneficial for us, bilateral power trade cannot be a trusted pillar of our economic development. The sustainability of bilateral power trade depends on its price. At present, three types of electricity pricing—treaty-based rates, power exchange rates, and short and long term commercial rates—exist.
Under Koshi Agreement signed between Nepal and India in 1954 and amended in 1966, Nepal receives 10 MW power at a concessional rate, which is only about 71 percent of the power exchange rate. This issue has been raised with India in the meeting of Indo-Nepal Power Exchange Committee (PEC) so as to bring the rate on par with the bilateral exchange rate.
Nepal annually receives 70 million units of free power under the Mahakali Treaty. The treaty increased the quantity of energy from the previous 10 million units to be supplied on continuous basis, free of cost. It is symbolically described as a sign of good relations between the two countries. Perhaps India wanted to remove the clouds of mistrust in connection with Tanakpur barrage construction partially on Nepal’s land.
Despite some yet-to-be-solved issues inherent in the Mahakali Treaty, it is beyond doubt that its implementation can boost Nepal’s economy. The most attractive part of this treaty is the Pancheswar multipurpose project which is capable of generating as much as 6,480 MW. Although the treaty prescribes equal sharing of cost and benefits between the two countries, the pricing of excess power may require further understanding. Fair determination of this price will open an avenue towards the era of sustainable and mutually equitable power trade.
In principle, the price of energy is agreed on through certain pricing mechanisms. But the Power Trade Agreement, 1996, signed at the secretarial level by Nepal and China, does not provide any insights about it. There are no guidelines to the concerned parties—governmental, semi-governmental or private enterprise—for determining the terms and conditions regarding the price, quantity, delivery points, and parameters of power.
In matters related to power trade, Power Trading Corporation (PTC) of India is the only nodal agency that Nepal is required to deal with. In 2011, Nepal signed two important agreements, ITSA and PSA, in connection with the 400 KV Dhalkebar-Mujaffarpur cross border transmission line. Implementation and Transmission Services Agreement (ITSA) was signed between Nepal Electricity Authority and the companies responsible for construction of the line. The Power Sale Agreement (PSA) was signed between NEA and PTC India on long term basis for 25 years from the date of commencement of D-M transmission line. Its rate will be from IRs. 3.5 to 4, which can be expected to increase owing to unavoidable transmission loss.
Despite high pricing, Nepal, in the wake of its long hours of power shortage, needs to sign short term deals with PTC India. More transmission infrastructures will have to be built as the existing ones are not sufficient. Nepal’s need for power, at least till 2017, cannot wait for the more-than-two-years gestation period of the cross border Dhalkebar-Muzaffarpur transmission line. In this context, the speedy construction of some short transmission lines like Kataiya-Kushaha and Raxaul-Parwanipur, as identified by the joint team of experts from the two countries, and the timely reinforcement of existing ones, are inevitable.
The author is an Electrical Engineer