Prime minister Narendra Modi’s much-acclaimed Nepal trip failed on one count — the two countries couldn’t sign a much-awaited power trade agreement (PTA). Last-minute delays, and controversies, attributed to a Nepalese draft that arrived just two days before the trip and to questions raised by parties and civil society in Nepal, meant the deal could not go through.
The PTA is seen by the Nepalese government as a critical part of any plan to expand the trading of hydropower between Nepal and India. “Unless and until the PTA is signed, investors will not be confident of investing in such projects in Nepal,” says Radhesh Pant, chief executive of Investment Board Nepal, which was set up by the Nepalese government to promote private investment. Indian private sector developers who have bagged projects to set up a few thousand megawatts of hydro projects in Nepal are also eagerly awaiting the agreement. But will the PTA really give the boost needed for India-Nepal energy trade?
Despite being touted as having massive hydropower potential (to the tune of around 40,000 MW), Nepal ironically is a net importer of power from India. Indeed the country itself has been able to develop only around 680 MW of that potential. “What we have today is a power exchange rather than power trade,” points out Siddha Raj Pant, chief operating officer of Feedback Infrastructure Services Nepal.
If and when hydropower projects in Nepal are completed, the country is likely to turn into a power surplus supplier, with the bulk of power being exported to India. Indeed, ventures such as GMR’s 900 MW Upper Karnali project and Satluj Jala Vidyut Nigam Ltd’s (SJVNL’s) Arun-III project (also 900 MW) are both being developed as explicitly export-oriented projects — hence the importance of the PTA. “Investors need some policy certainty on electricity trade over the life of the project as investors are taking a long term commitment,” points out Raghuveer Sharma, chief investment officer at the International Finance Corporation, a co-developer with GMR in its two Nepal projects. Says an executive with an Indian company working in the power sector in Nepal: “Without the PTA, the concern in Nepal was that at some point in the future the Indian government may suddenly curb power imports into the country.”
“The PTA is intended to define the framework under which power will be exported to India,” adds Sandip Shah, past president of the Independent Power Producers Association, Nepal. “Projects in Nepal should have equal and non-discriminatory access to the Indian power market on par with producers in India.”
Source : The Economic Times