As part of its neighbourhood first policy, India has finalized a draft tripartite power trade agreement with Nepal and Bangladesh. The proposed pact is
likely to be signed in the coming months. Nepal and Bangladesh had a long standing demand from India to allow power trading between them through the Indian grid.
Indian Prime Minister, since the beginning of his tenure, has emphasized the importance of cooperation among the South Asian neighbours. He unveiled plans for India to facilitate the export of hydropower from Nepal to Bangladesh during Nepal Prime Minister Pushpa Kamal Dahal’s New Delhi visit in early June. The Nepal Prime Minister indicated that in the beginning, Nepal would be exporting 50MW which is likely to increase in view of country’s huge potential for hydropower generation far outstripping the domestic demand.
The development regarding energy cooperation has come on the back of Indian efforts to forge greater energy connectivity with Bangladesh, Bhutan, Nepal and Sri Lanka through electricity transmission networks and petroleum pipelines. The tripartite agreement between Nepal, Bangladesh and India is a break from the electricity trade agreement with neighbouring countries in the past mainly based on bilateral agreements.
The agreement on the new guidelines for trade in electricity among the three countries was reached in May 2023 after consultations with all the stakeholders. The agreed guidelines would allow neighbouring countries to purchase and sell power through the Indian grid and participate in Indian power exchanges in future. The finalization of new guidelines for the Cross Border Trade of Electricity (CBTE) in recent years served as the building blocks of the new arrangements.
Bangladesh amid the present season of summer and unusual heat is facing acute power shortage. While the demand for power in the country is estimated to be around 15,000 MW, the power plants in the country are producing power in the range of 12,000-13,500 MW, leaving a shortage of 1,500-3,000 MW. The instability and shortage in power supply in Nepal has deteriorated partially because of a rise in import cost due to rising energy prices in the international market, especially since October 2022 due to continuance of Russia-Ukraine war in particular.
Nepal on the other hand has surplus power. According to the Nepal Electricity Authority (NEA), the country’s power generation capacity has already reached 2,650 MW while the projected peak domestic demand for power in the current fiscal year 2022-23 is 2,036 MW. Nepal has huge hydropower potential. By the end of the current fiscal year in mid-July, Nepal’s power generation capacity is expected to rise to 2,853 MW, by midJuly 2024 and further to 4,507 MW by mid-July 2025. Nepal could solve the power crisis in South Asian countries including Bangladesh if it is allowed to export power through Indian power grid.
India, under the present regime of Narendra Modi led government is proactively constructing electricity transmission infrastructure in Nepal and Bangladesh. India has completed and handed over to Nepal 220 KV power transmission line. Another 106 Km Koshi corridor transmission line, costing a total of NRs 10.40 billion (USD 86.4 million) is being built under Government of India’s Line of Credit of USD 550 million. The package 1 of this project, worth NRs 4.5 billion (USD 37.3 million) was executed by India’s Kalpataru Power Transmission Ltd and handed over to Nepal Electricity Authority in October 2021. The completed 220 KV Double Circuit Koshi Corridor power transmission line goes enroute Inarwa-BasantpurBaneshwar-Tumlingtar. Once the remaining two packages are completed, the project would facilitate smooth power evacuation from the power generation projects in the Arun and Timor river basins, with a total output of 2,000 MW.
India believes that in coming times as economic development accelerates in the region, reliable energy supply would be needed to maintain the momentum of growth. With this realization, India has also helped build cross border petroleum pipelines with Nepal, Linkiag Motizari in Bihar to Amlekhgung in Nepal at a cost of Rs. 327 crore. This was launched in 2019 and has already supplied 2.8 million metric tonnes of diesel to Nepal. Now the energy cooperation with the tripartite agreement for energy trade by using Indian power grid is likely to boost power trade in the region. Under the tripartite agreement, Bangladesh plans to import electricity from Nepal’s 900 MW Karnali hydropower project from 2026. On the other hand, Bangladesh has also granted permission to India to build a corridor through Dinajpur to construct a power transmission line from Katihar in Bihar to Bornagar in Assam to supply electricity to the seven sister States in India’s North-East. At present, Bangladesh imports 1,160 MW of power from India through the Bahrampur-Bheramare and Tripura Cumilla cross-border grid lines.
Nepal’s entry into the tripartite agreement for power trade in South Asia through Indian grid would be game changer. The country has an estimated hydropower potential of around 80,000 MW, but the country has a generation capacity of around 2000 MW. Bhutan is also a potential source of power supply to South Asia through Indian grid and equally it could be a game changer as well. India, Bhutan and Bangladesh are likely to jointly implement hydropower projects in Bhutan through a tripartite investment agreement. India is leading energy cooperation in the region for a win-win outcome for all the stakeholders. This would go a long way in helping South Asia which is trying hard to come out of the LDC (Lease Developed Countries) category to realize its growth potential.
