Dahal, while speaking in the federal parliament on Monday, said that the agreement made during his visit to India has ensured the legal basis for electricity export in India. "The long-term electricity export agreement has ensured the market to promote investment in the hydropower sector in Nepal in the future," he said.
Officials at the Ministry of Energy, Water Resources and Irrigation (MoEWRI) also corroborated with what PM Dahal said. “Bilateral signing of the agreement could not take place only because India’s cabinet could not endorse it on time,” said a senior MoEWRI official. “Both sides reached an understanding that India will first get the agreement approved by the cabinet and the signing date will be fixed shortly after that.” Since the details of the initial agreement have not been made public, it is not clear how Nepal will benefit from it as claimed by government officials. Energy sector experts said that the fact that India did not give a concrete answer to Nepal's request to export an additional 1,200 MW of electricity including that of the Upper Tamakoshi Hydropower Project during Dahal's India visit, does raise questions about India's intention to buy electricity from all Nepali projects. While India has not stated it publicly, experts say the southern neighbor has shown reluctance to buy electricity generated from projects with Chinese investment or the involvement of Chinese contractors. However, the government officials who're part of the negotiation said that it is a 25-year-long agreement that will be renewed automatically as long as the two countries don't want to amend it. “Companies from two countries sign medium and longer-term deals for procurement of the electricity,” the MoEWRI official said. “A medium-term power purchase agreement can be signed for five years and the companies will be free to sign longer PPA as well.” Currently, Nepal is only allowed to sell power in the day-ahead market of India’s energy exchange. The day-ahead market means that Nepal can sell electricity once quantity and price are determined a day ahead of the trading day. Nepal has been requesting the southern neighbor for a long-term power trade deal arguing that an inter-governmental agreement would lock in the market and end the unpredictability of the Indian market’s availability for electricity from Nepal in the long run. Nepali Officials said that the government-to-government long-term agreement will help the country to address the risk of electricity spillage as well as open the door for massive investment in Nepal’s hydropower. According to them, the Indian announcement of buying so much power from Nepal should be considered both an opportunity and a challenge. “As the market has been guaranteed, we will have to increase investment massively to boost hydropower generation and build transmission infrastructure to ensure smooth energy trading between the two countries,” said a senior official of the Nepal Electricity Authority (NEA). Currently, projects with a combined capacity of over 3,000MW are under construction after the signing of the power purchase agreement, according to NEA. NEA and the companies developing the power projects have signed power purchase agreements for projects over 6.000MW of electricity. “As India promised 10,000 MW and we also plan to export power to Bangladesh, it is necessary to invest not only to generate power but also in transmission infrastructure,” the NEA official said. Nepal’s transmission infrastructure has remained poor with so far only a single high-capacity transmission line having been completed to trade electricity with India. Currently, Dhalkebar-Muzaffarpur Transmission Line is the only power line whose capacity is 400kV. There is no transmission line with this capacity for domestic transmission of power. However, optimism is growing that more high-capacity power lines will be developed within the country or cross-border power transmission. Nepal is about to start construction of a 315 km long 400kV transmission line under grant assistance from the Millennium Challenge Corporation, a US aid agency. This power line will connect Kathmandu, Ratmate (Nuwakot), Damauli (Tanahun), Hetauda (Makawanpur), and Butwal (Rupandehi). During Dahal’s India visit, the Prime Ministers of the two countries laid a foundation stone for the construction of the New Butwal-Gorakhpur Transmission Line Project. Nepal and India agreed to develop the 400kV Inaruwa (Duhabi-Purnia, Bihar) and 400kV New Lamki (Dodhara-Bareli, Uttar Pradesh) cross-border lines by 2027-2028 and 2028-2029, respectively during the 10 h meeting of Joint Steering Committee on Energy Cooperation held in India in February.
