Currently, in Nepal, the private sector is solely granted the right to generate electricity, while power trading remains under the monopoly of the government-owned Nepal Electricity Authority (NEA).
The Nepali private sector, including independent power producers, has been advocating for their involvement in power trading. This demand stems from the fact that the Nepal Electricity Authority (NEA) currently holds a monopoly on power purchase agreements (PPAs), leaving no other entity in the country authorized to sign such agreements. The Sher Bahadur Deuba-led government did make efforts to facilitate the entry of the private sector into power trading by introducing an ordinance last year. The Deuba government withdrew the long-pending Electricity Bill at the National Assembly and opted for an ordinance instead. In October 2022, the Deuba government passed an ordinance to ratify the Electricity Act 1991 to give licenses to the private sector for power trade. However, the then President Bidya Devi Bhandari did not endorse the ordinance sent by the government for authentication. The bill had provisions for the developers to sell their electricity in the market after taking approval from the ministry and the private sector can also obtain a license to trade power in the international market. The private power developers have welcomed the government's move to table the bill in the parliament. "This is a welcome move. We've been demanding this for long," said Krishna Prasad Acharya, president of the Independent Power Producers' Association Nepal (IPPAN). The Nepali power producers have been gearing up for power trading licenses by establishing power trade companies. According to the Department of Electricity Development (DoED), Nepal Power Exchange Ltd (NEPEX) and Power Trading and Energy Exchange Ltd (PTEEL) have applied for power trading licenses. Similarly, Nepal Infrastructure Bank has applied to the Ministry of Energy, on behalf of the Power Trading Company (PTC) Ltd, and the Himalayan Trading Company is also preparing to register an application for the license. While the private sector in Nepal is still awaiting the trading license to sell electricity in both domestic and foreign markets, some private entities have already signed the memorandum of understanding (MoUs) with Indian companies for cross-border power trading. The Nepal Power Exchange Limited (NPEL), subsidiary of IPPAN has already signed an agreement with Manikaran Power Limited, India to carry out cross-border electricity trade. As per the MoU, the Indian company will buy 500MW of electricity from the Nepal Power Exchange Limited besides investing in the Nepali company itself. During the Power Summit 2023, Nepali and Indian companies signed initial deals for selling 2,200 MW of electricity to India. Manikaran Power Limited signed a memorandum of understanding (MoU) to purchase around 200MW of electricity directly from the hydropower projects. Vedanta Resources, a sister company of Vedanta Limited, also initiated the process to buy 2,000MW of hydropower from Nepal in the next five years.
