India and Nepal have signed an agreement to start selling electricity to each other. The agreement commits both countries to buy and sell electricity during times of shortages.
Indian Power Secretary Pradeep Kumar Sinha says that electricity exports to Nepal will take place as soon as the Dhalkebar-Muffarpur cross-border transmission line has been completed which is expected to be December 2015 latest.
Deputy Managing Director of Nepal Electricity Authority (NEA), Sher Singh Bhat, says Nepal can start importing up to 400MW through the cross-border transmission line and load shedding can be reduced to one or two hours per day.
Under the agreement, India aims to assist Nepal with the development of its abundant hydropower potential which has yet to be harnessed. Nepal is able to generate as much as 42,000MW of electricity by harnessing the power of its rivers. Despite this potential, the country has an installed capacity of just over 800MW and suffers blackouts for up to 18 hours a day.
Nepal will help alleviate India’s energy shortage
The development of Nepal’s hydropower is in India’s interest since they will also be buying electricity from Nepal to help tackle its own energy shortage. India has one of the fastest growing economies in the world, with current electricity generation capacity of about 230GW to meet the needs of an over 1.25 billion population. However, the per capita annual energy consumption at around 600kWh is one of the lowest in the world. Further power supply is often of poor quality and unreliable. There is also a need to provide energy access to the over 400 million households that still lack basic access to electricity. [Engerati – India Poised To Join Energy Storage Revolution.]
"It will create a very good atmosphere for investment in Nepal as it will give confidence among investors that they will be able to sell electricity in the Indian market," Nepal's Energy Minister Radha Gyawali said."Investors who were earlier reluctant to put money in Nepal are now saying that they were encouraged by the prospects of selling electricity to India," she said.
Sinha says, “"This endeavour will, no doubt take us forward towards supplying power 24 hours a day and seven days a week."
India has been keen to re-assert influence among smaller neighbours where China has been forging closer ties, and the agreement follows Indian Prime Minister Narendra Modi's visit to Nepal in August.
Upper Karnali hydropower plant plans
Last month Indian company GMR Group and Nepal signed a US$1.5 billion deal to build the 900MW Upper Karnali hydropower plant in the northwest of the country, the single largest foreign investment scheme in Nepal. China, which has built small hydropower plants for Nepal, is also in talks to build large-scale hydropower plants.
The power trade agreement with India will initially help Nepal to import electricity to meet its own shortages.
India could start buying power from Nepal once the GMR plant starts generation in 2021 and Kathmandu is generating enough electricity to meet domestic demand, officials in Nepal said.
The export of power could help Nepal's trade deficit. According to state-run Trade and Export Promotion Centre, Nepal's deficit with India stood at US$4 billion in 2013, up from US$3.1 billion a year prior.
There will be a major shift in the current flow of electricity from west to east as residential consumers, as well as industrial and commercial sectors can run at full capacity.
However, the much overdue Khimti-Dhalkebar transmission line and Bhatkapur-Chapagaun-Matatirtha transmission line will remain a hurdle in the energy supply to Kathmandu, says Kanhaiya Lal Manadhar, chief of NEA’s Directorate of Transmission Lines.
The Bhaktapur-Chapagaun-Matatirtha line would complete a loop in Kathmandu Valley but the project has been shelved due to locals’ protests against land acquisition bids by NEA.