New Delhi: With the long-term power trade agreement signed between India and Nepal last month running into a controversy with those opposing it questioning the implications for the Himalayan nation, a strong Chinese angle to it is emerging. During External Affairs Minister S Jaishankar’s visit to Kathmandu in January this year, India and Nepal signed a long-term power agreement that will facilitate the export of 10,000 MW of electricity from Nepal to India in the next 10 years. The agreement was signed after Jaishankar and his Nepalese counterpart Narayan Prasad Saud co-chaired the seventh India-Nepal Joint Commission meeting.
The two countries had reached an understanding on the electricity export during Nepal Prime Minister Pushpa Kamal Dahal’s visit to India from May 31 to June 3 last year. According to the new agreement, New Delhi will increase the import of power from the neighbouring country to 10,000 MW in the next 10 years from the current 450 MW.
Currently, Nepal has a power generation capacity of 2,800 MW, with ongoing construction of infrastructure to add another 3,300 MW. The nation has set a goal to achieve a total power generation of 28,000 MW by 2035, intending to export nearly half of this amount. Despite the ambitious production and export targets, Kul Man Ghising, the director of Nepal Electricity Authority, acknowledges that achieving 50-60 per cent of the goal would be a significant accomplishment. Nepal commenced its electricity exports to India in May 2023.
However, Surya Nath Upadhyay, a former bureaucrat of Nepal, has filed a writ petition at the country’s Supreme Court arguing that the new long-term power trade agreement was against Nepal’s interest as it would enable India to make unjustified use of the Himalayan nation’s water resources.
According to a report in the Kathmandu Post, Upadhyay has sought an order from the court for the government to implement the agreement only after its parliamentary endorsement, arguing that, as the matter involves the distribution of water, a natural resource, it calls for parliamentary approval as per Article 279 (2) of the country’s constitution.
Following this, the court, earlier this week, ordered the Nepal government to explain within 15 days why it should not be issued an interim order against the agreement’s implementation as demanded by the petitioner. However, observers believe that there is more to the controversy than meets the eye.
According to Nihar R Nayak, Research Fellow at the Manohar Parrikar Institute of Defence Studies and Analyses and an expert on issues pertaining to Nepal and the eastern Himalayas, the agreement is being opposed by left-leaning Civil Society Organisations and lobbies in Nepal. “This is a move against India by external countries,” Nayak told ETV Bharat. “There is a strong China angle to this.”
It may be mentioned that following the signing of the agreement in January, China had warned Nepal that this might lead to jeopardising its power projects and energy supply ambitions. An opinion piece headlined ‘India's geopolitical game hurts outlook for Nepal's hydropower’ in the Global Times, the acerbic daily English tabloid that serves as the mouthpiece of the Chinese Communist Party, stated: “While electricity trade between India and Nepal appears to give the former a commanding advantage against China in Nepal’s hydropower sector, there is also growing concern as to whether India’s geopolitical game of edging China out could jeopardise Nepal’s power projects and energy supply ambitions.”
The article also referred to a shift in India’s power purchase policy that prevents the buying of electricity from projects financed by China. According to the cross-border power trade guidelines issued by Central Electricity in February 2021, a country cannot export power to India from a project that has investments from a third country. Though not directly naming China, Section 6 of the Procedure for Approval and Facilitating Import/Export (Cross Border) of Electricity by the Designated Authority states: “Indian entities may import electricity from the generation projects located in neighbouring country(ies) directly or through government or a government company or a licensed trader of that country after taking approval of the designated authority, provided that the generating company is not owned, directly or indirectly by any natural/legal personality(ies) whose effective control or source of funds or residence of the beneficial owner, is situated in/citizen of a third country with whom India shares land border and that third country does not have a bilateral agreement on power sector cooperation with India.”
As such, hydropower produced by Chinese-funded or Chinese-built plants is excluded from India’s power trade with Nepal. As a result, Nepal has removed Chinese developers from six hydropower projects and given four hydropower contracts to Indian companies. Indian companies have contracts to build and operate 10 hydropower plants in Nepal, while Chinese developers have contracts for five such projects.
According to Nayak, China has been engaging in illegal investments in hydropower projects in Nepal. He explained that there are three parts to a hydropower project--civil construction, electro-mechanical instruments and turbines-- of these, turbines are the costliest, Nayak said. “Banks in Nepal are averse to extending loans for turbines. As such, private developers involved in such projects approach Chinese companies for loans. The Chinese companies then seek a stake in the project concerned instead of the full reimbursement of the loan.”
Coming to the current controversy surrounding the long-term power trade agreement, a source, speaking on the condition of anonymity, referred to petitioner Upadhyay and said that most of the former bureaucrats in Nepal are pro-Communist Party of Nepal (Unified Marxist–Leninist).
“They are pro-China and anti-India,” the source said. “They do not want the BJP government to continue in power in India. They fear that if the BJP returns to power, the word ‘secular’ will be removed from the constitution and Nepal will be turned into a Hindu nation.”
Meanwhile, supporters of the agreement in Nepal say that the deal was more important for Nepal rather than it was for India. “I wonder why those opposing the long-term power trade agreement were mum when Nepal and India signed a similar agreement in 2014 paving the way for bilateral trade of power,” former energy secretary Dinesh Ghimire was quoted as saying by the Kathmandu Post. “Why don’t they also seek parliamentary endorsement for the ongoing trade of power?”
According to Ganesh Karki, president of the Independent Power Producers Association of Nepal, opposing the long-term agreement signed with India would discourage the export of Nepal’s excess power to its southern neighbour. “Many countries have enriched themselves by exporting their products,” the report quoted Karki as saying. “Electricity is a similar exportable item for Nepal. Why should the country not export more of it?”
According to Nayak, if the court scraps the new agreement, only Nepal will stand to lose at the end of it all. “India has never been dependent on Nepal for power,” he said. “Nepal does not have the infrastructure to export power to China and Beijing, too, does not need power from Nepal. If the agreement is scrapped, Nepal will also not be able to export power to other countries like Bangladesh via India. What will Nepal do with the surplus energy?”
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Read more: Nepal Inks Power Deal With India; To Sell 10,000 MW Of Electricity In The Next 10 Years
