New Delhi: Despite India and Nepal signing a power trade agreement earlier this year that is a win-win for both sides, objections are still being raised by stakeholders in the Himalayan nation about the process of implementation. According to reports in the local media in Nepal, private power producers are questioning a provision in the country’s electricity bill, which is under consideration by Parliament allowing the government to grant a licence without competition to any joint venture entity between Nepal and foreign government entities to develop hydropower projects over 100 MW.
“Nepali developers are themselves capable of developing projects up to 500 MW,” The Kathmandu Post quoted Ganesh Karki, president of the Independent Power Producers Association of Nepal (IPPAN), as saying. “Why grant a licence without competition for projects above 100 MW?” This comes after Surya Nath Upadhyay, a former bureaucrat of Nepal, earlier this month, 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. Following this, Nepal’s Supreme Court issued a show-cause notice to the government about the recently signed long-term power deal with India, questioning whether the agreement requires endorsement by a majority of Parliament members.
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, 2023 . 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 2,200 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.
According to The Kathmandu Post report, the private sector is also of the view that the provision would open the doors for Indian state-owned companies to develop more hydropower projects in Nepal at a time a section of stakeholders has expressed concern over increasing “Indian control” of Nepal’s rivers. But, the fact of the matter is that India is not dependent on Nepal for power. It is Nepal that needs India to export the surplus power that is generated.
According to Nihar R Nayak, a Research Fellow at the Manohar Parrikar Institute of Defence Studies and Analyses and an expert on issues about Nepal and the eastern Himalayas, Karki’s statement is based on wrong perceptions and not on evidence. “See, there are two types of hydro projects in Nepal – dam-based projects and run-of-the-river projects,” Nayak told ETV Bharat. “Private players in Nepal are not capable of developing dam-based projects. They can only develop seasonal run-of-the-river projects that can generate power for six months in a year. It is India that exports 300-400 MW of power to Nepal during the lean season.”
The currently deliberated bill in the federal parliament does not prohibit a foreign government entity from collaborating with Nepal’s state-owned entities for projects exceeding 100 MW capacity. Notably, the Nepal Electricity Authority (NEA) and SJVN Limited of India have formalised a memorandum of understanding (MoU) for the joint development of the 490 MW Arun 4 hydropower project, while India’s NHPC Limited and Nepal’s Vidhyut Utpadan Company Limited have entered an agreement for the 480 MW Phukot Karnali hydroelectric project. These agreements are established on inter-governmental understandings. Additionally, the Nepal government has assigned the survey licence for the 669 MW Lower Arun Hydropower Project to SJVN Limited, and licences for the development of the 750 MW West Seti Hydropower Project and the 450 MW Seti River (SR-6) were granted to NHPC Limited.
Nayak also explained that the Nepal Electricity Authority Bill amendment of 2010 that allowed domestic private players to develop hydropower projects does not prohibit other countries from entering into tie-ups with Nepali entities. So, the argument that India can exploit Nepal’s water resources is baseless. “But the fact of the matter is that India is at an advantageous geographical position and is the immediate market for the export of the surplus power generated in Nepal,” Nayak said. “India can also be the transit point for export of power from Nepal to other countries in the region like Bangladesh, Bhutan, Myanmar and Sri Lanka.”
He also pointed out that the IPPAN, which has raised the latest objections about Indian companies’ participation in the development of hydropower projects, is backed by the Communist Party of Nepal-Unified Marxist–Leninist (CPN-UML), a political party that is inclined towards China. It may be noted 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. But, any which way one looks at the objections being raised about the India-Nepal power trade agreement and the pending bill in that country’s Parliament, it is Kathmandu that will stand to lose at the end of it all.
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