Sweet Power Deals Against Bitter Reality

As geographically close and historically and culturally bounded nations, Nepal and India have unique economic relations as their reality

Sept. 26, 2014, 5:45 p.m.

Power Trade Agreement (PTA) and Power Development  Agreement (PDA) have long been in public discourse. Facing severe power shortages and long hours of load shedding, we have been raising the issue of PTA and PDA for long as our agenda. As Nepal and India have already signed initial PTA and Investment Board of Nepal has signed PDA with Indian Company GMR as per the commitment expressed by Indian Prime Minister Narendra Modi during his recent visit to Nepal, these will open new opportunities for foreign investors. As geographically close and historically and culturally bounded nations, Nepal and India have unique economic relations as their reality. In this context, both the countries have been stressing the need to have consensus  to develop and tap Nepal’s hydropower potential for the benefit of both the nation.  There is a growing realization in both the countries to have better bilateral understanding for commercialization, development and use of  Nepal’s hydropower.  Despite fifty years long power exchange between Nepal and India, Nepal has been unable to generate more than 750 MW of electricity. This bitter reality is in front of us. We have enough water, technology and even we can manage money. Along with holding energy summits and bigger workshops, the government and Nepal's development partners have been showing plans and commitments every year. However, the situation is different in reality. Despite all these efforts, we are facing acute power shortage and industries are shutting down resulting in a widening trade gap every year. Similarly, industrialists are in no position to bear all the production cost.

Electricity is an infrastructure that has multidimensional impacts on accelerating the country’s economic growth and prosperity. Everyone knows how the lack of electricity has been disrupting  Nepal’s industrial production as well as our day to day life. Although Nepal has been harping on the slogan of Bright Nepal, Prosperous Nepal, there is a growing fear among the private sector about the possibility of turning this slogan as just a slogan in the context of the lack of commitment of political parties and government plan. 

With the changing political context, Nepal and India signed PTA which was proposed in 2010 and Nepal Investment Board and GMR inked PDA after almost seven years. These indicate good tidings for the private sector also. The private sector believes that both the agreements, which were pending for a long time, will pave the way to increase foreign investment in Nepal’s power sector and open opportunities to trade Nepal’s electricity to the Indian market. As water resource is Nepal’s main development agenda and national need, with the concluding of two treaties PTA and PDA, Nepal’s private sector is more encouraged now. After the agreement at the high political level, the time has now come to implement both the agreements with a win-win situation. CNI-EDC and Independent Power Producer Association Nepal (IPPAN) recently jointly organized an interaction on this.

Power Trade Agreement (PTA)  is fundamental to guarantee the market for generated electricity and PDA is interlinked with it. PDA is an important component to lure the foreign investment for the development of hydropower. Due to lack of PDA, bigger companies - which are investing money for pre-feasibility study and renewing generation license- are suspicious about the prospect of investment in Nepal. Similarly, it also hampered the construction of the project as well. CNI has been stressing for signing of PDA with companies protecting national interest with the view to move side by side with neighbors and luring foreign investors in the power sector to benefit both the countries. CNI holds the view that only by signing the PDA with bigger countries, Nepal can lure enough foreign investment.

Energy is the pre-requisite for the country’s development and it has multi-dimensional effects. CNI holds the view that it doesn’t want to waste the time for the development of hydropower. After completion of PDA and PTA, Nepal’s private sector is encouraged and there are increased hopes of brighter days ahead.  This is a great moment in the history of Nepal’s hydropower development and foreign investment in the power sector. Although much needs to be done in the future, the private sector has reasons to rejoice for now.

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