NEPAL-INDIA PPA: Power Need And Price

Although India raises the price of electricity exported to Nepal, the electricity supply by India is essential to ease load shedding

April 7, 2018, 7:29 a.m. Published in Magazine Issue: VOL.11, No.18, April 06, 2018 (Chaitra 23, 2074) Online Register Number: DOI 584/074-75

As Nepal Electricity Authority, NEA, renews the Power Purchasing Agreement (PPA) with India's NTPC Vidyut Vyapar Nigam Ltd (NVVN) for 15 months, it has helped Nepal’s efforts to ease load shedding.

As per the new agreement, India has raised the price of electricity that it exports to Nepal and the new price comes into effect from April 1.

As per the new power purchase agreement by NEA and India's NTPC, electricity imported from India becomes costlier by 60 paisa. India now sells electricity to Nepal at IRs 3.6 (Rs 5.76) per unit, up from IRs 3.98 (Rs 6.36).  

NEA Managing Director Kul Man Ghising and Chief Executive Officer of NVVN Arun Kumar Garg signed the agreement in New Delhi.

The new PPA came into effect after the existing PPA signed by the NEA and NTPC in December last year expired on March 31. According to the new PPA, the price rate will increase by 5 percent again after six months.

According to NEA officials, the new PPA has ensured smooth supply of 120 megawatt of electricity via Dhalkebar-Muzzafarpur cross-border transmission line for 15 months.

Nepali officials say that India raised the price of electricity exported to Nepal as the southern neighbor has also increased electricity tariff in its domestic market. “We had maintained our stance during the negotiation with Indian side to supply electricity at the existing price rate. However, we have to agree on the increased tariff as they argued that they must increase the price rate due to rise in electricity tariff in Indian market,” Prabal Adhikari, chief of the Power Trade Department of NEA, told Republica.

He said that the NTPC, the nodal agency of Indian government in the business of power trading, increased the price rate, citing the rise in the cost of production of electricity in the Indian market. He said that average clearing price of electricity exchange is IRs 4.19 (Rs 6.7) per unit in India.

NEA has been importing electricity from India on commercial basis as well as based on power exchange, and Mahakali agreement. NEA imports electricity from Dhalkebar-Muzzafarpur cross-border transmission line on commercial basis and on power exchange basis from other routes.

The power utility imports electricity from Bihar, Uttar Pradesh and Uttarakhand states of India based on the tariff set by the Power Exchange Committee where there is representation of India and Nepal.

The tariffs of electricity imported via these Indian states are IRs 5.55 (Rs 8.88), IRs 6 (Rs 9.6) and IRs 6.45 (Rs 10.32) per unit, respectively. Compared to the tariff via these states, the price rate of electricity imported via Dhalkebar-Muzzafarpur cross-border transmission line is still on the lower side.

Nepal started import of electricity via Dhalkebar-Muzaffarpur transmission line from February last year following the inauguration of the cross-border transmission line jointly by Prime Minister KP Sharma Oli and his Indian counterpart Narendra Modi.

NEA’s official says that the import from Dhalkebar-Muzaffarpur transmission line has played a major role in reducing load-shedding in the country.  

Though energy import from India has enabled the NEA to eliminate power cut, critics say there is no reason to be happy as electricity import is rising with each passing year. The country has been footing the electricity bill worth billions of rupees annually to India. 

As most of the current power projects, which are undergoing construction and those already installed are run-off the river, NEA does not have any option other than to import energy from India.

Nepal will be importing power from India till the beginning of wet season of 2019 even though the Upper Tamakoshi hydropower project is expected to be completed by the end of this year.

PPA rate of the electricity is decided during the Nepal-India energy secretary-level talks. However, the meeting that was supposed to be held in November last year was pushed back due to the elections then. The government of India has appointed NVVN as the nodal agency for the cross-border electricity trade.

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