NEPAL-INDIA ELECTRICTY TRADE Request Pending

At a time when Nepal has been wasting about 800MW of electricity due to lack of consumption in domestic market, India can generate huge goodwill in Nepal by allowing additional 212MW electricity import from Nepal

Oct. 20, 2022, 10:49 a.m. Published in Magazine Issue: VOL. 16, No. 06, Oct.21,2022 (Kartika 04. 2079) Publisher and Editor: Keshab Prasad Poudel Online Register Number: DOI 584/074-75

It is peanuts for India in allowing an import of additional 212MW electricity from Nepal but the gesture will gain a huge goodwill in Nepal, proving redundant the old populist anti-Indian narratives that India does not purchase Nepal’s electricity.

In the last one year and a half, Nepal and India have made many meaningful negotiations in their bilateral relations, taking each other’s concerns and responding to them with care. Among the most valuable deal was the beginning of export of electricity from Nepal to India.

After a long hiccup, India has agreed to import 364MW of electricity from Nepal. For this, Nepal also has reciprocated awarding license to Indian state-owned power company to construct two lucrative reservoir hydropower projects, including West Seti in far-west.

As trade is a process of negotiations and give and take, it is natural for Nepal and India to make deals that make business sense. Goodwill is not tested on electricity trade only. Backing India’s bid for permanent UN membership and calling for the UN Security Council reforms firmly, while siding with India, Nepal has given a clear message.

However, Nepal and India power trade faced disruptions with India’s adamant response to Nepal’s proposal to export additional 212MW electricity to India.

Knowing that the country would have huge surplus energy in September and October, Nepal has requested India for export of additional 212MW to prevent spillover, of up to 800MW daily, due to increasing electricity generation within the country and decreasing domestic demand.

As soon as local online media reported the story regarding waste of Nepal’s electricity due to lack of market, those, who were defeated in their narrative after Nepal began the export, found the right moment to push their narrative that India cannot purchase electricity generated in Nepal. Social media like Twitter are full of comments and criticisms against India and Nepal’s authorities on this.

Allowing 364MW of import of electricity from Nepal, India has gained huge goodwill in Nepal. Had India allowed additional 212MW import, the narrative that a group of Nepalis have been using to criticize India would have completely vanished.

In June, Nepal started exporting the total approved 364MW of electricity to India through its power exchange market. Buoyed by surplus rainfall this year, Nepal is exporting surplus electricity to India through its power exchange market, according to the state-owned power utility body, Nepal Electricity Authority (NEA).

"We are facing from 400 to 800MW as losses due to increasing electricity generation within the country and decreasing domestic demand," said Pradeep Thike, Deputy Managing Director of NEA told PTI.

"We have asked the Indian authority for the approval of exporting an additional 212MW of electricity for the last two months, but have not got any response from them," he said.

By selling 364MW electricity to India from June to November end, Nepal will receive Rs 4.78 billion, according to the NEA.

NEA started selling surplus electricity in the day-ahead market of Indian Energy Exchange Limited (IX) at competitive rates from June 2.

Nepal became an energy surplus country ever since the 456MW Upper Tamakoshi Hydropower Project came into full operation in August last year. As many more hydropower projects are in the process of completion, Nepal will have over 1000MW surplus electricity next year.

At a time when Nepal’s domestic market does not have capacity to consume huge surplus electricity and Nepal is unable to make any deal with India, Nepal will have to waste billions of rupees worth of seasonal electricity. This will put a huge financial burden to NEA.

As trade is about negotiations, it involves conditions and other safeguarding measures of parties. In recent months, India’s main condition in the electricity trade is exclusion of Chinese investment and its involvement. Due to this condition, Nepal is unable to sell 456MW electricity generated by Upper Tamakoshi, which is constructed through domestic investment. However, out of 4 contractors, one Chinese contractor was involved in the civil work and two Indian contractors were involved in transmission and hydro-mechanical.

Whether one likes it or not, India is the only big market for Nepal’s surplus electricity. For this, Nepal needs to gain goodwill from India. As electricity export is a trade, Nepal also needs to learn the art of trade and deal with India accordingly.

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