Long-Term Electricity Trade Agreement to Open the Door for Exporting 10,000 Megawatts to India
With the approval of the long-term electricity trade agreement, initially signed during the Prime Minister's visit to India, the pathway to export up to 10,000 megawatts of electricity to India will soon become a reality.
The long-term electricity trade agreement has been given the green light by the Council of Ministers of India, and the signing ceremony is scheduled to take place at the secretary level of both nations in Kathmandu.
Within the framework of the long-term power purchase agreement, the export of 10,000 megawatts of power is prominently featured over a span of 10 years, effectively paving the way for this monumental undertaking.
But what happens after this initial decade?
This current agreement establishes a firm legal foundation for the export of 10,000 megawatts for the subsequent 10 years. Additionally, provisions have been made to accommodate necessary changes, with the authority to make amendments vested in the secretaries of both countries. The agreement grants these secretaries the power to determine export targets beyond the initial 10-year period.
As the situation unfolds after the first decade, decisions will be made regarding the export of electricity for a prolonged 25-year period. Furthermore, flexibility is built into the agreement to adapt to evolving circumstances, allowing for adjustments to the established goals.
The genesis of this groundbreaking agreement dates back to Prime Minister Pushpa Kamal Dahal Prachanda's visit to India, where a preliminary agreement on long-term electricity trade was inked on the 16th of Jestha.
Notably, while the Cabinet of Ministers of Nepal approved the proposal for this agreement at the time, the Government of India withheld full approval, citing the need for further review.
However, the Indian Council of Ministers has now given its stamp of approval, signaling that the agreement is set to be signed imminently.
The preliminary agreement was officially signed by Nepal's Energy Secretary, Dinesh Kumar Ghimire, and his Indian counterpart, Shri Alok Kumar. Subsequently, they will also formalize long-term contracts in accordance with the agreement's provisions.
This monumental agreement will facilitate the export of up to 10,000 megawatts of electricity generated by joint projects between Nepal and India.
However, it's important to note that, considering the current state of infrastructure and electricity availability, only 800 megawatts of electricity can be supplied initially.
Presently, Nepal exports 452 megawatts of electricity to India through a short-term agreement. Additionally, a mid-term agreement has been reached to export an additional 200 megawatts of electricity over a 5-year period.
According to the Electricity Authority, the 452 megawatts currently exported will enter the competitive market, while the additional 200 megawatts will follow a separate path. The agreement specifies that Nepal will provide electricity up to the border at Dhalkebar Substation within the designated 5-year timeframe. From there, the Indian side will shoulder all expenses and purchase the electricity.
Nepal had long proposed a long-term electricity trade agreement with India, but the Indian government initially resisted during the Prime Minister's visit. It was only after Prime Minister Prachanda made it clear that this agreement was a prerequisite for any other agreements that India ratified it three months later.
The potential revenue from regularly exporting 10,000 megawatts of electricity amounts to approximately 9 Kharba rupees annually for Nepal. However, achieving this level of electricity export throughout the year will require Nepal's production capacity to reach 25,000 megawatts.
This agreement holds immense significance in attracting investment for the hydropower sector's development in Nepal, according to Sharma. It not only opens the door to exporting 10,000 megawatts of electricity over 10 years but also charts a new course for regional development. Furthermore, it can play a pivotal role in Nepal's economic development and restructuring.
Under the long-term power purchase agreement with India, the private sector will also gain the opportunity to sell electricity in India. However, this privilege is extended exclusively to electricity produced by investors from India and Nepal.
Previously, Nepal and India signed an Energy Trade Agreement (PTA) in 2014. During the visit of then Prime Minister Sher Bahadur Deuba to India on 18-20 Chaitra 2078, officials from both countries signed the 'Joint Approach Letter on Cooperation in the Energy Sector.'
This agreement sets the stage for increased investment in Nepal's hydropower sector and ensures the sale of domestically produced electricity. Consequently, hydropower investors can invest with confidence, benefiting not only the energy sector but the economy at large.
Nepal's installed electricity capacity has reached approximately 2800 MW. However, during the rainy season, 500 to 600 megawatts of generated electricity go to waste as projects operate at full capacity. A long-term agreement with India promises to utilize this surplus energy and promote its export.
