Cross-Border Electricity Trade: Opportunities and Challenges for Nepal

Abstract

Nepal, with abundant hydropower potential and situated in a geo-politically important place, has the opportunity for cross-border electricity trade. The paper argues that for Nepal, the trade of electricity with neighboring countries of India and China is of both strategic and financial importance. This is because, even if Nepal develops all the potential hydroelectricity and export to neighbors, the contribution of such export will also be insignificant to them where the installed capacity have already crossed hundreds of thousands megawatts. In such backdrops, the paper attempts to explore the major opportunities and challenges of cross-border trade of electricity for Nepal. The paper delves into Nepal's existing plans, policies and regarding which, the paper urges for serious consideration in formulating or implementing them. Presenting the current status of bilateral and multilateral agreements and institutional arrangements, the paper reinforces the fact that cross-border electricity trade is not an easy task. Nevertheless, with prioritization of fulfilling internal demands, it is high time for Nepal to address the existing challenges and grab the opportunities offered by cross-border electricity trade. For this, the paper entails for the development of national strategy in lieu of considering electricity as trade commodity only.

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Cross-Border Electricity
Trade: Opportunities and
Challenges for Nepal
Prakash Gaudel
Assistant Manager, Environment and Social Studies Department, NEA
Abstract
Nepal, with abundant hydropower potential and situated in a geopolitically importantplace,has the opportunity for cross-
border electricity trade. The paper argues that for Nepal, the trade of electricity with neighboring countries of India and
Chinaisofbothstrategicandfinancialimportance.Thisisbecause,even ifNepaldevelopsallthepotentialhydroelectricity
and export to neighbors, the contribution of such export will also be insignificant to them where the installed capacity
have already crossed hundreds of thousands megawatts. In such backdrops, the paper attempts to explore the major
opportunities and challenges of cross-border trade of electricity for Nepal. The paper delves into Nepal’s existing plans,
policies and regarding which, the paper urges for serious consideration in formulating or implementing them. Presenting
the current status of bilateral and multilateral agreements and institutional arrangements, the paper reinforces the fact
that cross-border electricity trade is not an easy task. Nevertheless, with prioritization of fulfilling internal demands, it
is high time for Nepal to address the existing challenges and grab the opportunities offered by cross-border electricity
trade. For this, the paper entails for the development of national strategy in lieu of considering electricity as trade
commodity only.
Key Words: hydropower, cross-border, transmission lines, electricity trade, regional cooperation.
1. Background
Nepal, one of the South Asian nations, is surrounded by
two most populous nations, China in the North and India
in the remaining directions. With expanding economies,
there is a growing demand for electricity in South Asia
as well as in China. To meet this energy demand, the
electricity is currently being produced from different
sources in the region. This is mainly guided by naturally
available resources. For instance, India and China are rich
in fossil fuels, mainly coal; whereas Nepal is not rich is
fossil fuel but has abundant water resources. Therefore,
theelectricityproductionin Indiaand China are dominated
by thermal power plants (Table 1) which depend on supply
of fossil fuels and that of Nepal is hydro-dominated. The
table below depicts the current electricity generation by
source types in Nepal and Nepal's immediate neighboring
nations.
With rising population and speeding economies, there is a
need of more reliable and sustained supply of electricity.
Nepal, as locked between the two giant nations, has the
opportunities for cross-border electricity trade and the
potentiality to change Nepal from land locked to electricity
linked nation. This paper first discusses the existing
cross-border trade of electricity and then analyze the

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Table 1: Current Electricity Generation
S.No.
Energy Type
Source Type
Installed Capacity (MW)
Nepal
1
(June 30, 2018)
India
2
(May 31, 2018)
China3
(2017)
1
Hydropower
1,006.78
49,889.23
341,190
2
Thermal
Diesel
53.41
837.63
1,106,040
Coal
196,957.50
Gas
24,897.46
3
Nuclear
-
6,780.00
35,820
4
Renewals
Solar
0.68
21,651.48
130,250
Wind
-
34,046.00
163,670
Geothermal
-
-
5
Others
Biomass/Cogeneration
8,700.80
Waste to energy
138.30
Total
1060.87
343,898.40
1,777,030
1 For detail, http://www.doed.gov.np/operating_projects_hydro.php
2 Ministry of Power, Government of India
3 https://chinaenergyportal.org/en/2017-electricity-other-energy-statistics-update-of-june-2018/
applicable national plans and policies. The cross-border
agreements and institutional mechanisms for such trade
are then discussed. With such backdrop, the paper then
presents the opportunities and challenges of cross-border
electricity trade for Nepal.
2. Nepal’s Cross-Border
Electricity Trade
Globally the cross-border electricity trade is gaining
momentum. The governments and international
organizationareprioritizingsuchtradebecauseoflowering
costs, diversification of supply and tapping into low
carbon or renewable energy sources (UN-ESCAP, 2018).
However, trade of electricity requires strong cross- border
interconnections of transmission lines and mutual
cooperation among the nations.
At present, Nepal has interconnecting transmission lines
with India only and there is no any trade of electricity with
China. The cross-border electricity trade between Nepal
and India is predominantly characterized by the import of
electricity needs of isolated areas of both sides of border.
Alltogether over20cross-borderbilateralpower exchange
facilities are operational at 11kV, 33kV and 132kV. The
total electricity flow from cross-border transmission lines
of capacity 33kV to 400kV is about 488MW (MoEWRI,
2018). Though Dhalekbar–Muzaffarpurcross-border
transmission line is of 400kV capacity, it was being
charged at 132kV since its operation in 2016 and recently
upgraded to 220kV in July, 2018. These existing lines are
currently being used mainly for importing electricity from
India. Further, 11kV cross-border lines connects Jaljibe
with Dharchula, Baitadi with Pithoragarh and Pipli with
Dharchula.With existing cross-border transmission lines,
trade of electricity with India has been mainly dominated
by imports which is in increasing trend. The imports
have increased by more than threefolds in a period of
just 8 years. There is nominal volume of electricity being
exported to India and the trend is decreasing (Table 2).
Table 2: Cross-border
Electricity Trade with India
S.No.
Fiscal Year
Import (GWh)
Export
(GWh)
1
2016/17
2175.04
2.69
2
2015/16
1777.68
3.15
3
2014/15
1369.89
3.17
4
2013/14
1070.47
3.40
5
2012/13
790.14
3.60
6
2011/12
746.07
4.12
7
2010/11
694.05
31.10
8
2009/10
638.68
75.07
Source: NEA (Annual Reports)
The maximum energy imported as per the Kosi and
Mahakali Agreements total about 30MW (10MW from
Kosi and a maximum of 20MW from Tanakpur for 70
million units). Ironically, the dry season imports is only
about 17.5MW for these river treaties (MoEn, 2009). The
remaining major share of import is from the power
exchange agreements and commercial arrangements
with power trading companies. Before entering into these
agreements, it is worthwhile tofirst look into Nepal’s plans
and policies that dictate the cross-border electricity trade.

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3. Nepal’s Plan and Policy Regime
The concept of regional trade of electricity is not new for
Nepal, at least in plan and policy documents. Initially, the
trade of electricity between Nepal and India were guided
by the bilateral agreements of Kosi and Gandak done in
the 1950s. Nepal has also reflected the potentiality and
possibility of cross-border hydroelectricity trade through
its own plans and policies. The Hydropower Development
Policyof 1992 hasfirstenvisaged toexporthydroelectricity
produced in excess to the national demand. The following
subsection deals with the existing national policies and
plans of hydropower and transmission line development
in relation to cross-border electricity trade.
3.1 Hydropower Development Policy, 2001
In Nepal, hydroelectricity trade across the border is mainly
guided by the Hydropower Development Policy of 2001.
The policy envisages hydropower, from its objectives, to
be developed as an exportable commodity. The policy has
encouraged the export of electricity by considering the
abundant hydropower generation capacity in the country.
For such trade, the Policy has prescribed a strategy of
bilateral or regional cooperation in the hydropower
development sector. The Policy believes that the
development of hydropower in Nepal will not only support
the domestic economy but also the regional economy.
Since the policy is focused on development, there is no
mention of hydropower import.
3.2 Water Resources Strategy, 2002
The Water Resources Strategy (WRS) of 2002 is the
first document of Nepal to acknowledge the principles of
IntegratedWaterResourcesmanagement (IWRM).Oneof
the specific objectives adopted by the WRS is 'to generate
hydropowertosatisfynationalenergy requirements and to
allowfor export of surplusenergy'.Asalongtermpurpose,
in 25 years of time (by 2027), the WRS envisages the
development of 22,000MW of hydroelectricity. As such
large hydropower generation will meet the domestic
energy demand, the Strategy aims at increasing revenues
by exporting surplus energy of as much as 15,000MW to
India and other neighboring countries.
3.3 Ten-year Hydroelectricity Development
Plan, 2009
A taskforce for formulating the ‘10 year Hydroelectricity
Development Plan’ was formed by the Government of
Nepal (GoN) on December 3, 2008. The taskforce came
up with the final report in August, 2009 prescribing the
generation of 10,000MW in ten years. This 10-year plan
envisages the development of storage and non-storage
projects in the ratio of 60:40, so that Nepal can export
3,000 to 5,000MW of electricity.
3.4 Twenty-year Hydroelectricity
Development Plan, 2010
Without considering the essence and the findings of the
final report of the task force for formulating 10 years plan
of hydropower development, the GoN formulated another
taskforce for formulation the ‘20 year Hydroelectricity
Development Plan’ on August 26, 2009. The task force
was primarily given the responsibility of preparing a plan
of generation 25,000MW in two decades. The task force
submitted the report in April, 2010 which envisages the
generation of total of 37,628MW of electricity including
multipurpose projects of Pancheshwar, Karnali Chisapani
and Sapta Koshi by 2029. If these three multipurpose
projectsarenotconceived,thetotalgenerationisprojected
to be 20,354MW for the same period of 20 years. Since
the generated electricity cannot be fully consumed in
Nepal, the task force recommends for export to India. The
plan has also considered the potentiality of cross-border
transmission lines as well as the SAARC regional power
grid and has recommended for at least one cross-border
line from each major basin of Nepal.
3.5 National Energy Crisis Mitigation and
Electricity Development Decade, 2016
A concept paper on mitigation of national energy crisis
and electricity development decade was presented by
the then Ministry of Energy in January, 2016. The plan
is to import up to 930MW of electricity from India up to
2 years in order to fulfill the domestic demand of Nepal.
In ten years of time (by 2026), generation of 10,000MW
of electricity including 5,000MW from storage projects is
anticipated. After fulfilling the internal demand, the plan
suggest for the export of excess hydro-electricity. For
this, the plan has foreseen the study and execution of
cross-border transmission lines of 400kV capacity which
includes a number of projects like New Butwal-Gorakhpur,
Duhabi-Purniya, Kohalpur-Lucknow, Lamki-Bareli, Attaria-
Bareli and Chilime Hub-Kerung.
Analyzing these national level plans of hydropower
development, one can clearly visualize that there
is no consideration of the previous plans and their
implementation. The focus has always been kept on
formulating fancy plans, one after another, emphasizing
only on setting targets of thousands of megawatt of

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Table 3: Fluctuating Targets of Hydropower Generation in Nepal
S.No.
Policy/Plan/Strategy
Target
Remarks
Period
Capacity (MW)
1.
Water Resources Strategy, 2002
2002-2027
22,000
including 15,000MW for export
2.
10 year Hydroelectricity
Development Plan, 2009
2009-2020
10,000
including export of 3,000MW to
5,000MW
3.
20 year Hydroelectricity
Development Plan, 2010
2010-2029
37,628
including 3 multipurpose project
(Karnali Chisapani Pancheshwar &
Saptakoshi)
4.
Electricity Development Decade,
2016
2016- 2026
10,000
later upgraded to 17,000MW in 7
years
Source: WECS, 2002; MoEn, 2009 and 2010
hydropower production (Table 3). However, in the
lack of ownership and enforcement of serious plans
by the authorities, the hydropower sector of Nepal is
underdeveloped.
3.6 Transmission System Development
Plan of Nepal, 2018
The Rastriya Prasaran Grid Company Limited (RPGCL),
owned by GoN, has prepared Transmission System
Development Plan in 2018. The plan has proposed the
construction of 3,192kmof 400kV capacityand 1,160kmof
220kV capacity transmission lines. The plan also includes
the six Nepal-India cross-border connection points in the
TeraiRegionandtwo Nepal-Chinacross-borderconnection
points in the Himalayan Region. These cross-border lines
which will be capable of transmitting a total of 15,900MW
of electricity (Table 4) are much same as proposed by the
Electricity DevelopmentDecade,2016.
Table 4: Proposed 400kV
Cross-border Transmission Lines
S.N.
Cross-border
TL Project
Length, km
(up to border)
MW Flow
A. Nepal -India
1
Dodhara-Bareli
58
3,000
2
Attariya-Bareli
30
700
3
Phulbari-Lucknow
44
2,600
4
Butwal-Gorakhpur
30
2,500
5
Inaruwa –Purnera
50
1,800
6.
Dhalkebar -Muza ffarpur
39
3,100
Sub-total
251
13,700
B. Nepal-China
1
Chilime-Kerung
14
1500
2
Upper Arun –Latse
23
700
Sub-total
37
2,200
Total (A+B)
288
15,900
Source: MoEWRI and RPGCL, 2018
The Transmission Plan was prepared as per the GoN
latest targets of developing 15,000MW in 10 years and
around 40,000MW by the year 2040. Prior to this, in
2015, Nepal Electricity Authority (NEA) has prepared a
'Transmission Master Plan of Nepal' from the year 2015
to 2035. Similarly, Joint Technical Team (JTT) of Nepal
and India has formulated an 'Integrated Master Plan for
Evacuation of Power from Nepal to India' up to the year
2035. However, the Plan of 2018 assumes that these
prior plans were mainly targeted for electricity exports to
India, and thus calls for updated master plan focusing
more on internal consumption.
4. Cross-Border Agreements
The cross-border agreements on electricity trade can
mainly be categorized into two types. The first includes
the river project agreements which were primarily done
for developing irrigation and flood control, and electricity
has come out as a byproduct. The second one include
power exchange/trade agreements which were done with
the primary objective of exchange (or trade) of electricity.
For Nepal, both types of agreements are predominantly
bilateral and done with India only.
4.1 Bilateral Agreements
4.1.1River Project Agreements
There are some rivers, originating from China and flowing
towards to Nepal. However, till date no agreement has
been signed between Nepal and China for development
oftheserivers.Onthe otherhand,Nepalhassignedsome
bilateral agreement with India regarding the development
of projects on transboundary rivers which flow from Nepal
to India. Kosi Agreement, 1954 (amended 1966); Gandak
Agreement, 1959 (amended 1964); and Mahakali Treaty,
1996are the existing major bilateral agreements between
Nepal and India. These agreements do have some

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provisions for cross-border electricity exchange/trade.
AsperArticle 4 (ii) of the amended KosiAgreement, Nepal
isentitledtouseupto50%ofthetotal hydroelectric power
generated by any powerhouse situated within 10mile
radius from the Koshi barrage on payment of certain tariff
fixed by mutual understanding. This 50% electricity was
materialized only in October 31, 1971 when the first two
units of four turbines of Kataiya powerhouse, built in India
onthe irrigationcanaldrop,started generation(Pun, 2009)
almost a decade after the completion of Koshi barrage in
1962. Though this supply ofelectricity is of no significance
in comparison to the benefits to India in terms of irrigation
and flood control, Upadhyay (2012) claims that the supply
of electricity to Nepal is not a matter of agreement and
negotiation but a matter of right- an entitlement. The
Kataiya powerhouse was damaged by the Koshi flood of
2008 and as a result Nepal has been deprived of getting
the said share of electricity on the agreed tariff.
Similarly, under the Gandak Agreement, a 15MW
powerhouse was to be constructed by India in Nepalese
territory using the canal drop Main Western Canal and a
transmission line from the powerhouse in Nepal to Indian
border. Though the powerhouse was commissioned in
April 1979, the Gandak Agreement’s 60% load factor for
thepowerhousetobe handedover to Nepal [Article 8 (iii)],
forced Nepal to buy Gandak electricity from 1979 to 1981
(Pun, 2007).
Under the Mahakali Treaty (Article 2), Nepal obtained a
supply of 70 million kWh (units), as against the earlier
agreed figure of 20 million kWh, of electricity on a
continuous basis annually, free of cost from Tanakpur
HydropowerPlant located in India. The increase in energy
from 20 million kWh to 70 million kWh is based on the
calculation of the increment of power due to pondage on
2.9ha of land at elevation of 250m. Though not mentioned
explicitly in the Treaty, the number that has been agreed
was half of what increment the pondage contributes to the
production of energy (Upadhyay, 2009).
4.1.2 Power Exchange Mechanisms
Though Kosi and Gandak agreements were done in
1950s, the first power exchange between Nepal and India
materializedonlyin1971throughthe KosiPower underthe
Kosi Agreement which was initially supplied to Biratnagar,
Dharan and Rajbiraj (Pun, 2009). In due course of time,
cross-border electricity exchange increased. By 1983,
Nepal imported about 6MW of electricity from India for
supply to border towns from 11 power exchange points
and exported about 5MW from only Birgunj-Raxual point
(Pun, 2009).
The tariff of such exchanged electricity across border is
decided by Power Exchange Committee (PEC)4. Further,
NEA concluded Power Sale Agreement on December 12,
2011 with Power Trade Corporation of India for importing
150MW power, mainly from Dhalkebar-Muzaffarpur
400kV cross-border transmission line. This Agreement is
yet to be operationalized. Apart from this, NEA has been
purchasing electricity through NTPC VidyutVyapar Nigam
Limited of India.
4.1.3 Power Trade Agreements
As early in 1996, a Power Trade Agreement between
Nepal and India was signed at secretary level. However,
the agreement never came into implementation due tothe
issue of parliamentary ratification (Pun, 2009). Almost
after about two decades, Nepal and India signed another
agreement "Indo-Nepal Electric Power Trade, Cross
Border Transmission and Grid Connectivity Agreement"
in October 21, 2014. This agreement is perceived to open
new doors from cross-border electricity trade.
4.2 Multilateral Agreements
Even though the cross-border electricity trade of Nepal
is dominated by bilateral arrangements as in the case of
other South Asian nations, there are rooms for graduating
from current bilateral arrangements to multilateral
arrangements. For Nepal, the bilateral arrangements with
China, the northern border is also strategically important.
There were efforts, in the past, for realizing the regional
power grid project involving Bangladesh, Bhutan, India
and Nepal. However due to India's negation, the project
could not march forward (Pun, 2009). But, recently in
2017, with the visit of Prime Minister of Bangladesh to
India, both the countries have agreed on conceiving of
trilateral understanding between Bangladesh, Bhutan
and India for the cooperation in the field of hydroelectric
power5. Though this is a good start, the detachment of
Nepal from this cooperation is quite questionable.
Beyond trilateral cooperation, at broader scale, the
SAARCEnergyRingconceptwasfirstannouncedin2004.
4. The PEC was formed in April 18, 1991 and is responsible for finalizing and periodically updating the matters related to exchange of power, including the tarifffor the exchange of power
between Nepal and India.
5. India-Bangladesh Joint Statement during the State Visit of Prime Minister of Bangladesh to India (April 8, 2017), Government of India, Ministry of ExternalAffairs. Retrieved from:
http://www.mea.gov.in

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Unfortunately, there has no substantial progress towards
the regional interconnectedness and cooperation (UN-
ESCAP, 2018).Realizing the need and benefits of cross-
border electricity trade, SAARC Framework Agreement
for Energy Cooperation (Electricity) was signed by the
member countries of the 18th SAARC Summit held in
Kathmandu in November 2014. However, things have not
moved forward as expected.
5. Opportunities
There are notable examples around the globe which
depict the benefits of cross-border electricity trade. Such
trade is accompanied by establishment of regional grid
and powerful institutional arrangements. The Southern
African Power Pool (SAPP) interconnecting 12 countries,
provide an example of good practice in the regional
energy cooperation (Rahman et al, 2011). Similarly, the
other successful examples from the developing world
includes West African Power Pool (WAPP) and Central
American Power Market (Oseni and Pollitt, 2014). Similar
opportunities for regional energy cooperation do exist in
the South Asian regions. The opportunities for cross-
border electricity trade specific to Nepal are discussed
below.
5.1 Seasonal Variation
Steep topography and perennial rivers makes Nepal ideal
for hydropower generation. However, Nepal's hydropower
is characterized by seasonal fluctuations; which are
indeedtheramificationof the too littleandtoomuchwater.
The four months of June to September is characterized
by the Monsoon which brings as much as 80% of the
total precipitation in the country. Even in the pre-monsoon
season, the high summer temperatures melts the snow
and glaciers resulting in the increased discharge in the
river. During this summer (pre-monsoon and monsoon)
season, the hydropower generation of Nepal is maximum
however the demand is not high.
On the contrary, in the same season, the electricity
production in India goes down. This is mainly due to
the fact that the major share of electricity generation in
India is from coal. In the wet season the processes of
mining, processing and transportation of coal are affected
resulting in required availability of amount and efficiency
of coal. Moreover, in the summer season, the electricity
demand surges in India. This is mainly attributed by the
increased use of cooling appliances and increased
groundwater pumping for irrigation. Therefore, there
seems perfect match for cross-border electricity trade
between Nepal and India as the energy peak demand in
winter and summer of Nepal and India are in contrast and
can be used as complementary for exchange. This is the
reason why Nepal proposed for the concept of ‘Energy
Banking’ with India.
5.2 Cleaner and Climate Friendly
Hydropower
Nepal's hydropower (untapped potential and current
generation), is regarded as much cleaner sources of
energy. On the opposite, both neighboring nations are
heavily dependent on fossil fuels for thermal generation,
the major greenhouse gas (GHG) emitters. Nevertheless,
we should not deny the fact that both the nations are
transforming themselves from the non-renewal sources
towards renewals, as their international commitments.
Furthermore, with the addition of hydro-based electricity
imports, the flexibility of the grid will increase to adjust
the intermittent supply for other renewals like solar and
wind. Even for thermal and nuclear which takelonger time
to start or shut down, the hydropower have comparative
advantage of quicker adjustment to the changing load.
Moreover, cross-border electricity trade need to be
looked from a new perspectives of fulfilling Sustainable
DevelopmentGoalsaswellasglobalclimatecommitments.
Clean hydropower production from Nepal can offset at
least some fossil fuel consumption and help reduce global
emission of greenhouse gases. This is one of the major
opportunities for cross-border hydro-electricity trade
where both neighboring nations heavily depends on fossil
fuel.
5.3 Strategic Opportunity for Nepal
There is a greater scope for Nepal regarding cross-border
electricity trade from strategic point of view.As depicted in
Table 1, the neighboring countries have already crossed
hundreds of thousands of megawatts of electricity
generation and therefore the amount of electricity to be
exported from Nepal is insignificant from the financial
perspectives. However, the geopolitical context and the
security concerns of both neighbors provide ample
strategic opportunities for Nepal to export its hydropower
in the near future.
It is the high time to integrate the individual national
energy markets of China, Nepal and India including other
countries of South Asia Region. As Nepal has already
been interconnected with the Indian electricity market, the
integration with northern market is anticipated to increase
the reliability and security of the energy market. Opening

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of new cross-border transmission lines towards China
is expected to end the monopoly of the Indian market,
transforming the current bilateral trades of electricity to
trilateral. The assurance from multiple buyers will also
helpNepalto develop more hydropower through domestic
or foreign investments.
6. Challenges
Despitehavingsignificantpotentialoftechno-economically
feasible hydropower, Nepal is not yet successful in
meeting its own demand. On the contrary, policy regime
for hydropower development in Nepal assumes that
electricity may be exported to India and beyond. Top
priority needs to be given to internal consumption and on
increasing the per capita electricity consumption.
At the regional level, there had been talks on the energy
cooperation in South Asia. The SAARC energy grid has
also been included in the agendas of such talks for quite
some time. However, no any generous progress has
been made and the SAARC energy ring/grid still seems
elusive (UN-ESCAP, 2018). Therefore, it is quite
important to identify the challenges for such cooperation.
For successful execution of cross-border electricity trade,
there is the need to address the following challenges that
prevails at the national and regional context.
6.1 Lack of Determined Plans and
Institutions
From 2002 since the formulation of WRS tothe Electricity
Development Decade of 2016, different targets for
hydropower generation were spelled out (Table 3). There
is lack of coordination or acknowledgement among these
plans.
In case of cross-border transmission lines, there are two
major issues. The first issue is about the interlinkages
and coordination of the recent plan of 2018 prepared
by RPGCL with the previous plans of NEA and JTT. The
question here is whether or not the 2018 transmission
plan replaces previous plans. The second issue is about
the ownership and implementation.
6.2 Regional Cooperation: Not an Easy
Task
The cross-border trade with India may not be as easy as
perceived or depicted by national plans and policies. The
India's Guidelines on Cross-Border Trade of Electricity,
2016 is reported to have some contradictory clauses with
the essence of SAARC Framework Agreement, 2014 and
Indo-Nepal Power TradeAgreement, 2014 (Pun, 2018).
The World Bank’s Ganges Strategic Basin Assessment
Report (2014) has also highlighted that the potential for
power trade among the basin countries is significant and
simple to negotiate. However, as applied in the case of
water resources, India is seemed to have its cross-border
electricity cooperation to be fixed at bilateral levels with
Nepal. Khadka and Adhikari (2005) has identified four
major barriers to regional power market in the South
Asian region, which includes policy barrier, technical
barriers, institutional barriers and commercial or financial
barriers, whereas, Malla (2005) has identified' post legacy
of mistrust' among the south Asian countries as one of
the major concerns for regional energy cooperation.
6.3 Electricity Trade: Does not necessarily
lead to Prosperity
For the desired economic growth of any country, the
(hydro)-electricity should be used as an input for internal
consumption rather than just for exporting as a raw
material. However, the national policy should not totally
ignore the possibility of cross-border electricity trade
where possible.
There are examples around the world which portray that
selling hydropower, mainly by hydro-rich but economically
weak nations, would not necessarily lead to prosperity.
The Paraguay's hydropower export is one of the typical
example where Paraguay alone is the main electricity
exporter in South America but is still the second poorest
nation in the region (Pun, 2008; Thanju and Canese,
2011). Similarly, Bhutan, a hydropower rich country like
Nepal, exports major share of its hydroelectricity to India
atnominal rates.6However indryseason, Bhutan needsto
importthe power back from India athigherrates(SARI/EI,
2016).
6.4 Storage Projects are not only
Hydropower Projects
The cross-border hydroelectricity sale for Nepal is
constantly and repeatedly being reflected in national
plans and policies. These plans mainly rely on developing
storage hydroelectric projects so that generated
hydropower can be exported for financial returns. This
concept is also equally strengthened by multilateral
6. Bhutan sells electricity as much cheaper price in the region. The electricity from the 336MW Chhukha HP is sold as the rate of Bhutanese Ngultrum (BTN) 2.25 per unit (revised from
BTN 2 per unit from Jan. 2014); BTN 1.98 per unit (revised from BTN 1.75 per unit from Jan 2008) from 60MW Kurichhu HEP and BTN 1.98 per unit from 1020MW Tala HEP (SARI/EI,
2016).

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53
agencies. The World Bank’s Ganges Strategic Basin
AssessmentReporthas emphasized that storage projects
in Nepal would provide hydropower as the greatest
benefits and there is little to do with flood control and
water regulation in the downstream. Pun (2013) strongly
portrayed this report as Indo-centric and suggested Nepal
not to rush just because of significant power trade. But
despite the multiple benefits of storage projects which
surpass the benefits of electricity generation, the storage
projects are being perceived as hydropowerprojects only.
For example there is no consideration of downstream
benefits from the proposed 1200MW Budhi Gandaki
Storage Project. Decision makers of Nepal need to see
Budhi Gandaki Project from multipurpose perspective
which has potential to bring regional benefits (Upadhyay
and Gaudel, 2014).
6.5 Increasing Socio-Environmental
Concerns
The hydropower is considered as a much cleaner source
ofelectricity.However hydro-projectsarefacing increasing
concerns from the society and environment. Water
diversion for hydropower generation can make
downstream stretch completely dry which has adverse
impact on the aquatic and terrestrial ecosystem as well
as livelihood of the people. This is particularly applicable
for run-of- river projects. For larger projects, construction
of dams in the Himalayan Region includes complex as
well as costly structures characterized by multiple
problems. Besides different socio-economic impacts
including involuntary displacement and loss of fertile
land and many others, the creation of huge reservoirs
on the lap of Himalayas, will also affect the microclimate
of the region. Therefore clear scrutiny of projects not only
from the economic or cross-border trade perspectives but
also from the social and environmental perspective has to
be done. However, the multiple national plans formulated
one after another for the hydropower sale across the
border seriously lack socio-environmental concerns.
7. Conclusion and Way Forward
The share of huge hydropower potential (about 83,000
MW) of Nepal, is merely less than five per cent of the
current installed capacity of China and hardly one fourth
of already installed capacity of India. So, the cross-border
export of all feasible hydroelectricity from Nepal to these
giants,will have hardly any nominal impact on theirenergy
systems.Bysayingthis, however,we cannot deny the fact
that the energy trade of Nepal is of strategic importance.
It is, therefore, necessary for the policy makers of Nepal
to deal with this cross-border trade from strategic point
of view and deal diplomatically with the neighboring
nations.
For this, Nepal needs to formulate its own national and
economicstrategyrelated to cross-border electricity trade.
Moreover, the environmental and social consequences of
hydropower are on higher sides. Therefore, Nepal has to
take care of optimum harnessing of rivers for hydropower
productionwith prioritizationofthe domestic consumption.
Realizing the need of trilateral and regional cooperation,
Nepal should immediately attempt for executing cross-
border transmission lines with China as well as take
initiatives in implementing the SAARC Framework
Agreement and the Power Trade Agreement with India.
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