India, Nepal sign power exchange deal

In a step that could be a precursor to the US-backed Millenium Challenge Corporation (MCC) project to upgrade Nepal’s power grid, the country this week signed an agreement with India to increase two-way electricity trade.

Nepal Electricity Authority (NEA) Managing Director Kulman Ghising on Wednesday signed an MoU with the state-run Power Grid Corporation of India (POWERGRID) for the construction of a second, transnational 400kV transmission line from Butwal to Gorakhpur.

This new power line will be connected to the 350km transmission line up to Butwal that will evacuate power from 3,000MW of electricity being generated from new power projects in Nepal in the next three years. However, this domestic power line has been thrown into doubt because politicisation of the $500 million MCC project by Nepal’s bickering parties has blocked its ratification by Parliament.

Ghising is in New Delhi to sign off on a joint investment agreement. The project is a key subset of the MCC’s main objective: a 315km transmission line between Hetauda-Damauli-Butwal, which will prove crucial as private projects such as the 456MW Upper Tamakosi come on stream, allowing Nepal to have surplus electricity at least during the monsoon.

The transmission line from Butwal in Nepal to Gorakhpur in India will be 120km, with 20km of it in Nepal and will cost Rs6 billion. The project will be financed by loans and 20% of it by equity from a jointly-owned NEA-POWERGRID company. 

Nepal will build its side of the transmission line by itself, while the joint company will be responsible for building the Indian section. Work is underway to finish the transmission line within three to three-and-half years.

“With the agreement, the stage is set to create the joint company and write up transmission service agreements.” Ghising said from the Indian capital.

Once the Butwal-Gorakhpur line is completed, Nepal will be able to export up to 2,000MW of electricity, much more than the present Dhalkebar-Muzaffarpur corridor that can handle only 300MW. The new transmission line will not just be able to export electricity to India, but can also be part of new power deals with Bangladesh in future.

“This will prove to be a lifeline for energy trade, as it will have more than double the capacity of the currently operational 400kW Dhalkebar-Muzaffarpur transmission line,” explains NEA’s director of the Power Trade Department Prabal Adhikari.  

Construction of an India-Nepal transmission line is a prerequisite for the MCC’s implementation, and the NEA’s agreement signals a bold move forward by the Deuba administration despite fierce opposition to the American project from his coalition partners, the Pushpa Kamal Dahal-led Maoist Centre and Madhav Kumar Nepal’s breakaway CPN (United Socialist) faction.

In fact, Vice President of the MCC Fatema Z Sumar jetted into Kathmandu on Monday in a bid to convince politicians opposing the project that the MCC had no military or strategic component, and was purely a catalytic initiative meant to kick-start Nepal’s economic growth.

The Maoists and other coalition members have whipped up populist opposition to the MCC project saying it is anti-national, against the Constitution and part of US military strategy to encircle China. The MCC responded to a Finance Ministry query ahead of the Sumar visit saying that the project was not above Nepal’s Constitution, and America had no hidden agenda behind it. 

Translated by Kaustubh Dhital from the Nepali language original in Himal Khabar.