Balance of Power

The 'hydro' in hydropower is strategically more important than electricity for Nepal


Probably the best thing to happen to Nepal’s economy lately is India’s refusal to buy more electricity. It could eventually force the government to expedite transmission infrastructure and increase domestic demand.

Nepal Electricity Authority (NEA) is losing billions in spilled power this monsoon because it cannot evacuate power. Some private producers have actually stopped generating altogether.

Installed hydropower capacity is touching 3,000MW this monsoon, and projects for a further 3,300MW are under construction. But domestic consumption is stuck at 1,700MW.

Nepal could export electricity, but India has agreed to buy only 452MW from projects with no Chinese involvement. Even if the full quota was exported, Nepal would only earn NPR20 billion, whereas the trade deficit with India is at NPR840 billion and growing. In fact, Nepal imported NPR20 billion worth of power from India last year to cover its dry season deficit. 

“At the current rate, if we do not put up transmission lines in time, by 2025 we will be losing electricity worth 120 million every day in winter and Rs170 million during the monsoon,” warned Kathmandu University engineering professor Bishal Silwal at at a recent seminar. 

NEA blames delays in substations and transmission lines on locals blocking construction. Kathmandu Valley therefore faces frequent power outages due to tripping even there is enough power in the grid.

“The problem right now is not of supply but infrastructure,” former NEA head Hitendra Shakya explained at the seminar. “It is a result of poor planning.” 

There is also lack of coordination between various agencies of government to encourage domestic consumption with tax rebates for industries, battery-powered vehicles and household appliances. An average Nepali consumes 325kWh of electricity, much lower than the global per capita of 3,180kWh.

Former energy secretary Dwarika Nath Dhungel, who is the author of a new compendium on the political economy of hydropower, says: “Exporting electricity should be the last thing on our list. We might be generating surplus but we still import power from India during winter, let’s first try to use the surplus to replace that import.”

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Indeed, while some 95% of Nepal’s population is said to have access to electricity, districts like Bajhang, Dolpa, Bajura, Jumla and Mugu are not yet connected to the grid. Nepal’s wetter eastern half has most of the hydropower generation capacity, while the more arid west does not have enough.

Surplus power could also jumpstart Nepal’s struggling industries, the tourism sector and agriculture. This in turn would create jobs so Nepalis are not forced to migrate abroad.

“Hydroelectricity should be a crucial element of our national development strategy so we make its maximum use domestically and for employment. Only then should we be exporting power,” says Dhungel.

NEA can earn more from selling power domestically. Private industries are paying up to NPR11 per unit whereas the average price of electricity sold to India is just NPR4.33 per unit.

Using electricity to slash Nepal’s petroleum import bill by just 10% would save the country at least NPR30 billion a year, and be a faster way to decrease the trade deficit with India. Improving public health by cutting pollution would be a bonus.

Nepal’s balance of power with its two neighbours is also getting skewed with a tilt towards India, as New Delhi leans on politicians here to systematically cancel Chinese investments in hydropower. Experts say India’s real interest is in regulating Nepal’s rivers to ensure future water supply rather than electricity.

“Politicians spout non-stop nonsense about how they will make the country rich by exporting electricity when water is our strategic commodity,” says Dhungel. “They are trading our water resources to stay in power by keeping a certain neighbour happy. One has to wonder if Singha Darbar is making decisions or the Delhi Darbar.”

Successive governments of K P Oli, Sher Bahadur Deuba and now Pushpa Kamala Dahal have all awarded one hydropower project after another to Indian state companies which are now building projects that will generate a combined total of 4,000MW. More Indian projects are in the pipeline.

With the rise of China and India as global players and the new Sino-US cold war, Nepal has become a geo-strategic hotspot. But it is now also a climate hotspot, and shrinking glaciers will affect electricity generation and the hydrology of Himalayan rivers. 

Dwarika Nath Dhungel sums it up: “We can’t change our neighbours but we can understand their aspirations better so that we have leverage when dealing with them. But first, we have to become stronger by making the best use of our own resources domestically.”

Sonia Awale


Sonia Awale is Executive Editor of Nepali Times where she also serves as the health, science and environment correspondent. She has extensively covered the climate crisis, disaster preparedness, development and public health -- looking at their political and economic interlinkages. Sonia is a graduate of public health, and has a master’s degree in journalism from the University of Hong Kong.