The fine print

On 20 February Nepal’s visiting Prime Minister K P Oli and his Indian counterpart Narendra Modi (pic) inaugurated the much-delayed 400kV transmission line linking Nepal and India. The 140km crossborder line joins the Indian grid from Muzaffarpur in Bihar with Dhalkebar in Dhanusa to export electricity to ease the acute shortage in Nepal.

Nepal’s chronic power shortage has been made worse because of the scarcity of diesel for generators due to the closure of the Birganj border for five months by Madhesi protesters allegedly abetted by India.

Prime Minister Oli has vowed to end electricity rationing within a year, and Deputy Prime Minister and Energy Minister Top Bahadur Rayamajhi last week declared an “energy emergency” to cope with the crisis. He also endorsed a National Energy Crisis Reduction and Electricity Development Decade Plan which includes the import of 580 MW from India.

The Nepal portion of the transmission line was constructed at a cost of $13.5 million and is already feeding 80 MW of power to Nepal from this week. This will be augmented to 200 MW at 220kV in October 2016, and eventually to 600 MW at 400kV by December 2017.

Although Oli received wide accolades in the media for the deal that could reduce power shortage, the project was actually initiated and developed by erstwhile Minister of Water Resources Gyanendra Bahadur Karki of the NC as far back as 2006.

A staunch nationalist, Oli vowed not to sign any anti-national agreement during his visit, but the transmission line he inaugurated puts Nepal’s hydro-electricity market at a disadvantage. A pre-condition for this deal was that Nepal Electricity Authority (NEA) sign a 150 MW Power Purchasing Agreement (PPA) for at least 25 years with Power Trading Corporation (PTC) of India.

In other words, the fine print requires Nepal to purchase 150 MW power from India for at least 25 years and take $13.5 million in loan to construct the transmission line at a cost of $20 million. Nepal awarded the contract for construction of 40km of Nepal portion to an Indian company, Tata Projects Ltd. Such a disfavourably worded PPA and MoU discourages domestic investment for hydroelectricity generation and transmission in Nepal.

The cost of the 40km Nepal portion of the transmission line is $20 million while the 100km Indian section costs only $32 million. Experts have calculated that the Nepal part of the transmission line costs $180,000 more per km.

Although the agreement mentions the word ‘flow’, the transmission line was constructed for the uni-directional import of power from India, not export from Nepal. The leaders in Kathmandu talk endlessly about Nepal’s huge hydroelectric potential and make grand plans for energy independence, but their actions tell a different story.

In its 2015 annual report, the NEA reported a loss of Rs 7 billion. It may be prudent to ask how importing 600 MW from India would improve its balance sheet. Furthermore, accepting a foreign loan to invest in power import infrastructure and sign a 25 year long PPA in US dollars instead of investing in domestic generation capacity is against the national interest.

On a typical day, domestic generation meets roughly 500 MW of 1,292 MW peak at 6:10 pm. NEA can supply only 39 per cent of this peak demand with total domestic capacity. It has two options: either shed load until demand meets supply or import additional power. NEA imported about 250 MW from India but it was still insufficient to meet the peak demand. The deficit in 2014 is big, but it has become much worse and hence, the need for declaration of energy emergency.

The 400 kV transmission line would have been a matter of national pride if it were constructed with immediate or long-term plans to export surplus power by harnessing Nepal’s theoretically high hydroelectric potential.

Puru Shah is an electrical engineer based in the United States, and founder of Madhesi Youth.

Read also:

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Back to the dark age, Om Astha Rai

Big delays in big projects, Sahina Shrestha

Shortage Raj, Foreign Hand