Nepal and India have formalized a power trade agreement, signed on Thursday, enabling Kathmandu to export 10,000 megawatts (MW) of hydroelectricity to India over the next 10 years. This ambitious deal seeks to draw investment to Nepal, a country facing financial challenges, by leveraging its untapped hydroelectric potential.
Despite the Himalayan nation's rivers having the capacity to generate about 42,000 MW of electricity, technical know-how and funding constraints have limited its current production to less than 3,000 MW.
See also: Nepal's Hydroelectric Generation Soars by 500 MW Amidst Economic Challenges
India, through a short-term electricity trading deal with Nepal, is already investing significantly in infrastructure, including hydropower plants, as part of its efforts to strengthen its influence in the region. This initiative aligns with India's broader strategy in neighboring countries where China is also expanding its presence.
Last year, Indian Prime Minister Narendra Modi and his Nepali counterpart Pushpa Kamal Dahal agreed on a long-term power trade agreement, seen as crucial for attracting investment in Nepal's hydroelectric sector.
The latest agreement, one of four deals formalized during the Nepal-India Joint Commission meeting in Kathmandu, is viewed as a milestone in attracting investment for the development of Nepal's hydro sector.
See also: SJVN Secures Approval for Four Joint Ventures Totaling 8,778 MW in India and Nepal
Suresh Bahadur Bhattarai, spokesperson for the state-owned Nepal Electricity Authority, acknowledged the significance of the agreement but emphasized the need to update laws and coordinate with various ministries and agencies to ensure timely execution. The Joint Commission meeting included Indian Foreign Minister Subrahmanyam Jaishankar and Nepali counterpart N.P. Saud.
Indian companies are actively involved in constructing or negotiating power plants in Nepal, with the potential to generate a combined total of 8,250 MW. This involvement is expected to attract substantial investments. Nepal's objective is to export surplus energy to India, addressing its significant trade deficit with its southern neighbor.
