India relaxes hydropower import rules

Published On: December 24, 2018 11:34 AM NPT By: Republica  | @RepublicaNepal

KATHMANDU, Dec 24: India has revoked ‘monopolist’ provisions in Guideline for Import/Export (cross-border) of Electricity-2016, making electricity trading in the region easier.

The guideline had given right for cross-border electricity supply and trading exclusively to Indian companies. The new guideline, issued on December 18, has omitted all the ‘monopolist’ provisions, opening up electricity trading in the region. 

The cross-border electricity trading is an expansion of the South Asian Association of Regional Cooperation (SAARC) energy framework signed by SAARC member states in 2014. 

The new guideline has stated that India shall allow any tripartite or bilateral agreements signed with India and other neighboring countries for cross-border electricity trading and that neighboring countries can sign an agreement with the Central Transmission Utility of India to obtain transmission corridor access. The new guideline provides free market access for electricity generated in Nepal in the SAARC region. It is expected to enhance power trade between India and Nepal as well as enable Nepal to trade power with Bangladesh which signed a power trade agreement with Nepal earlier in August.

Dhaka has already entered into a preliminary agreement to purchase 500 MW electricity of Upper Karnali Hydropower Project to be developed by Indian company GMR. Bangladesh, which has been importing electricity from India, which has also signed a long-term energy cooperation agreement to meet its energy demand for a rapidly growing economy, has also floated an idea of making a tripartite mechanism among Nepal, India and Bangladesh for smooth energy trading.

The guideline of 2016 had discouraged investors as it made only the Indian companies or companies having at least 51 percent Indian investment eligible for supplying electricity to India. This meant India would by energy produced by state-owned firms of Nepal. Companies developed by private Nepali firms as well as a third country were not eligible for energy trading with India as per the guideline.

The government had been requesting the Indian government to review the ‘monopolist’ provisions in the guideline. 

Nepali hydropower investors have termed the relaxation in guideline as a positive move. They also said that the new guideline will open up energy trading in the region where intra-regional trading stands at a dismal 5 percent only.

Shailendra Guragain, president of Independent Power Producers’ Association Nepal, thanked the energy minister and the energy ministry officials for their efforts to open up energy trading in the SAARC region. “The important thing is that we should first meet domestic need before thinking about exporting energy,” Guragain told Republica over the telephone. He also urged the government to facilitate hydropower developers by building a transmission line and making it easier to get forest clearance, among others. Guragain suggested putting the things in order at to open the constraints in the energy sector at home by facilitating the energy generation for the domestic developers by building a transmission line, easing forest clearance. 

Many believe the new guideline will help in making the Upper Karnali project bankable and financial closure will happen for the 900 MW project. However, Guragain is of the view that it is too early to expect those things.

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