In a major boost for bilateral power trade, Nepal and India have signed an investment agreement for the construction of the second Butwal-Gorakhpur 400 KV cross-border transmission line.
A joint venture and shareholder agreement has been signed between the Nepal Electricity Authority (NEA) and the Power Grid Corporation of India Ltd, in New Delhi on Thursday, according to the NEA.
The agreement was signed by NEA Managing Director Kulman Ghising and PGCIL Executive Director Y.K. Dixit.
After completing the project, Nepal, and India can easily trade around 2,000 MW of energy from this dedicated transmission line.
The proposed transmission line is a major component of the $630 million “Nepal Compact”, an agreement between the Nepal government and the US’ Millennium Challenge Corporation to fund electricity and road projects of strategic importance in Nepal.
An agreement on implementing the transmission line is also a prerequisite for the multi-million dollar MCC-Nepal compact — viewed by many in Nepal as a counter-initiative under the Indo-Pacific Strategy of the US against China’s Belt and Road Initiative — to become effective.
Nepal’s Council of Ministers has already approved the NEA’s proposal to invest 50 per cent shares in the company to be set up for the construction of the Butwal-Gorakhpur cross-border transmission line.
The signing of the agreement has paved a way for both sides to set up the joint venture company with 50 per cent share each of the NEA and the Power Grid for the construction of the section on the Indian side,as well as completing the legal procedure, Ghising said.
It will take three and half years to complete the construction of the project that will be 120 km long – around 100 km will be on the Indian side and rest on the Nepali side.
The transmission line will become a major energy lifeline between Nepal and India, NEA spokesperson Prabal Adhikari said.
A meeting of the Nepal-India Energy Joint Steering Committee had decided, in October 2019, to build the transmission line but due to the Covid pandemic, further negotiations were put on hold. The total cost of the project would be (Nepali) Rs 7 billion (Indian Rs 4 billion).
During the meeting in Delhi, the Nepali delegation also discussed selling the sale energy from Nepal to India.
Nepal is adding around 456 MW energy soon and during the rainy season, it wants to sell the spare energy to India. Nepal is also importing over 300 MW of energy from India during the winter season to meet its energy demands.
As per the power utility’s estimate, Nepal will have a surplus of around 8,000 MW by 2025 as the country’s generation capacity is expected to reach 10,924 MW while peak demand is likely to be 2,981 MW. In line with the multiple requests from Nepali authorities and the surplus power projections, India has also agreed to formalise the terms related to the energy banking mechanism which will allow Nepal and India to exchange power on a need basis.