India relaxes hydro power import rules to allow Nepal-Bangladesh trade

Bangladeshi Prime Minister Sheikh Hasina Wazed calls on Prime Minister KP Sharma Oli, in Kathmandu, on Thursday, August 30, 2018.

India has amended its cross-border power trading regulations, paving the way for Nepali power producers to export electricity to third countries such as Bangladesh.

Before the amendment, only state-run companies of the two countries or companies with at least 51 per cent Indian shareholders could sell power to India or any other country using Indian powerlines. The older provision discouraged foreign investors and private Nepali power developers from exporting to India.

However, the new amendment makes it easier for hydro powers owned by Nepali private sector or China-backed companies to export electricity to neighbouring countries such as Bangladesh. But participating entities will have to sign a transmission agreement with the Central Transmission Utility of India to trade electricity using Indian power lines.

The recently-issued Guidelines on Cross-Border Trade Import/Export of Electricity states that after tripartite agreements (in the case of Nepal, between Dhaka, New Delhi and Kathmandu) cross-border trade of electricity across India will be allowed under the overall framework of bilateral agreements signed between the Government of India and the government of respective neighbouring countries of the participating entities.

While issuing guidelines on cross-border electricity trade for the first time in 2017, the Indian Power Ministry had failed to recognise a possible trilateral arrangement between countries such as Nepal and Bangladesh, who have been intensifying power-trading talks in the last few months.

This comes as good news for foreign investors who refrained from investing in hydropower in Nepal after India’s reluctance to import electricity produced by non-Indian entities. Energy Ministry officials have also welcomed the latest guidelines, saying it is more dynamic and that it has opened a path for the development of the hydropower sector in Nepal.

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