Nepal Achieves First-Ever Profit from Electricity Trade with India After Over 5 Decades
For the first time in over five decades of Nepal-India electricity trade, Nepal has recorded a profit. In the fiscal year 2080/81, Nepal earned a net profit of Rs. 12.23 Crores from electricity trade with India, with exports surpassing imports. According to data from the Nepal Electricity Authority (NEA), Nepal imported electricity worth Rs. 16.81 Arba in the past fiscal year, amounting to 1.83 Arba units. In contrast, exports to India totaled Rs. 16.93 Arba, equivalent to 1.94 crore units, resulting in a net export value of Rs. 13.23 Crore.
In the previous fiscal year 2079/80, Nepal had imported electricity worth Rs. 19.44 Crore from India, while only exporting Rs. 10.45 Arba worth. This resulted in a deficit of Rs 8.98 Arba. The surplus in the latest fiscal year marks a significant turnaround for Nepal, which traditionally faced a deficit in electricity trade with India. Most of Nepal's hydropower projects are river flow-based, leading to reduced production during dry seasons, necessitating imports from India to meet domestic demand. However, during the monsoon season, when river flow is high, Nepal can produce electricity at full capacity and export the surplus to India.
Kulman Ghising, the Executive Director of NEA, stated that Nepal has become a net electricity exporter due to the increase in domestic production. He emphasized the symbolic importance of this achievement, calling it a milestone for the energy sector. "This signifies a substantial milestone for the energy sector," he said. Nepal began importing electricity from India in 1971 and started exporting it in 1972, with up to 5 MW from the Trishuli Hydropower Project. Initially, the electricity was exported via the Trishuli-Kathmandu-Kulekhani-Birgunj (66 kV transmission) line to Raxaul, India, and through the Jogbani and Ramnagar transmission lines to various Indian states.
However, exports were halted when domestic demand could not be met. Ghising mentioned that, during the early years, Raxaul in India had no access to electricity, with some households using generators. Nepal provided electricity to Raxaul, illuminating the area. Despite ongoing imports, the inter-country electricity trade between Nepal and India has achieved profitability after 53 years. However, Nepal still faces the necessity to import electricity during the winter months. Commercial electricity trade between Nepal and India began only in October 2021. Prior to that, imports and exports were conducted under energy banking, power exchange agreements, and the Mahakali Treaty.
Under the Mahakali Treaty, Nepal receives seven million units of electricity annually from India at no cost. Nepal entered the Indian competitive electricity market in May 2021, becoming the first South Asian country to do so. Initially, Nepal received import permissions, and by November 2021, it gained export permissions. NEA has received export permits for 690 MW of electricity from 16 projects. The authority sells surplus electricity, after domestic consumption, to India's Day-Ahead and Real-Time Markets on the Indian Energy Exchange (IEX) at competitive rates, as well as under medium-term power agreements with NTPC Vidyut Vyapar Nigam Ltd. (NVVN).
Ghising stated that while Nepal will still need to import electricity for a few months in the winter, export volumes are expected to increase in the coming years. "Six to seven years ago, we were solely an importer of electricity. Despite starting exports three years ago, imports exceeded exports, making us a net importer. From the last fiscal year, we have transitioned to being a net exporter. Although the volume is small, this is a significant achievement and a milestone for the energy sector," he said. Nepal and India signed a long-term electricity trade agreement in 2014, which forms the basis for current commercial exchanges. Initially, only short-term electricity trade occurred between the two countries.
