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Nepal, India, and Bangladesh could reach first trilateral power agreement soon

Nepal, India and Bangladesh are on the cusp of signing their first trilateral power agreement

Kathmandu: A trilateral power deal between Nepal, India and Bangladesh is likely to be inked soon involving supply of 40 MW of electricity routed through India.

Though Nepal has been exporting power to India since November 2021, Bangladesh will be the first third country to receive power from the Himalayan country once the plan materialises.

“We have reached a final stage of negotiation with Bangladesh on the template of power sale agreement, “said Kul Man Ghising, managing director of Nepal Electricity Authority (NEA) which is supposed to sell power to Bangladesh at a press meet last week in Kathmandu. “We will move ahead to export power to Bangladesh after determining the tariff soon.”

According to Nepal’s Ministry of Energy, Water Resources and Irrigation, there is a plan to sign a tripartite agreement among Nepal Electricity Authority (NEA), the Bangladesh Power Development Board (BPDB) and the NTPC Vidyut Vyapar Nigam Limited (NVVN) of India, before export of power begins from Nepal to Bangladesh.

The NVVN is the nodal agency designated by the Indian government for cross border power trade with the neighbouring countries.

Prabal Adhikari, power trade director at the NEA told India Narrative that a draft of agreement mutually agreed between Nepal and NVVN has been sent to Bangladesh for its opinion a second time after addressing the feedback of Bangladesh on the first draft.

“We sent the template of the agreement a second time to the Bangladeshi side in early June for the latter’s opinion. We are now awaiting the response,” Adhikari said. According to him, the template has covered all other details except electricity tariff. “It is because Bangladesh first wants to conclude other technical and commercial terms except power tariff. A separate negotiation will be held on tariff after agreement is reached on other terms and conditions.”

Nepal does not see much problem in determining the tariff for exporting power to Bangladesh. “It will be in the range of the average prices Nepal is receiving from India’s power exchange market,” said Adhikari.  The Indian authorities have so far allowed Nepal to sell 452.6MW of electricity in the power exchange market of the southern neighbour. “We are not looking for a hard bargaining on tariff because it will be Nepal’s first export of power to Bangladesh,” Adhikari said.

When it comes to transmission charge, it will be the equivalent to fee that India’s power traders are charging on buyers currently. “It has been written in the draft of the power sale agreement that the transmission tariff will be in line with India’s open access rules,” said Adhikari. “This means, Bangladesh might have to pay 40-55 paise (in Indian currency) per unit depending on technical conditions of transmission infrastructure including its loads.”

He said Bangladesh would pay this fee to the NVVN. The Indian company will levy ‘trade margin’ or ‘service fee’ on Bangladeshi companies for all its services including for its efforts to get approval from India’s regulatory authorities. “It may be in the range of 4-7 paise (Indian Currency) per unit which is the usual rate being charged by NVVN,” said Adhikari. He however said that Nepal should not worry about the service fee as Bangladesh would pay this fee to India.

Though Nepal and Bangladesh are not far away, they are not geographically contiguous. Indian territory falls between the two countries. Consequently, active Indian support is necessary to enable bilateral trade of electricity between Kathmandu and Dhaka.

Nepal wants to sell the power to Bangladesh under a long-term deal. “We have proposed signing a power sale deal for 25 years,” said Adhikari. “But the Bangladeshi side is insisting on a five-year deal with the option for renewal.”

These developments have taken place after Nepal and Bangladesh and Nepal and India reached separate understanding in principle on export of 40MW electric power from Nepal to Bangladesh.

During the fifth meeting of the secretary-level Joint Steering Committee on energy cooperation held in Patuakhali, Bangladesh in the middle of May, Nepal and Bangladesh decided to start trading power at the earliest, with an export target of 40MW from Nepal to Bangladesh after receiving necessary approvals from Indian authorities.

“For this, the two countries aim to sign a trilateral power sale agreement among the entities including that of India as early as possible,” Nepal’s Ministry of Energy, Water Resources and Irrigation said in a press statement after the meeting.

During Nepali Prime Minister Pushpa Kamal Dahal’s visit to India from May 31 to June 3, the southern neighbour agreed to allow Nepal to sell up to 40 MW power to Bangladesh through existing Indian transmission infrastructure. “The Nepali side welcomed the decision of Government of India to facilitate the first trilateral power transaction from Nepal to Bangladesh, through Indian grid with an export of up to 40 MW of power,” India’s External Affairs Ministry statement released on June 2 states.  “Both sides expressed their commitment towards greater sub-regional cooperation, including in the energy sector, which would lead to increased inter-linkages between the economies for mutual benefit of all stakeholders.”

The NEA has sent a request to the Indian authorities, asking them to allow the sale of the power generated by the 52.4MW Likhu-4 project to Bangladesh through India’s existing transmission infrastructure.

“Efforts will be made to sign a tripartite agreement very soon so that Nepal could export power in the wet season this year (June-November),” Madhu Bhetuwal, spokesperson at the Nepal’s Energy Ministry told India Narrative earlier.