Last month, a new chapter opened up in Nepal’s power sector. On March 19, the Indian Energy Exchange (IEX), an electricity trading platform, announced that NTPC Vidyut Vyapar Nigam Limited had secured approval for Nepal’s participation in the exchange.
This announcement caps an important milestone in Nepal’s aspiration to integrate with India’s power trading. This is a big achievement for many in and out of the government who have dedicated themselves to securing Nepal’s access to India’s electricity markets.
For me, the announcement was a moment of great reckoning. Over the past 15 years, I’ve been a critic of Nepal’s strategy on cross-border power trading, cautioning (however I could) against impetuously jumping into India’s competitive markets. It was only fitting, perhaps that the announcement came exactly on the day I finished reading J. G. Farrell’s “The Siege of Kishnapur,” which ended emphatically with these lines: “…he had come to believe that people, a nation, does not create itself according to its best ideas, but is shaped by other forces, of which it has little knowledge.”
Whatever the basis for that strategic choice on power markets integration, for good or bad, Nepal has chosen. A new era now dawns. We must adapt to the competitive forces of Indian power sector. Time to look ahead.
It is time to drop our opposition to the $500-million aid offered under the Millennium Challenge Corporation (MCC) compact and secure that grant. The promise of the compact funding has accelerated and enabled Nepal’s integration with Indian power markets.
Just a few years ago, Nepal and India were hopelessly at odds on how best to operationalize cross-border electricity trading. Efforts to get an agreement on a cross-border transmission line connecting Butwal (Nepal) with Gorakhpur (India), for example, had stalled. Drawing from experiences of the previous cross-border lines, Nepal proposed to proceed under a government-to-government agreement. India was adamantly opposed.
The promise of aid under the MCC compact unlocked that stalemate. A precondition in the compact required Nepal to secure agreement with India on the Butwal-Gorakhpur line. As the MCC’s pressure built on Nepal, India also dropped its objection to the cross-border line. An agreement was reached, and that line is now on course to be built, without even having to wait for Nepal’s approval of the compact. At the same time, India rapidly accelerated the policy process on cross-border power trading, overcoming a decade of foot-dragging. It framed many of the required rules and policies on cross-border electricity, including the most recent approval that has now allowed Nepal to participate in IEX’s platform.
My previous objection to the MCC grant was on its precondition for a cross-border interconnection. It implicitly pushed Nepal into a strategy of competing against cheap Indian electricity prices without adequate preparedness and safeguards, especially when national consensus on the strategy was still missing.
With the cross-border integration of power markets, my previous objection to the compact is meaningless. Best to go full throttle now: access the grant, build the lines, and be as prepared as possible for the future.
For me, one of the most haunting remarks on Nepal-India electricity trade that will forever be etched in my mind was from the US Ambassador to Nepal, Randy William Berry, who wrote in an op-ed in 2019 about cross-border transmission lines “that will bring Nepal’s power to the consumers who will pay Nepal good money for it. It is a simple fact of geography and economics that means India.”
Many have echoed the ambassador’s sentiments, arguing that Nepal has tremendous opportunity to sell electricity to India and profit from it. Plenty of resources and intellectual capital have gone into shaping that narrative and lobbying for supportive policies. To all those who dedicated themselves to securing Nepal’s integration with Indian power markets, the IEX milestone is a moment to stand up and take the applause.
As important, they must recognize the gravity of what they have accomplished. Failure to build a competitive Nepali power sector that can compete against Indian power prices will be devastating for Nepal, locking it into a permanent dependence on Indian power imports.
Those that forged the narrative on the benefits of cross-border electricity trading for Nepal cannot now scurry off into shadows and hide behind excuses of this constraint or that bottleneck. Whatever needs to be done must get done. They must also stand up to deliver on their promise.