However, these deals will not yield results if the government does not bring a law that allows the Nepali private sector to get into power trading. As of now, the state-owned Nepal Electricity Authority (NEA) is the only entity involved in power trading. There is no provision in Nepal's electricity law that would let any entity other than NEA engage in power trade.
While the private sector has been demanding a legal framework that allows them to enter electricity trading, the government is yet to take any concrete steps in this regard. As Indian companies in the power trading business increasingly show their interest to buy energy from Nepal, domestic power developers say there is an urgent need to introduce laws to facilitate the private sector's involvement in the power trade to sell electricity to the Indian market. The Nepali private sector is frustrated with the government as entrepreneurs have been waiting for a long time to engage in power trade within and outside the country. According to the Ministry of Energy, Water Resources and Irrigation (MoEWRI), around half a dozen companies have already applied for power trading licenses. While the Electricity Bill to amend the Electricity Act 1992 had reached the parliament, it got stuck for more than two years and failed to get endorsed. The then Energy Minister Pampha Bhusal withdrew the bill from the parliament in September 2022. A cabinet meeting on September 26, 2022, approved the ordinance to amend the Electricity Act and forwarded it to the President’s Office for approval. However, former President Bidya Devi Bhandari failed to authenticate the ordinance. After the fresh elections in November 2022, the country has got a new parliament and the government now plans to introduce the new bill in the House of Representatives. Now, the government has said it plans to introduce the new bill soon. “Draft of the bill is almost ready. We will soon register the new electricity bill at the parliament,” said a senior MoEWRI official. “The new bill will pave the way for the private sector to engage in trading of electricity. We will also include the recommendations of the lawmakers of the erstwhile House of Representatives.” Both government officials and private sector people agree that the involvement of the private sector could open new avenues for expanding the power market for Nepal’s electricity at a time when the country is producing excess power in the wet season. During the inauguration of the Power Summit on Tuesday, Prime Minister Pushpa Kamal Dahal said that the government expects Nepal to become a net power exporter by 2025. Independent power producers say it's high time for the government to show urgency when it comes to allowing the private sector into power trading. "The Nepali private sector has already signed deals with an Indian company for selling electricity," said Krishna Prasad Acharya, President of Independent Power Producers' Association, Nepal (IPPAN), "It’s high time the government removed legal barriers." According to him, IPPAN is of the view that a policy to allow the private sector to engage in power trading should be brought through a fast-track mechanism. "If we go through the parliament, then the process will take a long time as opposition parties may not support it," said Acharya, adding, "The government should open the way for the private sector through a special decision of the cabinet." IPPAN office-bearers say they can't wait for the government to introduce the new electricity bill. According to them, the government could grant the license to the private sector following the same procedure through which it awarded a power trade license to NEA's power trade company. "The cabinet granted the power trade license to Nepal Power Trade Company of NEA through clause 35 of the Electricity Act," said Ashish Garg, Vice President of IPPAN. "Why can't the same provision be applicable also to us?" According to Garg, this was among the two suggestions given by the IPPAN to Energy Minister Shakti Basnet a week ago. "The other way is to bring the ordinance," he said. Madhu Bhetuwal, Spokesperson at the Energy Ministry, said that the government is committed to facilitating the entry of the private sector into electricity trading. "As the private sector has already entered into a PPA MoU to sell electricity in India, we also want it to be successfully implemented," he said. While lobbying with the government for the license, the Nepali private sector is also signing agreements with Indian companies for cross-border electricity trade. In January 2022, Nepal Power Exchange Limited, a trading company established by private sector power developers signed an MoU with India’s Manikaran Power Limited on energy trading. As per the MoU, the Nepali company is supposed to supply up to 500 MW to the Indian company. Currently, a lot of hydropower projects are in the completion phase and the power generation capacity of the country is increasing rapidly. Nevertheless, the country is facing difficulty to find a market for surplus power. According to the NEA, power generation capacity in the country has now reached 2,650 MW and it is expected to increase to 2,853 MW by mid-July this year. The government-owned power utility projects that Nepal will produce 4,507 MW by the fiscal year 2023/2024 and 5,251 MW by FY 2024/2025. According to Garg, the Power Summit 2023 reinforced the fact that there are buyers for the electricity produced in Nepal. "If we do not act urgently, over 1,000 MW of electricity will be wasted in the upcoming wet season." Garg also stressed the need for a policy for open access to enable the private sector to use the same transmission line across the country. A MoEWRI official says the proposed bill would open the door for open access to all the power traders on the national grid. “A separate operation guideline needs to be introduced and works are ongoing in this regard,” the official said.
