Energy takes center stage as Nepal prepares to welcome Jaishankar

Nepal is seeing the first diplomatic visit of 2024 from India. Indian External Affairs Minister S Jaishankar is arriving in Kathmandu for a two-day visit on Jan 4.

Jaishankar will lead the Indian delegation in the 7th meeting of the Nepal-India Joint Commission—the highest bilateral mechanism between the two countries. The delegation will include Indian Foreign Secretary Vinay Mohan Kwatra, Anurag Srivastava, Nepal desk chief at the Indian External Affairs Ministry, and other high-level officials.

Among the key agendas of the meeting is the formal signing of the Power Purchase Agreement (PPA) which will pave the way for India to import 10,000 MW of hydropower from Nepal in 10 years, energy ministry officials say. The 11th meeting of the Nepal-India Joint Steering Committee in Chitwan will finalize the agreement. However, secretaries of both countries have yet to sign the agreement to formalize the long-term PPA.

The preliminary agreement for the long-term PPA was signed in June. It was endorsed by the Indian cabinet in September. Nepal had presented the draft of the long-term PPA to India during Prime Minister Pushpa Kamal Dahal’s visit to the southern neighbor from May 31 to June 3.

Pancheshwar in limbo

High-ranking government sources reveal that the upcoming diplomatic visit will not make progress on the Joint Detailed Study Report (DPR) of the Pancheshwar Multipurpose Project.

Despite being proposed nearly seven decades ago, the Pancheshwar project still remains confined to paper. A former Indian ambassador to Nepal expressed skepticism about the project, stating that neither country is genuinely committed to advancing the project. Despite being a recurring topic in high-level discussions, there is a lack of genuine commitment from Nepal and India to implement this mega project, he added.

An official from Nepal’s energy ministry echoed the sentiment. “The project won’t move forward without political commitment. The joint mechanism between the two countries cannot resolve the issue,” he added.

While the initial disagreements on the joint DPR of the project numbered over 500, most of them have been sorted out. The two sides reportedly have differences or just two or three issues now. Both nations have struggled to form a common stance on water use. “The project has been stalled because the countries are prioritizing self-interests over bilateral concerns regarding water usage,” the energy ministry official said.

India first identified the Pancheshwar Project on the Mahakali River, which serves as the border between the two countries, in 1956. The two countries decided to form a joint team to study the project in 1978. Nepal established the Pancheshwar Multipurpose Project Office in 1988. The 1991 Pancheshwar Multipurpose Project Report stated that 6,720 MW of hydropower can be generated - 6,480 MW by building a 315-meter rock-filled dam at Pancheshwar, and an additional 240 MW by building an 83-meter regulating dam at Rupaligad. Nepal prepared the Detailed Project Report (DPR) for the project in 1995 based on the findings and insights derived from the 1991 report.

Nepal and India signed the Mahakali Treaty for the integrated development of the Mahakali River, which included Sarada barrage, Tanakpur barrage and Pancheshwar Dam Project, on 12 Feb 1996.

In 2009, Nepal and India agreed to form the Pancheshwar Development Authority to implement the project. In 2014, WAPCOS Limited, a government undertaking of India, was assigned to prepare a joint DPR by studying separated DPR prepared by the two countries. WAPCOS submitted the DPR in 2016. However, differences arose between the two countries on the DPR as it reportedly contradicted the Mahakali Treaty signed by the two countries. An agreement was reached to finalize the DPR within three months during Dahal’s India visit. However, there has been no progress even though it has already been seven months since the agreement was reached. 

The project also aims to control floods in Kanchanpur district and irrigate 93,000 hectares in Kanchanpur and 1.6m hectares in India.