In a turbulent world where a polycrisis looms—from Ukraine to Iran—hot conflicts remain unresolved through diplomacy, and the developed world shows fractures, as seen in the recent G7 summit in Canada, multilateral efforts are withering. A rare exception is European unity in the Ukraine conflict. Against this backdrop, cooperation in South Asia becomes especially noteworthy, particularly given that nuclear-armed neighbors India and Pakistan were on the brink of war after the terror attacks in Kashmir’s Pahalgam.
Amid these tensions, a positive development emerges. Nepal has begun supplying 40 megawatts (MW) of electricity to Bangladesh via India. This is a significant step for one of the world’s least interconnected regions. But why is this a crucial milestone in South Asia’s energy landscape?
South Asia is undergoing an energy transition. India, the world’s third-largest power consumer, saw peak demand reach 250 GW this year, with projections suggesting 458 GW by 2032. Bangladesh’s peak demand is nearing 16,000 MW and is expected to exceed 34,000 MW by 2030. As India expands its renewable energy capacity and Bangladesh shifts from gas and coal, both countries are increasingly turning to cross-border power exchanges to supplement domestic supply.
Nepal and Bhutan represent untapped potential. The Himalayan nations possess hydropower capacities of 40,000 MW and 30,000 MW, respectively, yet less than 10 percent has been harnessed. With proper infrastructure, they could become the region’s clean energy reservoirs.
The feasibility of power trading hinges on infrastructure, where quiet but meaningful progress has been made. Since 2016, the Nepal–India Dhalkebar–Muzaffarpur 400 kV line has enabled Nepal to export electricity to India. The recent Nepal-Bangladesh power transfer utilized this line, routing through India’s eastern grid via the HVDC Baharampur–Bheramara link.
BIMSTEC has sought to capitalize on this momentum. Its Grid Interconnection Master Plan, developed with ADB support and approved in 2018, outlines technical strategies for an integrated electricity market. The Energy Centre in Bengaluru, envisioned as a BIMSTEC knowledge hub, is expected to foster policy alignment and trade facilitation.
Yet BIMSTEC remains institutionally weak. While the recent trilateral power exchange occurred within its territory, it was not coordinated by BIMSTEC itself, which is a critical distinction. Unlike the EU’s energy union or Africa’s Power Pools, BIMSTEC lacks a formal regulatory framework for energy trade. There is no central market operator, no unified dispute mechanism, and no standardized tariff system. Without a dedicated trading platform, transactions rely on bilateral deals, contingent on India’s willingness to facilitate them.
This model has worked so far, but its scalability is uncertain. As new projects like Bhutan’s Sunkosh and Nepal’s Arun-IV come online, challenges around pricing, grid stability, and regional capacity planning will grow. A regional market cannot thrive indefinitely on ad-hoc bilateral agreements.
Political commitment within BIMSTEC is also uneven. While India, Nepal, and Bangladesh have made progress, members like Myanmar and Sri Lanka remain peripheral to energy discussions, and Thailand’s involvement has been largely rhetorical.
A multilateral institutional framework is needed—not just for regulation but also to develop infrastructure, from unlocking Himalayan hydropower to building a shared grid. It could also create an integrated market for surplus power. However, this requires sustained engagement. BIMSTEC could learn from ASEAN, where economic cooperation persists despite territorial disputes.
India and Bangladesh aim for net-zero emissions by 2070. With rising energy demand and a push for cleaner solutions, investments in hydropower and other renewables are critical. As a neighbor to most BIMSTEC members, India should not only facilitate power exchanges but also actively help build the necessary infrastructure. This is also a strategic imperative for Indian and Bangladeshi exports, particularly to the EU, which will soon impose a Carbon Border Adjustment Mechanism (CBAM) tax.
The Nepal-Bangladesh power deal, enabled by India, is more than a regional energy milestone. It underscores a geopolitical and developmental opportunity South Asia cannot ignore. Amid climate crises, energy insecurity, and volatile bilateral ties, cross-border power trade offers a path to redefine cooperation through economic interdependence.
Yet without a multilateral framework, such exchanges remain fragile, dependent on India’s strategic calculus. The absence of standardized rules, dispute resolution, and long-term planning leaves the region vulnerable to political shifts and technical failures. For India, formalizing a BIMSTEC energy community is not just goodwill—it aligns with its climate diplomacy and trade competitiveness in a CBAM-regulated world.
The real challenge is not technical feasibility but political vision. South Asia’s energy future hinges on its ability to institutionalize trust, integrate equity, and depoliticize infrastructure.
The author is a PhD Candidate at the School of International Studies, Jawaharlal Nehru University. He is also associated as a Life Member of the International Centre for Peace Studies, New Delhi
