Foreign ministers of all the member countries signed the agreement on Tuesday at the 18th Saarc Summit, opening the door for electricity trade among the countries.  Although it was the only agreement signed at the summit, energy cooperation was one of the themes that the majority of Saarc heads of state and government touched upon during their address to the inaugural session of the summit on Wednesday. Prime Minister Sushil Koirala hailed the signing as “an important agreement for Nepal and other states in the region.”

After initial reservations, Pakistan finally ratified the agreement after other heads of state and governments took up the matter with Pakistan Prime Minister Nawaz Sharif at Dhulikhel retreat.

With the energy pact in place, all the Saarc members have agreed to “enable” the concerned agencies in their respective countries to develop transmission interconnectivity within the region. The agreement would allow power supply from surplus countries to those with deficit in the region.

The member countries have also agreed to gradually lift barriers, including the customs duty for enhancing the regional connectivity as per the laws and acts of all the member states.

Besides being a catalyst for development and trade of electricity across the region, the agreement is expected to provide a  huge opportunity for Nepal, according to officials. “This agreement will attract more foreign investments and make the market more competitive. A big foundation has been laid with the development of regional electricity market for energy sector development,” noted Energy Secretary Rajendra Kishore Kshatri. He added that the agreement also guarantees non-discriminatory access to electricity and expansion of transmission network for trade facilitation within the region.  

According to Keshav Dhowj Adhikari, joint secretary at the Energy Ministry, the “umbrella” agreement encourages the member countries to enter into public-private partnership for regional grid connectivity.

“For a country like ours, it opens up a huge opportunity of electricity export,” said Adhikari. “Bangladesh has expressed interest to invest in hydropower projects in Nepal and buy electricity.”

During the 15th Saarc Summit held in Colombo in 2008, the regional leaders had stressed the need to develop the regional hydroelectricity potential, grid connectivity and gas pipelines.

At a meeting held a year later in the Bhutanese capital Thimphu, the Working Group on Energy rephrased the proposal as ‘Regional Inter-Governmental Framework Agreement’  and included other thermal energy sources within the ambit of energy sources.

The fifth meeting of the Saarc Energy Ministers held on October 16-17 in New Delhi had finalised the framework agreement and was subsequently endorsed by all member countries except Pakistan, which was absent at the time. Most of the member states’ Cabinet had endorsed the agreement before its ratification on Thursday.

According to officials, the agreement will facilitate development of a South Asian Association for Regional Cooperation Market of Electricity (Same).