The Nepal Electricity Authority (NEA) plans to hold talks with the Central Electricity Authority (CEA) of India this month to finalise the funding and implementation modality of the 400 kV New Butwal-Gorakhpur Cross-Border Transmission Line Project.

The fifth energy secretary-level joint steering committee (JSC) meeting between the two countries in April had authorized the NEA and the CEA to give suggestions to the committee about the implementation and funding modalities within three months.

As per the minutes of the meeting, the two entities are supposed to study the power transfer requirements of both countries and recommend funding modalities accordingly. During the same meeting, there was a broad agreement that the portion of the transmission line passing through Indian territory would be built by a commercial entity, and that it would charge a fee from the power importer to recover its investment.

The agreement means that whenever the power line is used by Nepal to export power, the transmission charges for the Indian portion of the line can be collected from the Indian importer.

The NEA expects that the power line will be used to import electricity from India for a few years, and then it will be used to export power as Nepal will have surplus energy. “The NEA and the CEA will determine the time periods for the export and import, and submit a report to the next meeting of the JSC,” said Prabal Adhikari, spokesperson for the NEA. “Based on the report, a commercial entity will be formed to fund the project.” After the Indian side rejected Nepal’s proposal to develop the cross-border power line under a government-to-government financing model, both sides agreed to develop it by establishing the commercial entity.

As per the financing model proposed by Nepal, the two governments will build the 400 kV power line on their respective territories. Around 20 km of the 135-km transmission line falls on Nepali territory. However, the Indian side rejected the Nepali proposal saying that the line should be developed by a commercial entity considering its commercial viability.

Nepal will develop the portion of the power line within Nepali territory under the new modality too. Nepal has already arranged funds to build its portion of the transmission line. It is planning to build the power line with a grant provided by Millennium Challenge Corporation (MCC), an independent US government agency. An agreement to this effect has been signed, but the Nepal government must get the Indian government’s consent over the financial terms for the construction, as per one of the preconditions set by MCC.

The Energy Ministry has prioritised the construction of the New Butwal-Gorakhpur transmission line as it can efficiently distribute imported power to high energy consuming cities like Bhairahawa, Butwal, Pokhara and Narayangadh. The power line can also be used to evacuate surplus energy produced in the Budhi Gandaki, Marshyangdi and Trishuli corridors where most of of the country’s hydropower projects are located.