India for the first time has given explicit recognition to the tripartite arrangement in cross-border trading of electricity, paving the way for Nepal to export surplus electricity to Bangladesh via Indian transmission lines. 

Introducing new guidelines on cross-border trading of electricity, the Indian Power Ministry included a provision under which two countries having a bilateral agreement with the Indian government can trade electricity between them through Indian power lines after entering into agreement with the Indian government owned-Central Transmission Utility. 

“Provided that in case of tripartite agreements, the cross border trade of electricity across India shall be allowed under the overall framework of bilateral agreements signed between the Government of India and the Government of respective neighbouring countries of the participating entities,” the recently issued Guidelines on Cross Border Trade Import/Export of Electricity say. 

“Where tripartite agreement is signed for transaction across India, the participating entities shall sign a transmission agreement with the Central Transmission Utility of India to obtain transmission corridor access.” 

While issuing guidelines on cross-border electricity trade for the first time in 2017, the Indian Power Ministry had failed to recognise a possible trilateral arrangement among two countries and India. 

But the recently introduced guidelines by India after withdrawing the old one issued in 2017, according to the experts, provide an opportunity to its neighbouring countries—Bangladesh and Nepal—to trade electricity between them via Indian territory.  

“This will foster power trade between Nepal and Bangladesh, giving opportunity to the former to export surplus electricity that it is on the track to generate within a few years,” said Semana Dahal, a lawyer who is advising the government of Nepal on different infrastructure projects.

Energy Ministry officials also welcomed the latest guidelines, saying the new one is more progressive and that it has opened plenty of avenues for the development of hydropower sector in Nepal. 

“These guidelines are more progressive than the earlier one issued by the Indian government,” said Dinesh Kumar Ghimire, joint secretary at the Energy Ministry. “The new guidelines were introduced along with the spirit of the Power Trade Agreement (PTA) signed between Nepal and India in 2014 which requires both countries to allow non-discriminatory access to cross-border electricity market.”

The Indian government has also removed the discriminatory provision included in the older guidelines, under which Nepali-based hydropower projects which are owned by the Indian government or have a majority Indian share were only allowed to export power to India. 

As per the older guidelines, only Nepali-based companies wholly owned by the Indian government or the public sector or private companies with a 51 percent or more Indian stake and companies owned or controlled by the Nepal government were allowed to sell power to India. 

Other companies wishing to sell power to India were required obtain the approval of the designated authority on a case-by-case basis. 

The provision was discouraging to foreign investors and private Nepali power developers planning to build export-oriented hydropower projects with an eye on the Indian market.

“The severe qualification criteria linked to equity ownership for participating entities has been relaxed albeit each time an approval from designated authority has to be obtained which is not certain,” said Dahal. “The approval for export could be refused if the designated authority is not satisfied with equity ownership or Indian government does not concur as per the new guidelines. This leaves some room for discretion.” 

Dahal also cautioned that the guidelines lack precision and that most of the matter contained therein will have to be further clarified in the regulations to be issued by Central Electricity Authority (CEA) or Central Electricity Regulatory Commission (CERC) of the India.