Nepal wants to sign a long-term intergovernmental agreement with India on selling Nepal’s excess power to the southern neighbour during the upcoming India visit of Prime Minister Pushpa Kamal Dahal.

Nepali officials said that Prime Minister Dahal could visit India after the second week of April. However, the two sides have yet to announce the dates.

Officials at the Ministry of Energy, Water Resources and Irrigation said they are in intense discussion on including the signing of a long-term ‘Intergovernmental Agreement for Power Transfer from Nepal to India’ on the agenda of Prime Minister Dahal’s visit to the neighbouring country.

“We are preparing a proposal for the Indian side on the 25-year agreement,” said a senior official at the Energy Ministry. “But a lot also depends on whether the Indian side agrees to include our proposal in the agenda.”

Dinesh Ghimire, secretary at the ministry, said the issue of long-term inter-governmental agreement was under discussion at the ministry but was yet to be forwarded to Nepal’s foreign ministry to make it an agenda item ahead of the prime minister’s trip.

Ghimire said that such an agreement can be signed only if the Indian side gives its nod at the bureaucratic level before Dahal reaches New Delhi.

Nepal had proposed such a deal during the 10th secretary-level meeting of Joint Steering Committee on Energy Cooperation in India in late February.

“During the meeting, it was decided that Nepal would make a proposal which India would examine,” said Prabal Adhikari, power trade director at the Nepal Electricity Authority, who was also in the Nepali delegation.

Nepali officials also stress an inter-government agreement to cut the red tape in the approval process. As per the Guidelines for Import/Export (Cross Border) of the Electricity-2018 issued by India’s Ministry of Power, the Indian entity willing to buy electricity from neighbouring countries can do so by taking approval from the designated authority.

According to the Procedure for Approval and Facilitating Import/Export (Cross Border) of Electricity by Designed Authority, any Indian power trader, on behalf of any entity of a neighbouring country, may trade in Indian Power Exchanges, only after obtaining approval from India’s Central Electricity Authority, a specified quantum in megawatt and duration.

Following these procedures, getting clearance from India’s designated authorities has been taking time.

As per the Guidelines for Import/Export (Cross Border) of the Electricity-2018, approval of the designated authority will, however, not be necessary where the import/export is taking place under the Inter-government Agreement signed by India and neighbouring countries for specific projects.

Based on this, Nepal sought an inter-government agreement with India in order to avoid the red tape. It is also necessary for Nepal to renew, every year, the approval for a particular project to export power to India, which adds to the uncertainty, according to Nepali officials.

Currently, Nepal is allowed to sell 452.6MW electricity generated by 10 hydropower projects in the Indian power markets. Nepal awaits the approval for more projects from Indian authorities to export electricity.

Adhikari said an inter-government agreement could also pave the way for selling power to India irrespective of whether a third country has invested or is involved in a particular project.

Currently, India has been refusing to buy the electricity from the projects that involve Chinese investors or contractors.

This has created uncertainty over market availability for Nepal’s energy. An inter-government agreement would lock in the market and end the unpredictability of the Indian market’s availability to Nepal in the long run, officials said. “A predictable market helps attract investment in power generation in Nepal,” the energy ministry official said.

Nepal produces surplus energy during the wet (summer) season while it has to buy electricity from India during the dry (winter) season. NEA Managing Director Kul Man Ghising believes the country will be self-sufficient in hydropower even during the dry season by 2026.

As of the first half of the current fiscal year 2022-23, Nepal’s installed capacity is 2,424 MW, according to the ministry.