Nepal and India have reached a new deal on construction, upgrade and investment modalities for five transmission lines at a time when 11,000 megawatts of energy from various hydro projects is in pipeline.

The 12th meeting of Joint Working Group on Power Sector Cooperation concluded in New Delhi on Wednesday finalised the investment modalities of two 400Kv cross-border transmission lines and agreed to expedite the three additional transmission lines for power augment, said Sandeep Dev, joint-secretary at Ministry of Energy, Water Resources and Irrigation, who also led the Nepali side at the meeting.

“We have reached an agreement on investment modalities of 400Kv Inaruwa (Duhabi)-Purnia (Bihar) and Dodhara (Lamki)-Bareli (Uttar Pradesh) cross-border transmission lines through a joint venture involving entities of the two countries,” he told the Post.

Earlier, India did not want to involve Nepal in building the two cross-border transmission lines on its territory even as the two countries are jointly carrying out the construction of the Butwal-Gorakhpur cross-border line.

“Nepali and Indian entities have 50-50 stakes in the construction of the 400Kv Butwal-Gorakhpur line, which is facing hurdles. Based on the lessons from this project, we have reached a new deal on the two new cross-border transmission line projects,” said a Nepali participant at the meeting.

As per the agreement, India will have a 51 percent stake in the transmission lines on its territory while the Nepali side will have 49 percent stake.

Similarly, inside the Nepali territory, Nepal will hold a 51 percent stake and the Indian side will have 49 percent. The Nepal Electricity Authority and the Power Grid Corporation of India will establish a joint venture and invest in the two projects, said Dev.

In the past two—tenth and eleventh—meetings, the Nepali side had proposed building these two cross-border lines through a joint venture. But the Indian side had been proposing that Nepal build the Nepali section itself while the India section would be constructed by an Indian company. This had been a major bone of contention.

According to a Nepali participant, the length of the transmission line inside Nepal’s territory is shorter than the corresponding length in India.

The agreement reached at the joint-secretary-level will later be tabled in the energy-secretary-level meeting for final endorsement. A venture involving the NEA and the Power Grid Corporation of India has been established to build the Indian section of the 400kV Butwal-Gorakhpur transmission line.

The two countries have agreed to build the 120-km power line by March this year but, according to Nepali officials, it would be hard to meet the completion deadline. The Nepal section of the line, which is around 20 km, will be funded by the US-supported Millennium Challenge Corporation (MCC) Nepal Compact.

Nepal had also proposed the same modality for building the other two transmission lines but India rejected it earlier. After the Indian side’s refusal, Nepal notified that it would refrain from the capacity booking of these transmission lines as it did in the case of Butwal-Gorakhpur Transmission Line for 25 years.

Capacity booking would force Nepal to pay a minimum fee to the joint venture irrespective of whether power flows through the line.

If the modality of Butwal-Gorakhpur power line was not adopted, the Nepali side wanted to pay a wheeling charge based on the flow of energy and agreed to book the capacity of the line as the country needs this cross-border line to sell excess power to its southern neighbour.

Despite having to bear a fixed financial burden due to capacity booking, joint venture profits will also be shared with the NEA as a partner in the case of the Butwal-Gorakhpur line. This was Nepal’s position in the tenth and eleventh meetings.

“There was a stalemate for years on settling the financing modalities of these two cross-border transmission lines, which we finally settled in the latest meeting,” said Dev. “Earlier we were not able to decide the financing and investment modalities.”

At present, according to him, 11,000 megawatts of electricity from various hydro projects is coming online and a power purchase agreement for producing 20,000 megawatts of energy has been proposed by the developers, which is under consideration.

“So we have to expedite the construction of both cross-border transmission lines as well as the others in the country in order to gain access to a larger market,” he said. “Guaranteed energy market will help attract investments.”

The construction of the 400kV Inaruwa (Duhabi)-Purnia (Bihar) and Dodhara (Lamki)-Bareli (Uttar Pradesh) cross-border lines are set to be completed in four years. The two countries have already agreed to complete the Duhabi-Purnia power line by 2027-2028 and Dodhara-Bareli by 2028-2029, respectively.

Similarly, officials have also agreed to scale up the capacity of the 400kV Dhalkebar-Muzaffarpur cross-border line as the only high-capacity connection between the neighbours to transmit 800 MW power. Either side can now import or export to 1,000 to 1,100 MW of energy, said Dev.

This project is going to be completed by 2030. With India promising to buy as much as 10,000MW from Nepal in 10 years under a long-term power trade agreement, more high-capacity lines will be needed.

The Supreme Court recently dismissed a writ petition challenging the long-term power purchase agreement signed between Nepal and India during Pushpa Kamal Dahal’s prime ministerial visit to India in June, 2023.

Indian Prime Minister Narendra Modi then promised increasing hydropower imports from Nepal to 10,000 MW in 10 years. This requires construction of new hydro projects as well as cross-border transmission lines.

Four high-capacity cross-border transmission lines are in the pipeline. The SJVN Arun-3 Power Development Company, the 900MW Arun 3 Hydropower Project developer, has been constructing a 400kV Dhalkebar-Sitamarhi line to transmit up to 2,000MW.

Likewise, construction of the New Butwal-Gorakhpur Transmission Line, which will supply up to 3,500MW, is underway after its joint inauguration by Dahal and Modi.

Additionally, the two sides have agreed to construct three transmission lines: the 400 kV Nijgadh (Bara)-Motihari (Bihar) cross-border transmission line; the Kohalpur-Lucknow (Uttar Pradesh) cross-border line; and the 220 kV Chameliya-Jaulajiwi cross-border line.

“As we could not upgrade the capacity of the 132 kV Mahendranagar-Tanakpur transmission line, we are looking for an alternative and have proposed to build a 220 kV line from Chameliya to Jaulajiwi,” said Dev.

The study of two cross-border lines (the 400 kV Nijgadh-Motihari line and the Kohalpur-Lucknow line) is over. Their expected construction deadline is 2028. Likewise, feasibility study for the 220 kV Chameliya-Jaulajiwi line will be completed by March.

Officials from the Ministry of Foreign Affairs, the Ministry of Energy, the Nepali Embassy in New Delhi, the NEA, and the Department of Electricity Development attended the meeting.