India and Nepal have signed an agreement to invest in the construction of the 400 KV cross-border transmission link Butwal-Gorakhpur 400 V, which will give a boost to bilateral power trade.
According to the NEA, a joint venture and shareholder agreement was signed by the Nepal Electricity Authority and Power Grid Corporation of India Ltd in New Delhi, on Thursday.
Kulman Ghising, Managing Director of NEA, and Y.K. Dixit, Executive Director of PGCIL signed the agreement. Dixit.
The dedicated transmission line will allow India and Nepal to trade approximately 2,000 MW of electricity after the project is completed.
The transmission line proposed is part of the $630 million “Nepal Compact”, an agreement between Nepal’s government and the US’ Millennium Challenge Corporation, to finance electricity and road projects in Nepal.
A multi-million-dollar MCC-Nepal Compact is only possible if there is an agreement to implement the transmission line. This compact, which many in Nepal consider a counter-initiative to the US’ Belt and Road Initiative, is also necessary.
The proposal by the NEA to invest 50% in shares of the company for construction of the Butwal Gorakhpur cross-border transmission link has been approved by Nepal’s Council of Ministers.
Ghising stated that the signing of the agreement allowed both parties to create a joint venture company with 50% each of the NEA or the Power Grid for construction of the section on Indian side. Ghising also said that the legal process was completed.
Construction of the 120km long project will take three years. Around 100 km will be on India’s side, and the rest will be on Nepali.
Prabal Adhikari, spokesperson for NEA, stated that the transmission line would be a vital energy link between India and Nepal.
The Nepal-India Energy Joint Steering Committee had voted to build the transmission link in October 2019. However, due to the Covid pandemic further negotiations were halted. The project’s total cost would be (Nepali Rs 7 billion, Indian Rs 4 billion).
The Nepali delegation discussed selling energy from Nepal to India during the meeting in Delhi.
Nepal will soon add 456 MW of energy. During the rainy season, it plans to sell any remaining energy to India. To meet its energy needs, Nepal imports over 300 MW from India in winter.
According to the power utility, Nepal will have an excess of approximately 8,000 MW by 2025. Nepal’s generation capacity is estimated to reach 10,924MW and peak demand is 2,981MW. India also accepted to formalize the terms of the energy banking system, which will allow Nepali and Indian power to be exchanged on a need basis. This is in line with multiple requests from Nepali authorities.