Last week, Nepal and India finalised the construction modality of the 400 kVA New Butwal-Gorakhpur cross-border transmission line. A two-day Nepal-India energy secretary-level Joint Steering Committee talk held in Bangalore had decided to build the project with equal equity investment. Moreover, the government aims to export surplus power to India and Bangladesh and the cross-border transmission infrastructure has been upgraded accordingly. Umesh Poudel of The Himalayan Times caught up with Dinesh Kumar Ghimire, secretary at the Ministry of Energy, Water Resources and Irrigation, to learn about cross-border power trade, energy banking and implementation status of the US government funded Millennium Challenge Corporation projects. Excerpts:

Recently the government signed a pact with India to build a strategic cross-border transmission line. What benefits can Nepal derive from this?

The agreement with India to build the New Butwal-Gorakhpur 400 kVA cross-border transmission line is historic as it will help us tremendously in energy trade with the southern neighbour. Both Nepal and India have varying demands for power throughout the year and the new transmission line will help us in trading energy as per the requirement. For example, we have more demand for power during the dry season here but it is less in India during that time. And during the wet season in our country when we have surplus production India requires more energy. So, we can complement each other when necessary. We have also agreed to trade energy through the upgraded Dhalkebar-Muzaffarpur transmission line whose capacity has been increased to 400 kVA.

Though its upgradation had already been completed we had still not signed a pact to operate it as per the increased capacity. The New Butwal-Gorakhpur transmission line will also help us transmit power that will be generated by various upcoming projects in the Marshyangdi corridor and also by the Budhigandaki and Upper Tamakoshi projects, among others. Though we can use this line to import energy from India we hope to be able to use it more for export to not only India but Bangladesh too. The other important aspect of this new transmission line is that it will help form a circuit so that if there is any problem in the Dhalkebar-Muzaffarpur line then the Butwal-Gorakhpur line can be utilised and vice-versa. This transmission line will be more reliable and secure. We had been holding discussions with India since long regarding the construction modality of the New Butwal-Gorakhpur transmission line which has been sorted out now and it will be constructed with equal investment from both countries.

India has a policy of building transmission lines based on the rate of return and financial viability but we were able to persuade the Indian government to overlook that provision and build the new transmission line through government to government modality. There has also been an agreement whereby Nepal Electricity Authority (NEA) will book the transmission line for 25 years. NEA and Power Grid Corporation of India Ltd will form a joint venture with equal investment to execute the project as per the pact. Both the state companies will directly invest 20 per cent equity and the remaining 80 per cent will be managed through concessional loans from different multilateral development partners or exim banks. After the joint venture company is established it will sign the project implementation and transmission service agreement with NEA. The joint venture is expected to be set up by May next year and construction is expected to be completed within three years of the joint venture being formed.

Why has NEA booked the new cross-border transmission line for 25 years?

When the Dhalkebar-Muzaffarpur cross-border transmission line was built we faced criticism from different stakeholders as NEA’s stake in the project was only 10 per cent. So, when NEA booked the transmission line it received only 10 per cent service charge collected from this transmission line. Now that NEA has 50 per cent stake in the New Butwal-Gorakhpur transmission line, the power utility will be able to receive 50 per cent of the service charge collected through this line. This will help NEA recoup its investment faster and also help it pay back the loans it acquires earlier. Different Indian private firms had expressed interest to be a part of the joint venture but we refused that request and agreed to build on government to government basis. And the reason why NEA booked the transmission line for 25 years is that we will be able to have ownership of it for a longer period and receive more profits as we plan to export more power to India and other third countries in the near future. Even when any state-owned or private company in India transmits power through this line on their side NEA will earn 50 per cent income from that. We believe that if the transmission line is utilised to its full capacity then NEA will be able to recoup its investment within five years. The construction cost of the new transmission line project is expected to stand at Rs 11 billion. However, NEA’s investment will significantly drop as the stretch from Butwal to Sunauli will be built through the Rs three billion compact assistance from the US Millennium Challenge Corporation. Moreover, we have also agreed not to build a separate substation in Gorakhpur which will help save another Rs 1.5 billion. This effectively means that the joint venture between NEA and Power Grid Corporation of India will only have to invest around Rs 6.5 billion, which further means that NEA’s investment in the joint venture will also drop.

What were the new developments regarding energy banking in the recent bilateral meeting?

In December last year, Nepal and India had agreed to ink the much-awaited energy banking deal, which will ensure uninterrupted exchange of power between the two countries. The meeting of the Power Exchange Committee had agreed to seal the Nepal-India energy banking deal. Nepal had long been demanding the energy banking deal with India in a bid to ensure that the country is able to export its surplus electricity to India, especially during wet season and import power from India when necessary. In the recent meeting we held discussions on the criteria that need to be adopted to implement that deal and we also agreed on the framework agreement with India. During the recent bilateral meeting we urged India to also make necessary guidelines for the energy banking deal.The Indian authorities made a commitment to frame the necessary energy banking guidelines and include them in their energy policy within six months.

Bangladesh has also shown willingness to buy electricity from Nepal. How can Nepal, Bangladesh and India coordinate on this matter and make it possible?

We have already held discussions twice with the Bangladeshi government for the purpose. We have also formed a secretary level Joint Steering Committee (JSC) and joint-secretary level Joint Working Group (JWG) with Bangladesh to accelerate the process of exporting energy to Bangladesh. We are at present conducting studies on transmission connectivity and potential export oriented projects, among others. Nepal and Bangladesh have agreed to talk with India at a trilateral meeting related to energy connectivity soon. All three countries have already formed bilateral government mechanisms with each other to address energy related issues and now we need to have a trilateral mechanism. In the recent meeting, Nepal and India have agreed to call a trilateral meeting with Bangladesh within three months. The trilateral meeting will be coordinated by the Ministry of External Affairs, India. I believe that this meeting will be a success as India has already agreed in principle to allow use of its territory to construct dedicated transmission lines or

utilise its existing transmission backbone for energy trade between Nepal and Bangladesh.

What is the progress status of projects being developed through the United States’ MCC grant assistance?

There were many issues related to MCC-backed projects which have been resolved now. In fact, we have already drafted necessary laws for the projects and included them in the national pride project list. We have also signed the agreement with India to take forward the new cross-border transmission line project which is being developed through the MCC fund. It now only needs to be ratified by the Federal Parliament which we hope will be done during the next Parliament session. The other remaining work is to clear the forest area for which the Environment and Social Impact Assessment (ESIA) report needs to be prepared first. The ESIA is being prepared by the Millennium Challenge Account Nepal (MCA-Nepal), the project implementing body. Once it has been completed and handed over to the Department of Electricity Development, forest clearance works will begin and after that we can start construction. I believe that the MCA-Nepal will prepare it as soon as possible because we have been given a strict deadline to complete the projects.