Energy export to India will help reduce trade deficit and maintain the balance of payments
The state-owned Nepal Electricity Authority (NEA) was able to trade surplus electricity worth Rs 1.72 billion in the Indian energy market under the Indian Energy Exchange (IEX) in the month of June. The NEA aims to export more energy worth Rs 5 billion in the IEX within the current fiscal year and around Rs 20 billion in the coming year as Nepal will be producing more electricity when other power plants currently under construction are completed. The IEX had allowed Nepal to export its surplus energy since last year at a competitive price in the Indian energy market. Initially the NEA was allowed to export 39 MW of electricity generated from the Trishuli and Devighat hydel projects, both built with Indian assistance.
So far, the NEA has sold 364 MW of surplus energy in the IEX on a daily basis from June 10. All the energy sold in the IEX is made through the Dhalkebar-Muzaffarpur transmission line. On average, Nepal produces around 500 MW of surplus energy during the rainy season, which goes to waste if it is not exported to India, where the demand for energy is very high due to the scorching heat in Bihar and Uttar Pradesh.
As per the NEA, 170.819 million units of electricity were sold in the IEX in June, and income from the sale stood at Rs 1.72 billion after deducting all service charges. The average rate of electricity sold in the IEX at a competitive price over the last month was Rs 9.67 per unit. Energy is traded at a competitive rate set by the IEX, dividing 24 hours into 96 blocks of 15 minutes each. The NEA received the highest average rate of electricity sale on June 15, when average per unit rate was Rs 15 while the lowest rate stood at Rs 4.92 per unit on June 21. The highest amount of electricity, totalling 7.8 million units, was sold on June 14, earning Rs 70.28 million. India decided to import energy from Nepal's hydropower projects, built either under Indian assistance or with Nepal government investment, after it faced a shortage of coal and natural gas due to the war in Ukraine since February 24.
Nepal could export more energy in the IEX provided both Nepal and India built other cross-boundary transmission lines. Looking at the quantum of energy sold to the Indian market, Nepal will get some relief on the pressure of foreign exchange reserves it is currently facing due to rising prices of petroleum products in the international market. It will also help reduce Nepal's ballooning trade deficit with India and also contribute to propping up the country's balance of payments. Power trade with India would also add a major boost to the development of more hydropower projects in Nepal. While energy export will help bridge the trade deficit with India, the government needs to make more investments for domestic consumption of the clean energy. The NEA should also address the problems related to unreliable energy supply and tripping due to voltage fluctuations, and focus on the transmission and distribution system.
The NEA should be able to provide reliable energy to the domestic industries at competitive prices as it has practised with the IEX. The shortage of electricity Nepal faces during the dry season should be addressed by building more reservoir projects, which can provide regular energy round the year.
Nijgadh airport
It is for certain that Nepal's fourth international airport will come up at Nijgadh, despite an order of certiorari in May this year to quash the government's decision to build the airport. Just days after the apex court released the full text of its verdict of May 26 on it, senior leaders of the five-party ruling coalition, including Prime Minister Sher Bahadur Deuba, inspected the proposed site of the airport on Saturday.
Prime Minister Deuba made it clear that the construction of the proposed airport would not be halted now, although it would be done so by keeping the environmental damage to a minimum, the major concern of the SC verdict.
According to the full text of the verdict, there were differing views among the justices, with two in favour of constructing the airport at Nijgadh by mitigating the environmental impact, and the majority three unclear about whether another international airport should be built at Nijgadh or elsewhere. Nepal will soon have three international airports. However, they will not be adequate to handle the ever-growing air traffic in the country. The government should thus make a strong decision and push ahead with the multi-billion dollar Nijgadh project if it intends to.
A version of this article appears in the print on July 4, 2022, of The Himalayan Times.
