Prospects of greater multilateral power trade in Bangladesh, Bhutan, India and Nepal sub-region: Part-I

Bangladesh, Bhutan, India and Nepal (BBIN) have been making concerted efforts in recent years to expand power connectivity through the development of cross-border electricity networks across the sub-region. Such initiatives of the BBIN countries, especially India are being designed to promote multilateral power trade and cooperation in the region, where cross-border electricity trade (CBET) are currently conducted only through bilateral agreements. The Government of India (GoI) has issued new guidelines for the CBET, facilitating greater power connectivity in South Asia. The guidelines allow neighbourig countries to purchase and sell power through the Indian grid and participate in Indian Power Exchange (IEX).

The GoI has also introduced several measures, providing opportunity to interconnect the power generation plants of the BBIN countries. The offer of using India’s elaborate power transmission networks for electricity trade and cooperation among the BBIN countries is an integral component of India’s growing neighbourhood engagement. India’s power interconnections with neighbouring Bangladesh, Bhutan and Nepal have been expanded significantly over the last one decade. The World Bank data shows that the electricity transmission in the BBIN sub-region has risen from 2.1 gigawatts (GW) in 2015 to 6.4 GW in 2022.

India presently has about 27 cross-border interconnections at various voltages with Bangladesh, Bhutan and Nepal. Recent reports suggest that several new ones are under construction while some others are being proposed to boost power connectivity among the BBIN countries. Due to the positive developments on the power sector front, the sub-region will witness rapid expansion in cross-border transmission interconnections (CBTI, i.e cross-border transmission capacity) in the coming years. It is estimated that by 2040, CBET capacity could be 40 GW, which would be a tenfold increase from the existing level of about 4 GW.

In its bids to meet the growing power needs, Bangladesh has long been seeking to import electricity from Nepal. The senior government officials and concerned authorities of the two BBIN countries been regularly engaged in diplomatic negotiations to conduct power trade between them. In a major development in June 2023, Bangladesh Power Development Board (BPDB) and Nepal Electricity Authority (NEA) and India’s NTPC Vidyut Vyapar Nigam (NVVN) finalised the draft of a tripartite power trade agreement. The proposed deal, the first of its kind in South Asia, was agreed to by the three countries and is expected to be signed soon.

According to reports, BPDB and NEA, the state-owned agencies of Bangladesh and Nepal, respectively, have finalised various aspects of the 25 years agreement, including utilisation of India’s existing Baharampur-Bheramara high-voltage interconnection grid lines as well as construction of new transmission lines. Under the agreement, Nepal will export 500 megawatt (MW) of electricity from the 900 MW Upper Karnali Hydropower Project situated in the western region of the country and is being developed by India’s GMR Group. The deal is similar to the long-term inter-governmental power trade agreement inked between India and Nepal during Nepalese Prime Minister Pushpa Kamal Dahal’s May 31-June3, 2023, New Delhi visit.

Initially, 50 MW of electricity will be provided to Bangladesh by Nepal from its 52.40 MW Likhu-IV Hydropower Project through the Baharampur (India)-Bheramara (Bangladesh) cross-border transmission link. The Likhu-IV Project, which is located on the border of Okeldunga and Ramechap districts of Nepal, started commercial production in 2022. In the recent bilateral talks, Dhaka and Kathmandu have decided to make efforts to begin power trade during the current wet season, i. e. June-November, 2023.

South Asia’s energy experts maintain that the proposed trilateral power trade pact is likely to reshape the BBIN sub-region’s energy scenario. As per reports, India’s Prime Minister Narendra Modi on June 1, 2023, informed his visiting Nepalese counterpart Dahal that New Delhi would allow the use of the existing Baharampur-Bheramara transmission link to enhance power connectivity across the BBIN sub-region. Earlier, the India-Nepal Joint Vision Statement on Power Sector Cooperation issued on April 2, 2022, also mentioned that both the countries had agreed to expand the bilateral power cooperation to include their partner countries under the BBIN framework subject to mutually agreed terms and conditions between all involved parties.

The proposed trilateral power trade agreement is mutually beneficial for the three BBIN countries. Bangladesh has surplus electricity during the winter months when domestic demand remains low but Nepal experiences power shortages because of low water levels in the rivers as the country’s electricity is mainly produced by run-of-river plants. On the other hand, Nepal generates surplus power during summer and monsoon when power demand in Bangladesh rises. Reports say Dhaka has conveyed to Kathmandu that it would buy power from Nepal during May-December and would sell its electricity from December to February.

Nepal’s energy specialists are of the opinion that seasonal variations in production and consumption of electricity between the two BBIN nations make the bilateral power trade a win-win deal. Reports say in addition to shortage of electricity supply, power in Bangladesh is too expensive and the country has to pay a minimum amount to certain plants called rental power plants even when it is not using electricity. However, Nepal could provide cheap and clean power to Bangladesh which has no option but to keep its surplus power on standby during four-five months of winter. This problem has been persisting in Bangladesh for several years.

For the last two years, Bangladesh and Nepal have been engaged in dialogues to jointly take India on board for utilising its electricity transmission networks to enable power trade between the two BBIN countries. Since the territories of Nepal and Bangladesh are not contiguous, the former can sell electricity to the latter only through Indian soil. Nepal’s growing hydro output has resulted excess supply in the wet season. In its bids to avoid waste of surplus power, Nepal is looking for foreign markets. Due to close geographical proximity, India and Bangladesh offer the most suitable energy markets for Nepal.