Indian cabinet approves 10-year power purchase agreement with Nepal

The Indian cabinet has approved an agreement to purchase 10,000 MW of electricity from Nepal in the next 10 years.

Nepal’s ambassador to India, Dr. Shanker P. Sharma tweeted about the approval in his X account a few hours early today. The Indian government has yet to release the information on its Press Information Bureau website.

Both countries reached a ‘long-term power purchase agreement’ during PM Pushpa Kamal Dahal’s last visit to India in May this year, and was subject to the Indian cabinet’s endorsement. The agreement will be followed by endorsement at the secretary-level meeting between the two countries.

Nepal’s road to exports to India materialised after the Nepal Electricity Authority (NEA) joined the Indian Energy Exchange (IEX) in April. NEA now participates in the daily day-ahead auction (from 10-12 a.m.) at the IEX to sell its power through a competitive bidding process. 

Nepal can now also trade power on a real-time basis. 

In August 2023, India amended its ‘Procedure for approval and facilitating Import/Export (Cross Border) of Electricity by the Designated Authority’.

The amendment stated, “Any Indian power trader, on behalf of any Entity of neighbouring country, may trade in Indian Power Exchanges (DAM/RTM/Both DAM and RTM segment), after obtaining approval from the Designated Authority, up to specified quantum (MW) and duration, paved the way for Nepal to trade power on the real-time energy exchange market.”

Earlier, Nepal’s export quota to India was fixed up to 452.6 MW of electricity generated by 10 projects which was subject to annual renewal. 

Nepal then reached a 5-year agreement with India for exporting an additional 200 MW of electricity, an agreement signed between NEA and NTPC Vidyut Vyapar Nigam Limited (NVVN) of India on May 23.

Nepal’s private sector and the government had been pushing for a long-term deal to secure the export market and pave the way to secure more investment in the country’s power sector.