The Platform

Gosainkunda, Nepal. (Sergey Pesterev/Unsplash)

India has communicated to power producers in Nepal that it won’t purchase electricity from hydropower projects that have Chinese tech components. India opened the door to purchasing power from Nepal in November 2021. This is a significant milestone for Nepal since it is the first time the Himalayan country has exported hydropower. India’s refusal to acquire electricity from any project with Chinese involvement demonstrates India’s attempt to re-establish itself as a regional force.

Under the Indian Energy Exchange (IEX), Nepal has exported 39 megawatts of power to India. During Indian Prime Minister Narendra Modi’s visit to Nepal in 2014, the India-Nepal Power Trade Agreement was inked. Nepal is India’s first neighbor to join the IEX.

The selling of energy to India fulfills a long-held Nepalese aim of exporting hydroelectricity. This is a significant improvement for Nepal’s energy industry, which had at one time imported more than half of its electricity from India at peak demand in 2019.

Utilizing nature’s gift

Nepal’s goal has always been to be Asia’s powerhouse. On the other hand, it was in the dark for more than a decade, from 2006 to mid-2017, with blackouts lasting up to 18 hours a day. It is a small country with rugged terrain, few resources, and even fewer industries. Nature has bestowed an incredible gift to the country: river systems. Many rivers flow from Nepal to India, including the Karnali, Mahakali, Gandaki, Koshi, and southern rivers.

These resources give Nepal an effective advantage in producing electricity in a cleaner and more environmentally-friendly way. However, its limited economy has hampered its ability to realize this objective. India seized the opportunity and increased its investment in clean energy. The power produced by these clean energy projects was subsequently exported to India. After an Indian-invested plant began full-scale operations in August 2021, Nepal became a power surplus country. Nepal will be permitted to export power to Bangladesh via India at a later time in order to fulfill the expanding demands of that country’s domestic economy.

The selling of energy to India fulfills a long-held Nepali aim of exporting hydroelectricity for national wealth. Environmentalists see this as a positive step for both Nepal and India since it might help to reduce carbon emissions. India has pledged to be carbon neutral by 2070. India will not be able to meet this goal unless it replaces coal.

Meanwhile, the price of coal in India has risen, and the economy is regaining speed following pandemic-related shutdowns. This has raised the need for energy in India. The quantity of electricity now exported from Nepal may be minimal, but it has the potential to expand in the future.

Chinese alliance and India’s resistance

With the approval of the Investment Board Nepal (IBN) in June of last year, the way was cleared for a China-Nepal joint venture to build three hydropower projects on the Marsyangdi river in western Manang and Lamjung districts at the same time. This may not have gone over well with India. Several private sector power developers claim to have received communications from the Indian side at various venues of discussion indicating that the Indian side is disinterested in acquiring electricity from projects with any Chinese participation. This is not an official correspondence, but officials from the Indian embassy and the Central Electricity Board have provided indications that corroborate the assertion.

India is keen to maintain relations with its neighbors who have fallen prey to Chinese clout. India has also invested in Myanmar and has invested substantially in Sri Lanka, which has been caught in China’s “debt trap.”

Nepal will benefit from hydropower exports. However, it must tread carefully since it requires both Chinese capital and access to the Indian market. However, India has made it clear that, no matter how bad things are at home, it will not relinquish regional supremacy to China so readily.

Benedict George is a Ph.D fellow at the University of Texas, having a Master's degree in Strategic Studies. His area of interest is in Asian Foreign Politics.