Experts caution against signing hasty power deals with India

With cooperation in the power sector being one of the key items on the agenda during the upcoming visit of Indian Prime Minister Narendra Modi, experts have said that Nepal should sign a bilateral agreement on energy only if it is in the form of a power trade agreement (PTA).

An Indian proposal received by Nepal recently has included power trade as part of a broader power sector agreement. However, speaking at a roundtable organized by Kantipur Publications on Tuesday, energy experts cautioned the government against signing a pact in haste without adequate preparations.

There however was suggestion that Nepal should not lose the opportunity for harnessing its water resource at a time when India seems keen to move ahead on bilateral cooperation in the energy sector.

Former president of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) Pradeep Shrestha said that Nepal should be able to cash in on Modi’s visit since he seems to be trying to strengthen relations with South Asian countries.

“The growth of the manufacturing sector has remained dismal due to lack of power. Hence, we should enter into an agreement on the energy sector, but with great caution,” said Shrestha.

“Since signing an agreement on cooperation in the power sector requires a lot of homework, Nepal should not rush to sign any deals,” said former energy secretary Sheetal Babu Regmi, pointing to lack of preparation and wider consultation on the Indian proposal. He added that if the agreement was purely a PTA, it would be okay to sign it.

India has sent a proposal for comprehensive partnership on the power sector in response to Nepal’s proposal to sign a PTA. Nepal had first sent a proposal on a PTA in 2010, but in return it received separate proposals in May 2014 under the title Cooperation in Power Sector.

The proposal attracted controversy due to a provision which sought ‘100 percent Indian investment or investment through Indian joint ventures’ without mentioning whether third country investors could also invest in Nepal’s hydropower development.

Nepal is willing to sign a PTA with India that opens the door for the two countries to buy and sell energy like a commodity. Signing a PTA would assure investors in Nepal’s hydropower sector of a market next door in India.

Another former energy secretary Surya Nath Upadhyay said that building trust is essential for signing agreements on power sector development cooperation.

“There is a huge deficit of trust between the two nations. Trust should be built first by setting concrete examples,” said Upadhyay. Taking the Mahakali project ahead which has been neglected for a long time now can be one of the confidence building measures, he added.

“Apart from Mahakali, the Pancheswor project that has not moved ahead for almost two decades now should be accorded priority by the Nepali side during Modi’s visit,” said Upadhyay. He added that the proposed PTA between Nepal and India should not block Nepal’s potential to trade power in the South Asian region.

Upadhyay also said that any PTA between Nepal and India should have components like non-discriminatory access to power, open tariff, free flow of power and facilitation by the government of both the countries.

“Not having a PTA has had some effect on Nepal’s hydropower development, however, there isn’t any negative side to not having a power cooperation agreement (PCA),” said Upadhyay. “Even without a PCA too, India and Nepal are cooperating in the development of several projects, and that can continue even in the days to come.” Former water resources minister Deepak Gyawali said that Nepal should be cautious regarding agreements about the energy sector.

Former executive director of Nepal Electricity Authority (NEA) Shanta Bahadur Pun said that a PTA between the two countries should be signed after proper homework. “There won’t be any controversy if the decision is made based on the PTA draft prepared by Nepal. Necessary amendments can be made to it,” said Pun.

Source: ekantipur