Nepal’s recent milestone—exporting 40 MW of electricity to Bangladesh via the Indian grid—is a bold step toward redefining regional energy cooperation.
This historic trilateral agreement, signed on October 3, 2024, between Nepal, India, and Bangladesh, is more than just a trade deal; it is a blueprint for economic transformation, regional integration, and sustainable development.
This five-year agreement, focused on exporting electricity during Nepal’s rainy season, promises significant economic benefits.
At a rate of 6.4 cents per unit, Nepal stands to earn $9.2 million annually. These revenues could be reinvested in hydropower infrastructure, a sector with untapped potential of over 40,000 MW. Currently, Nepal utilizes less than 4% of this capacity, with only 1,400 MW installed.
Strategic investment in this sector has transformative potential. Even a 20% utilization of Nepal’s hydropower capacity could increase GDP by 87% by 2030, double real economic output, and boost household consumption by 66%.
By addressing challenges head-on and leveraging regional partnerships, Nepal can establish itself as a sustainable energy leader.
Beyond the economic benefits, this agreement strengthens Nepal’s energy security, reducing its dependence on costly imports.
Nepal’s electricity exports have historically been dominated by India, with $70 million worth of electricity sold in the fiscal year 2022/23.
While this partnership remains vital, the recent deal with Bangladesh marks a significant pivot in Nepal’s trade strategy.
By entering the Bangladeshi market, Nepal diversifies its energy exports, reducing reliance on a single buyer.
This diversification not only mitigates market risks but also fosters resilience in the face of fluctuating regional energy demands.
The trilateral energy agreement highlights the power of collaboration in addressing shared challenges. By facilitating energy trade between Nepal and Bangladesh, India plays a critical intermediary role, setting a precedent for future regional cooperation.
Such initiatives have the potential to transform South Asia into a cohesive energy hub, driving mutual economic growth and ensuring stability in an increasingly interconnected world.
For Nepal, this agreement is a testament to its ability to navigate complex regional dynamics, positioning itself as a leader in South Asia’s energy landscape.
Despite the promise, challenges remain. Political instability, technical barriers, environmental concerns, and market competition require proactive strategies.
Nepal must strengthen diplomatic ties with India and Bangladesh to ensure uninterrupted trade, upgrade its technical infrastructure to regional standards, and adopt environmentally sustainable practices to address public concerns.
The Nepal Electricity Regulatory Commission must also play a pivotal role in crafting policies that promote transparency, harmonized regulations, and regional trust.
Nepal’s foray into power trade with Bangladesh, facilitated by India, is a landmark achievement that could reshape South Asia’s energy dynamics.
By addressing challenges head-on and leveraging regional partnerships, Nepal can establish itself as a sustainable energy leader.
This journey not only promises economic prosperity but also cements Nepal’s role as a pivotal player in fostering cooperation and growth across the region.
(Shirish A. Adhikari is a seasoned development practitioner with over two decades of experience in the fields of water, sanitation, and hygiene, climate change, and resilient infrastructure.)
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