Abstract: The recently executed tripartite agreement on cross-border energy trade among Nepal, India, and Bangladesh (NIB) represents a significant advancement in facilitating regional electricity commerce. This agreement lays the groundwork for considerable future energy exchanges within the subregion. As stakeholders embark on this collective journey towards shared economic growth, the energy sector stands out as a pivotal element, illuminating the pathway towards enhanced sub-regional cooperation and prosperity.
Introduction
On 3 October 2024, a significant tripartite agreement was signed among Nepal, India and Bangladesh, establishing a framework for the exchange of 40 megawatts of electricity.[i] This agreement enables Nepal to export electricity to Bangladesh through Indian transmission lines. The signatories to this historic agreement were Kulman Ghising, the executive director of the Nepal Electricity Authority (NEA); Mohammad Rezaul Karim, the chair of the Bangladesh Power Development Board (BPDB) and Renu Narang, the CEO of India’s NTPC Vidyut Vyapar Nigam.[ii] Besides, Nepal’s Minister of Energy, Water Resources and Irrigation, Deepak Khadka; Energy Minister of State, Purna Bahadur Tamang and Syeda Rizwana Hasan, Advisor for Forest, Environment, Climate Change, and Water Resources in Bangladesh, were present to observe the signing.[iii]
The trilateral agreement represents a momentous and impactful development, not only for Nepal and Bangladesh but also as a significant stride towards facilitating regional electricity trade. This agreement paves the way for substantial future energy trade within the subregion.
Background
Nepal-Bangladesh trade relations have evolved significantly since the signing of the first trade treaty in 1976. Over the years, the nations have endeavoured to foster mutually beneficial economic ties, marked by trade agreements and transit arrangements. However, despite vast potential, bilateral trade volumes have not surged as expected. Bangladesh is Nepal’s second-largest trading partner in South Asia, after India. In the past two decades, Nepal’s import volume from Bangladesh has exhibited consistent growth; however, on the export front, Nepal’s trade data with Bangladesh indicates a declining trend.[iv] Yet, amidst this backdrop, recent developments in the energy sector signal a promising avenue for deeper collaboration between the two countries. Perhaps Nepal will be able to reduce its huge trade deficit with Bangladesh to a certain extent.
Amidst the quest for trade expansion, the energy sector emerges as a beacon of cooperation between Nepal and Bangladesh. In August 2018, Nepal and Bangladesh signed a Memorandum of Understanding (MoU) on cooperation in the field of the power sector. The MoU envisioned the development of cooperation in the fields of power generation, grid connectivity, energy efficiency, renewable energy and the development of hydropower and transmission lines.[v] In this regard, as per the MoU, a Joint Standing Committee (JSC) and Joint Working Group (JWG) were formed to explore the potential in this field.[vi] During the fifth JSC meeting on energy cooperation held on 16 May 2023, discussions centred on the export of power from Nepal to Bangladesh via India at the earliest opportunity. Both countries agreed to collaborate on signing a tripartite agreement with India, facilitating the export of 40 MW of power from Nepal to Bangladesh utilising the existing transmission infrastructure in Nepal-India and Bangladesh (NIB). Consequently, the NEA submitted a formal request to India for the sale of power to Bangladesh through India’s established transmission infrastructure.[vii] Furthermore, Bangladesh and Nepal agreed to undertake efforts to create a high-level trilateral administrative mechanism with India for cooperation in power trade and the power sector and the development of cross-border transmission infrastructure.[viii]
In June 2024, Pushpa Kamal Dahal, the then Prime Minister of Nepal, visited New Delhi to engage in discussions regarding bilateral development cooperation and the possible sale of Nepal’s electricity to Bangladesh using India’s transmission infrastructure. The Nepali delegation expressed appreciation for the Indian government’s decision to facilitate the first trilateral power transactions from Nepal to Bangladesh through the Indian grid, allowing for an export of up to 40 MW of power.[ix] Further, India and Nepal affirmed their keenness to enhance subregional cooperation, particularly in the energy sector.[x]
Earlier, it was anticipated that a tripartite agreement would take place during former Bangladeshi PM Sheikh Hasina’s proposed visit to Nepal in July 2024. However, domestic issues arose in Bangladesh due to civil protests, leading to the ousting of the Hasina government and the formation of an interim government in August 2024. Despite the uncertainty, bilateral discussions between Nepal and Bangladesh, as well as Nepal and India, were held, resulting in the successful conclusion of the proposed tripartite agreement. This also reflected the Bangladeshi interim Governments’ positive stance towards sub-regionalism and India’s indispensability to it.
The signing ceremony for the tripartite deal was hailed as historic by officials from Nepal, Bangladesh, and India. Nepalese Energy Minister Khadka described the agreement as a landmark for Nepal’s energy sector, while Bangladeshi State Advisor Hasan termed it a milestone in energy cooperation in South Asia.[xi] The Indian Ambassador to Nepal, Naveen Srivastav, emphasised that the agreement will enhance power sector cooperation and encourage investment in Nepal’s hydropower sector, ultimately leading to greater energy security among the three countries.[xii]
India as a Facilitator
It is significantly important to note that Nepal-Bangladesh trade relations are not purely bilateral matters, as Nepal and Bangladesh require their tradable items to get access through the Indian territory, and hence, India becomes a major development partner for both countries. The recent energy trade agreement between two countries also includes India since it is required to get through the transmission line, going through the Indian territories to enter Bangladesh.
Nepal and India are connected through electricity transmission lines for power transactions, including the Dhalkebar (Nepal)-Muzaffarpur (Bihar, India) 400kV D/C transmission line.[xiii] In October 2014, Nepal and India entered into an agreement pertaining to electric power trade, cross-border transmission interconnection, and grid connectivity. This agreement underscores the collaboration in cross-border power exchange and trading by means of enhanced transmission interconnections and grid connectivity. Moreover, it also emphasises that the mutual benefit derived from the establishment of a unified electricity market between India and Nepal may extend to sub-regional and regional levels.[xiv]
The interconnection also extends to Bangladesh, with high-capacity interconnections between India and Bangladesh through Baharampur (West Bengal, India)-Bheramara (Bangladesh) 400kV D/C lines along with another 400kV interconnection exists between Surajmaninagar (Tripura, India) in India to Comilla in Bangladesh.[xv] This facilitates bilateral power transfer between India and Bangladesh.
The recent tripartite agreement proposes that India transmit electricity to Bangladesh through its territory. Per the agreement, the electricity will first travel from Dhalkebar to Muzaffarpur via a cross-border transmission line, and then from Baharampur to Bheramara through another transmission line.
During the annual five-month period from mid-June to mid-November, Nepal plans to export 144,000 megawatt-hours (MWh) of electricity to Bangladesh at 6.4 US cents per unit.[xvi] Per Ghising, the Executive Director of NEA, Nepal will be able to export electricity to Bangladesh within 15 days to a month as it requires approval from the Central Electricity Authority of India through its Ministry of Power, and Nepal will be applying for the same soon.[xvii]
Mutual Interest of the Countries
Nepal has been working on diversifying its trade and investing in sectors where it has a comparative advantage. The country’s hydropower sector has huge potential and attracts a significant amount of foreign investment. While Nepal used to be a net importer of electricity from India, it has now become a net exporter. With new hydropower plants coming online, Nepal is looking to connect with other countries in the region through Indian transmission lines to sell its hydroelectricity. Additionally, Nepal faces a significant trade deficit with Bangladesh and aims to address this by selling electricity to its neighbours. As a part of the SAARC Framework Agreement for Energy Cooperation (Electricity) and the MoU on BIMSTEC Grid Interconnection, Nepal has been eager to engage in a trilateral arrangement with neighbouring countries India and Bangladesh to sell electricity in the SAARC and BIMSTEC regions. The signing of this agreement presents new opportunities for Nepal to leverage its hydropower capacity, not just through export but also through seeking investment from regional partners.
Bangladesh is interested in importing power from Nepal for several reasons. Firstly, to meet the increasing demand for industrial growth. After graduating from a Least Developed Country (LDC) to a “Developing Country” status in November 2026, Bangladesh needs to sustain its developing country status, which requires sustaining its industrial sector. This sector contributes to more than 35 per cent of the total GDP.[xviii] Secondly, Bangladesh aims to diversify its power sources because it heavily relies on natural gas, which makes up about 55 per cent[xix] of its total power generation. Diversification will help reduce this reliance.
Additionally, engaging in the hydropower trade will promote the use of cleaner energy and address environmental concerns. Moreover, this trilateral energy cooperation will help strengthen Bangladesh’s economic and strategic ties with Nepal and India. Bangladeshi State Advisor Hasan emphasised that the initiative is not only about meeting immediate energy needs but also about ensuring long-term energy security in an environmentally friendly manner.”[xx]
India, as a proponent of sub-regionalism in South Asia and in line with its “neighbourhood first” policy, is a staunch advocate of exploring new avenues to enhance bilateral and multilateral relations through cooperation. Energy cooperation is among the proposed areas of collaboration, alongside water resources, trade, connectivity and infrastructure development. India has already been actively involved in bilateral engagement with Bangladesh, Bhutan, Nepal and Myanmar in the electricity trade. The efforts have facilitated the establishment of a trilateral power trade engagement, which is poised to benefit the northeastern region of India in terms of power trade. Additionally, this agreement is expected to pave the way for further expansion by connecting energy trade with BIMSTEC and the SASEC sub-region. This trilateral power transaction, leveraging India’s high-voltage transmission line, represents a paradigm shift in regional energy dynamics.
Conclusion
The trajectory of Nepal-Bangladesh trade relations embodies a tale of resilience and aspiration. From the inception of transit agreements to the dawn of energy cooperation, the nations have navigated challenges and seized opportunities to forge a path of prosperity. On the other hand, India has played a pivotal role of facilitator to the bilateral trade between Nepal and Bangladesh in general and now to energy trade in particular. As Nepal-India-Bangladesh (NIB) embark on this journey of shared growth, the energy sector emerges as a beacon of hope, illuminating the path towards a future of enhanced sub-regional cooperation and prosperity. By leveraging each other’s strengths and regional partnerships, the three nations can unlock new avenues for trade expansion and infrastructural development. With concerted efforts and strategic vision, the NIB partnership stands poised to redefine regional economic dynamics and foster sustainable growth for years to come.
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*Subodh Chandra Bharti, Research Associate, Indian Council of World Affairs, New Delhi.
Disclaimer: Views expressed are personal.
Endnotes
[i] The Kathmandu Post. “Three-nation deal signed for Nepal to trade power with Bangladesh via India.” The Kathmandu Post. October 3, 2024. https://kathmandupost.com/money/2024/10/03/nepal-india-and-bangladesh-sign-trilateral-electricity-trade-deal (Accessed October 3, 2024).
[ii] Ibid.
[iii] Ibid.
[iv] Bharti, Subodh C. “Economic Liberalisation and Shifts in Foreign Policy of Nepal.” PhD thesis, Jawaharlal Nehru University, 2023., pp. 156-157.
[v] Government of Nepal. “Memorandum of Understanding (MoU) Between the Government of Nepal and The Government of The People’s Republic of Bangladesh on Cooperation in the Field of Power Sector.” Ministry of Energy, Water Resources and Irrigation, Government of Nepal. August 10, 2024. https://moewri.gov.np/storage/listies/May2020/mou-between-nepal-and-bangladesh.pdf (Accessed October 4, 2024).
[vi] Government of Nepal. “Energy Cooperation.” Embassy of Nepal, Dhaka, Government of Nepal. 09 October, 2024. https://bd.nepalembassy.gov.np/energy-cooperation/ (Accessed October 9, 2024).
[vii] South Asia Subregional Economic Cooperation (SASEC). "Bangladesh, Nepal JSC Meeting on Energy Cooperation Discuss Fast-tracking Export of Power via India." SASEC. 16 May 2023. https://www.sasec.asia/index.php?page=news&nid=1496&url=ban-nep-jsc-2023&enews=111. (Accessed October 4, 2024).
[viii] South Asia Subregional Economic Cooperation (SASEC). "Bangladesh, Nepal JSC Meeting on Energy Cooperation Discuss Fast-tracking Export of Power via India." SASEC. 16 May 2023. https://www.sasec.asia/index.php?page=news&nid=1496&url=ban-nep-jsc-2023&enews=111. (Accessed October 4, 2024).
[ix] Government of India. “Visit of Prime Minister of Nepal Rt Hon’ble Mr. Pushpa Kamal Dahal ‘Prachanda’ to India.” Ministry of External Affairs, Government of India. June 02, 2024. https://www.mea.gov.in/press-releases.htm?dtl/36643/Visit+of+Prime+Minister+of+Nepal+Rt+Honble+Mr+Pushpa+Kamal+Dahal+Prachanda+to+India (Accessed October 2, 2024).
[x] Ibid.
[xi] The Kathmandu Post. Three-nation deal signed for Nepal to trade power with Bangladesh via India. The Kathmandu Post. October 3, 2024. https://kathmandupost.com/money/2024/10/03/nepal-india-and-bangladesh-sign-trilateral-electricity-trade-deal (Accessed October 3, 2024).
[xii] ANI. “India, Nepal, Bangladesh sign trilateral agreement to facilitate power export from Nepal to Bangladesh.” ANI News. October 03, 2024. https://www.aninews.in/news/world/asia/india-nepal-bangladesh-sign-trilateral-agreement-to-facilitate-power-export-from-nepal-to-bangladesh20241003221114/ (Accessed October 04, 2024).
[xiii] Government of India. “Interconnection with Neighbouring Countries.” Ministry of Power, Government of India. N.d. https://powermin.gov.in/en/content/interconnection-neighbouring-countries. (Accessed October 4, 2024).
[xiv] Government of Nepal. “Agreement Between the Government of Nepal and the Government of the Republic of India on Electric Power Trade, Cross-Border Transmission Interconnection And Grid Connectivity.“ Ministry of Energy, Water Resources and Irrigation, Government of Nepal. October 21, 2024. https://moewri.gov.np/storage/listies/May2020/pta-english-21-oct-2014.pdf (Accessed October 4, 2024).
[xv] Government of India. “Interconnection with Neighbouring Countries.” Ministry of Power, Government of India. N.d. https://powermin.gov.in/en/content/interconnection-neighbouring-countries. (Accessed October 4, 2024).
[xvi] The Kathmandu Post. "Three-nation deal signed for Nepal to trade power with Bangladesh via India.” The Kathmandu Post. October 3, 2024. https://kathmandupost.com/money/2024/10/03/nepal-india-and-bangladesh-sign-trilateral-electricity-trade-dealhttps://kathmandupost.com/money/2024/10/03/nepal-india-and-bangladesh-sign-trilateral-electricity-trade-deal (Accessed October 03, 2024).
[xvii] The Image Channel. 2024. "उर्जामा स्वर्णिम युग: कुलमानको काम र परिणाम...बंगलादेशलाई पनि बिजुली बेच्दै!!!" The Image Channel. October 4, 2024. https://www.youtube.com/watch?v=3t0JTCpjbeM. (Accessed October 8, 2024).
[xviii] Bangladesh Bureau of Statistics. “Gross Domestic Product (GDP) of Bangladesh 2022-23 (Final).” Government of the People’s Republic of Bangladesh. N.d. https://bbs.portal.gov.bd/sites/default/files/files/bbs.portal.gov.bd/page/057b0f3b_a9e8_4fde_b3a6_6daec3853586/GDP_2022-23_Final.pdf (Accessed October 03, 23024).
[xix] Government of Bangladesh. "Energy Scenario of Bangladesh 2021–22." Ministry of Power, Energy and Mineral Resources, Government of Bangladesh. February, 2023. www.hcu.org.bd/sites/default/files/files/hcu.portal.gov.bd/publications/da1f3395_2c8f_4608_a48c_d184d5925d45/2023-03-14-07-47-0d3be29ec0b5cfc0dc6055e8eec23e37.pdf (Accessed October 11, 2024).
[xx] The Dhaka Tribune. “Nepal, Bangladesh, India sign 40MW power agreement.” The Dhaka Tribune. October 03, 2024. https://www.dhakatribune.com/bangladesh/foreign-affairs/360698/nepal-bangladesh-india-signs-40mw-power (Accessed October 4, 2024).