Nepal and India have signed the much-awaited Power Trade Agreement (PTA) on 21st of October in Kathmandu and paved the way for the free trade of electricity between two countries. After one and half months of the initial signature, Rajendra K Kshatri energy secretary of Nepal and his Indian counterpart Pradeep Kumar Sinha put the final ink on the ‘Agreement on Electric Power Trade, Cross-border Transmission Interconnection and Grid Connectivity’. Minister for Energy Radha Gyawali described it as "a milestone in Nepal's Hydropower Development," to the New Business Age.

 

"This agreement will throw up new vistas of cooperation between India and Nepal in the power sector," Sinha said to journalists after signing the agreement. He said that it would also provide a permanent forum for interaction between India and Nepal in the power sector. The agreement concluded four years of continuous Nepali efforts. In 2010 Nepal had forwarded the draft of agreement to India. During the visit of Indian Prime Minister Narendra Modi to Nepal in August this year, two sides had agreed to sign the agreement.

 

The PTA has guaranteed the tax-free, duty-free and quota-free market access to the Indian market for the electricity generated in Nepal. It has allowed all authorized/licensed public and private participants (power producers, traders etc.) of both countries non-discriminatory access to the cross-border interconnection(s) in the common electricity market. "Both the parties have committed to removing any distortion to the market that usually happens while imposing customs duty and other measures,” energy secretary Kshatri said. The commitment includes removing and mutually resolving issues relating to barriers, including tariff, levies, fees, taxes, duties or charges of similar effects in the cross-border exchange and trading of electricity. Article I of the agreement says, "This Agreement will enable cooperation in the power sector, including developing transmission interconnections, grid connectivity, power exchange and trading through the governmental, public and private enterprises of the two countries on mutually acceptable terms." 

 

Two countries have also agreed to form two permanent mechanisms for power sector dialogue. According to agreement a Joint Steering Committee (JSC) co-chaired by the power/energy secretaries of both countries will be formed, which will review the progress made by the Joint Working Group (JWG). The JWG, which will be headed by joint secretaries of both countries, will be responsible for planning and identification of cross-border interconnections, selection of transmission technologies, preparation of detailed project reports (DPRs), and modes of investment for timely implementation of projects, and preparation and finalization of operation and maintenance guidelines. The meetings of the JWG and the JSC will be held at least twice and once a year, respectively. 

 

The agreement has come into effect from the signing date and will remain in force for a period of twenty-five years and will be automatically renewed every ten years thereafter. 

 

Nepali private sector has welcomed the agreement. "The coverage and scope of PTA signed between Nepal and India covers all aspect in general", said Khadga Bahadur Bisht, president of Independent Power Producers Association of Nepal (IPPAN). Electricity generated in Nepal did not have a guaranteed market, prior to the signing of PTA. "PTA has guaranteed non-discriminatory access to the Indian market for energy generated in Nepal. This has ensured huge foreign investment in Nepali hydro-power sector in recent future," he added. 

 

Binod K Chaudhary, chairman emeritus of the Confederation of Nepalese Industries (CNI) while stating that the PTA should have been signed during Modi’s visit, nonetheless welcomed it. "Finally it happened, it is significant step in the development of Nepal's hydropower sector," he said.