March 26: India’s hesitation to renew the agreement to allow Nepal to purchase electricity from its electricity trading market (Indian Energy Exchange) has heightened the risk of load shedding in Nepal from next week.

According to the Nepal Electricity Authority (NEA), the contract, which has to be renewed every year, is expiring on March 31. Officials of the NEA say that even though Nepal has been urging India for renewal of the contract since the last three months, the concerned bodies of India have not shown any interest for renewal.

"Indian officials have hinted verbally that the contract cannot be renewed under the pretext of the upcoming Lok Sabha elections in India," said a high-ranking source at the NEA on condition of anonymity.

According to the official, it will be challenging for the NEA to manage electricity for the next one and a half months as Nepal's domestic electricity production will not increase until mid-May.

"India had not delayed the renewal of contract in the past," said the source. India gave the permission to Nepal to import electricity from the Indian Energy Exchange for the first time in March 2021.

According to the agreement, Nepal can import electricity through Dhalkebar-Muzaffarpur International Transmission Line and Mahendranagar-Tanakpur International Transmission Line.

Officials of the NEA said that although India had been renewing the contract without any issues in the past, this year it has indicated that it cannot be renewed on the pretext of elections. In India, the Lok Sabha elections are being held in different stages for 6 weeks starting from April 17.

"There is a state of confusion due to non-renewal of the agreement," Chandan Kumar Ghosh, spokesperson for the NEA, told New Business Age, "But we are hopeful, India will renew the agreement because providing electricity to Nepal will not affect the availability of electricity in India.”

According to him, if the contract is not renewed, there will be a situation where electricity supply to the households and industries will have to be halted.

According to the NEA, it imports about 600 MW of electricity from India in winter. This is about one third of the demand. According to the authority, the peak hour demand has now reached 1,885 MW.

"If one-third of the demand of electricity is not available, there will be a situation of load shedding," said Ghosh. In such a situation, he indicated that industrial customers may experience power cuts more than household consumers. When there is a shortage of electricity, the authority gives priority to domestic customers.

Although Nepal sells surplus electricity to India during the rainy season, it has to import electricity from India in the winter to meet the domestic demand. Most of the hydropower projects in Nepal are run-of-the-river type. Such projects produce only one-third of their capacity in winter.

Although India has indicated that it will not renew the agreement due the Lok Sabha elections, it is speculated that India’s reluctance to renew the agreement may be the result of New Delhi's dissatisfaction with the latest change in the power equation of Nepal. The Indian media and analysts have been saying that the coalition government of the CPN (UML) and CPN (Maoist Center) was instigated by China. Prime Minister Pushpa Kamal Dahal broke the alliance with the Nepali Congress on March 7 and formed a new alliance with the UML and other fringe parties.