The Supreme Court has dismissed a petition challenging the government's 25-year power trade agreement with India. A bench, comprising Chief Justice Prakash Kumar Singh Raut and Justices Sapana Malla Pradhan and Mahesh Sharma Poudel, ruled to reject the petition, which sought to annul the long-term agreement. The court has also issued several directive orders, details of which are yet to be disclosed.
The ruling has raised hopes among officials that Nepal’s plan to export 10,000 megawatts of electricity to India over the next decade will soon take shape.
Former Chief Commissioner of the Commission for the Investigation of Abuse of Authority, Suryanath Upadhyay, along with others, had filed the petition, arguing that the agreement undermined Nepal's sovereignty. Upadhyay claimed the deal would allow India to exploit Nepal's water resources without tangible benefits to Nepal and insisted that such agreements should be ratified by parliament due to the involvement of natural water resources.
The Supreme Court held a hearing on 29th August and announced its decision on Tuesday, dismissing the petition and issuing directive orders. On 3rd January 2024, energy secretaries from Nepal and India had signed the long-term power trade agreement, specifying that India would import 10,000 megawatts of electricity from Nepal within ten years.
Dinesh Kumar Ghimire, former secretary of the Ministry of Energy, Water Resources, and Irrigation, told New Business Age that the Supreme Court’s decision, which deemed the petition unnecessary, has now enabled the government to move forward with its plan to export electricity to India over the next decade.
Ghimire emphasised that the ruling further guarantees the market for Nepalese electricity. He noted that preparations for the agreement had commenced during his tenure as Energy Secretary.
"The verdict has also eased investor concerns about potential risks in electricity production due to market uncertainties. By upholding the agreement, the Supreme Court has sent a positive message, encouraging both Indian and international investors to invest more in Nepal’s hydropower sector," he said.
The government aims to generate 28,500 megawatts of electricity by 2035, with plans to export 15,000 megawatts to international markets.
Achieving this ambitious target will require policy and legislative amendments to support energy production and greater involvement of the private sector. The Energy Development Roadmap and Action Plan, 2024, estimates a total investment of Rs 6.217 trillion (USD 46.5 billion) will be necessary to achieve an installed capacity of 28,500 megawatts by 2035.
Funding is expected to come from various sources, including USD 6 billion from the Government of Nepal, USD 10 billion from domestic banks and financial institutions, USD 8 billion from the Nepal Electricity Authority, and USD 2 billion from climate funds. Additionally, USD 12 billion is projected to be raised from non-resident Nepalis and migrant workers, with a further USD 8.5 billion from foreign investments, grants, and loans. While the Nepal Electricity Authority’s contribution is secured, further efforts will be needed to arrange the remaining investment.
Chiranjivi Chataut, joint secretary at the Ministry of Energy, stated that the court’s decision has reassured the market for Nepalese electricity. He expressed optimism that the ruling would bolster investor confidence and energise the government’s goal of generating 28,500 megawatts by 2035. With the dismissal of the petition, Chataut noted that the path for long-term power trade between Nepal and India is now clear.
Ganesh Karki, president of the Independent Power Producers' Association of Nepal (IPPAN), pointed out that the petition had previously created uncertainty around the agreement, causing apprehension among investors. He believes that the Supreme Court's dismissal will restore confidence in long-term power trade with India and other nations, inspiring greater enthusiasm among private sector investors. Karki emphasised that the petition was misguided, arguing that the agreement concerns the sale of generated electricity, not the rivers themselves.
