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Nepalese Electricity Sector: Past, Present and Future

Nepal is one of the least developed South Asian countries. It’s a landlocked country situated between two Asian giants India and China. Naturally, Nepal feels pressure and tries to maintain a balanced geopolitical relationship with India and China. Nepalese economy mostly depends on India when it comes to foreign trade.   

Recently, like many other countries in Asia, Nepal’s foreign reserves have been declining gradually. It’s alarming for the economy because Nepal is an import oriented country. In this fiscal year, its trade deficit amounted to Rs. 1720.41 billion, which exceeded their budget of Rs. 1564 billion. Government is now trying to put restrictions on importing luxury goods. But It’s important for them to import essential goods like petroleum, food and so on and for this, they need to have a good amount of Dollar reserve. 

For foreign reserves,  Nepal largely depends on tourism and remittance. And its new potential source of foreign currency income can be the hydro-power electricity. As a mountain covered country, Nepal has a great source for producing hydro-power electricity. 

For Russia-Ukraine war, the global energy crisis is increasing. It is a crisis but at the same time, it is helping Nepal to move from its dependence on petroleum towards the green and clean energy produced from hydropower. Also this crisis has created an opportunity for Nepal to export their surplus hydropower electricity to neighboring countries like India and Bangladesh. It’s interesting that a few years ago Nepal was an electricity deficit state but  now they have a significant amount of  surplus electricity to export during the monsoon. 

Already, Nepal is exporting 312 MW electricity to India daily worth Rs 75 million. But  they need to find other countries besides India for trading additional 636 MW electricity generated during peak time. It should be mentioned that   India refused to import electricity from the Tamakoshi Hydropower Project which was developed by a Chinese firm, and it has caused some concern for Nepalese government as China is becoming an important trade partner as well as source of FDI for Nepal. 

Besides India, Bangladesh is also a power hungry state neighbour where Nepal can export their excess electricity. Bangladesh already imports 1160MW electricity from India through the Baharampur-Bheramara and Tripura-Comilla cross-border power transmission link between the two countries. The Baharampur-Bheramara pipeline is able to exchange 500MW of electricity.

Now a partnership agreement was planned to be signed between Nepal and Bangladesh for trading electricity. So the countries requested the Indian Government to permit exporting of 40-50MW of electricity from Nepal to Bangladesh through the Baharampur-Bheramara power transmission link. And Bangladesh also can sell electricity to Nepal during winter when Nepal faces an electricity crisis. 

As the first power trading Indian company in  Nepal, state-owned PTC India Ltd is planning to start their project for supplying electricity to India and Bangladesh. 

Nepal suffered from a civil war during 1996-2006. The Maoists wanted to overthrow the monarchy. So, a bitter civil war happened and caused thousands of deaths. It has a serious negative impact on the economy of the country. Specially, there was a serious power shortage as the government could not focus on increasing the production of electricity. 

Conditions did not improve overnight after the end of the civil war. According to a BBC report of 2011, “Nepal imposes daily 12-hour power cuts”. And it happened during the month of January (during winter). It caused huge suffering for ordinary people and every winter season, quite a few persons died from lack of electricity. 

Electricity is mandatory for economic development of any country. If there is shortage in product, it surely hurts the overall economy of any country. The same happened for Nepal. It hurt GDP growth for many years. It also made the country unattractive in seeking FDI or foreign direct investment. Electricity is vital for agriculture and irrigation. Load shedding makes modern life come to a standstill , especially in city life. 

Loadshedding hampers office activities as well as industrial production. People in Nepal suffered from load shedding or power cuts for many years. The economy suffered badly. Political unrest is a normal matter in the country but lack of electricity makes life worse for the ordinary people.  

In fact, Nepal had its first hydropower electricity in 1911. However, for the next one hundred years, the country did not invest in this seriously despite having immense potential. The next hydropower project came in 1939. For many years, Nepal had to depend on importing electricity from its neighbor India. For almost 100 years, electricity production capacity of Nepal was insignificant compared to the huge potential it always had of hydropower. 

In the last few years, Nepalese government has become seriously committed to increasing electricity production to the level that it can become an export product for the country. The main problem is that Nepal is a victim of geopolitical reality. China and India have had a bitter relationship for many decades and Nepal is suffering because of its location. There is no easy way out of this problem. 

The civil war during 1996-2006 only made things worse. Then came the global economic recession of 2008. In fact, electricity production increased significantly only in the last 5 years. During FY 2016-17, Nepal had to import nearly 35% electricity from neighboring India. Now, Nepal is becoming capable of exporting electricity to India and Bangladesh. Bangladesh is looking forward to importing electricity from Nepal as soon as possible. The only problem is that there is no direct boundary between Nepal and Bangladesh. So, the two countries have to depend on the approval from the Indian government for carrying Nepalese electric cable through Indian soil. 

During 2006-2017, things really got very bad for the people of Nepal when it comes to access to electricity. At one stage, there was loadshedding of 14 hours a day. So, Nepal is performing well in generating and increasing electricity production now. Right now, the problem is not the production shortage but how they can sell the electricity. 

Per capita electricity consumption of Nepal is low because it is a poor country. Then neighboring India is concerned about the involvement of Chinese companies in Nepal electricity production. Bangladesh wants to import but it depends on the goodwill of the Indian government.

Nepal has surely come out of its electricity crisis. Now, the situation can only get better from here on. 


Khatun-A-Jannat Asha, Researcher, Deshi Ponno e-Commerce

Razib Ahmed, Former President, e-Commerce Association of Bangladesh (e-Cab)

Khatun-A-Jannat Asha
This is Khatun-A-Jannat Asha from Mymensingh, Bangladesh. I am entrepreneur and also a media activist. This is my personal blog website. I am an curious woman who always seek for new knowledge & love to spread it through the writing. That’s why I’ve started this blog. I’ll write here sharing about the knowledge I’ve gained in my life. And main focus of my writing is about E-commerce, Business, Education, Research, Literature, My country & its tradition.

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