This is a lifeline that emerged following recognition by Kathmandu authorities half a decade ago that a high volume power link was essential, first to import from and later to ‘evacuate’ electricity to India. The World Bank/IFC got involved, the New Delhi officials were forthcoming and the power trading company PTC India Limited stood ready to arrange a deal. The agreement was signed in 2009 when Ram Saran Mahat was last Finance Minister, with the support of the then Finance Secretary Rameshwor Khanal and Power Secretary (later minister) Shankar Prasad Koirala.

The Muzaffarpur-Dhalkebar link is like a rescue rope thrown to the Nepal economy, without which we would have to wait for the large hydropower projects being constructed on the flexible schedules we have grown used to. The first of these will be the Upper Tamakoshi project, expected to start producing in late 2017. Presently, the country struggles with a peak 1,300MW of winter demand, producing no more than 800MW even during the monsoon with hydel plants at full capacity.

Oddly, the agreement on Muzaffarpur-Dhalkebar is to take 150MW, though the line is designed to carry 1,000MW. In the highly charged hydropower discourse of Kathmandu, there are those who believe Nepal is paying high rates for imports but may end up getting low for exports when they begin. There are others opposed to export under prevailing circumstances, but not import in the short term.

Since the line to Muzaffarpur provides transmission infrastructure to export hydropower as and when Nepal has a surplus, its backers maintain that it (and others like it in future with even more kV capacity) will lead to a surge in foreign direct investment from the global independent power producers (IPPs). Sher Singh Bhat, chief of the Generation Directorate of the Nepal Electricity Authority (NEA), points to the 2,000MW worth of deals signed by IPPs since Muzzafarpur-Dhalkebar was inked. Several Indian IPPs have approached PTC India Limited with an eye on the Nepal market.

India and neighbourhood

In sharp contrast to Nepal’s shriveled energy sector, unable to keep pace even with household demand, India’s electricity production and distribution was unfettered about two decades ago. It abolished the monopoly of state and central power producers and distributors, which themselves were made more autonomous. This led to rapid growth in production, which today stands at 250,000MW, with nearly half of it generated by the private sector. Efficiency was enhanced when New Delhi permitted power trading between India’s regions, benefitting in particular hydel-rich states like Himachal Pradesh (many dams) and Orissa (the Hirakud).

Bhutan has taken advantage of the evolution of the Indian grid and its production capacity is set to rise from 4,000MW to 6,500MW by 2017. Bangladesh is buying 500MW of Indian power through open bidding and wants another 500 MW. A deal to supply 500MW to Pakistan was all set to be signed before it was nixed last year, it is said, by the Islamabad generals.

“Our market has become mature and transparent, the bidding is competitive. With the production we have in India, there is no problem supplying Nepal’s needs,” says Deepak Amitabh, Chairman and Managing Director of PTC India Limited, which negotiated the Muzzafarpur-Dhalkebar deal with NEA. The parastatal agency, which also deals in coal, moved 35,000 million units in 2013-14, and trades upwards 4,000MW every day.

In the past, the Nepali water bureaucracy was held back by poor understanding of the Indian market and ab initio suspicions of New Delhi’s intentions. Today, at least on the matter of buying and selling electricity, South Block is moving towards allowing the Indian market players to negotiate directly with NEA, as indicated by the Muzaffarpur-Dhalkebar deal.

The bilateral energy connectivity will be optimised when the two countries have a power trade treaty that formally allows their utilities to negotiate directly. Simultaneously, Nepal must unbundle its power sector and set up independent distribution and power entities to buy, sell and transfer production, to India as well

as Bangladesh. At that point, Nepal will evolve as a player in the power marketplace rather than a weak state forever seeking bilateral magnanimity.

Power from Chattisgarh

Bishal Thapa, a Kathmandu-based expert on India’s energy market, says transmission lines to supply power-starved Nepal are a good thing. However, he believes Nepal could have negotiated a lower price for the electrons that will move from Muzzafarpur to Dhalkebar through a longer-term agreement, given the electricity glut in India. Additionally, Thapa cautions that it is unlikely that the upcoming transmission line and others like it will open the spigot for export of electricity as claimed. He maintains that Nepali hydel producers will find it difficult to compete with the price offered by Indian IPPs.

While time will tell whether exports will happen, or whether Nepal will be a permanent importer of Indian electricity, there is no doubt about the criticality of the Muzzafarpur line at present. It is needed in order to reduce the social scourge that is loadshedding, and to promote employment and manufacturing, especially in the Tarai. Given the inability to develop indigenous capacity owing to the decade-long insurgency and extended political uncertainty, as we await Upper Tamakoshi, Upper Karnali, Trishuli-A and others, the only option is to import. Nepal already buys about 110MW, and another 70MW is expected through upgrading of a transmission line in Bihar that NEA itself is carrying out with consent of Indian authorities.

Supply of the 150MW via Muzzafarpur-Dhalkebar is from a coal-based thermal plant in Chattisgarh in central India. Nepal will be purchasing power from the ‘Chattisgarh Athena’ company at approximately NRs 6.5 per unit; with ‘wheeling charges’, this is approximately the same rate at which NEA buys from national producers during the dry season. This rate is more than four times cheaper than producing electricity with diesel generator sets.

“Under the circumstances, Nepal may be advised to use the full 1,000MW that the Muzzafarpur line can supply and lock in long-term supplies sourcing specific plants in India,” says Thapa. He believes that Nepal’s power planning is skewed by unrealistically low estimates of how the (suppressed) demand will pick up.

Oxygen of electricity

Sadly, there is no certainty that even the Muzzaffarpur-Dhalkebar line will be built on time. No matter the level of urgency being felt by a large population in great distress and an economy that has choked for years on end for lack of the oxygen of electricity, the inertia of the political players and institutions continues even after the invigorating elections of November 2013. For long, as far as electricity supply is concerned, the people have been victimised by what can only be described as sabotage-through-inertia.

There are altogether 400 towers to be placed on the line from Muzzafarpur, along 100km within India and 40km in the Nepal stretch. India is said to have already arranged right-of-way and foundations for the towers have been laid. On the other hand, land acquisition has yet to begin on the Nepal side and the local activism that recently halted construction on the Khimti-Dhalkebar transmission corridor rings a bell of alarm.

Inaugural of the Muzzafarpur line is set for June 15, 2015 but we can be thankful if it is ready by the winter of that year. If there is delay, it will most likely be the fault of the Nepal side, no matter the level of desperation of the people and economy.