Nepal and Bangladesh on Friday signed a cooperation agreement in the energy sector which paves the way for the export of surplus electricity that Nepal is expected to produce within a few years.

The memorandum of understanding (MoU) signed by Minister for Energy, Water Resources and Irrigation Barsha Man Pun and Bangladeshi State Minister of Power Nasrul Hamid aims to explore the possibilities of initiating electricity trade between the two countries.

In a bid to make power trade happen, the two countries have decided to work together to establish an appropriate power grid connectivity at the regional level. They have also agreed to form a joint task force co-chaired by the joint secretaries of their energy ministries to achieve energy sector cooperation.

Likewise, they have agreed to set up a joint directive committee chaired by their respective energy secretaries to review the progress of the joint task force. As per the MoU, the two mechanisms will meet annually.

The pact signed with Bangladesh, according to energy sector experts, will be beneficial to Nepal if both countries succeed in getting India on board as they have to use Indian territory to conduct electricity trade.

“Bangladesh is an energy hungry nation, and the price of electricity in Bangladesh is good compared to Nepal and India. This will make a large number of hydropower projects in Nepal financially viable,” said Khadga Bahadur Bisht, former president of the Independent Power Producers Association, an umbrella organization of the country’s private hydropower producers. “As Nepal and Bangladesh have to use the Indian power grid to transmit electricity, India’s consent is necessary make it happen.”

Bangladesh has repeatedly shown interest in importing power from Nepal via India, and has raised the issue at the meetings of the sub-regional BBIN (Bhutan, Bangladesh, India and Nepal) Initiative which was signed by the four countries to facilitate regional trade and business.

Bangladesh has already signed a memorandum of understanding with India’s NTPC Vidyut Vyapar Nigam (NVVN) to import electricity generated by the Upper Karnali Hydropower Project being developed in Nepal with Indian investment. As per the understanding, it will import 300-500 MW of energy from the project.

The MoU also envisions exploring the possibility to tapping foreign direct investment from Bangladesh for the development of hydropower projects in Nepal. Bangladesh has been showing interest in investing in hydropower projects in Nepal for the last couple of years.

Bangladesh first expressed interest in putting money in hydropower during the ninth South Asia Economic Summit it hosted in Dhaka last October. The then commerce minister Romi Gauchan Thakali and his Bangladeshi counterpart Tofail Ahmed signed an agreement on the sidelines of the event to build two hydroelectric plants capable of generating over 1,600 MW of electricity in Nepal.

The proposed projects are the 1,110 MW Sunkoshi II and 536 MW Sunkoshi III on the Sunkoshi River in central Nepal. Both countries have agreed to develop the projects under the BBIN Initiative. As per the agreement, the energy produced by the Sunkoshi projects will be evacuated to Bangladesh via India through the BBIN economic corridor. However, there has been no headway on this front.