Nepal, India and Bangladesh Energy Cooperation

Syllabus: GS2/IR

Context

• Nepal, India and Bangladesh have signed a tripartite agreement to facilitate cross-border electricity trade.

About the Agreement

• Nepal will export its surplus electricity to Bangladesh via India from June 15 to November 15 every year.
  • In the first phase, Nepal will export 40 MW of hydroelectricity to Bangladesh via Indian territory.
  • The rate per unit of electricity has been fixed at 6.4 cents. 
  • Electricity will be exported to Bangladesh via the Dhalkebar-Muzaffarpur 400 KV transmission line, with the metering point in Muzaffarpur.
• From the export of electricity, Nepal will make an annual income of around USD 9.2 million.

Energy Requirements of India

• India’s energy imports more than doubled to 40 percent of total energy requirements in 2022 from 18 percent in 2002.
  • In the same period, the country diversified its energy partners from 14 to 32. 
• These energy supplies and diversifications are essential to India’s overall economic security.
  • As the country will require more and more energy supplies to reinforce its economy, which is growing at an annual rate of approximately 8 percent.

India’s Energy Cooperation in Neighbourhood

• India is building green energy infrastructure (hydel power plants and solar parks) in Bangladesh, Bhutan, Nepal and Sri Lanka.
  • India is connecting these countries’ national energy apparatus to India for exporting excess energy generated in these nations.
• India loaned, invested, or extended Lines of Credit worth US$ 7.15 billion between 2005 and 2023 to further collaboration with its neighbours.
  • Development assistance ranges across cross-border transmission lines, hydel power plants, oil and gas pipelines, and undersea lines for grid integration. 
• Resultantly, electricity trade among the aforementioned countries has grown from 2 billion units to 8 billion units between 2016 and 2023. 
• Energy Cooperation with Nepal: It culminated in the 25-year long-term power purchase partnership agreement between the two countries, wherein India will annually buy 10,000 MW of hydel energy from Nepal by 2030.
  • Nepal, currently, has over a hundred hydel power plants and another one hundred and fifty in the pipeline. 
  • This massive and rapid hydel power capacity development will lead to a surplus that energy-needing neighbouring countries—India and Bangladesh—can utilise.
• India-Bhutan: In FY22, India imported 1500MW of electricity worth US$ 83 million from Bhutan. These imports comprised 70 percent of Bhutan’s hydel power generation capacity. 
  • Bhutan is currently also coordinating with multilateral development banks and India, to increase its installed hydel power capacity to cater India, Bangladesh and Myanmar.
• India-Bangladesh: It involves importing through the India Bangladesh Friendship Pipeline (IBFP) and the newly developed electricity transmission network.
  • India is also endeavouring to link Bhutan and Nepal with Bangladesh through Indian territory for greater energy connectivity across South Asia.

Significance

• Connectivity: India’s cross-border collaboration for energy infrastructure development is pivotal for connecting the geographies of India, Bhutan, Bangladesh and Nepal. 
  • Bangladesh and India are energy-deficient countries, which heavily rely on conventional energy sources in their energy production matrix. 
  • Bhutan and Nepal produce an energy surplus annually.
• Countering Chinese Influence: India wants to counter China’s BRI through increased development aid in the neighbouring countries because of their geopolitical and geostrategic relevance to India’s territorial integrity.
  • Furthering energy cooperation is a step towards regional connectivity and economic integration, something that can act as a hedge against Chinese influence in the region. 

Conclusion 

• India’s energy cooperation with its South Asian neighbours is a cornerstone of its foreign policy and energy security. 
• By investing in regional energy infrastructure and fostering interdependence, India aims to underpin economic growth, counterbalance China’s influence, and enhance its global standing. 
• While challenges like geopolitical tensions and competing interests persist, the mutual benefits of energy collaboration are clear. 
• As India continues its rise on the world stage, its energy diplomacy is set to play an increasingly pivotal role in shaping the region’s future.

Source: IE