Hurdles to power import from Nepal

Indian companies which have invested in hydel joint ventures in Nepal, with a total a capacity of over 6,000 mw, face uncertainties over exporting the bulk of the power to India due to several policy barriers that also restrict New Delhi's plans to put in place a Saarc grid and create a thriving power trading market in the region.GMR, Tata and Bhilwara groups, SN Power and state-run Satluj Jal Vidyut Nigam are working on 16 projects in partnership with either the Nepal government or private partners. These projects are in various stages of implementation and were based on the premise that power sale to India will constitute the bulk of revenues.

In a representation to power secretary P Uma Shankar, the Independent Power Producers' Association of Nepal (IPPAN) has cited the DGFT move to list electricity as a 'restricted commodity' as the biggest hurdle. This will require Indian buyers of power from projects in Nepal to seek import licence, issued for 12-18 months, which will need to be renewed every year. This creates uncertainty for developers and buyers as power projects need sale-purchase agreements for 25 years to attain financial closure.

IPPAN said lack of clarity on customs duty regime was adding to the woes of investors. The Finance Bill, 2008, slapped basic customs duty at the rate of Rs 2 per unit on power and subsequently exempted it to maintain 'nil' tariff level. Such tariffs, if restored, will render most projects unviable and won't be in line with the government's "policy intent of promoting hydro power in neighbouring countries to enhance India's energy security''. IPPAN said New Delhi also needs to clarify whether central and state regulators will have jurisdiction of tariff determination for hydro power from Nepal. The association also said developers of Nepal projects should be allowed to sell power in the Indian open market to boost trading and give consumers a choice of suppliers.

Theoretically it is estimated that Nepal has a hydel potential of over 82,000 mw out of which 42,000 mw is considered economically viable. The country, however, has only developed a capacity of 600 mw. India and Nepal have low-capacity transmission links through which 50 mw flows to areas in Nepal bordering Bihar. Talks are on to increase this quantity to 150 mw. On its part, India is looking to develop hydel facilities of 10,000 mw in a decade in Bhutan and is pushing a grid linking Saarc countries.