Hot debate is ensuing in Nepal – in the parliament and in the street – as to whether to sign or not to sign Power Trade Agreement (PTA) with India. A lot of ink is being used up by print media and significant quantum of air time by electronic media for and against signing of PTA.
Nepal had sent a draft PTA in 2010 to India, which was simply shelved and ignored while hydrocrats in Nepal were readying themselves to have it signed during recent visit of minister of external affairs of India. But India came up with an ace up her sleeve by proposing to sign an agreement on cooperation in power sector which succeeded to raise a huge storm/ruckus and even resulted in cancellation of meeting of energy secretaries of Nepal and India in Delhi, scheduled to be held on 20th July. There are those who opine that Nepal will have to live in darkness if PTA isn’t concluded while others don’t see a need for it.
Relevant facts are as follows:
• Investment Board of Nepal is preparing to sign project development agreements (PDAs) for a number of export oriented projects like Upper Karnali, Arun III, etc. Obviously being export oriented projects, these do not need PTA to export power.
• Another reason cited in the context is the potential of generating spill energy during wet/rainy season by the projects with which power purchase agreements (PPAs) have already been signed by Nepal Electricity Authority. This one is a logical reason to have PTA in place.
However, India has time and again made it amply clear that she isn’t interested in "spill energy," rather is interested to purchase power. Therefore, there is very little chance of India agreeing to purchase “flood” energy. NEA tried to sell spill energy from Kali Gandaki A project in early 2000 without much success.
• A way out to mitigate it is to explicitly stipulate in the PTA that India will purchase electricity in rainy season only.
• If India agrees to buy “spill” energy, the tariff will become a very contentious issue. As Indians too are highly patriotic, they will endeavor to purchase spill energy at very low tariff, as, they will argue that the marginal cost of generation of power during rainy season will be nominal.
However, it is clear to all that during the time Nepal spills energy, it is peak electricity consuming season in India, with rampant load shedding (even resulting in riots, arson, etc.) and, therefore, deserves “peak tariff”. But the way hydrocrats of Nepal have been negotiating and agreeing to, the chances of spill energy of Nepal fetching better tariff is less than slim.
• It is also argued that PTA is also necessary to mitigate load shedding in Nepal by importing power from India. This is a very weak logic as India herself is suffering from power scarcity and the chances of India exporting power to Nepal in significant quantum is almost non-existent which will condemn her own populace to darkness and hamper her own industrial development. There are places in UP of India where people “get” power once every 20 days for a few hours. Even current Indian PM’s constituency of Varanasi is gripped by a huge power crisis.
To conclude, in the above backdrop, proposed PTA, if signed will also gather dust like a number of agreements and treaties signed with India till date.