Nepal PM says India has reservations over energy produced by Chinese state firms in Himalayan nation

Nepal's Prime Minister Pushpa Kamal Dahal, widely known as "Prachanda", revealed on Wednesday that India harbours reservations regarding the purchase of energy generated by Chinese contractors in the Himalayan nation. Speaking at a parliamentary committee meeting, Prachanda explained that while investment and energy production in Nepal are open to all, India expresses hesitation in acquiring energy produced by Chinese companies or contractors for long-term trade.

"India has reservations over energy produced directly by Chinese government companies. The Chinese have asked us to convey to India that it's not Chinese government-owned companies but entities selected through a global competitive bidding process," Prachanda said. 

Last week, during External Affairs Minister S Jaishankar's visit to Nepal, the two nations signed an agreement facilitating long-term power trade. The agreement was inked in the presence of Jaishankar, and Nepalese Minister for Energy, Water Resources and Irrigation Shakti Bahadur Basnet during a bilateral meeting in Kathmandu. It allows Kathmandu to export 10,000 megawatts of energy to New Delhi over 25 years, subject to renewal every 10 years. 

According to India's cross-border energy trading guidelines, electricity can only be purchased from Nepal if it is produced by Indian or Nepali companies and investments. Prachanda emphasised that the agreement with India does not specify buying energy exclusively from Indian companies, and Nepal has urged India to consider purchasing energy produced through a competitive bidding process, regardless of the origin.

Nepal has been concentrating on hydropower development to meet its energy needs and export surplus to neighboring countries. A recent study identified the potential to harness over 72,000 MW of hydropower across ten major river basins. With approximately 6,000 rivers and an annual water runoff of about 220 billion cubic meters, Nepal's water resources are substantial, according to the Asian Development Bank.

The 25-year long-term agreement between Nepal and India was initiated during Dahal's visit to India in 2023, with Prime Minister Narendra Modi announcing the goal of importing 10,000 MW of electricity from Nepal in the next decade.

In addition to power exports, there has been a notable increase in Indian investment in Nepal's energy sector. Indian companies such as SJVN Limited, NHPC Limited, and GMR are actively involved in hydropower projects in Nepal, contributing to the growth of the energy sector in the region.

Prachanda reiterated Nepal's willingness to supply energy to India, and clarified: "If energy produced by Chinese companies is obtained through a global competitive bidding process, we have asked the Indian side not to perceive it as produced by Chinese companies or the Chinese government."

With inputs from agencies