India has communicated to the independent power producers of Nepal that it will not buy electricity from hydropower projects that have Chinese components. India opened its doors to purchase Nepal's power in November 2021. This is a significant milestone for Nepal since it is the first time the Himalayan country has exported hydropower. India's refusal to acquire electricity from any project with Chinese involvement demonstrates India's resolve to declare its regional dominance. 

Under the Indian Energy Exchange (IEX), Nepal exported 39 MW of power to India. During Indian Prime Minister Narendra Modi's visit to Nepal in 2014, the India-Nepal Power Trade Agreement was inked. Nepal is India's first neighbour to join in the IEX. 

The selling of energy to India fulfills a long-held Nepalese goal of exporting hydroelectricity to generate national wealth. This is a significant improvement for Nepal's energy industry, which had once imported more than half of its electricity from India at its peak demand in 2019.

Nature helps Nepal 

Nepal's ambition has always been to be Asia's energy powerhouse. On the other hand, it was in the dark for more than a decade, from 2006 to mid-2017, with blackouts lasting up to 18 hours a day. It is a small country with rugged terrain, little resources and few industries. Nature has bestowed an incredible gift on the country -- river systems. Many rivers flow from Nepal to India, including the Karnali, Mahakali, Gandaki, Koshi. This gives Nepal an effective advantage to produce electricity in a cleaner and environment-friendly way and provide surplus power in the region. 

However, Nepal’s limited economy has hampered its ability to realize this objective. India seized the opportunity and increased its investment in the area. The power produced by these installations was subsequently exported to India. After an Indian-invested plant began full-scale operation in August 2021, Nepal became a power surplus country. Nepal will be permitted to export power to Bangladesh via India at a later time to fulfill the expanding energy demands of that country. 

Nepal and India 

The selling of energy to India fulfills a long-held Nepali aim of exporting hydroelectricity for national wealth. This is a significant improvement for Nepal's energy industry, which received more than half of its electricity demand from India in 2019. Environmentalists see this as a positive step for both Nepal and India since it might help to reduce carbon emissions. India has pledged to achieve carbon neutrality by 2070. It will not be able to meet this aim unless it replaces coal, which is primarily used for electrical generation in India, with renewable energy. 

Meanwhile, the price of coal in India has risen, and the economy is regaining speed following the pandemic-related slowdown. This has raised the need for energy in India. The quantity of electricity now exported from Nepal may be minimal, but it has the potential to expand to double-digit gigawatts in the long run.

With the approval of the Investment Board Nepal (IBN) in June last year, the way was cleared for a China-Nepal joint venture to build three distinct hydropower projects on the Marsyangdi river in western Manang and Lamjung districts at the same time. This may not have gone down well with India. Several private sector power developers claim to have received communication from the Indian side at various venues of discussion indicating that the Indian side is disinterested in acquiring electricity from projects with any Chinese participation. This is not an official correspondence, but officials from the Indian embassy and the Central Electricity Board have provided indications that corroborate the assertion. 

No to China 

India is working to repair its relationship with its neighbors, especially those that have fallen prey to the Chinese financial trap. India not only wanted Nepal's exclusivity but also collaborated with Myanmar's regime to build twin-track diplomacy and invested substantially in Sri Lanka, which had been caught in China's "debt trap" for quite some time. The Sri Lankan High Commissioner to India's statement -- "Our relationship with India is our most important relationship, period" -- demonstrates that the country is warming up to India. 

Nepal will benefit from hydropower exports. However, it must tread carefully since it requires both Chinese capital and India's market. However, India has made it clear that it would not cede regional supremacy to China so readily; so Kathmandu will need to balance between the lure of Chinese capital and the Indian market. 

(The author is a Ph.D. fellow at the University of Texas, US. His area of interest is Asian foreign politics. Views are personal. He can be contacted at benedictbgeorge@gmail.com)