Indian policy discourages non-Indian hydropower investors

KATHMANDU, Nov 8: India has brought cross border electricity trading policy to facilitate energy trading with neighboring countries. 

But the policy says that import permission will be issued only to Indian entities, companies owned or funded by the Government of India, Indian Public Sector Units and private companies having at least 50 percent Indian entity ownership.

The 'Guidelines on Cross Border Trade of Electricity' issued by the Indian Ministry of Power on Monday envisages setting up an authority to regulate all the transmission and import export issues of electricity trading.

Clause 5.2.1 (b) of the guidelines says that Indian entities will import electricity from the projects in which Indian entities have 100 percent equity, which is owned or controlled by the Government of India, or companies of neighboring countries.

This means, only Nepal Electricity Authority (NEA) can do power trading with India. Any other entity, partially owned by the government or any other private or public limited company, needs have to case by case approval to export electricity.

Clause 5.2.2 of the guideline reads: "Any other participating entity shall be eligible to participate in cross border trade of electricity after obtaining approval of the designated authority on case to case basis."

This means any other trading parties or projects financed or developed by foreign direct investment other than India have been put in 'case to case' category.  This means a controlled access to the Nepal's private sector as well as foreign investors. Energy experts, lawyers and officials of Independent Power Producers' Association, Nepal (IPPAN) have said that the new Indian policy will not create a level playing field for Nepal's private sector investors and non-Indian investors.

The control, they say, is to discourage private sector and foreign direct investment from countries other than India.

India has argued that the guideline has been prepared to implement the SAARC Framework Agreement for Energy Cooperation signed during 18th SAARC Summit held in Kathmandu in 2014.

This policy is directly for setting environment for importing energy generated by three hydropower projects -- Aurn III, Upper Karnali and Upper Marshyangdi-2-- being developed by Indian government undertaking or Indian investors.

Energy expert Surya Nath Upadhyaya said it will directly impact energy produced by West Seti Hydropower project which is being developed with Chinese investment. "India may deny approval for export of energy generated by the project”," explained Upadhyaya.

Similarly, Kumar Pandey, general secretary of IPPAN, said that the policy breaches the free access provision in the Power Trade Agreement (PTA) that Nepal and India have signed.
Similarly, Advocate Semant Dahal said that the case to case approval provision will be cumbersome for third country investors.

Investment Board Nepal (IBN) CEO Maha Prasad Adhikari said that the policy will facilitate GMR and Satluj Jal Vidyut Nigam Limited (SJVNL) who are preparing to make financial closure of Upper Karnali and Aurn III, respectively. Both the projects have capacity of 900 MW each.
Adhikari also said Nepal can propose for amendment in the policy to create level playing field for all investors.

Nepal needs to import electricity from India to meet its energy demand for at least few years. But the policy does not have clear provision on such issues.

India will export energy produced from coal based thermal power projects other than public sector undertakings to its neighboring countries but only in the condition the energy is surplus capacity and also certified by the Designated Authority, according to clause 5.2.4 of the guidelines.

Source: Repulica