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South Asia

Nepal’s Import Constraints To Stay Despite India's Energy Price Cap

The NEA has been buying 3,500-4,000 megawatt hours of electricity in recent days, which is almost half of what it used to buy from India’s power exchange market.

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Kathmandu: The Nepal Electricity Authority (NEA) is not expecting any ease in securing electricity from India’s power exchange market although the southern neighbour’s regulatory authorities instructed the market authority not to allow bids of more than Indian Rs 12 per unit.

On Friday, India’s Central Electricity Regulatory Commission directed Indian power exchanges to re-design the bidding software immediately in such a way that members can submit their bids in the price range of Rs 0/kWh (unit) to Rs 12/kWh (unit).

Earlier, India’s regulatory authority had capped the maximum price at Indian Rs 20 per unit. The commission said it had to take action as supply did not improve despite soaring prices of electricity.

In the present stressed scenario, where the demand at power exchanges is nearly double the supply volume, buyers are bidding the maximum price to ensure that their bids get cleared, according to the commission. This indicates a desperate buying scenario in the prevailing conditions, it further added.

“Amid continued supply shortage, there is a little chance that we will be able to get more electricity from India’s power exchange market,” said Suresh Bhattarai, spokesperson for the NEA. “Irrespective of how many bids we make, it is difficult; to rescue the required quantity of power because of reduced supply of electricity in the exchange market.”

But after the regulatory instruction, the electricity prices at the India Energy Exchange Limited (IEX) have come down drastically.

The average day-ahead market clearing price for Sunday stands at Indian Rs 4.50 per unit, according to the IEX website.

Since April last year, the NEA has been buying electricity from the IEX after the Indian government allowed Nepal to participate in bids. Nepal also sold a certain amount of electricity in the IEX for just over a month since early November last year when Nepal had surplus energy.

According to Bhattarai, the NEA has been buying 3,500-4,000 megawatt hours of electricity in recent days, which is almost half of what it used to buy from India’s power exchange market.

Nepal has a special power exchange agreement with Bihar and Uttar Pradesh states of India. Under this agreement, the two countries can buy power from each other at fixed prices as and when needed. The prices have been fixed at Indian Rs 6.18 per unit for taking power through the 132kV transmission line and Indian Rs 6.65 for buying electricity through the 33kV transmission line.

In late March, India discontinued supplying electricity in the night time – from 6 pm to 6 am the next day. The southern neighbour has stopped providing electricity at the fixed rate from Tanakpur since mid-February as well.

Bhattarai said despite uncertainty over adequate supply, the Indian authority’s instruction to cap pricing on electricity at IRs 12 would help NEA stop its financial health from deteriorating.

Earlier, the NEA said it had to pay as high as Rs 38 per unit to buy electricity from India’s exchange market. According to Bhattarai, it has to pay extra fees for various services so that the cost of electricity imported from India goes up despite the earlier cap of Indian Rs 20 per unit (Nepali Rs 32 per unit).

According to India’s Central Electricity Regulatory Commission, the high price of imported coal is leading to highly variable charges for coal-based plants. Similarly, due to a sharp rise in the global price of petroleum products, diesel-operated power plants are not able to sell in the market.

Amid reduced supply of electricity, the NEA has imposed power cuts on factories for the past several days. Industrialists of Morang-Sunsari Industrial Corridor said that the NEA cut power for 14 hours last Tuesday.

Representative organisations of the business community of Province 1 warned of job cuts if the situation continued. But Bhattarai told the Post on Saturday that domestic production has been on the rise along with increasing water levels in the rivers fed by the initial melting of snow in recent days.

“We have been able to supply well even to industrial firms now due to increased domestic production,” said Bhattarai. According to him, Nepal’s power plants have an installed capacity of around 2,200 MW but they are producing just around 850 megawatts currently. Earlier, the NEA had said production had dropped as low as 650 MW.

After a week-long load shedding in the night time, the NEA didn’t cut power supply to factories on Saturday. “There was no load-shedding in Morang-Sunsari Industrial Corridor on Saturday,” said Bhim Ghimire, province 1 president of Confederation of Nepalese Industries.

“We are not sure if we will get power 24 hours a day in the days to come.”

Industrialists want clarity on load-shedding.

Pradeep Murarka, senior vice-president at the Chamber of Industries, Morang. “We want clarity from the NEA, on whether the load-shedding will continue and if yes then we want a timetable.”

This article was first published in the Kathmandu Post.