Nepal and India Enhance Electricity Trade with New Agreements

New Delhi, India Jul 16, 2026 ALN: Nepal and India have reached a significant agreement to boost the volume of electricity traded between the two nations through two cross-border transmission line projects. This agreement marks a crucial development in the ongoing collaboration between the two countries, which have a long history of energy cooperation.

The energy sector in Nepal has seen considerable growth in recent years, primarily due to its vast hydropower potential. With an estimated capacity of around 83,000 MW, Nepal has the potential to become a major electricity exporter in the region. However, the country has faced challenges in harnessing this potential due to infrastructural limitations and the need for foreign investment.

During the 13th meeting of the Nepal–India Joint Steering Committee (JSC), an energy Secretary-level bilateral mechanism held in the western Nepali city of Pokhara, officials from both countries agreed that Nepal could export up to 1,650 MW of electricity to India while importing up to 1,400 MW through two 400 kV cross-border transmission lines connecting the two countries. This increase in trade capacity signifies a mutual recognition of the benefits of energy cooperation, particularly as both nations seek to meet their growing energy demands.

The two transmission lines designated for power transfer are the Dhalkebar–Muzaffarpur and Dhalkebar–Sitamarhi 400 kV cross-border transmission lines. The Dhalkebar–Muzaffarpur transmission line has been operational since 2016, while the Dhalkebar–Sitamarhi transmission line project is nearing completion, according to Nepal's Ministry of Energy, Water Resources and Irrigation. The operational Dhalkebar–Muzaffarpur line has already facilitated significant electricity flow from Nepal to India, establishing a precedent for future trade.

The SJVN Arun-3 Power Development Company, established by India's state-owned SJVN Limited, is responsible for developing the 900 MW Arun III Hydropower Project in eastern Nepal and is also constructing the Dhalkebar–Sitamarhi transmission line. This project is significant not only for its energy output but also for its role in strengthening the bilateral relationship between Nepal and India. The involvement of Indian companies in Nepal's energy sector has been a focal point of bilateral discussions, with both nations recognizing the importance of collaboration for mutual growth.

Previously, the two countries had agreed to allow Nepal to export up to 1,100 MW of electricity to India and import up to 1,000 MW through the Dhalkebar–Muzaffarpur cross-border transmission line. With the high-capacity Dhalkebar–Sitamarhi transmission line nearing completion, the two sides have now agreed to increase the amount of electricity that can be traded through both transmission lines. This strategic move is expected to enhance energy security for both countries and optimize the utilization of Nepal's hydropower resources.

The meeting was co-chaired by Sarita Dawadi, Secretary at Nepal's Ministry of Energy, Water Resources and Irrigation, and Pankaj Kumar, Secretary at India's Ministry of Power. Their leadership in these discussions underscores the importance of high-level engagement in addressing energy challenges and opportunities in the region.

A Joint Working Group (JWG) meeting at the Joint Secretary level was held prior to the JSC meeting to facilitate discussions. This preparatory meeting indicates a structured approach to bilateral negotiations, ensuring that both sides are adequately prepared to address the complexities of energy trade.

The two sides also agreed to expedite work on several new high-capacity cross-border transmission line projects. According to a press statement issued by Nepal's Energy Ministry, the meeting approved the Detailed Project Report (DPR) for the Chameliya (Nepal)–Jauljibi (India) 220 kV double-circuit transmission line, with a target to complete construction by December 2028. This project is part of a broader strategy to enhance cross-border electricity trade and improve the overall energy infrastructure in the region.

Additionally, the meeting agreed to accelerate the establishment of a joint venture company between the Nepal Electricity Authority (NEA) and Power Grid Corporation of India Limited (PGCIL) to develop the Inaruwa–New Purnea and Dododhara (New Lamki)–Bareilly 400 kV cross-border transmission line projects. The Shareholders' Agreement (SHA) and Joint Venture (JV) Agreement for these projects have already been signed by the two entities, indicating a strong commitment to collaborative energy development.

The meeting also approved the DPR for the Motihari–Nijgadh 400 kV double-circuit transmission line, which is expected to facilitate additional electricity exports from Nepal to India by 2034–35. This long-term planning reflects an understanding of the need for sustainable energy solutions that can adapt to future demands.

Furthermore, it approved the DPR for upgrading the Muzaffarpur–Dhalkebar 400 kV transmission line by replacing the existing conductor with a High Temperature Low Sag (HTLS) conductor to enhance its transfer capacity. This technical improvement will allow for more efficient electricity transmission, thereby increasing the reliability of energy supply between the two nations.

The Ministry stated that additional technical studies would be conducted before finalizing the proposed Lucknow–Kohalpur (Lamahi) 400 kV transmission line project. This careful approach to project planning aims to ensure that all potential challenges are addressed before construction begins, thereby minimizing disruptions and maximizing the effectiveness of the project.

The meeting also reached an understanding on the New Butwal–Gorakhpur 400 kV cross-border transmission line. As the Nepal section of the line is expected to be completed by August 2026, while the New Butwal 400 kV substation is scheduled for completion only by December 2027, the transmission line will temporarily operate at 220 kV until the substation is completed. This interim arrangement demonstrates a pragmatic approach to energy infrastructure development, allowing for gradual integration of new capabilities.

The Nepal section of this project is being developed with funding from the Millennium Challenge Corporation (MCC), an aid agency of the US government. This involvement highlights the international dimension of energy development in Nepal, with various stakeholders contributing to the country's energy future.

Under this interim arrangement, the transmission line will be capable of importing up to 130 MW of electricity from India and exporting up to 200 MW from Nepal. This balanced approach to electricity trade is likely to foster a more stable energy relationship between the two countries, enhancing energy security and supporting economic development.

In summary, the recent agreements between Nepal and India represent a significant step forward in the realm of energy cooperation. As both countries work to enhance their energy infrastructure and capacity, the implications of these agreements extend beyond mere electricity trade. They signify a deeper commitment to regional collaboration, economic interdependence, and sustainable energy practices, which are crucial for addressing the energy challenges faced by both nations.