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The Nepal Electricity Authority and Power Grid Corporation of India have signed an agreement to develop the 400KV Butwal-Gorakhpur Cross-Border Transmission Line on the Indian side through joint investment.

Nepal will, however, develop the part of the cross-border transmission line on the Nepali side alone. Around 120km out of the Butwal-Gorakhpur Transmission Line’s 135-km length is on Indian territory. The two sides signed the agreement on Wednesday in New Delhi, India.

Kulman Ghising, managing director at the authority, said that the agreement has paved the way for the construction of a second cross-border transmission line between the two neighbours.

“Construction of this transmission line is very important for Nepal as a lot of power projects will be completed in the next few years and Nepal needs to export power to India,” he said.

Currently, the 400KV Dhalkebar-Muzaffarpur Cross-border transmission line is the only power line for power trade between the two countries. “If some problem arises in this power line such as it breaks down somewhere, we will be able to trade power through the alternative transmission line after the completion of the Butwal-Gorakhpur Transmission Line,” said Ghising.

The proposed Butwal-Gorakhpur Transmission Line will have a capacity of transporting power as much as 3,500MW, a far more capacity than the 400 kV Dhalkebar-Muzaffarpur Transmission Line Cross-border transmission line whose capacity of carrying 1,000MW, according to the authority.

The Dhalkebar-Muzaffarpur Cross-Border transmission line had come into operation early last year.

The new agreement has been reached at a time when the authority has been reporting wastage of electricity after all turbines of the 456MW Upper Tamakoshi Hydropower Project started producing electricity.

The Butwal-Gorakhpur Transmission Line can act as a suitable channel to fulfil the seasonal complementaries of demand and supply as Nepal relies heavily on run-of-the-river projects whose output peaks during the monsoon when India’s farm sector sees a surge in power demand.

And Nepal can also import energy through this line during the dry season when the plants run at less than 50 percent of their capacity.

As per the agreement, the two sides will register a company to develop the project on the Indian side.

“It may take around six-seven months for necessary preparation to start construction. We hope to start construction within this fiscal year,” said Ghising.

According to him, a detailed project report of this project has already been prepared. The project is scheduled to be completed within four years.

In October 2019, the two countries had agreed to fund a second high-capacity cross-border transmission line connecting Butwal in Nepal and Gorakhpur in India through a commercial entity with both the countries pledging equal equity in funding of the project. The two sides had agreed to build the transmission line with 20 percent of equity investment and 80 percent loan.

Ghising said that both the Nepal Electricity Authority and Power Grid Corporation of India will have an equal portion of equity, the portion of loan might vary. The project is expected to cost INR4.5 billion. The cross-border transmission line project will be connected with the proposed transmission line planned to be developed under the Millenium Challenge Corporation Nepal Compact (MCC).

Earlier, India had rejected Nepal’s proposal to develop the cross-border line under a government-to-government financing model. They later had reached a broad agreement that the portion of the transmission line passing through Indian territory would be built by a commercial entity.

The MCC, the American aid programme under which Nepal is to receive $500 million for electricity transmission and road infrastructure projects, had made the signing of an agreement between Nepal and India on building a cross-border transmission line a prerequisite for the implementation of the compact agreement.

The Energy Ministry has accorded the Butwal-Gorakhpur Transmission Line project high priority as the Electricity Transmission Project will result in efficient distribution of imported power to high energy consuming cities like Bhairahawa, Butwal, Pokhara and Narayangarh. Also, the lines can be used to evacuate energy produced in the Kali Gandaki, Marshyangdi and Trishuli corridors where there is a high concentration of power schemes.

As per a report by the National Renewable Energy Laboratory’s Strategic Energy Analysis Centre of the US, Butwal is a strategic location for cross-border energy trade between India and Nepal because of its proximity and ability to connect with India’s Uttar Pradesh state and the Northern Regional Load Despatch Centre via Gorakhpur where power demand is high during the monsoon.