September 12: Nepal and India have signed an agreement to jointly invest in the construction of the 400kVA Butwal-Gorakhpur cross border transmission line on the Indian side. An agreement to this effect was signed between the Nepal Electricity Authority and the Power Grid Corporation of India Limited in New Delhi on September 8, Wednesday.

The agreement was signed by Kulman Ghising, managing director of NEA on behalf of Nepal and YK Dixit, managing director of Power Grid Corporation , India. This has paved the way to set up a joint venture company to build a transmission line to India.

As per the agreement, Nepal and India will each hold 50 percent share in the company.

Prabal Adhikari, director of NEA, said that an agreement has been reached to build the transmission line through a joint investment model. "It's not just an investment agreement, it is also about building the transmission line in a joint venture model," he said, adding, "Both the parties will have equal equity in this project."

The total length of the transmission line, which is considered significant to export electricity, will be of 120 kilometers. Nepal will build a 20 km transmission line itself on its side. The transmission line on the Nepal side is being constructed under the Millennium Challenge Corporation (MCC) project. The 100 km transmission line on the Indian side will be constructed jointly.

The cabinet meeting held on August 3, 2021 had allowed NEA to invest in 50 percent shares of the company to be set up to build the transmission line on the Indian side. Following the cabinet decision, the agreement was signed between the two parties. 

The estimated cost of constructing the transmission line on the India side is said to be around Rs 4.61 billion. A total of 20 percent of the investment will be chipped in by the two sides as equity and the remaining 80 percent will be financed by banks. The transmission line on the Nepal section is estimated to cost Rs 2.31 billion. 

A secretary-level meeting of energy ministries of Nepal-India held in October 2019 had finalized the construction model of the project. The construction work of the transmission line has moved forward accordingly.

Earlier, a bilateral agreement was reached to build a transmission line jointly on the Indian side.  Such agreement was signed at the meeting of Secretary and joint secretary level of the two countries. However, the process could not move ahead due to delay in getting approval of the government of Nepal.

NEA says that the process has moved forward after the government gave the green signal. As per the agreement, a joint venture company will be established in India. The company will then sign the agreement regarding the transmission service and the process of securing loan investment will be initiated.

The construction of the cross-border transmission line is expected to be completed within three and a half years.

Currently, the 400 KV Dhalkebar Muzaffarpur transmission line - the first cross border transmission line between Nepal and India - is in operation. It is said that the capacity of Butwal-Gorakhpur transmission line will be twice as much as that of Dhalkebar. Altogether 2000 MW of electricity can be transmitted through the proposed transmission line.