World Bank Supports Cross-border Energy Cooperation between India and Nepal

June 21, 2011

WASHINGTON, June 21, 2011 – The World Bank approved a US$ 99 million package for the Nepal-India Electricity Transmission and Trade Project (NIETTP) to assist efforts of the Government of Nepal to mitigate a national energy crisis.

Insufficient and costly electricity is a major constraint to the economic and human development of the country, where only 46% of the population has access to electricity. As a result, rationing of electricity is common, with some areas receiving electricity for as little as 8 hours a day during the dry winter season.

In response to the worsening electricity situation, the Government of Nepal declared a “national energy crisis” in December 2008 and approved an Electricity Crisis Management Action Plan which is currently under implementation, with support from the World Bank. The Action Plan includes development of the Dhalkebar-Muzaffarpur transmission link, a key component of the NIETTP and the first major cross-border transmission line between India and Nepal developed on a commercial basis. Upon completion, Nepal could end electricity rationing by 2015. 

The landmark, 1000 MW cross-border transmission project will provide Nepal with at least 100 MW of additional electricity imported from India to meet its power needs. It will also develop key segments of the backbone high voltage system to help expand access to electricity across Nepal.

“Having 24 hour, reliable power supply and increasing access to power throughout the country are some of the most significant development challenges facing Nepal today,” said Susan Goldmark, World Bank Country Director for Nepal. “According to a recent investment climate survey, Nepali businesses cite inadequate power as a key constraint to their growth. This project will help meet a significant part of this deficit in the quickest, economical manner. Once Nepal develops its hydropower potential and meets all of its domestic needs, this transmission infrastructure could also be used to carry surplus hydropower to India.”

The energy situation throughout the South Asia Region (SAR) is characterized by poor consumer access to electricity, high dependence on imported oil and/or petroleum products, slow development of energy sources and supply infrastructure, weak distribution and almost no intra-region energy trade.

“Cross-border energy cooperation can lower costs in each country, improve supply reliability, and help lower carbon emissions,” said Raghuveer Sharma, Project Team Leader. “This project will lead the way in providing the necessary physical infrastructure for initially bilateral and eventually multi-country electricity trade in the northeastern part of South Asia Region.”

The project is a continuation of the World Bank Group’s deepening engagement in Nepal's power sector. The World Bank Group’s assistance spans a wide spectrum: developing Nepal's energy resources and institutions to better serve Nepal's electricity needs, e.g., through micro hydro and other renewable energy, rehabilitation of larger existing power plants under the on-going Power Development Project; supporting grid extension under the Kabeli transmission project; developing small hydropower generation with private sector participation such as the proposed Kabeli ‘A’ hydropower Project; promoting renewable energy through the future Scaling up Renewable Energy Program and, finally, the linkage of  Nepal with regional markets to relieve Nepal's energy crisis and optimize the development of its vast hydropower resources.

The support to NIETTP is part of a $202 million project, which is also supported by private sector and development partners as well as the governments of Nepal and India. The Bank’s assistance package for NIETTP comprises $84 million in IDA credit and a grant of $15 million. The credit portion carries a 0.75% service charge, 10 years of grace period and a maturity of 40 years.

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