Landmark Cross Border Transmission Project To Ease Power Shortages

July 15, 2011

KATHMANDU, July 15, 2011 – The World Bank and the Government of Nepal signed an agreement here today towards financing the implementation of the Nepal India Electricity Transmission and Trade Project (NIETTP).

The agreement was signed by Lal Shanker Ghimire, Joint Secretary and Chief of the Foreign Aid Coordination Division, Ministry of Finance and Andras Horvai, World Bank Acting Country Manager for Nepal.

“Removing infrastructure barriers to growth is among the key development challenges facing Nepal today,” said Ellen Goldstein, the World Bank Country Director for Nepal and Bangladesh. “This landmark project is one of several joint efforts that Nepal and the World Bank are making to help relieve the chronic shortage of electricity.”

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 significantly reduce load shedding, and with the potential of increased trade, end electricity rationing by 2015.

“The project will provide Nepal with at least 100 MW of additional electricity imported from India to meet its power needs,” said Goldstein. “It will also develop key segments of the backbone high voltage system to help expand access to electricity across Nepal.”

According to a recent investment climate survey, Nepali businesses cite inadequate power as a key constraint to their growth. The 1,000 MW capacity cross border transmission link 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 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, for example, 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; and promoting renewable energy through the future Scaling up Renewable Energy Program.

The assistance package is part of a $202 million project, which is also supported by the private sector and development partners, as well as the Governments of Nepal and India. The Bank’s contribution comprises $84 million in credit from the International Development Association (IDA), the concessionary lending arm of the World Bank Group and an IDA 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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