Cross-border Trade In Power In South Asia

Updated: Aug 26 2002, 05:30am hrs
Politics is more in command than economics in driving cooperation in the South Asian region. The lack of any momentum whatsoever on the export of natural gas from Bangladesh to India in many ways is emblematic of the dismal possibilities of closer integration. The regions diverse topography lends itself to greater cross border power trade, but there are no prizes for guessing why the actual progress is less than the potential.

To be sure, some amount of power trading is already taking place, with the action observed mostly in the border regions of Nepal, Bhutan and India. The surplus generated by hydroelectric power stations in Nepal and Bhutan in fact coincides with the seasonal peak demand in the supply-short Indian economy. According to a recent report*, there is thus a fast emerging complementarity as far as demand and supply of energy is concerned.

Nowhere is this more evident than between India and Nepal. The latter doesnt have much of a surplus, but whenever it generates some surplus, it sells power to India. Otherwise, it imports power from India. According to the report, the capacity balance for Nepal shows a deficit of 67 MW in 2000-01 and to be followed by surpluses until shortages occur to the extent of 1.1 MW in 2003-04 and 47.1 MW in 2004-05. Clearly, there is a need to have a project ready by 2004-2005 or arrange for imports from India.

Possibilities of more bilateral power trade are also indicated by Indias growing requirements, especially in the northern region. In 1998-99, this region suffered a deficit of 2,096 MW in peak power demand and 6,240 GWH in energy requirements. By 2011-12, this deficit will go up to 61,077 MW and 350,185 GWH, respectively. Part of this gap can surely be met by supplies from western Nepal through the development of the Karnali project of 10,800 MW and Pancheswar project of 6,480 MW under the Mahakali Treaty of 1997.

Bhutan, too, sells its surplus power to the highly power-deficit regions of West Bengal, Orissa and North East. The Chukha project thus could serve as a model for power trading as it exports as much as 76 per cent of its generation to India, revenues from which constitute 11 per cent of its GDP in 1998-99. Projected revenues from on-going and projects in the pipeline might transform it into a middle income country over the next 15 years.

However, Bhutan is keen to diversify its power supplies as India is the only monopsonistic buyer at present. Presumably, the fear of becoming too dependent on the Indian market also is responsible for Bangladesh blowing hot and cold on natural gas supplies to India. But if economic efficiency grounds were the sole yardstick, the eastern neighbour should actually be trading in power with India. The report argues that the least cost short-term option is for it to import power from West Bengal at present and from Meghalaya and Arunachal Pradesh in the future to avoid the high domestic costs of electricity generation.

But politics is spoiling the party for South Asian power trade. While the economic imperatives include the need for placing the matter on sounder commercial principles and adopting suitable power trading models, such forces are not in command. The hydel power of Nepal and gas from Bangladesh have faced several such blocks sometimes driven by sheer irrationality and myopic thought processes, adds the report. Clearly, the challenge ahead is to address these political inhibitions.

*Economic Reforms and Power Sector in South Asia: Scope and Challenges for Cross Border Trade by Dr Mahendra P Lama, Professor of South Asian Ec-onomies, Rajiv Gandhi Foundation and Centre for Sou-th Asian Studies, Jawaha-rlal Nehru University, New Delhi and Dr Mohan Man Sainju, executive chairman, Institute of Integrated Development System, Kathmandu and Dr QK Ahmad, chairman, Bangladesh Unnayan Parishad, Dhaka.