ADB to facilitate bilateral power trade pacts in South Asia

The Asian Development Bank is hosting a regional meeting soon to facilitate bilateral power trade agreements and help countries in the energy-deficit South Asia region meet their burgeoning demand for power.
The meeting to be held in Bangkok will facilitate bilateral agreements, according to Yongping Zhai, director of Energy Division at the ADB’s South Asia Department.
Home to one third of the global population, South Asia is the least connected region in terms of overall intraregional trade, including power trade. “Most SAARC member-states, including Nepal, are unable to generate sufficient electricity to meet their own demands,” Zhai, who was in Kathmandu to take part in the Energy Investors’ Forum, said.
Nepal plans to ink a power trade agreement with India during Prime Minister Baburam Bhattarai’s India visit starting next week, keeping in mind the fact that it will be difficult to export power to India once the export-oriented hydropower projects like GMR’s Upper Karnali and Sutlaj’s Arun III start generating power.
According to Zhai, SAARC member-states should enter into an ‘umbrella power trade agreement’ apart from bilateral pacts to meet the energy shortfall. The pacts are likely to herald further power trade agreements, resulting in more effective use of existing energy resources in the region.
The ADB is also trying to bring co-financers in the construction of key transmission lines for inter country and intra country power trade. “The private sector is very much into generation, hence the need to invest in the construction of transmission lines,” Zhai said.Apart from new transmission lines, the ADB wants the Nepal Electicity Authority restructured. “Reorganisation of the NEA and power tariff revision are also a must. It is up to Nepal to decide how to do it,” said Priyantha Wijayatunga, senior energy specialist at the South Asia Department’s Energy Division.The government’s commitment and policy papers have impressed the experts. Now, they want the government to walk the talk. “The action is missing, though policy papers seem impressive,” Zhai added.
Michael Barrow, director of the Infrastructure Finance Division under the Private Sector Operations Department at the ADB, seconded his colleague. “The ADB is studying around half-a-dozen reservoir-based hydel projects for private sector financing,” he said, adding that the private sector companies should approach the ADB for project financing.
The Manila-based lender that, in principle, is open to aid infrastructure projects, including power, transport, water and telecom, has, after years, shown interest in financing the hydropower project directly.
“The ADB is also planning to help local banks finance small hydropower projects,” Barrow said and stressed the need for a strong financial structure.
“ADB will try its best to guarantee the reduction of political risk, bring in international banks or other private sector for co-financing, and even lend directly,” the private sector expert said, suggesting that Nepal should create an international-standard legal and regulatory structure if it wants Foreign Direct Investment (FDI).
Though Energy Minister Post Bahadur Bogati welcomed the FDI in the hydropower sector, his plan to revise the agreements with GMR and Sutlaj may discourage FDI.