Nepal faces soaring electricity costs as imports from India hit record highs

KATHMANDU: In response to a surge in energy demand during the dry season, the Nepal Electricity Authority (NEA) has reportedly paid an exorbitant rate of up to Rs 16 per unit to import electricity from India.

The country’s peak domestic demand for energy currently stands at 1,860 MW, but electricity production has plummeted to as low as 1,300 MW due to a significant drop in water levels in rivers, well below the installed capacity of over 2,800 MW.

To meet the energy deficit, the NEA has been importing around 500 MW of electricity daily from India since the beginning of December.

However, officials state that the authority is compelled to pay a higher price due to India’s recent tariff rate hike on electricity supplied to Nepal, with the average rate for this season hovering around Rs 11.50 per unit.

This tariff increase has become a recurring trend, with India consistently raising the rates almost every year. In the fiscal year 2020/21, the NEA paid an average of Rs 8.26 per unit for imported electricity, which rose to Rs 9.66 per unit in the subsequent year and further increased to Rs 10.74 per unit in FY 2022/23.

In a surprising revelation, from mid-July to mid-December of the current fiscal year, the NEA exported electricity worth Rs 13.23 billion to India, with an average selling rate of just Rs 8.96 per unit.

Despite occasional claims by the NEA regarding electricity exports, the nation finds itself at a disadvantage in net electricity trade with India. In the previous fiscal year, the NEA imported electricity worth Rs 19.44 billion against exports of Rs 10.45 billion, and projections indicate electricity imports may exceed Rs 20 billion this year.

In a contrasting development, the NEA reported profits totaling Rs 15.36 billion in the first half of the current fiscal year, marking a significant increase of Rs 4.44 billion compared to the same period in the previous fiscal year.

Kulman Ghising, the managing director of the NEA, attributed the enhanced profitability to successful measures in controlling electricity leakage, minimizing internal costs, increased domestic consumption, and a rise in exports to India.