Nepal–India PEC agrees to raise electricity tariff by 1.5% after tough negotiations

KATHMANDU: Nepal and India have agreed to increase the electricity tariff for cross-border power purchases by 1.5 percent following intense negotiations during a meeting of the Nepal‑India Power Exchange Committee (PEC).

The decision was reached after prolonged discussions between officials from the Nepal Electricity Authority (NEA) and Indian energy authorities. The agreement also extends the duration of electricity trading under the PEC mechanism for another one year, ensuring continued cross-border electricity supply between the two countries.

NEA Managing Director Hitendra Dev Shakya confirmed that the meeting concluded with an agreement to increase the tariff by 1.5 percent for electricity imported through the PEC arrangement.

“An agreement has been minute-recorded to increase the price by one and a half percent. Electricity supplied through the PEC mechanism will provide some relief,” Shakya said. “At a time when a potential petroleum crisis is being anticipated, this arrangement could help mitigate an energy shortage.”

Electricity Import Mechanism and Supply Volume

Nepal currently imports electricity from India through multiple mechanisms, including bilateral arrangements and the Indian power exchanges. However, approval for Nepal to purchase electricity from India’s day-ahead and real-time markets is scheduled to expire on March 30, and renewal from the Indian side has not yet been granted.

Under the PEC mechanism, Nepal imports electricity mainly from the Indian states of Bihar and Uttar Pradesh.

The NEA typically imports up to 300 megawatts of electricity daily through this arrangement, although Nepal has permission to import up to 350 megawatts under the framework.

New Tariff Structure

Until now, Nepal had been paying Rs 8.10 per unit for electricity purchased through PEC. Following the new agreement, the tariff will increase by 12 paisa per unit, bringing the cost to Rs 8.22 per unit starting from April.

The revised tariff will come into effect only after formal approval from the NEA Board of Directors and the Electricity Regulatory Commission of Nepal, which oversees electricity pricing and regulatory compliance in the country.

Background of Previous Controversy

The PEC had also agreed to increase the electricity tariff by 1.5 percent last year. At that time, the NEA was led by former Managing Director Kulman Ghising.

The agreement triggered political controversy when then Energy Minister Deepak Khadka interpreted the tariff increase as an act against national interest and demanded clarification from Ghising.

After deeming the explanation unsatisfactory, the government removed Ghising from his position on March 24, 2025.

Negotiations Marked by Tensions

Sources said the latest meeting held in Pokhara witnessed intense debate over the tariff adjustment.

Shakya reportedly pushed to maintain the existing electricity price during the early phase of the meeting, partly due to the controversy surrounding last year’s tariff hike.

According to insiders, the NEA chief sought to avoid another increase that could be interpreted as validating last year’s disputed decision.

However, the Indian side remained firm on revising the tariff, leading to prolonged negotiations before both sides eventually settled on the 1.5 percent increase.

Participants in the Meeting

The Nepali delegation included officials from the Nepal Electricity Authority, along with representatives from the Ministry of Energy, Water Resources and Irrigation and the Ministry of Finance.

The Indian delegation was led by Vikrant Kumar Singh, a member of the Central Electricity Authority. Senior engineers from the authority and energy officials from Bihar and Uttar Pradesh also attended the meeting.

Regional Energy Context

The agreement comes at a time when Nepal is closely monitoring the regional energy situation amid concerns about global fuel supply disruptions and potential petroleum shortages. Policymakers view continued electricity imports from India as a key component in ensuring energy security, particularly during periods of high domestic demand or hydropower fluctuations.

The PEC framework remains one of the most important institutional mechanisms supporting cross-border electricity trade between Nepal and India, a sector that has expanded rapidly in recent years as Nepal seeks to stabilize power supply and deepen regional energy cooperation.