Nepal's private sector power developers have asked the government to introduce an ordinance to allow them to buy and sell electricity domestically and abroad, as the country currently lacks a law for the same.

The Ministry of Energy is reportedly prepared to allow the private sector to engage in power trading, including export of electricity, by introducing an electricity transmission directive and a working procedure, but the Ministry of Law, Justice and Parliamentary Affairs poured cold water on the plan, arguing that the existing law does not have any provision to allow the private sector to trade in electricity.

A Bill to Amend and Integrate Existing Electricity Laws remains stuck at the National Assembly since mid-July 2020.

As per Section 29 of the bill, Nepali private sector companies can also get a licence for trading electricity within and outside the country.

“After hearing the argument of the law ministry that the existing law lacks provision to allow electricity trade by private sector, we held a discussion with energy minister Pampha Phusal last week,” said Ganesh Karki, a vice-president of the Independent Power Producers’ Association of Nepal (IPPAN), a grouping of private sector electricity developers.

“During the talks, Bhusal assured us that her ministry could consider introducing an ordinance to allow the private sector to trade in power.”

According to Karki, IPPAN officer bearers have also called for an early introduction of the ordinance, given the possibility of delays in passing an electricity bill from parliament.

A number of the private sector companies are planning to enter the power trading business and a few of them have already applied at the energy ministry for permission.

Nepal Power Exchange Ltd, a Nepali private sector power trading company, and India’s Manikaran Power Ltd, had signed a memorandum of understanding (MoU) on energy trading on January 10.

Manikaran has also agreed to purchase 500MW of electricity from Nepal Power Exchange Ltd, according to Karki.

“Not only Manikaran, some more Indian companies are also in touch with us for possible deals for cross-border power trading,” he said. “There is a scope for the private sector to sell electricity in the Indian market.”

The Nepal Infrastructure Bank, the country’s only bank dedicated to financing infrastructure projects, has also proposed setting up a power trading company as its subsidiary.

Ram Krishna Khatiwada, the CEO of the bank, told the Kathmandu Post last month that his company was also discussing with Indian and Bangladeshi companies for a partnership for power trading arrangements between Nepal, India and Bangladesh.

Also, the energy ministry had been working on a directive and working procedures to facilitate for the last few months only to be told by the law ministry that existing laws do not allow private sector firms to engage in power trade. After this the energy ministry has stopped work on the directive and working procedures.

“Our understanding was that the Electricity Act-1992 has given us authority to allow the private sector to engage in trading of power. But we stopped the work after learning that directives and working procedures were not solution,” said Madhu Bhetuwal, spokesperson for the energy ministry.

Currently, only the Nepal Electricity Authority (NEA), the state-owned power utility, is engaged in power trade as per Section 20 of the Nepal Electricity Act-1984.

The power utility body sold electricity generated from the 24MW Trishuli Hydropower Project and the 15MW Devighat Hydropower Project in India’s power exchange market for over a month starting from early November last year.

Early this month, the NEA received approval from the Central Electricity Authority of India to sell an additional 325MW electricity from the Kali Gandaki Hydropower Project (144MW), Middle Marsyangdi Hydropower Project (70MW), Marsyangdi Hydropower Project (69MW) – all developed by the NEA – and Likhu 4 Hydropower Project (52.4MW), developed by the private sector.