Prime Minister Narendra Modi’s visit to Nepal received unusually complimentary coverage on two successive days, in the New York Times , which rarely, if ever, is complimentary of India’s relations with its South Asian neighbours.

Apart from the announcement of additional economic assistance of $ 1 billion, Modi’s visit also resulted in progress in a number of issues, ranging from border demarcation, to review of the contentious India-Nepal Treaty.

Hydel projects in Nepal

But what can really change the dynamics of the India-Nepal relationship is mutually beneficial utilisation of the 83,000 MW potential of Nepal, for hydro-electric power. Despite its vast potential, Nepal actually imports electricity from India.

An understanding was reached during the visit of Sushma Swaraj to expedite the construction of transmission lines so that Nepal could import additional power from India. The World Bank is also assisting Nepal to enhance trans-border transmission capacities by 1,000 MW. Nepal will be importing and not exporting power significantly to India in the near future.

The expected signing of a power trading agreement during Modi’s visit did not materialise because of Nepalese objections to what was quite evidently not a well worded Indian draft.

The agreement is however, expected to be finalised shortly. Work on the 5,600 MW Pancheshwar multipurpose project could commence within the next year. One encouraging development has been action by Nepal to issue 28 survey licences to private Indian power companies for hydropower, projects amounting to 8,249 MW.

Some of these surveys have been completed, but much work needs to be done for finalising power purchase agreements and financial closure. The issue of the duration of these projects also needs to be mutually agreed upon.

But progress appears to have been made for finalising details in the 900 MW Upper Karnali project, being undertaken by GMR. A word of caution is called for. Energy diplomacy with Nepal will have to be conducted sensitively, with patience and forbearance, given the country’s current constitutional impasse.

East is best

Energy cooperation seems to be increasing significantly with all India’s eastern neighbours. The experience of India’s cooperation with Bhutan has been radically different from what has emerged in its relations with Nepal. Bilateral cooperation was initiated with the commissioning of a 60 MW hydro-electric project in April 2006.

The first of six hydro-electric projects of 170 MW, the Tala Project, was commissioned in July 2006. Ten hydro-electric projects were agreed for implementation in 2009. Three of these projects are under construction. Project reports for four others have been finalised and are under examination by the two governments. The project reports for the other three projects are expected to be finalised soon. India and Bhutan appear well set to achieve the target of 10,000 MW by 2020.

India commenced supply of 250 MW of power to Bangladesh last year, after the Government-run Bangladesh Power Development Board and a subsidiary of India's National Thermal Power Corporation (NTPC), signed a deal Feb 28, 2012. This followed an agreement signed during Bangladesh Prime Minister Sheikh Hasina’s visit to New Delhi, in January 2010.

India and Bangladesh are reported to have tentatively agreed to connect their distribution networks for the transfer of 6,000 MW of hydroelectric power from Assam to north-western Bihar, via Dinajpur in Bangladesh. The network could ultimately connect two other SAARC members– Nepal and Bhutan– opening up hydroelectric power generation across the region. There is huge hydropower potential in India’s northeast, for such projects. Arunachal Pradesh alone has the potential to produce 50,000 MW.

Neighbouring Myanmar, with a hydroelectric potential of 40,000 MW, is ready to cooperate with both China and India in projects that meet its environmental concerns. The NTPC and the Ceylon Electricity Board (CEB) signed an agreement for setting up a 500 MW coal fired power plant, to be commissioned in 2016, in Sri Lanka’s Northern Province.

The two countries are also studying options for a High Voltage DC Grid, linking either Madura or Tuticorin in Tamil Nadu to Anuradhapura or Puttalam.

Western complications

The prospects for energy cooperation across our western borders are bleak. Though agreement has been reached on the “TAPI Pipeline” to bring gas from Turkmenistan to India through Afghanistan and Pakistan, it is unlikely that the security of this pipeline can be guaranteed for years.

China has, in the meantime, commenced negotiations for a Turkmenistan-Afghanistan-China gas pipeline, which traverses through relatively terrorism free areas. Faced with pressure from the Saudis and Americans, the Nawaz Sharif Government has, in the meantime, reneged on an agreement signed by President Zardari for an Iran-Pakistan pipeline. Iran has threatened punitive legal action against Pakistan.

The Nawaz Sharif Government has backed off from proposals for energy cooperation with India under pressure from the army. India should now examine the prospects of obtaining Iranian natural gas not through Pakistan, but directly through an undersea pipeline.

Such a pipeline is estimated to cost $ 4-5 billion and could carry 31 million cubic metres of gas a day. But, actual work on the pipeline can commence only after current international banking sanctions on Iran are eased, or ended. In these circumstances, we should realize that the East offers the best opportunity for regional energy cooperation.

The writer is a former High Commissioner to Pakistan