With the revision of regulation on cross-border trade of electricity (CBTE) in India, Bhutan’s electricity market looks secured in India and beyond.
The Ministry of Power, India issued an office memorandum on December 18, in supersession of the guidelines on CBTE approved in December 2016. The Guidelines will be effective from the date of issue of this office Memorandum, according to the power ministry.
The revision was considered after Bhutan and Nepal raised some concerns on the earlier guideline that impedes cross-border power trade. The amendment comes after the Indian authorities formed a committee to review the issues last year.
In the revised guidelines, Indian authorities have repealed the earlier provision, which stated that only companies fully owned by the governments of the concerned countries or those having at least 51 per cent equity investment of Indian public or private companies could export power to the Indian market after obtaining one-time approval from the designated authority in India.
“Any entity proposing to import or export electricity may do so only after taking approval of the designated authority. Approval of the designated authority will, however, not be necessary where the import or export is taking place under the Inter-Government Agreement signed by India and a neighbouring country for specific project(s),” the new guideline states.
Due to this clause, the concession agreement for Kholongchhu project is still on hold. Since November 2015, the project has not been able to finalise the contract for the main package, which includes the dam, powerhouse and a headrace tunnel.
Kholongchhu is built on a joint venture modality between Druk Green Power Corporation (DGPC) and Satluj Jal Vidyut Nigam (SJVN), meaning that the two public sector companies will hold 50 percent equity shares each.
Dagachhu, which was commissioned in 2015, also faced problems related to market access because of the CBTE. DGPC holds 59 percent equity, 26 percent of the equity is held by India’s Tata Power Company Ltd and another 15 percent by the National Pension and Provident Fund (NPPF).
However, the new guideline states that the designated authority in India shall grant approval for export or import of electricity only after taking into account the generation capacity (as available) and the demand. This means that imports may be permitted only when the demand exceeds generation capacity and exports may be permitted in case of capacity being in excess of the domestic demand.
The revised regulation also states that cross-border trade of electricity across India will be allowed under the overall framework of bilateral agreements signed between respective countries.
While this comes as a pavestone for the 1125MW Kuri-I or Dorjilung project, supposedly a tripartite project between Bhutan, Bangladesh and India, the government will review and assess the prospects.
Foreign minister and government spokesperson Tandi Dorji said there is nothing formal as yet. However, he said that the government welcomes it, as there are opportunities to explore in tripartite cooperation and electricity market. “But we will thoroughly assess, review and decide whether we can take few projects forward,” Lyonpo Tandi Dorji said.
The Chief Executive Officer of DGPC, Dasho Chhewang Rinzin also said that the guidelines are being reviewed and has no comments as yet.
However, in case of tripartite agreement for transaction across India, the guideline stated that transmission corridor access must be obtained from central transmission utility of India. Further the transmission system in India for transmission of electricity across the territory of India shall be built after concurrence from Government of India and necessary Regulatory approvals.
For transmission systems within Indian grid, for import or export of electricity between India and the neighbouring country, the inter-connection shall be planned jointly based on the need for electricity trade in foreseeable future and sharing of information required for analysis and studies for such planning, according to the new guidelines.
On tariff, the guideline stated that import of electricity by Indian entities would be determined through a competitive bidding. There is an exception for the Inter-Governmental projects, where tariff is determined through government-to-government negotiations. In such cases, the negotiated tariff would continue until the expiry of the agreement or as may be decided by the two countries.