Nepal is preparing to open cross-border electricity trade to private companies, but India’s existing cross-border electricity trade guidelines currently pose a significant hurdle, limiting immediate export opportunities for Nepali private developers.
While the Nepal government is keen to end the monopoly of the Nepal Electricity Authority (NEA), Nepal’s state-owned power utility responsible for generation, transmission, and distribution, India’s policy framework has historically recognized only the NEA as an official trading entity. This situation creates uncertainty for Nepali private energy developers seeking to export electricity.
The Electricity Regulatory Commission, Nepal’s electricity regulatory body, has recently taken steps to facilitate private sector involvement. On October 1, 2026, it determined new transmission fees for private sector open access to the national grid for the fiscal year 2083/84 (starting mid-July 2026). For long-term and medium-term open access, the fee is set at Rs 412,755 per megawatt per month, while short-term open access will cost 57 paisa per kilowatt-hour. Minister of Energy, Water Resources and Irrigation Birajbhakta Shrestha stated on the same day that this decision marks a starting point for building an energy-based economy in Nepal and will create a secure environment for both citizens and the private sector to invest confidently.
Growing energy trade and infrastructure
Nepal’s energy trade with its neighbors has been expanding. A tripartite agreement for 40 megawatts (MW) of electricity trade between Nepal, India, and Bangladesh was signed on October 3, 2024, paving the way for Nepal to sell power to a third country. Furthermore, India approved the export of up to 654 MW of electricity to Nepal for 18 hours daily from September 13, 2026, to December 31, 2026, via the Muzaffarpur-Dhalkebar 400 kV and Tanakpur-Mahendranagar 132 kV lines. On July 15, 2026, Nepal and India also agreed to increase cross-border transmission line capacity, reaching 1530 MW for import and 1850 MW for export.
The Nepal Electricity Authority (NEA) reported significant growth in electricity exports. In the fiscal year 2083 (ending mid-July 2026), NEA earned Rs 29.32 billion from electricity exports to India and Bangladesh, a 679.96% increase from the previous fiscal year. After deducting import costs, the net saving from electricity trade was Rs 18.76 billion. As of August 17, 2026, 97.6% of Nepal’s population, approximately 5.92 million customers, has access to the national grid, with per capita electricity consumption reaching about 465 kilowatt-hours.
Policy background and future steps
The push for private sector involvement stems from Nepal’s increasing electricity generation, which often leads to surplus power during the monsoon season. A committee formed by the Ministry of Energy, Water Resources and Irrigation on approximately July 10, 2025, under the coordination of former Energy Secretary Dinesh Kumar Ghimire, had recommended private sector participation in electricity trade. India had also revised its cross-border electricity trade guidelines on December 23, 2018, allowing for the purchase of electricity from neighboring countries and the use of Indian transmission lines for trade with other nations like Bangladesh.
Key agreements underpin this trade, including an initial Power Trade Agreement (PTA) signed between Nepal and India on September 4, 2014. During then-Prime Minister Pushpa Kamal Dahal ‘Prachanda’s visit to India on June 2, 2023, an initial long-term power trade agreement was reached, with India announcing its intention to purchase 10,000 MW of electricity from Nepal over 10 years. This was solidified on January 5, 2024, with the signing of a medium and long-term power trade agreement during Indian Foreign Minister Dr. S. Jaishankar’s visit, ensuring India’s commitment to purchase a minimum of 10,000 MW over the next decade.
Looking ahead, the volume of electricity exported from India to Nepal will be reviewed in December 2026. The Nepal government is also advancing the development of a new Electricity Act to formally integrate the private sector into electricity trade. However, the exact timeline for the enactment and full implementation of this new act remains uncertain. The effectiveness of the new transmission fees set by the Electricity Regulatory Commission in facilitating private sector cross-border trade is also yet to be fully seen, given India’s existing policy barriers.
