16 June 2026, NIICE Commentary 12560
Arman Sidhu
Nepal began its monsoon-season electricity export to Bangladesh on 15 June 2026 at 40 megawatts (MW). The volume agreed in principle at a Joint Steering Committee (JSC) meeting in Dhaka the previous November had been 60MW. The missing 20MW did not turn on any shortage of water or demand. Nepal had the water, and Bangladesh had the demand. The shortfall reflected a single administrative decision: India’s Central Electricity Authority (CEA) declined to approve the increment, citing capacity limits on the transmission system that carries the power across Indian territory.
The volume is small, which is what makes the episode instructive. A 20MW block is marginal within a regional grid, and the fact that it could be held up at all locates the authority over cross-border power in South Asia with some precision. According to the Kathmandu Post, the Nepal Electricity Authority (NEA) had formally requested India’s NTPC Vidyut Vyapar Nigam (NVVN) to facilitate the additional supply, and NVVN responded that the 1,000MW India–Bangladesh line could not accommodate it.
Geography as Constraint
Geography sets the terms of the arrangement. Nepal and Bangladesh do not share a border. At their closest they are separated by roughly 22 kilometres of Indian territory at the Siliguri Corridor, the strip known as the ‘Chicken’s Neck’. Every unit of electricity Nepal sells to Bangladesh must therefore cross Indian soil, though not through that corridor: the power flows first into the Indian grid over the Dhalkebar–Muzaffarpur 400kV line in Bihar and then into Bangladesh over the Baharampur–Bheramara 400kV line in West Bengal. The power is drawn from the Trishuli and Chilime run-of-river projects and priced at 6.40 US cents per unit under a five-year tripartite agreement signed in October 2024. The first delivery, lasting 12 hours, crossed the border on 15 November 2024.
Conduit and Gatekeeper
Because both the physical conduit and the regulatory approval are Indian, the arrangement that participants describe as trilateral operates, in practice, as a bilateral trade between Nepal and Bangladesh that India administers. New Delhi can enable the flow, restrict it, or halt it at the level of a single 20MW block. The June episode demonstrates the point at the smallest available scale. Tharka Bahadur Thapa, director of the NEA’s electricity trade department, told the Kathmandu Post that after Nepal initiated the request through NVVN at India’s CEA, “the response was that the transmission line does not have capacity.” The expansion now waits on a further JSC meeting and a secretary-level Joint Working Group meeting, neither of which has been scheduled.
The Regulatory Basis of India’s Discretion
India’s discretion is written into policy. The Guidelines for Import/Export (Cross Border) of Electricity, issued by India’s Ministry of Power in 2018, subordinate cross-border power trade to the concurrence of the Government of India on the basis that such trade touches on relations between states, and they reserve to New Delhi the right to act for reasons of ‘larger policy interests’. The effect is to convert an engineering question, whether a line has spare capacity, into a policy question, whether India wishes the power to flow. The same framework, tightened by a subsequent approval procedure, has kept electricity generated at Chinese-built or Chinese-financed projects in Nepal out of the Indian market. The long-term understanding under which India agreed to import up to 10,000MW from Nepal over ten years, formalised at the Nepal–India Joint Commission in January 2024, carries the same conditionality. India therefore holds approval authority over what Nepal exports and over who is permitted to finance Nepal’s generation in the first place.
The Monsoon Surplus and Nepal’s Dependence
The shape of Nepal’s generation explains why this dependence matters. The overwhelming majority of Nepal’s installed capacity is run-of-river, so output rises sharply with the monsoon and falls in the dry season. Through the wet months Nepal produces more electricity than its domestic market can absorb and has curtailed generation for want of an outlet. The export window, which runs from 15 June to 15 November, is the principal route for that surplus, and it is the window India controls. Nepal’s export earnings are rising: the NEA reported electricity sales worth approximately Rs21 billion to India and Bangladesh in the first ten months of the current fiscal year, with the Bangladesh arrangement alone projected to yield around Rs330 million annually. The revenue is real, and the access that produces it remains conditional.
Nepal’s position is a recognised one in the study of landlocked exporters that depend on a single transit neighbour. Laos, also landlocked and hydropower-rich, sells its surplus into the regional market through Thailand’s grid under comparable terms. Where one neighbour is the sole conduit, control of transit becomes a form of strategic leverage, and the exporting state’s autonomy extends only as far as the transit state allows.
Weighing India’s Position
India’s position has a credible basis that warrants engagement. The cross-border line has finite capacity, a system operator carries a genuine duty to protect grid security, and transmission constraints are facts of engineering and not pretexts in every case. On balance, India has done more to enable Nepal’s export economy than to obstruct it. New Delhi has opened its market to Nepali power, raised Nepal’s export ceiling over successive years, admitted Nepali electricity to the Indian Energy Exchange, and built the interconnections that make any cross-border trade possible. The objection does not rest on Indian obstruction. It rests on the conditional character of Nepal’s market access. Access that can be reduced 20MW at a time, under a clause permitting action on broad policy grounds, functions as leverage. It is not a guaranteed market right.
Outlook
Kathmandu’s structural options are limited, and none is quick. Four directions are available. The first is to expand domestic demand, electrifying cooking and transport so that monsoon surplus is consumed at home. The second is to build storage hydropower that flattens the seasonal generation profile, which would allow exports to function as a managed decision instead of a forced sale of power that would otherwise be spilled. The third is to convert curtailed wet-season electricity into transportable forms, whether green hydrogen, ammonia, or energy-intensive industry located in cross-border parks, so that the exported product is a commodity less dependent on a single line. The fourth is to diversify the conduit, pressing for additional interconnections that reduce reliance on any single line and any single approval. Nepal and Bangladesh have already agreed to study alternative Indian routes for the trade.
None of these paths can be completed quickly, which is the operative constraint. Nepal’s hydropower is frequently described as the foundation of the country’s future prosperity and regional standing. The events of 15 June 2026 indicate that, in physical and legal terms, the route to that prosperity still runs through India, and the question of how much power Nepal sells, and to whom, will continue to be settled in New Delhi until the transmission geography and the regulatory framework change.
Arman Sidhu is an American geopolitical analyst and writer covering commodities markets, international trade, and foreign investment.
