The World Bank has approved a $99 million package for an Indo-Nepal cross-border energy cooperation to mitigate a national energy crisis in the Himalayan republic.
The funding is meant for the landmark Nepal-India Electricity Transmission and Trade Project (NIETTP) that will provide Nepal with at least 100 MW of additional electricity, to supplement its current electricity generation capacity of 698 MW and help minimise power blackouts.
The project will see the establishment of cross-border transmission capacity of about 1,000 MW. It will also develop key segments of the backbone high voltage system to help expand access to electricity across Nepal.
Currently, Nepal needs 885 MW at peak time.
Insufficient and costly electricity is a major constraint to economic and human development in Nepal, where only 46 percent of the population has access to electricity. As a result, scheduled power cuts are common, with some areas receiving electricity for as little as eight hours a day during the dry winter season.
"Increasing access to electricity is one of the most significant development challenges facing Nepal today," said Susan Goldmark, World Bank Country Director for Nepal. "For the first time this project will help mitigate deficits through the trade in electricity. Once Nepal develops its hydropower potential and meets its domestic needs, the transmission infrastructure could also be used to export surplus hydropower and earn revenues for Nepal."
In response to the worsening electricity situation, the government of Nepal declared a "national energy crisis" in December 2008 and approved an Electricity Crisis Management Action Plan which is currently under implementation, with support from the World Bank.
The Action Plan includes development of the Dhalkebar-Muzaffarpur transmission link, a key component of the NIETTP and the first major cross-border transmission line between India and Nepal.
Upon completion, Nepal could end electricity rationing by 2015, according to projections.
The energy situation throughout the South Asia Region (SAR) is characterized by poor consumer access to electricity, high dependence on imported oil and/or petroleum products, slow development of energy sources and supply infrastructure, weak distribution and almost no intra-region energy trade.
"Cross-border energy cooperation can lower costs in each country, improve supply reliability, and help lower carbon emissions," said Raghuveer Sharma, project team leader.
"This project will lead the way in providing the necessary physical infrastructure for initially bilateral and eventually multi-country electricity trade in the northeastern part of South Asia Region."
The World Bank Group is supporting energy sector development throughout the region. In Nepal, the International Development Association (IDA) is providing ongoing funding for the Power Development Project to support increasing transmission capacity and strengthening of the distribution system; rehabilitation of existing generation capacity; and technical assistance for the Nepal Electricity Authority.
It also funds the Alternative Energy Promotion Center (AEPC) for the expansion of micro-hydro schemes and biogas plants across Nepal. The International Finance Corporation (IFC) has investments in two power projects. The new package is part of a $202 million project, which is also supported by development partners as well as the governments of Nepal and India.
The Bank's assistance package for NIETTP comprises a credit of $84 million and a grant of $15 million. The IDA credit carries a 0.75 percent service charge, 10-year grace period and a maturity of 40 years.
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