India opening power transmission infra sector to Chinese-linked firms gives Nepal a chance to make its case

India's recent decision to permit four Chinese-linked companies to bid on strategic electricity transmission projects has created a potential opening for Nepal. Kathmandu is urging renewed diplomatic efforts to dismantle existing barriers that have long hindered hydropower projects involving Chinese investment and to expand cross-border electricity trade.

In June, India's Department of Expenditure granted a two-year exemption to TBEA Energy India, Nanjing Electric India, New Northeast Electric India, and Taikai Electric (India). These companies, which manufacture equipment within India, had been subject to restrictions implemented in 2020 following strained relations between India and China. These measures generally barred bidders from countries sharing a land border with India from participating in government procurement without prior approval.

While India has emphasized that this exemption is limited and not a precedent, Nepali energy sector stakeholders view it as a crucial opportunity. They believe this development could pave the way for removing restrictions that continue to affect Nepal's hydropower industry, even as regional ties improve. Currently, Nepal requires project-specific approval from India to export electricity and a no-objection certificate from the Indian Embassy in Kathmandu to import explosives necessary for hydropower construction.

Developers report that India has been hesitant to approve power exports from projects involving Chinese investors, contractors, or equipment. Similar concerns have complicated the renewal of permits for importing explosives. Industry representatives note an increasing restrictiveness from Indian authorities over the past year, with some developers being asked to provide proof of equipment imports before no-objection certificates for explosives are renewed. This situation underscores the complex geopolitical factors influencing Nepal's energy sector development.