IL&FS pioneers a bold cross-border transmission project for power exchange between India and Nepal
A dream to connect neighbours
Home to eight of the ten highest mountains in the world, Nepal has forever attracted adventurers and thrill-seekers from across the globe. Yet her own people face an uphill struggle day after day to meet far more ordinary needs. For India this diminutive neighbour has always held the place of a younger sibling to be partnered and supported. As political skirmishes have led to the stirrings of anti-Indian sentiment among some Nepalese in the last couple of years, India has felt an even greater need to reach out.
With four transmission lines across the border, India will first export power to Nepal and later import Nepal's hydropower.
What if India could power an energy-starved Nepal today — and then provide a market for the electricity that Nepal will itself generate tomorrow? Imagine what such cross-border infrastructure could do, not only for the people of Nepal, but also for the goodwill between our two nations.
For 20 years the prospect had remained a what-if, as the two governments struggled to find a way around the complexities of structuring such a project, until IL&FS stepped in. By 2016, the company had laid the first of four new transmission lines over the border, which are now being used to export 150 MW of electricity to Nepal out of their ultimate capacity of 800 MW. The same lines are incentivising the setting up of hydroelectric power stations in Nepal by opening up the Indian market for the enormous amount of electricity that will come out of these stations.
Battling energy starvation
The challenges of its topography and a history of isolationist policies have made Nepal one of the world’s poorest countries. Heavily reliant on foreign aid and tourism, Nepal’s economy has been further slowed by decades of political instability. Fossil fuel imports, while satisfying only about 8% of its energy requirements, eat up over a quarter of the country’s foreign exchange earnings. The Kathmandu valley, staggering under 16-hour power cuts, would consume 100 million litres of diesel annually for power generation.
With nearly a third of the entire Himalayan range within its borders, Nepal has perennial rivers and steep slopes ideal to develop some of the world's largest hydroelectric projects. But the country has been unable to exploit this potential for lack of a large enough domestic market, even though the peak electricity demand is almost the double the capacity. Almost 70% of Nepal’s energy comes from fuel wood, and only 1% of the energy need is met by electricity, to which half the population simply has no access.
New vision to crack the old puzzle
In 2007 IL&FS came forward to address what it recognised as a dire need. There was no prior mandate from either of the governments; nor was there any known precedent for a cross-border transmission project in the PPP framework. The project’s poor bankability, and the governments’ wariness of the complexity involved, meant that it stood wholly on the strength of IL&FS’s own initiative and resources.
With the project’s success, today Kathmandu faces zero load shedding, saving Nepal an estimated NPR 900 crore per year in diesel costs alone. When the substations are completed, the project will meet almost half of Nepal’s total power requirement, saving 270 million kg of CO2 in carbon emissions. Going forward, the project will help cut down almost 8 million tonnes of CO2 emissions when India begins to import Nepal’s hydropower using the same lines.
Laying the groundwork
Synchronising power grids even within a country is a complex process, requiring the willingness and participation of a large number of different agencies. To do this at a cross-border level, where everything from technical benchmarks to governmental procedures differed between countries, was certainly not going to be straightforward. The challenges, foreseen and unforeseen, would be many.
Retaining all project liability, IL&FS brought together a dozen agencies and achieved complex cross-border grid synchronisation.
The first hurdle appeared early on. IL&FS was working towards developing the Indo-Nepal Cross Border Transmission Project as a standalone joint venture (JV) with the state-owned Nepal Electricity Authority. In the meanwhile, however, the regulations of the Central Electricity Regulatory Commission of India were changing, so that such a project could only be implemented through an Indian government-controlled company. By bringing on board two government entities — Power Grid Corporation of India Ltd. (PGCIL) and SJVN Ltd — and convincing them to buy a total of 52% equity in the JV company, IL&FS was able to have the transmission licence granted for the project. Nevertheless, as per the requirements of the regulatory body and the JV partners, IL&FS had to retain all liability for the project.
By 2013, IL&FS had succeeded in designing a project platform that tied together at least half a dozen varied entities on either side of the border, and solved highly complex issues of grid synchronisation between the two different contexts. Through meticulous liaising with various agencies, IL&FS also played a pivotal role in securing funding for the project on behalf of both Nepal and India.
Crossing rivers and preserving homes
To lay transmission lines across the meandering Baghmati and Budhi Gandhaki rivers means tackling 10 km-wide floodplains that get inundated every monsoon. While the normal solution would have been to custom-design extra tall towers with huge foundations, IL&FS found a way to use conventional towers instead, by strategically locating them at appropriate points. This saved Rs 10 crore and cut down the total implementation time by nearly a year.
Routes for the transmission lines were mapped out with special care to avoid infringing upon protected areas, human habitation, monuments, or public utilities like schools, hospitals, and playgrounds. To mitigate the social, environmental and economic impacts the foundations were instead located in low lying wastelands, though this was more expensive. In the few instances where the lines crossed agricultural land, IL&FS ensured that crop and land compensation was efficiently disbursed.
Procuring right-of-way in North Bihar can be a tricky business: not only are land records poor but land holdings are highly fragmented, and much of the population has strong political affiliations. The optimized route alignment, along with IL&FS’s close collaboration with the district and state administration, helped gain active support from the government, and cooperation of local communities.
Record project finish despite tragedy
Two major setbacks were yet to come, which would challenge Nepal as a country and put the company’s grit and soul to the test. In the aftermath of the devastating earthquake of 2015, IL&FS motivated its team to continue despite enormous challenges.
The only project to continue unhampered through national setbacks, it was finished in 18 months as against a norm of 5 years.
Later the same year the Terai agitation brought a staggering Nepal to a further standstill. Since the Terai region is the biggest beneficiary of the project, IL&FS rallied the senior agitating leaders and gained their support. With blockades crippling the transport of goods across the Indo-Nepal border, IL&FS kept the project going using bullock carts and motorcycles. This was the only project to continue unhampered during the agitation, and was in fact completed in a record time of 18 months — the norm for major transmission schemes in Nepal is over five years.
It was inaugurated by the prime ministers of both countries in 2016. The largest investment ever in Nepal’s transmission sector, the project is the first successful PPP project funded by the Indian government’s Line of Credit, and is also the first major PPP investment in Nepal.
Providing Nepal power in the short term and economic empowerment in the long term, this milestone project has become the most significant boost to Indo-Nepal relations in recent history.