Nepal and India have inked an investment pact for the construction of the second Butwal-Gorakhpur 400 KV cross-border transmission line.

A joint venture and shareholder agreement has been signed between the Nepal Electricity Authority (NEA) and the Power Grid Corporation of India Ltd, in New Delhi on Thursday.

The agreement was signed by NEA Managing Director Kulman Ghising and PGCIL Executive Director Y.K. Dixit, said NEA.

After completing the project, Nepal, and India can easily trade around 2,000 MW of energy from this dedicated transmission line.

The proposed transmission line is a major component of the $630 million “Nepal Compact”, an agreement between the Nepal government and the US’ Millennium Challenge Corporation to fund electricity and road projects of strategic importance in Nepal.

An agreement on implementing the transmission line is also a prerequisite for the multi-million dollar MCC-Nepal compact — viewed by many in Nepal as a counter-initiative under the Indo-Pacific Strategy of the US against China’s Belt and Road Initiative — to become effective.

Nepal’s Council of Ministers has already approved the NEA’s proposal to invest 50 per cent shares in the company to be set up for the construction of the Butwal-Gorakhpur cross-border transmission line.

The signing of the agreement has paved a way for both sides to set up the joint venture company with 50 per cent share each of the NEA and the Power Grid for the construction of the section on the Indian side,as well as completing the legal procedure, Ghising said.

It will take three and half years to complete the construction of the project that will be 120 km long – around 100 km will be on the Indian side and rest on the Nepali side.

The transmission line will become a major energy lifeline between Nepal and India, NEA spokesperson Prabal Adhikari said.

projections, India has also agreed to formalize the terms related to the energy banking mechanism which will allow Nepal and India to exchange power on a need basis.

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