On 12th August, the Ministry of Power, Government of India, announced notable amendments to the Guidelines for Import/Export (Cross Border) of Electricity, 2018. The updated guidelines aimed at enhancing the strategic leverage in cross-border electricity trade, particularly with countries like Bangladesh, while safeguarding the energy security of India.
Key Provisions of the amendment
As per the announcement by the Ministry of Power, Indian generating and distribution companies can now export electricity generated from coal, renewable energy or hydropower plants to the neighbouring countries. These trades can be done directly or via trading licenses after getting approval from the designated authority.
However, the government has imposed specific conditions on the export of electricity generated using coal and gas-based plants. The export of electricity generated from coal-based plants will be allowed if the coal is imported, obtained through spot e-auctions or sourced from commercial mining. In the same way, electricity generated from gas-based plants can be exported only if the gas used in the plants is imported or it was sourced from government-approved suppliers.
Dedicated transmission lines and grid connectivity
One of the most notable aspects of the amendments announced by the government is the provision to allow Indian generating stations that supply electricity exclusively to neighbouring countries to construct dedicated transmission lines that connect to those country’s grids. The construction of the lines is subject to approval under the Electricity Act, of 2003. The aim is to support the seamless transfer of electricity.
Additionally, the government has safeguarded the interests of Indian generating stations by providing provisions to connect to Indian grids in case the buying country in the neighbourhood, such as Bangladesh, fails to schedule power or default on payment obligations under the Power Purchase Agreement (PPA). The generation stations can connect, in that case, to inter-state or intra-state grids to sell power domestically.
Strategic implications for India
The move is designed to mitigate financial risks for Indian companies and to ensure the optimal use of generating capacity. The amendment, as of now, will benefit companies like Adani Power which has an exclusive agreement to supply electricity to Bangladesh from its 800 MW Godda power plant located in the state of Jharkhand.
Due to the political turmoil and fall of Sheikh Hasina’s government, Bangladesh is facing economic challenges and it has led to concerns about potential payment defaults. The amendment came at the right time and provided strategic importance to India and Indian companies.
Pressure on Bangladesh
The amended guidelines have the potential to put pressure on Bangladesh as it allows Indian power companies to reroute electricity back to the Indian grid in case Bangladesh fails to meet its obligations under PPA. It ensures that Bangladesh remains compliant with the decided terms and conditions of the agreement. It also adds a layer of accountability on the buyers’ side.
The amendments send a clear signal to Bangladesh that India is prepared to prioritise its energy security and financial interests over bilateral arrangements if any are in place. It puts the neighbouring country in a position where it has to fulfil the commitments or risk losing access to electricity that it imports from India. Any such event may lead to significant implications on the economic stability and political landscape of Bangladesh, especially in current times.
Congress criticises the move
Interestingly, Congress has issued a statement criticising the government’s decision. It has accused the government of using regulatory changes to put pressure on Bangladesh. The Congress party has claimed that the amendments have been brought to help Adani as Adani Power is the only company that has exclusive rights to supply electricity to neighbouring countries. The amendments came at a time when India is visibly increasing its focus on securing the energy needs of the country and expanding its influence in the Indian sub-continent region. The strategic implications of the amendments may not be visible at first but it will show results in coming months as India will be navigating its relationship with the new government in Bangladesh.
