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China is out and India in. The power project diplomacy that plays out in Nepal

What does it mean to China the fact that Nepal has granted two joint storage projects with a combined capacity of 1200MW each to India?

After being abandoned twice in the past by China, Nepal has formally granted the West-Seti Hydropower Project and the Seti River Project (SR6)–joint project for storage that total 1200MW to the Indian National Hydro Power Corporation (NHPC) on 18 August.

The project will function as an energy storage system that will produce electricity throughout the year. By using its own national grid India is expected to receive energy, whether for its own use or to export.

It is reported that the Chinese CWE Investment Corporation, one of the subsidiaries to China Three Gorges Corporation withdrew from the project in August 2018.

Prior to that, Nepal did not renew China’s Snowy Mountains Engineering Corporation’s license due to the company’s inability of starting its work “convincingly” for a whole decade by the mid-1990s.

Nepal is home to an estimated 83,000 MW of power generation capacity.

But the country suffers from an immense power deficit and generates only around 90 MW, compared to a capacity of around 2 000 milliwatts.

Even though Nepal sells 364 MW of power produced through seven projects India Nepal also produces excess electricity during the wet seasons, but not enough during dry seasons and a large volume of the electricity it imports comes from India.

The projects of 750MW West Seti and 450MW SR6 projects are spread across four districts namely Bajhang, Doti, Dadeldhura and Achham in the far western region of Nepal.

West Seti project West Seti project is designed to generate electricity throughout the year through the storage of extra flows of the wet season in the reservoir , and using this water to create energy in the dry season when demand is at its highest (December-May).

However, for a long time the electricity sector in Nepal has been afflicted, mostly due to issues with governance.

The only electricity consumer and the electric utility of the nation, Nepal Electricity Authority, is frequently the subject of political interference.

In addition, variables other that economic or scientific theories often influence electricity rates and power purchase agreements.

The development of Thursday, according to analysts is also a purely political choice. This is a move by the Prime Minister Sher Bahadur Deuba to redress tensions with India.

India put up an unofficial blockade in the year 2015 and stopped essential supplies in order to pressure Nepal to agree with their suggestions for the Constitutional changes.

Nepal requested assistance from China and China immediately responded. Since that time, the relationship between India and Nepal has been in a state of tension.

“Whenever India has overplayed its hand, the bilateral relationship suffers,” Praveen Donthi senior analyst (India) at the International Crisis Group tells TRT World..

“The Hydroelectric Power Project will go a long way in mending the bilateral relationship,” Donthi says.

As per Saumitra Neupane who is the executive director at Policy Entrepreneurs Inc., an Nepali think-tank. The energy generated by these two projects will help strengthen the power balance of the region and from an angle of geostrategic significance it will also help make India as Nepal’s primary partner in the field of energy.

“Expanding power trading with India is key to unlocking Nepal’s aspirations of hydro-led prosperity,” the expert declares.

Collaboration between India and Nepal began in 2013 when two Indian companies – Satluj Jal Vidyut Nigam (SJVN) and GMR Energy – obtaining approval for the construction of 900 MW initiatives in Nepal.

While GMR is still working on this project SJVN will soon be finishing the 900 MW Arun 3 Project.

In 2021, SJVN was awarded a second project, that of 679 MW Lower Arun.

However, the biggest project in the country, located along the Tamakoshi River in the Dolakha region of north-central Nepal approximately 200 km away from Kathmandu It is a Chinese-executed project.

So , what does the new MoU with India and Nepal regarding the hydropower project will mean for China?

India’s influence is enormous on Nepal however, the MoU does not guarantee it will actually be executed with the help of this Indian company, according to analysts.

Over the years, Nepal as well as India have reached several agreements, none of which have been implemented.

The instance in question is that of the 6,500MW Pancheswor Multipurpose Project. Post agreement talks between the two countries about this project has been ongoing from the 1990s onwards, Neupane, who is also studying the situation for Infrastructure Diplomacy for Nepal and Nepal, explains.

China is, however is currently completing and delivering major infrastructure projects, including projects like the Pokhara International Airport. It is currently in negotiations for a variety of different infrastructure developments in conjunction with Nepal’s Government of Nepal as part of its Belt and Road Initiative (BRI) agreement, which includes a number of hydroelectricity and road projects.

Beyond the facets of Nepal’s bilateral relationship that it has with India and China both have clearly stated their security interests in Nepal which is tied to their security as a nation.

“For India, it is about the open border and terrorism and for China it’s more about Tibet more than any other thing. Therefore it’s in the best interest that both countries be able to play a role in Nepal. The competition is becoming more apparent in Nepal over the past decade due to the growing of China’s participation – and matches China’s plans for superpower status in the world’s political arena,” Neupane says.

The growing influence and rise of China in Nepal in various ways alters the status quo of power in the region, which has historically signaled South Asia being within the Indian zone that has influence over it, says.

Therefore, the competition to influence South Asia between India and China is likely to continue, especially in the present, as the US currently sees India as a potential counterweight in the face of China within the Indo-Pacific region.

“This regional rivalry between India and China is only bound to get more intense as it gets enmeshed with the great power rivalry between the US and China,” declares Praveen Donthi, the senior analyst (India) of the International Crisis Group.

“While this may look like India pushing back on Chinese influence in Nepal, it is more of an illusion than reality.”

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