Energy Cooperation in SAARC countries

1. Energy Cooperation in South Asia.
(G Parthasarathy)
At the SAARC Summit meeting in Kathmandu in January 2003, the SAARC Heads of
Government proclaimed: “To give effect to the shared aspirations for a more prosperous
South Asia, the (SAARC) Leaders agreed on the vision of a phased and planned process,
eventually leading to a South Asian Economic Union”. The process of economic integration
has been far slower in South Asia, than what has transpired in India’s relations with ASEAN.
India has concluded a Free Trade Agreement in goods with its ASEAN partners. It is now
close to concluding a comprehensive free trade agreement in both goods and services with
ASEAN. Moreover, India has also, in the recent past, concluded agreements for
Comprehensive Economic Cooperation with Japan and South Korea. There is now increasing
readiness for barriers being removed in a phased manner, for free trade in goods, services
and investment between India and its eastern neighbours, Sri Lanka, Bangladesh, Bhutan
and Nepal and with Maldives to India’s west. The entire SAARC process of economic
integration has, however, been impeded, as Pakistan has shown no inclination to even fully
implement the provisions of the SAARC Free Trade Agreement in goods, in its trade with
India. The entire SAARC Vision of moving towards an Economic Union lies in the doldrums.
Any process of regional economic integration is naturally accompanied by efforts to
develop a common energy grid. There is growing grid interconnectivity in North America
between Canada, the US and Mexico, with prospects of carrying such interconnectivity into
Latin America. In Europe, a programme has been embarked upon to develop “Smart Grids”
at national and European levels, which are user centred, market based and sustainable.
Despite existing problems in promoting regional connectivity in South Asia, the SAARC
Energy Centre based in Islamabad along with the IPPAI organized a Workshop in Kathmandu
on June 26-27 on: “Organising Regulations and Policies for Cross Border Power Trade, Risk
Sharing and Financial Settlement Issues”. While this is certainly a laudable long-term
objective, what needs to be considered is whether this can be introduced regionally, or
whether it would be more realistic to look at this issue in the context of existing bilateral
power and energy cooperation in South Asia. We need, therefore, to first look at recent
developments in energy cooperation in South Asia.
Nepal:
During the July 2014 visit to External Affairs Minister Sushma Swaraj to Kathmandu,
Nepal and India agreed to finalise the text of the Power Trading Agreement at the earliest.
The Agreement is to pave the way for either country to purchase any quantity of electricity,
when energy production dwindles and sell any quantity of power, when production exceeds
domestic need. During the meeting between the two Foreign Ministers, they also agreed to

2. expedite the process of preparing a detailed project report on the Pancheshwar
Multipurpose Project, which has the potential to generate nine billion units of electricity per
year. The Foreign Ministers also agreed to finalise the terms of reference of the
Pancheshwar Development Authority, which will oversee implementation of the
Pancheshwar Project. “The two Foreign Ministers underscored the importance of harnessing
Nepal’s vast hydropower potentials for mutual benefit,” said a joint press statement issued
after completion of the meeting.
Further, an understanding was also reached to expedite the construction of 132 kV
Kataiya-Kusaha and 132 KV, Raxaul-Parwanipur transmission lines so that Nepal could
import additional power from India in the short term, to address its continuing power
deficit. During the July 2014 talks, both sides also took notice of Nepal’s widening trade
deficit with India, and agreed to take effective measures to increase the country’s exports to
the southern neighbour. “In order to promote Nepal’s exports to India, the Indian side
agreed to further relaxing the rules of origin requirements; simplifying and streamlining
transit and customs related procedures; eliminating technical barriers to trade and making
(quarantine processes) less stringent; and lifting quantitative restrictions on exports of
Nepali products to India,” the Joint Statement proclaimed.
Uniquely situated with the world’s steepest mountains and some of the world’s
heaviest rainfall, Nepal possesses an unparalleled hydropower generation potential. The
perennial attributes of Nepali rivers and the steep decline in height from Mount Everest to
the north Indian plains provide ideal conditions for the development of some of the world’s
largest hydroelectric projects in Nepal. The most often published figures relating to Nepali
hydroelectric potential is approximately 83,000 MW, Yet Nepal currently has just 600 MW
of installed hydropower capacity, leaving 99% of this resource untapped. Sandwiched
between the two most rapidly expanding yet energy-starved economies on earth, this is a
time like no other, for Nepal to expedite hydropower investments. One encouraging
development has gs been action by Nepal to issue 28 survey licences for hydropower
projects amounting to 8249 MW. Some of these surveys have been completed, but much
work needs to be done for finalising power purchase agreements and financial closure. The
issue of the duration of these projects also needs to be mutually agreed upon.
What emerged from the visit of Mrs. Sushma Swaraj’s visit is that the there would be
yet more studies on development of Nepal’s Hydroelectric potential. Given the political
situation in Nepal, where political attention is now almost entirely focused on drawing up a
new Constitution, it remains to be seen whether the Constitution making efforts will
succeed soon. Only then could we perhaps look forward to meaningful movement in
exploiting the country’s vast hydroelectric potential. The diffidence in Nepal on early
development of its vast hydroelectric power potential is evident from the fact that the
present focus of attention in primarily on securing World Bank financing for the Nepal-India
Electricity Transmission and Trade Project. This project is designed to provide for the early

3. import of 100 MW from India and to expand cross border transmission capacity to 1000
MW.
Bhutan:
Bhutan currently uses only 390 MW of its 30,000 MW hydropower potential (or 1.3
percent). Even at its modest level of development, hydropower has already emerged as the
mainstay of the Bhutanese economy, alongside tourism. The experience of India’s
cooperation with Bhutan has been radically different from what has emerged in its relations
with Nepal. Bilateral cooperation was initiated with the commissioning of a 60 MW hydro-electric
project in April 2006. The first of six Hydro-electric projects of 170 MW, the Tala
Project, was commissioned in July 2006. Ten hydro-electric projects were agreed for
implementation in 2009. Three of these projects are under construction. Project reports for
4 other projects have been finalized and are under examination by the two Governments.
The Project Reports for the other three projects are expected to be finalized soon. The two
countries appear well set to achieve the target of 10000 MW by 2020.
Bangladesh:
India commenced supply of 250 MW of power to Bangladesh last year (2013), after
the government-run Bangladesh Power Development Board and India's NTPC Vidyut Vyapar
Nigam Ltd (NVVN), a subsidiary of India's National Thermal Power Corporation (NTPC),
signed a deal Feb 28, 2012. This was following an agreement signed during Bangladesh
Prime Minister Sheikh Hasina's visit to New Delhi, in January 2010. That agreement led to
the establishment of a 500 MW cross border interconnection between Baharampur in West
Bengal and Bheramara in Bangladesh. , which was commissioned on October 5,2013.The
Chief Minister of Tripura, Mr. Manik Sarkar had (April2014) said: "We have already told the
Government on India that Tripura is ready to supply at least 100 MW of electricity to
Bangladesh. The Chief Minister noted: "To supply power from Tripura to Bangladesh, only a
nine-km transmission line is required to be erected from (western Tripura's bordering
village) Rabindranagar, to connect with that country's electricity network." It is important
to note that Bangladesh provided unprecedented transit facilities for the movement of
heavy equipment for development of power plants in Tripura.
The Bangladesh and Indian governments have reportedly concluded, in recent days,
a power co-operation deal for 2017, which would allow India to transmit electricity from its
north-eastern states to Bihar through Bangladesh territory. In exchange, Bangladesh would
get a daily minimum of 500 to 1,000 in additional megawatts, the Daily Star (Bangladesh)
reported. Under the deal, reportedly reached April 3rd 2014, at the seventh meeting of the
Bangladesh-India Joint Steering Committee on Power Co-operation, the two countries are
said to have agreed to connect their distribution networks for the transfer of 6,000 MW of
hydroelectric power from Assam to north-western Bihar via Dinajpur, in Bangladesh. The
network could ultimately connect two other South Asian Association for Regional Co-

4. operation (SAARC) members– Nepal and Bhutan– opening up hydroelectric power
generation across the region. There is huge hydropower potential in India’s northeast, for
such projects. Arunachal Pradesh alone has the potential to produce 50,000 MW.
China-Bangladesh:
Like India’s other South Asian neighbours, Bangladesh is complementing energy
cooperation with India, by expanding cooperation with China. The China National Machinery
Import and Export Corporation and North-West Power Generation Company Limited have
agreed to set up a 1,320 megawatt coal fired power plant in Bangladesh during Hasina’s visit
to China. A similar agreement was reached earlier, when Sheikh Hasina visited Japan. Both
plants will depend on import of coal from Indonesia, Australia and South Africa. While
energy cooperation with China and Japan are understandable, in purely economic terms, it
may be more economical for Bangladesh to get surplus power from India.
Myanmar:
From Myanmar’s point of view, developing energy resources in the country's
mountainous north, where many proposed hydroelectric sites lie, is strategically important
for two reasons. Firstly, developing some of the country's estimated 40,000 MW of
hydroelectric potential would help shore up domestic energy supply in this country of 54
million, which is slated to grow to 61 million by 2025, and nearly 71 million by 2050.
Myanmar has currently harnessed only 2,440 MW, or 6% of this hydro-electric potential.
Secondly, excess hydroelectricity produced in this region could be sold to consumers in
adjacent Yunnan Province (China) and India’s northeast. In a larger geopolitical context,
Myanmar would like both its large neighbours, China and India to be part of its efforts to
promote development of its vast hydro-electric potential.
India’s performance in cooperation in hydro-electric power in Myanmar has been
dismal. The proposal for development of 1800 MW of hydro-electric power from the
Chindwin River located near the border between Manipur and Myanmar’s Sagaing Division
was initiated in 1994. The total potential in Myanmar for hydroelectric power generation
close to India’s borders in the Kachin State, the Chin State and Sagaing Division is 4460 MW.
Fourteen years after discussions on the Chindwin project commenced, an Agreement was
signed between India’s NHPC and the Myanmar Government for building a 1200 MW
Thamanthi Hydro-Electric Power Project and a 600 MW Shwezaye Project in Myanmar’s
Chin State. Work on implementing these projects, is, however, yet to take off, inviting very
critical comparisons in project implementation, between India and China.
Sri Lanka:
A number of measures are in the pipeline to build a growing interdependence
between India and Sri Lanka on energy related issues. On September 6, 2011, the NTPC and

5. the Ceylon Electricity Board (CEB) signed an agreement for setting up a 500 MW coal fired
power plant, to be commissioned in 2016, in Sampur, which was a nerve centre for the LTTE,
during the ethnic conflict. India is extending a $ 200 million soft line of credit for the project,
with coal to be imported by Sri Lanka. India will be constructing a jetty in Sampur and the
transmission lines. Moreover, discussions are underway for an Indo-Sri Lanka High Voltage
DC Grid, with various options under consideration, linking either Madura or Tuticorin in
Tamil Nadu to Anuradhapura or Puttalam. The project will involve a 285 kilometre cable link
including 50 kilometres of submarine cable across the Palk Straits linking electricity grids in
India and Sri Lanka. The project envisages development of capabilities in two stages, for
transmission of 500 MW. There is also immense potential for cooperation with Sri Lanka in
developing the huge wind energy potential of the country.
Pakistan-Afghanistan:
Agreement was reached in December 2010 on the TAPI (Turkmenistan,
Afghanistan, Pakistan, India) Gas Pipeline from the Turkmenistan Gas Field in South
Yolotan. The 1680 Kilometre Pipeline is to traverse through Herat, Lashkar Gah and
Kandahar in Afghanistan. While it is expected to be commissioned in 2017-2018, much
will depend on the security situation in Southern Afghanistan and the border regions of
Pakistan. China has, in the meantime, commenced negotiations for a Turkmenistan-
Afghanistan-China gas pipeline, which traverses through the least volatile and violent
areas of Pakistan. This Pipeline will not face the same security and safety challenges that
the TAPI pipeline will face. It is entirely possible that this project will take off much
earlier than the TAPI pipeline for which no financing arrangements are yet in place.
Talks on a proposed Iran-Pakistan-India Gas Pipeline have been on the anvil for
well over a decade now. Discussions on India’s participation in this project have,
however, been on hold for some years now, primarily because of global sanctions on
trade in oil and gas with Iran have not only led to a drastic reduction in oil imports from
Iran, but also made discussions on a gas pipeline from Iran, presently unrealistic. There
have also been reservations and security concerns in India about the possibilities of gas
supplies being cut off in the event of a rise in bilateral tensions and the volatile situation
in Baluchistan, where even Pakistani pipelines are being regularly attacked and blown
up. In the light of these developments, Pakistan and Iran have continued bilateral
discussions on building an Iran-Pakistan pipeline, which could be later extended to
India and even China. Some details of this Pipeline and subsequent negotiations
between Pakistan and Iran, which have led to an impasse, with Iran threatening to sue
Pakistan for breach of contract, are given in succeeding paragraphs.
Length/Specifications of Iran-Pak Pipeline:
The length of the Iran-Pakistan pipeline that will be supplied from the South Pars field has on
the Iran-Pakistan sector has been estimated at 1957 kilometres. It starts from Asalouyeh and
stretches 1,172 kilometres through Iran. The Iranian section is known as Iran's seventh cross-country

6. gas pipeline. In Pakistan, the length of the pipeline is 785 kilometres. It will pass through Baluchistan
and Sindh. A branch would spur off to Karachi in Khuzdar, while the main pipeline will continue
towards Multan. The pipeline could later be expanded to Delhi from Multan. The route in Pakistan
may be changed if China will participate in the project. As there are concerns over the pipeline being
attacked by Baluchi insurgents, an alternative offshore route from Iran to the maritime boundary
between India and Pakistan off Kutch was proposed. According to this proposal, one branch was to
run to Pakistan, while other branch to run to Kutch.
History of Negotiations:
Discussions between the governments of Iran and Pakistan started in 1994. A
preliminary agreement was signed in 1995. This agreement foresaw construction of a
pipeline from South Pars gas field to Karachi in Pakistan. Later Iran made a proposal to
extend the pipeline from Pakistan into India. In February 1999, a preliminary agreement
between Iran and India was signed. In 2004 the project was revived after the UNDP report
Peace and Prosperity Gas Pipelines by Pakistani Petroleum Engineer Gulfaraz Ahmed, was
published in December 2003. The report highlighted benefits of the pipeline to Pakistan,
India and Iran.
In February 2007, India and Pakistan agreed to pay Iran US$4.93 per million British
thermal units (US$4.67/GJ) but some details relating to price adjustment remained open to
further negotiation. In April 2008, Iran expressed interest in the People's Republic of China's
participation in the project. In August 2010, Iran invited Bangladesh to join the project. In
2009, India withdrew from the project over pricing and security issues, and after signing a
civilian nuclear deal with the United States in 2008. However, in March 2010 India joined
Pakistan and Iran for trilateral talks to be held in May 2010 in Tehran. On 30 January 2013,
the Pakistan's Federal government approved a deal with Iran for laying the Pakistan's
segment of a pipeline. On 27 February 2013, the construction of the Pakistani section was
agreed.. On 11 March 2013, inauguration of the construction works on the Pakistani section
of the pipeline were inaugurated by President of Pakistan Asif Ali Zardari and President of
Iran Mahmoud Ahmedinejad. The pipeline in Pakistan was expected to be constructed in 22
months with the participation of Iran..
On 27 May 2013, Iranian Deputy Minister for Petroleum, A. Khaledi, in a letter to the
Pakistan government expressed concern over the delay in the start of the Pakistani portion
of the pipeline. He said that after a government-to-government agreement between the
two countries, they were supposed to select entities for the construction of the latter part
of the pipeline. On 12 June 2013, the newly elected Prime minister of Pakistan, Nawaz
Sharif, allayed any fears regarding the abandonment of the project and said that the
Pakistani government is committed to the fulfillment of the project and targets the first flow
of gas from the pipeline in December 2014. The premier also stated that his government is
planning to commit to the Turkmenistan-Afghanistan-Pakistan-India gas pipeline project as
well.[1]
On 10-November-2013, a meeting between Pakistan Federal Minister for Petroleum
and Natural Resources Shahid Khaqan Abbasi and Iranian Minister of Petroleum Bijan
Namdar Zangeneh held at the Ministry of Petroleum at Tehran. The Pakistani Officials

7. assured their Iranian counterparts that project would continue despite "external pressure".
On 25-Feb-2014, Minister for Petroleum and Natural Resources Pakistan, Shahid Khaqan
Abbasi told the National Assembly that the project for the moment is off the table, he cited
international sanctions as the issue, he said " In the absence of international sanctions the
project can be completed within three years, but the government cannot take it any further
at the moment because international sanctions against Iran are a serious issue". Pakistan
will face the penalty if it failed to lay its side of pipeline by December 2014. .
During the State Visit of Prime Minister Nawaz Sharif to Iran in May 2014, both the
government stated to remain committed on the completion of the pipeline and also agreed
to extend the completion date by one year. However on 30 May 2014, ISNA news agency
quoted Iranian Deputy Oil Minister for International and Trade Affairs Ali Majedi as claiming
that the deadline has not been extended as no such agreement was signed during Nawaz
Sharif's visit and the deadline to complete is still December, 2014.
Given the dependence of Pakistan on financial assistance from the USA and Saudi
Arabia it is evident that the agreement signed by former President Zardari will not be
implemented. How Pakistan deals with threats of penalties by Iran remains t be seen. It is
interesting that the agreement with Iran was signed by Mr. Zardari a Shia who did not enjoy
a particularly warm personal relationship with Saudi Arabia. Mr. Nawaz Sharif, on the other
hand, has long enjoyed a very close relationship with the Saudi Monarchy, which intervened
after the coup on October 199 to get him exiled to Saudi Arabia by General Musharraf.. His
family has business interests in Saudi Arabia.
Purchase/Sale of Electricity;
In 1999 India offered to purchase electricity from Pakistan and arrange for
transmission lines till near the Wagah-Attari Border. While Prime Minister Nawaz Sharif was
keen on the project, the Pakistan Government soon backed off, evidently because of
reservations by the Army. Matters came to a halt with the outbreak of the Kargil conflict.
Pakistan, thereafter, experienced growing shortages of power.
When Mr. Nawaz Sharif came back to power in 2013 he was faced with growing
public discontent over countrywide power breakdowns. While efforts have been underway
to obtain power from Iran, the Government of Pakistan made a conscious effort to import
electricity from India, which India agreed to. Pakistan now seems to have preferred to face
power outages rather than import electricity from India. There are reasons to believe that
this reluctance is primarily because of objections from the army and from persons linked to
the military establishment, like the Jamat ud Dawa Chief Hafiz Mohammed Saeed.
Conclusion:
Given the present political uncertainties in Afghanistan and Pakistan, the prospects
for these countries joining a meaningful process of regional energy cooperation in the near
future are not encouraging. It is also evident that given the political uncertainties within
Pakistan and the setbacks that Iran has faced after concluding an agreement with Pakistan,
India would need to look at the prospects of obtaining Iranian natural gas not through

8. Pakistan, but directly through an undersea pipeline. The pipeline is estimated to cost $ 4-5
billion and could carry 31 million cubic metres of gas a day. But, actual work on such a
pipeline could be commenced only after current banking sanctions on Iran are eased, or
ended. The geopolitical situation is very different across our eastern and Southern borders
where there is genuine interest, albeit for differing reasons, for promoting energy
cooperation and greater grid connectivity both bilaterally with India and regionally.
THE SAARC Regional Energy Centre in Islamabad has taken a considerable interest in
establishing toe modalities for effective grid connectivity across the SAARXC Region. While
this is welcome, we need to bear in mind that prospects of meaningful energy cooperation
across our western borders in the foreseeable future are relatively limited. At the same time
the prospects of enhanced for greater grid connectivity across Nepal, Bhutan, Bangladesh,
Myanmar, and across our southern borders to Sri Lanka are very encouraging. All these
countries are linked to India through the BIMSTEC. The focus for regional energy
cooperation in BIMSTEC should now assume greater alliance.