Nepal Seeks Indian Power After China-Funded Upper Trishuli Collapse, Making Transmission India’s Counter to BRI

The news

New Delhi. Transmission lines are the new pathways of India’s political power in the neighbourhood and its most effective counter so far to China’s Belt and Road Initiative (BRI), argues Pranab Dhal Samanta in his ‘State of Play’ column in The Economic Times; cards on 19 and 21 September covered the India–Nepal reset, and today’s new element is electricity as a strategic lever. BRI is China’s programme of loan-financed infrastructure abroad. Nepal, he writes, is rethinking after 300–400 MW were washed off its grid when the China-funded Upper Trishuli power project collapsed in the catastrophic Himalayan floods in August, and it has asked India for power to fill the shortage. The project was financed by a $149.4 million sovereign loan. The economics favour India because it is the only country in the subcontinent that can import power in large quantities: “China constructs, but doesn’t buy.” India has made clear over the past few years that it will not import power from China-funded generation in Nepal, so such projects cannot earn export revenue and add to Kathmandu’s financial burden. India is Nepal’s biggest electricity importer, bringing Nepal $130.8 million in 2025-26, about $40 million more than the year before. Yet six Indian projects and the 5,040 MW Pancheshwar project, which the column places in Uttarakhand, remain stuck in Kathmandu’s politics. Bhutan, which has no formal diplomatic relations with China, has done better: most government-to-government India–Bhutan projects are complete, and it has a policy that invites Indian private investment. Thimphu earned about $250 million from power exports to India in 2025, some $120 million more than Nepal, against over $190 million the previous year, and the gap will widen because the Tata and Adani groups are each working to generate 5,000 MW through separate joint ventures with the Bhutan government. Sri Lanka is not yet on India’s grid, but a 500 MW line connecting New Madurai with Mannar would, in time, let India draw on Sri Lanka’s solar and wind potential; the island still burns furnace oil for power and has high tariffs. When the new governments in Nepal and Bangladesh took office, the author notes, their first requirement was additional electricity, and India was the only country they could turn to. He argues that China’s lending can be countered only through credible sovereign income for these countries, that private investment in turnkey projects on win-win models beats China’s “sovereign debt dependency” structure, which Colombo experienced through its IMF bailout, and that deeper grid links create interlocking interests against anti-India street sentiment. The syllabus link is GS2 on India and its neighbourhood and GS3 on energy infrastructure.

Static syllabus linkage

1. Cross-border electricity trade is governed by Ministry of Power guidelines and regulator rules. The Ministry of Power issued guidelines on the import and export of electricity across borders in 2018, designating the Central Electricity Authority as the nodal authority for approvals. The Central Electricity Regulatory Commission (CERC) framed regulations on cross-border trade of electricity in 2019 covering transmission access and trading. A 2021 CEA procedure under the guidelines restricts imports from generating plants owned or funded by entities of a country that shares a land border with India and has no bilateral power-sector agreement with it, which is the legal basis of India’s refusal to buy power from China-funded plants in Nepal. Cross-border trade also takes place through power exchanges.
2. India–Nepal power ties rest on river treaties and a long-term trade agreement. The Mahakali Treaty of 1996 provides for the integrated development of the Mahakali river, including the Pancheshwar Multipurpose Project on the India–Nepal border. The Dhalkebar–Muzaffarpur 400 kV line was the first high-capacity cross-border link between the two countries. In 2024 India and Nepal signed an agreement for India to import 10,000 MW from Nepal over ten years, and Nepal began exporting power to Bangladesh through the Indian grid. The Kosi and Gandak agreements of the 1950s are earlier examples of water and power cooperation.
3. Bhutan is the model of hydropower partnership with India. India has built Bhutan’s major hydroelectric projects, including Chukha, Tala and Mangdechhu, through intergovernmental agreements that combine grants and loans, and buys the surplus power. Hydropower sale to India is Bhutan’s largest source of revenue. Bhutan has no formal diplomatic relations with China and has an unsettled boundary with it. The shift the column describes is from government-to-government projects to private Indian investment.
4. One Sun One World One Grid and BIMSTEC connectivity set the wider frame. Prime Minister Modi proposed One Sun One World One Grid (OSOWOG) at the first assembly of the International Solar Alliance in 2018 as a vision of an interconnected solar grid across time zones. The Green Grids Initiative–OSOWOG was launched jointly by India and the United Kingdom at COP26 in Glasgow in 2021. BIMSTEC members signed a Memorandum of Understanding for the establishment of the BIMSTEC Grid Interconnection at the Kathmandu summit in 2018. The Bangladesh–Bhutan–India–Nepal (BBIN) framework also covers energy cooperation.

Why UPSC loves this

1. GS2 regularly asks about China’s growing presence in India’s neighbourhood. Questions have asked how China’s BRI and ‘debt diplomacy’ affect India’s neighbourhood, and how India should respond. This column offers a specific, evidence-based answer: India’s market for electricity is an asset China cannot match, and it can be converted into influence.
2. GS3 links energy security with infrastructure and renewable integration. Cross-border grids help integrate variable solar and wind power by balancing across regions. UPSC has asked about OSOWOG and the International Solar Alliance. Hydropower from the Himalaya can balance India’s solar peaks, which gives the neighbourhood grid an energy-transition rationale beyond diplomacy.
3. Prelims draws on treaties and projects in the neighbourhood. The Mahakali Treaty, Pancheshwar, the BIMSTEC grid MoU and OSOWOG are all standard Prelims material. Projects in Bhutan and the countries they belong to are also frequently asked.

Analysis

1. India’s leverage comes from being the buyer, not the builder. China can outbid India in building dams, but a dam is worth nothing without a market for its power, and India is the only large market reachable by wire. By refusing to buy from China-funded plants, India turns Chinese loans into potential liabilities, as the Upper Trishuli collapse shows. This is monopsony power: the power of the sole buyer. The counter-view is that neighbours resent being told whom they may borrow from, and a rule that looks like economic coercion can feed the anti-India sentiment the column wants to prevent.
2. Bhutan and Nepal show that domestic politics decide who benefits from interdependence. Both countries have the same rivers and the same Indian market, yet Bhutan earns far more. The difference lies in political stability and a clear policy welcoming investment, while in Nepal six Indian projects and Pancheshwar have been stuck for years. India cannot fix Nepal’s politics, but it can offer predictable terms that make delay costly for Kathmandu. Grid diplomacy will succeed only where the partner government can deliver projects.
3. Private capital is a strength and a risk for India’s strategy. Replacing government grants with private investment, as in the Tata and Adani joint ventures in Bhutan, reduces the burden on India’s budget and gives projects commercial discipline. But it also ties India’s diplomatic image to the conduct of private firms. If a project runs into disputes over tariffs, land or environment, the neighbour will blame India, not a company. The government must retain oversight over contract terms precisely because these are strategic, not purely commercial, assets.
4. Sri Lanka’s link shows grids flow both ways. The New Madurai–Mannar line is framed as a way for India to access Sri Lankan solar and wind power, not only to sell power to Sri Lanka. That reverses the usual picture of India as supplier and makes the partnership more equal, which is politically important in Colombo. It also helps India balance its own grid with renewable power from another region. The obstacle is cost and Sri Lankan sensitivity about Indian dominance of strategic infrastructure.
5. The argument understates the ecological risks of Himalayan hydropower. The Upper Trishuli collapse in floods is also a warning about building large projects in a fragile, disaster-prone mountain range. If India buys power from Nepal and Bhutan, it shares responsibility for the safety of those projects, and Himalayan floods have damaged Indian projects too. A grid strategy must therefore include risk assessment, climate-resilient design and joint early warning, or the same floods that hurt China’s projects will hurt India’s.

Administrator's brainstorm