Energy Cooperation Between India and Nepal: Prospect and Implications

An agreement signed between India and Nepal on 5 January 2024 is a significant development as far as energy trade between the two South Asian neighbours is concerned. It provides further impetus to the agreement of Electric Trade, Cross-Border Transmission Interconnection and Grid Connectivity signed on 21 October 2014. Both South Asian states have a common predicament of an energy crisis. Fifth fifth-largest economy in the world, India has an energy shortfall; however, it ranks third in terms of global energy consumption. Likewise, Nepal, on the other hand, is energy-deficient and depends on India for its energy requirements. India’s growing economy demands an adequate supply of power, and its shortage will have negative repercussions on its development. Similarly, Nepal’s economic growth has been inhibited by the erratic supply of power. Notwithstanding its immense potential for hydro power generation, due to financial constraints and technological limitations, it has not been able to utilise its resources completely. Both India and Nepal now rely heavily on the import of non-renewable energy to meet their requirements. However, India’s adherence to sustainable development and commitment to generate renewable/clean energy makes the import of crude oil and natural gases unfeasible in future. Furthermore, India’s firm position on climate change and reduction of CO2 emissions to create a cleaner, greener, and healthier planet will make the quest for eco-friendly alternatives inevitable. Hence, the prospect for renewable energy in Nepal becomes crucial for both in myriad ways. It is in this backdrop; this paper tries to explore the significance of synergy between India and Nepal. It assesses a complex interplay among environment, economy, and politics from a theoretical framework of Complex Interdependence. The paper also delves into the nuances and intricacies of the geopolitical implications of cooperation in South Asia.