‘Only Sell Surplus Electricity Internationally After Meeting Nepal’s Domestic Demand’
The Supreme Court has issued strict guidelines to the government, instructing that interstate electricity trade must not compromise domestic consumption. The Court ruled that the long-term electricity purchase agreement between Nepal and India does not involve sharing of natural resources, and therefore, does not require approval by a two-thirds majority in the Federal Parliament. It further mandated that electricity sales under the agreement should only proceed without negatively impacting domestic demand and that such agreements must be published in the official government gazette.
On 27th Vaisakh in Kathmandu, the Supreme Court explicitly ordered that during cross-border electricity trade, Nepal’s domestic consumption should not be reduced. Following a petition filed against the electricity purchase agreement made between Nepal and India two years ago, the Court issued a directive recommending that the government sell surplus electricity internationally only after sufficient domestic demand is satisfied. In a full judgment released on 20th Kartik 2081, the Court stated, ‘Only sell or cause the sale of electricity in a manner that does not reduce or negatively affect domestic consumption.’
The petitioners, including Suryanath Upadhyay, challenged the agreement on the grounds that it is not a treaty concerning the sharing of natural resources, and thus does not warrant two-thirds parliamentary approval. The Supreme Court rejected this petition but issued several instructive directions, including the instruction that all domestic consumption must be met before selling electricity abroad.
The long-term power purchase agreement signed on 19th Poush 2080 between Nepal and India under Prime Minister Pushpa Kamal Dahal’s leadership facilitated electricity trade. Concerns were raised that despite the operation of hydropower-based reservoir projects, Nepal may not benefit adequately as transmission infrastructure remains under India’s control. The indefinite duration of the agreement and potential adverse impacts on Nepal’s interests led to demands for parliamentary approval.
Highlighting projections that domestic electricity demand could reach 50,000 megawatts within 20 years to support Nepal’s economic growth, critics argued the agreement could hinder development. Regarding whether approval under Article 279 of the Constitution is necessary, the Supreme Court clarified that such approval is required only for treaties related to peace, friendship, security, strategic relations, borders, and natural resource sharing.
Presided over by Chief Justice Prakash Man Singh Raut with Justices Sapana Pradhan Malla and Mahesh Sharma Paudel, the bench ruled that, ‘This agreement is not related to the distribution of natural resources, but solely pertains to hydropower trade, and therefore, cannot be considered a natural resource-sharing treaty.’ The Court emphasized that linking electricity purchase agreements to natural resource sharing is incorrect and recognized the agreement’s primary aim as promoting long-term electricity trade between the two countries. The agreement is thus viewed as a commercial arrangement based on hydropower development and utilization.
The Court noted, ‘Since electricity is generated from water, it is not a natural resource itself. If electricity were considered a natural resource, then agricultural produce emerging from the land would also have to be considered natural resources, potentially leading to export restrictions.’ Consequently, the Court determined that parliamentary approval is unnecessary for the electricity agreement.
The government had authorized the Energy Secretary to enter into the agreement, which includes provisions for electricity trade, infrastructure development, and investment promotion. The Court instructed that surplus electricity can be sold to India up to 10,000 megawatts only after Nepal’s consumption requirements have been fully met.
After rejecting the petition, the Supreme Court directed the government to inform the Federal Parliament about ratified treaties and to publish agreements in the official gazette. It also urged international coordination to ensure that electricity trade, grid interconnection, and transmission infrastructure expansion do not adversely affect national interests or domestic consumption. The directive further stated, ‘If the implementation of the agreement involves natural resource-sharing, parliamentary approval must be obtained as stipulated in the Constitution.’
