Nepal Power Trading Company Limited (NPTC), a subsidiary of the Nepal Electricity Authority (NEA), has received approval to buy and sell up to 100 MW of electricity, opening the way for the company to begin electricity trading after years of preparation.

The NEA Board has approved the sale of electricity generated by projects that already have power purchase agreements (PPAs) with the authority. NPTC plans to sell the electricity to India and potentially other international markets. The decision has now been forwarded to the Electricity Regulatory Commission for final approval.

The approval comes with conditions. NPTC cannot sell electricity for less than Rs 5.45 per unit and cannot charge a trading margin of more than 10 paisa per unit. Once regulatory approval is secured, the company plans to seek proposals from potential buyers and identify markets for the electricity.

Nepal exported electricity worth Rs 29.32 billion in the last fiscal year while importing electricity worth Rs 10.22 billion from India during the dry season. The NEA has so far handled these transactions itself under its existing legal authority.

NPTC was established as an NEA subsidiary in 2073 BS but has not previously started electricity trading. Its shareholding is divided among NEA (51%), Electricity Generation Company Nepal (17%), Rastriya Prasaran Grid Company Nepal (17%) and HIDCL (15%). The company has an authorised capital of Rs 1 billion.

The move has, however, renewed concerns among private-sector energy companies that the government is giving its own subsidiary an advantage while keeping private electricity traders waiting for licences. Companies including Nepal Power Exchange (NEPEX), NIFRA Trading and Energy Exchange and Himalayan Trading Electricity have sought permission to enter the electricity trading business.

Private-sector representatives argue that Nepal needs more electricity traders as domestic demand does not always absorb the country's generation capacity. IPPAN has also criticised the lack of a clear pathway for private companies to sell surplus electricity internationally.

The government says it is working to address the issue through amendments to the Electricity Act 2049. The Ministry of Energy has said preparations are underway to allow greater private-sector participation in electricity trading.

The Electricity Regulatory Commission's existing legal framework already provides for electricity purchase and sale by licensed entities and includes provisions related to PPAs, transmission charges and open access for cross-border electricity trading. The government's current budget has also proposed legal arrangements for electricity trading using transmission infrastructure on a wheeling-charge basis.