The Parliament of Nepal endorsed the South Asian Association for Regional Cooperation (SAARC) Framework Agreement for Energy Cooperation on 30 August 2016 enabling the 8 SAARC member countries—Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka—to conduct cross-border electricity trade.

The Agreement allows

• Authorized entities of SAARC member states, including private or public power producers, power utilities, trading companies, transmission utilities, distribution companies or other institutions established under the law, to buy and sell electricity within the region; 
• Buying and selling entities to negotiate the terms and conditions, payment security mechanism and tenure of the electricity trade, subject to regulation by the laws of the concerned member states; and
• Member states to consider exempting export and import duties, and other fees for cross-border trade and exchange of electricity between buying and selling entities.

Under the Agreement, SAARC member states will provide non-discriminatory access to the regional transmission grids in their respective countries. Negotiations—through bilateral, trilateral, or regional agreements—will be conducted among member states in installing cross-border transmission lines and cross-border interconnections for cross-border electricity trade.

The Agreement envisaged forming a system operations and settlement mechanism, a regulatory mechanism, and a dispute settlement mechanism. The SAARC Arbitration Council is the final authority to settle disputes related to energy exchange and trade among member nations. 

The Agreement provides a review of the pact by the SAARC member states every five years from the date of entry into force. However, SAARC member states can forgo the review if it is deemed unnecessary, and communicate this to one another in writing.

Related Link:

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