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Opinion | India’s anti-China electricity trade guidelines could backfire in South Asia
- Efforts to freeze out Chinese investment in power projects in South Asia will do little to improve India’s economic or soft power in the region
- Likewise, undermining the development of a liberal market for cross-border power trade in the region limits gains towards energy security
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It is no secret that India’s guidelines on cross-border trade of electricity aim to discourage Chinese investment in power projects in the Bangladesh-Bhutan-India-Nepal (BBIN) corridor. By securitising electricity, these guidelines are likely to shape the upcoming tripartite power trade pact between Bangladesh, India and Nepal and also influence Beijing’s economic overtures to Bhutan.
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Therefore, a critical analysis of the guidelines at this juncture is called for. I argue that they do little to advance India’s geopolitical heft in the region. Challenges with hydropower construction, feeble gains to local populations and pseudo-monopolistic behaviour are key problems that undermine any potential geopolitical or energy security gains from this policy.
Political differences – most notably between India and Pakistan – have hampered the growth of a South Asia-wide cross-border electricity trade platform. However, in the BBIN region, recent developments showcase the will to move ahead with power trading projects. The region includes two states with significant potential for generating surplus energy from hydropower in Bhutan and Nepal.
The other two constituents, India and Bangladesh, are power-hungry nations which have faced energy shortages in recent times and are transitioning towards greener energy sources. Apart from this, these countries also have high seasonal complementarities in their energy demands which make cross-border electricity trade an appealing policy choice.
India’s electricity trade guidelines have emerged in tandem with the emerging cross-border electricity trade between BBIN countries. Through masterful legalese, the approval procedures under this policy prohibit the trade of electricity via the Indian electrical grid with projects that are linked to investments or involvement from China.
The fact that India is centrally located in the BBIN region and no two other countries from this group share a border means the policy has significant potential to shape the future of cross-border electricity trade in the region. The effects of this shift are already evident in Nepal, where Chinese developers have been removed from six hydropower projects and four contracts have been awarded to Indian companies.
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