India has proposed a new charge of 0.005 Indian rupees per unit on electricity supplied to Bangladesh under a mechanism for settling cross-border power transactions. The proposed fee could slightly increase Bangladesh's electricity import costs and comes as Dhaka prepares to sign a new agreement with India covering payments and other grid-related transactions.

The proposed arrangement is particularly important for 1,160 MW of electricity supplied through Indian state-owned NTPC Vidyut Vyapar Nigam Ltd (NVVN). According to a report by Prothom Alo, Bangladesh's Power Division has sought the Finance Division's opinion on signing a Settlement Nodal Agency (SNA) agreement between the Bangladesh Power Development Board (BPDB) and NVVN. The Power Division sent its request on August 18. Any delay in finalising the agreement could complicate the settlement process for the electricity covered under the arrangement. The proposed SNA charge was introduced by India's Central Electricity Regulatory Commission (CERC) for cross-border electricity transactions. The regulator had initially proposed a fee of 0.01 Indian rupees per unit, but the amount was reduced to 0.005 rupees per unit following an application from BPDB.

Why the new charge matters

Officials from Bangladesh's Power Division and BPDB said the proposed fee is separate from the actual cost of electricity. Instead, it is intended to cover services associated with managing cross-border power transactions, including scheduling, meter reading, reconciliation of electricity supplied and consumed, and settlement of payments.

The financial impact on Bangladesh is expected to be relatively small because the proposed charge is only half a paisa per unit. However, the new mechanism is significant because it would establish a more structured process for settling transactions between the two countries.

NVVN to handle settlements

Under the proposed SNA arrangement, NVVN would act as the nodal agency responsible for settling relevant electricity transactions. The system is expected to simplify payments by reducing the need for separate settlement arrangements with individual power producers.

The SNA mechanism has already been used for cross-border electricity trade between India and neighbouring countries, including Nepal and Bhutan. For Bangladesh, officials expect the system to streamline scheduling, measurement and financial settlement of imported electricity.

Bangladesh imports 2,656 MW

Bangladesh currently has agreements to import a combined 2,656 MW of electricity from India through several arrangements. Government-level agreements involving NVVN cover 250 MW from an NTPC plant, 300 MW from Damodar Valley Corporation and 160 MW from the Tripura State Electricity Corporation.

Bangladesh also imports 200 MW from a Sembcorp Energy India plant through PTC India and another 250 MW directly from Sembcorp. The proposed BPDB-NVVN SNA agreement covers 1,160 MW of the total imports.

Separately, Bangladesh imports 1,496 MW from Adani Power's Godda plant in Jharkhand. BPDB officials said the existing power purchase agreement with Adani already contains provisions covering such charges, meaning a separate SNA agreement would not be required for that supply.

The proposed settlement mechanism therefore affects only part of Bangladesh's overall electricity imports from India. Its final implementation will depend on the agreement between BPDB and NVVN and the views of Bangladesh's Finance Division on the proposed arrangement.