Diplomats and regional analysts love a good geographic romance. For the past decade, the favorite talking point in South Asian geopolitics has been the South Asian trilateral sub-regional cooperation model. The narrative is always the same: Nepal possesses boundless untapped hydropower, Bangladesh suffers from chronic power shortages, and India sits perfectly in the middle as the benevolent transit hub and market creator.
It sounds clean. It sounds efficient. It is almost entirely a myth.
The consensus celebrated by regional think tanks ignores a brutal reality. True trilateral energy cooperation in South Asia does not exist. What we actually have is a series of fragmented bilateral arrangements where one dominant player holds all the cards. Treating this dynamic as a progressive, three-way partnership is not just naive; it actively blinds policy planners to the structural bottlenecks that will keep this region energy-starved for decades.
The Transit Illusion and the Power Grid Reality
The fundamental flaw in the trilateral narrative is the assumption that electricity flows like water across borders without political friction. To understand why this fails, look at the physical infrastructure. Nepal cannot send a single megawatt of electricity to Bangladesh without using Indian transmission lines. Bangladesh cannot buy a single megawatt from Nepal without New Delhi’s explicit permission, regulation, and tariff approval.
This is not a trilateral grid. It is a hub-and-spoke system masquerading as an open network.
When regional experts praise agreements like India’s decision to facilitate the transmission of 40 megawatts of electricity from Nepal to Bangladesh, they celebrate a drop in the bucket. Bangladesh's peak demand routinely crosses 16,000 megawatts. A 40-megawatt token allocation is a diplomatic press release, not an economic strategy.
I have watched state entities spend years negotiating these tiny allocations, treating them as massive victories while ignoring the core issue. India’s Cross-Border Trade of Electricity (CBTE) guidelines are designed to protect national security and domestic market interests. They are not designed to create a free-flowing, frictionless regional energy market. Under the current framework, any electricity passing through India must comply with strict ownership clauses. If a hydropower project in Nepal has even a fraction of investment from a country India deems a security risk, that power is barred from entering the Indian grid. This effectively gives New Delhi a permanent veto over who builds infrastructure in Nepal and who buys it in Bangladesh.
Why Nepal and Bangladesh Are Misreading the Market
Nepal often views its water resources through an outdated twentieth-century lens, treating hydropower as the ultimate geopolitical leverage. The prevailing belief in Kathmandu is that both India and Bangladesh will eventually become so desperate for clean energy that Nepal can dictate terms.
This is a dangerous miscalculation.
First, India is aggressively expanding its own domestic renewable energy capacity. New Delhi is not solely reliant on Himalayan runoff; it is betting heavily on massive solar arrays and domestic green hydrogen initiatives. By the time Nepal develops a fraction of its projected 42,000-megawatt economically viable hydro potential, the cost of solar and battery storage may drop so low that imported piped hydro will look expensive, rigid, and strategically risky.
Second, Bangladesh is trapped in a different structural vice. The country needs baseload power—stable, uninterrupted electricity to feed its manufacturing sectors. Hydropower from Nepal is highly seasonal. During the dry winter months, river flows drop drastically, and Nepal itself often has to import power from India to meet domestic demand. Bangladesh needs power most during the hot summer and monsoon months, which aligns with Nepal's peak generation, but relying on a seasonal source that travels through a foreign third party is a recipe for grid instability.
Imagine a scenario where a manufacturing hub in Chittagong relies on an alpine dam in the Himalayas. A severe winter delays the snowmelt, an administrative dispute pauses transmission in Bihar, and suddenly the factory floor goes dark. No serious industrial economy operates on hope of that nature.
The High Cost of the Middleman
We must talk about the economics of the transit state. In any genuine trilateral setup, the middle country acts as a neutral pipeline. In South Asia, India acts as the buyer, the seller, the regulator, and the transmission owner.
When Nepal sells power directly to India, the prices are strictly monitored and often subject to intense bilateral bargaining. When Bangladesh buys power, it faces steep costs. Introducing a third party's infrastructure means paying wheeling charges, transmission losses, and dealing with currency fluctuations across three different jurisdictions.
| Country Role | Strategic Bottleneck | Economic Risk |
|---|---|---|
| Nepal (Producer) | Seasonal river flows; lack of domestic capital to build transmission | Over-reliance on a single buyer for export revenues |
| India (Transit/Buyer) | Infrastructure capacity constraints; domestic market protectionism | Regulatory gridlock delaying regional connection |
| Bangladesh (Consumer) | Deep dependence on external grid security; high transmission costs | Hard currency drain for seasonal, intermittent power |
The numbers simply do not add up for a private investor looking to fund these cross-border lines. Without massive state subsidies from taxpayers, building high-voltage direct current (HVDC) lines across the narrow Siliguri Corridor to connect Nepal directly to northern Bangladesh is an economic non-starter.
Dismantling the Consensus on Regional Trade
Whenever this critique is raised, regional optimists point to the Bangladesh, Bhutan, India, Nepal (BBIN) Motor Vehicles Agreement as proof that sub-regional cooperation works. They argue that if trucks can move, electrons can move.
This is a false equivalence. A truck carries a discrete cargo that can be delayed at a border checkpoint for three days without destroying the utility of the product. Electricity requires instantaneous, split-second balancing of supply and demand. If the regulatory frameworks of India, Bangladesh, and Nepal do not perfectly align, the system collapses.
Currently, the three nations operate on entirely different grid codes, frequency management protocols, and legal structures for liability during grid failures. If a surge on a Nepalese line trips a substation in West Bengal and causes a blackout in western Bangladesh, who pays the damages? Who takes the blame? The current legal framework offers no answers, because no one wants to cede sovereign control over their national grid to a trilateral authority.
The Honest Path Forward
If these nations want to secure their energy futures, they must abandon the romantic notion of a harmonious trilateral brotherhood. Instead, they need to execute two brutal shifts in strategy.
1. Bangladesh Must Build Domestic Coastal Infrastructure
Stop waiting for the Himalayas to power Dhaka. Bangladesh needs to maximize its deep-water access. This means investing heavily in liquefied natural gas (LNG) terminals, floating storage regasification units (FSRUs), and looking south toward maritime energy partnerships rather than looking north across land borders it does not control.
2. Nepal Must Price for Reality, Not Potential
Kathmandu needs to stop treating its hydro potential as a sovereign pride chip and start treating it as a perishable commodity. Power ungenerated is revenue lost forever. Nepal must offer deep concessions to international developers—including Indian public and private firms—to build domestic transmission lines that connect directly into the Indian National Grid. Forget trying to bypass India to reach Bangladesh; sell directly to the Indian market at competitive rates, and let India handle the onward sale if it chooses.
The trilateral model is a comforting distraction for bureaucrats who prefer signing memorandums of understanding to pouring concrete. Until the physical, regulatory, and political sovereignty of the transit state is factored into the equation as a permanent barrier rather than a temporary hurdle, the grand South Asian energy grid will remain exactly what it is today: a network of promises that cannot survive the winter.
