Nepal and India have formally signed a historic Power Trade Agreement (PTA) which paves the way for free trade of power between the two neighboring countries. The signing took place at Nepal Prime Minister Sushil Koirala's office at Singha Durbar in Kathmandu, Nepal on 21 October 2014, with Nepal Energy Secretary Rajendra Kishore Kshatri and India Power Secretary Pradeep Kumar Sinha in attendance.

The PTA—formally the “Agreement on Electric Power Trade, Cross-border Transmission Interconnection and Grid Connectivity”—is expected to boost cooperation between Nepal and India in the power sector, paving the way for governmental, public and private enterprises of both countries to engage in developing transmission interconnections, grid connectivity, and power exchange. It also allows licensed energy producers to engage in cross-border electricity trade.

With the PTA ensuring an Indian market for power generators in Nepal, investments promoting development of Nepal's hydropower resources are expected to benefit the country economically, while expanding its source of energy.

A Joint Working Group and a Joint Steering Committee—scheduled to meet every six months—were also formed. These permanent mechanisms will monitor existing areas of cooperation, and explore and identify new areas of cooperation. The first meeting of the Working Group is set in November, according to a statement released by the Indian Embassy.

Earlier in September 2014, Nepal and India signed a preliminary version of the PTA, following Indian Prime Minister Narendra Modi's visit to Nepal, where he and Prime Minister Koirala both agreed to prioritize finalization and signing of the agreement.

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• Nepal, India Enact Power Trade