A FICCI-World Bank research paper has suggested energy trade between SAARC countries to help overcome crippling shortage of energy in South Asia. The paper released ahead of the two-day SAARC Business Leaders Conclave starting here from today suggests that public sector policymakers should focus on enhancing energy security through trade rather than the costly proposition of full national energy self-sufficiency.

The paper stressed that countries importing electricity and natural gas should promote sectoral reforms to encourage internal trade within countries and an environment to evolve market price signals. The countries should ensure that entities importing energy are financially solvent and creditworthy. For energy-exporting countries, the paper said they should ensure a stable and attractive investment environment as well as stable supply to domestic markets to mitigate the risk of energy exports being diverted to domestic consumption.

The paper released by Federation of Indian Chambers of Commerce and Industry (FICCI) and World Bank notes that India and Pakistan could serve as pillars of regional integration in the eastern and western SAARC areas. The eastern and western cluster could be integrated into a region-wide integrated energy market.

The eastern cluster will comprise Bangladesh, Bhutan, India, Nepal and Sri Lanka while Afghanistan, Pakistan and India comprise the western cluster. For the eastern cluster, the opportunities include expanding India’s bilateral electricity beyond Bhutan to Nepal and possibly gas and electricity imports from Bangladesh. The four countries then could link with Myanmar for gas exports.

In the western cluster, the priority options include expanding electricity imports from central Asia beyond Afghanistan to Pakistan and subsequently to India, the paper said. The market serving a population of 1.5 billion is one of the largest in the world and with its size can mitigate risks of external shock, reduce costs, create profitable trading opportunities and attract investments, the paper stated.

The paper also notes the developments including rising electricity exports from Bhutan to India, and that India is looking at setting up a pipeline to transport natural gas from Myanmar and financing a coal power plant in Sri Lanka. Also, India and Pakistan are pursuing possibilities of gas imports from Iran and Turkmenistan and if they materialise, it will integrate Afghanistan with both the south Asian and central Asian energy systems.