India has a hydro power potential of close to 150, 000 MW. The South Asia Regional Initiative for Energy (SARI-E) assesses Nepal's hydropower potential, which lies in its major river systems at around 42,000 MW. For Bhutan it is estimated to be 16,280 MW, Sri Lanka 2,423 MW and Bangladesh about 1800 MW. A simple back of the envelope calculation shows that together the South Asian region possesses a hydropower potential greater than 200,000 MW
Add to these the abundant natural gas deposits in Bangladesh and Afghanistan, the newest entrant to Saarc, and there is no dearth of energy in the region. Yet, in 2003 the total energy shortfall for the region was roughly estimated at 125 million tons of oil equivalent (Mtoe) according to the Energy Information Administration's international energy statistics. This is because the geographical distribution of energy is uneven and vastly differs from the distribution of demand. A logical step then would be regional energy trade to relieve energy supply constraints.
Already there exists some energy trade in the region albeit small in magnitude. Bhutan exports a bulk of the hydroelectricity generated at Tala (1,020 MW), Chukka (336 MW) and Kurichhu (60 MW) to India. The energy exchange between India and Nepal is about 50 MW, according to the World Bank.
Further trade within Saarc and with its neighbours would only help to enhance the energy availability of the region. The paper "Defining an Integrated Energy Strategy for India" by The Energy Research Institute estimates that gas imports from Bangladesh and Myanmar could bring in about 14 and 17 million cubic meters per day respectively to India. The entry of Afghanistan has literally brought large deposits of natural gas through the Turkmenistan and Afghanistan Pipeline (TAP) to the doorstep of Saarc. SARI- E estimates that TAP can supply up to 30 billion cubic meters of gas annually to Afghanistan, Pakistan and India.
With energy consumptions projected to almost double in the region by 2020 to 1200 Mtoe per year cooperation between both consuming and supplying countries is vital. It's a win-win opportunity where energy resource-surplus countries (Nepal, Bhutan, Central Asian countries, Iran, Myanmar) would benefit from energy export-led growth and implementation of large-scale regional projects. Those with significant energy import needs (India, Pakistan, Sri Lanka, Afghanistan) would attain enhanced energy security. While others like Bangladesh would gain from improving the energy mix.
A recent FICCI -World Bank research paper states that India and Pakistan would serve as the two pillars of
regional integration in the eastern and western SAARC regions. This would lead to the creation of an energy
market serving about 1.5 billion people and its sheer size would mitigate risks, bear external energy price shocks, and reduce costs. With investment requirements for India and Pakistan alone estimated to be $220 billion by 2010, another positive fallout would be increased investments and jobs for the entire region.
While the economic benefits appear clear, competing political interests and at times open hostility have thwarted the effort. Energy trade presents a Catch-22 situation for the region as reduction of tensions and conflicts, both regional and domestica, is critical for energy sharing. At the same time energy could be the bedrock on which trade, investment and commercial cohesion could be built and thus help in lowering political tensions. Imaginative financing and risk mitigating strategies involving multilateral financing institutions as neutral parties will help to build confidence and to strengthen this virtuous circle of trade growth and regional peace.