Nepal and India have formalised a significant power trade agreement that will see Nepal exporting 10GW of hydroelectricity to India over the next ten years, Reuters reported.

It is expected the agreement will draw capital to Nepal's financially struggling hydroelectric industry.

The Himalayan rivers that flow into Nepal have the potential to generate 42GW of electricity. However, a lack of funding and technical know-how means the country currently produces less than 3GW.

The agreement is a strategic move to utilise this untapped resource and stimulate economic growth in the country.

Last year, the prime ministers of the two nations reached a long-term power trade agreement.

A Nepal Electricity Authority spokesperson was quoted by Reuters as saying: “This is a milestone for the attraction of investment for the development of our hydro sector.

“But we need to update our laws and coordinate line ministries and other agencies to finish the work on time.”

The power trade agreement was one of four deals executed during the Nepal-India Joint Commission meeting in Kathmandu, as informed by Prem Rai, spokesperson for Nepal’s Ministry of Foreign Affairs.

Indian companies are already involved in the construction and negotiation of power plants in Nepal, which could yield a combined capacity of 8.25GW.

According to officials, these billion-dollar projects will enable Nepal to sell excess energy to India and close its significant trade deficit with its southern neighbours.