Indian Council of World Affairs

Introduction 

The traditional regional platforms like the South Asian Association for Regional Cooperation (SAARC) remain stagnant, and the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC), though active, is slow in progress. In this context, the evolving strategic landscape of South Asia is witnessing an emphasis on functional, interest-driven trilateral cooperation. The trilateral agreement between India, the UAE, and Sri Lanka to develop Trincomalee as a regional energy hub and the India-Nepal-Bangladesh trilateral agreement to enable cross-border electricity trade reflect a collective willingness among South Asian states to pursue pragmatic solutions in an increasingly complex geopolitical climate. These emerging trilaterals signal a shift towards a flexible, outcome-oriented mechanism, which can address domestic and regional interests amidst fast-changing regional dynamics. 

The trilateral cooperation mechanisms that India is trying to pursue in South Asia also align with India’s Neighbourhood First Policy, which places emphasis on mutually beneficial cooperation among the countries in the region. The trilateral mechanisms are also expected to address competing geopolitics amidst China’s push towards trilaterals in the region. China’s parallel efforts to advance trilateral dialogues with Pakistan, Bangladesh and Afghanistan can be seen as extensions of its Belt and Road Initiative (BRI) and can pave the way for China’s greater economic role in the region.

In this context, the paper will look at the two trilateral agreements signed in recent years by India in the region and their prospects and challenges.

India-Bangladesh-Nepal Trilateral Agreement

Enhancing energy cooperation has emerged as an important aspect of regional cooperation in South Asia.  India is emerging as a central player and key stakeholder in shaping regional energy cooperation. In line with this, a trilateral agreement between India, Nepal, and Bangladesh was signed on 3 October 2024,[i] to facilitate cross-border electricity trade. As per the agreement, all parties agreed upon the exchange of 40 megawatts of electricity from Nepal to Bangladesh via Indian territory. The deal has the potential to increase greater sub-regional cooperation in the energy sector, resulting in a mutually beneficial outcome.

Map showing the route for the transmission of electricity from Nepal to Bangladesh via Indian territory
Source: Created by Author

As Per the agreement, Nepal supplied 40 MW of electricity to Bangladesh from 15 June 2025 to 15 November 2025, via India, using the 400-kV Muzaffarpur-Baharampur-Bheramara transmission line.[ii] Nepal is charging 6.4 US cents per unit of electricity, which Bangladesh agreed to pay, and will import electricity from Nepal for another 5 years.[iii]

The agreement reached on electricity trade is important for a number of reasons. This can help Nepal earn revenue from the electricity trade, given the limited export basket of the country. Nepal has the capacity to produce surplus electricity, with domestic electricity consumption of around 1,389 MW and an installed generation capacity of approximately 3878 MW.[iv] Nepal’s annual revenue from this electricity trade is estimated at around Rs. 1.25 billion.[v]

Nepal also suffers a trade deficit of Rs. 46.31 million with Bangladesh; therefore, this trilateral agreement can help to lower the trade deficit with Bangladesh by selling electricity in dollars, which is being done for the first time[vi]. Nepal is expected to sell 144,000 MWh of electricity every year in five months from June to November. The trilateral agreement is in sync with Nepal’s ‘Energy Development Roadmap and Action Plan-2081’. By implementing this plan, Nepal aims to generate 28,500 MW of electricity by 2035, consuming 13,500 MW for domestic purposes and exporting the remaining 15,000 MW.[vii] If implemented as planned, this will position Nepal strategically as an important contributor to sub-regional energy security.

Bangladesh, on the other hand, generates around 24,000 MW of electricity against an estimated demand exceeding 30,000 MW.[viii] Bangladesh is also heavily dependent on natural gas[ix] for its energy needs. Hydroelectricity accounts for just 1 per cent of Bangladesh’s total generation capacity, while renewable energy as a whole constitutes only 2 per cent.[x] Therefore, it is expected to benefit from the import of hydroelectricity from Nepal, as it will add renewable energy to its energy basket and future energy diversity and security for Bangladesh. According to Bangladesh, this initiative will not only meet immediate energy needs but also ensure long-term energy security in an environmentally friendly manner.[xi]

This agreement allows India to showcase a model of development cooperation centred on efficiency, rapid delivery, and transparency that provides South Asian states like Nepal and Bangladesh an alternative pathway for energy connectivity in an increasingly competitive regional landscape.[xii]

The India-Nepal-Bangladesh agreement also addresses South Asia’s long-standing deficit in ‘HAT’ connectivity, where ‘H’ stands for hydropower, ‘A’ stands for aviation, and ‘T’ stands for tourism, as it allows Nepal, a hydropower-exporting country, to integrate more effectively into the regional energy market. Improved energy and transit facilities also help the flow of tourism and enhance aviation connectivity. Consequently, this trilateral agreement provides a practical mechanism to address South Asia’s connectivity gaps.[xiii]

India-Sri Lanka-United Arab Emirates Trilateral Agreement

Another important trilateral agreement in South Asia is the India, Sri Lanka, and UAE MoU signed on 5 April 2025, to jointly develop Trincomalee in Sri Lanka as a multifaceted key energy hub. Under this agreement, the three countries agreed to develop infrastructure and energy projects in Trincomalee, including the refurbishment of the World War II-era tank farm and the development of a new refinery.[xiv] This agreement aims to unlock the full potential of Trincomalee as an energy and logistics gateway of South Asia, along with enhancing Sri Lanka’s energy security.

Trincomalee holds exceptional economic potential as a logistics and energy hub, anchored by its British-era oil tank farm. It is located on the north eastern coast of Sri Lanka, which is one of the largest and deepest natural harbours in the world. The harbour also holds a critical position due to its location near major maritime lines of communication that link South Asia, Southeast Asia, East Asia, the Middle East, and Africa. Historically, Trincomalee has been valued for its capacity to command naval routes and trade across the wider Indo-Pacific. As the Indian Ocean region emerged as a key player in the global maritime trade, its strategic importance has been immensely recognised by powers in the region in contemporary times.[xv]

Map showing Trincomalee Harbour
Source: Created by Author

Trincomalee occupies an important place in India’s strategic and security thinking, as any country’s control over the Trincomalee harbour could pose serious threats to India’s eastern coastline and possibly to critical nuclear and space installations in Southern India. In terms of trade, over 80% of India’s oil imports and 90% of its trade volume come through the Indian Ocean. So, by developing Trincomalee, India is trying to counterbalance China’s expanding role in the region. China has invested heavily in Hambantota Port,[xvi] a strategic port in the south of Sri Lanka. In this context, Trincomalee is important for India’s Indo-Pacific strategy, and India has been involved in various projects in the area. The most prominent among them are a solar power plant in Sampur village and the renovation of the Thirukoneswaram temple in Trincomalee.[xvii]

By involving the UAE as a partner to develop Trincomalee, India’s important bilateral partner in West Asia, India is trying to strengthen its partnership with like-minded nations, who are keen to work with India in the region. 

The UAE is also keen to expand its foothold in the region, to diversify its energy diplomacy, and to tap into the South Asian market.[xviii] The energy market is shifting from Organisation for Economic Co-operation and Development (OECD) countries to rapidly growing Asian countries like India, China, Japan, and South Korea. This is seen as a reason for the UAE’s keen interest in developing energy cooperation in the Indian Ocean Region (IOR).[xix] UAE’s energy diversification strategy also supports economic diversification through a targeted investment of between AED 150 and 200 billion in energy projects by 2030[xx]. Therefore, energy agreements with India and Sri Lanka can facilitate this diversification by creating new infrastructure linkages in the region, which can reduce its overdependence on its traditional exports like crude oil and refined petroleum.[xxi] Currently, 30 per cent of the UAE’s GDP is directly based on oil and gas exports.[xxii] Beyond energy, the UAE’s growing engagement in the Indian Ocean region is centred around its Jebel Ali Port, which is a key component of Dubai’s transport and logistics sector and the second largest in terms of GDP (11.5% in 2023).[xxiii] For Jebel Ali port to remain functional, the Indian Ocean trade routes need to remain secure and uninterrupted. Therefore, the UAE is trying to expand its maritime connectivity through agreements in the Indian Ocean and also via platforms such as the Indian Ocean Rim Association (IORA).

For Sri Lanka, the development of the Trincomalee oil tank farm can reduce its dependency on other countries for crude oil. Sri Lanka’s Sapugaskanda oil refinery is catering to 30% of the country’s domestic demand, and the rest 70% is fulfilled by importing petroleum products from other countries.[xxiv] So, for Sri Lanka, this agreement provides future energy security. In response to further ensure energy security, the Sri Lankan cabinet accepted an expression of interest in February 2025 to increase the capacity of its Sapugaskanda oil refinery to 100,000 barrels per day under a Build-Operate-Transfer (BOT) model,[xxv] which Sri Lanka is hoping will attract investors from the Middle East, the United States, China, Japan, and India.[xxvi]  In addition, Sri Lanka has also signed an agreement with the Chinese state energy giant Sinopec in January 2025 to develop a state-of-the-art $3.7 billion oil refinery in the investment zone near Hambantota International Port (HIP).[xxvii]

As of November 2025, progress on the Trincomalee energy hub has moved into a preparatory phase. According to Sri Lanka’s Energy Minister, Colombo is waiting for the joint working team from India for further discussions on the refurbishment and operationalisation of the Trincomalee oil farm tank.[xxviii] Sri Lanka’s participation in the Trincomalee agreement is also shaped by its broader commitment to a multi-aligned foreign policy approach which emphasises economic recovery.[xxix]

Assessment

Both these agreements align with India’s effort to promote regional energy connectivity in South Asia. The India, Nepal, and Bangladesh agreement has the potential to boost Bangladesh-Bhutan-India-Nepal (BBIN) Cross-Border Electricity Trade (CBET). At present, South Asia commands only about 10% of CBET in the Asia Pacific.[xxx] The India-Nepal-Bangladesh energy cooperation also aligns with the BIMSTEC MOU on grid connection, thereby creating a pathway for BIMSTEC’s connectivity goals.[xxxi] For South Asian states like Sri Lanka and Nepal, more trilateral agreements like this will provide an economic pathway that preserves strategic autonomy while balancing investment.

Despite their growing relevance, these trilaterals also remain vulnerable to domestic political shifts. In Bangladesh, the political changes associated with the change of leadership in 2024[xxxii] created a degree of uncertainty for partner states. Similar dynamics are evident in Nepal, which witnessed a youth uprising in September 2025 against government corruption, leading to leadership change.[xxxiii] Even in Sri Lanka, a public uprising led to a change of leadership in 2022 and the formation of a new government through elections in 2024. These domestic developments in India’s neighbourhood can pose a challenge regarding the implementation and continuity of trilateral agreements in the future.[xxxiv]

Intensifying geopolitical competition with China’s expanding strategic engagement in South Asia is also a major constraint. The emergence of the China-led Trilateral framework in South Asia involving Beijing, Islamabad, Kabul, and Dhaka is viewed as a counterweight to India’s regional influence.[xxxv] China’s recalibrated foreign policy soft power strategy focuses on people-to-people diplomacy, aiming to shape perceptions and opinions towards China, complementing its broader geopolitical agenda.[xxxvi] In this context, India’s tripartite agreements in South Asia can help to secure energy cooperation with like-minded countries.

Against this backdrop, the trilateral agreements signed are important, as they provide alternative forms of cooperation in sectors that need immediate attention and cooperation at the regional level. Trilateral agreements are also useful in building momentum to ensure regional energy connectivity and security and have the capacity to ensure delivery of timely outcomes, particularly in a scenario where the SAARC is stagnant. From India’s perspective, these trilateral agreements serve as a bridge between sustaining diplomatic momentum and in strengthening neighbourhood partnerships.

***** 

*Sachin Yadav, Research Intern, Indian Council of World Affairs, New Delhi
Disclaimer: Views expressed are personal. 

Endnotes

[i] “Inauguration of First Trilateral Power Transaction – from Nepal to Bangladesh through the Indian Grid.” 2024. Ministry of External Affairs, Government of India. November 15, 2024. https://www.mea.gov.in/press-releases.htm?dtl%2F38523%2FInauguration_of_first_trilateral_power_trans.

[ii] “Nepal Starts Exporting 40 MW of Electricity to Bangladesh via Indian Grid.” 2025. Business Standard. June 15, 2025. https://www.business-standard.com/world-news/nepal-starts-exporting-40-mw-of-electricity-to-bangladesh-via-indian-grid-125061500236_1.html.

[iii] Prasain, Sangam. 2024. “Nepal Begins Historic Power Export to Bangladesh via India.” Kathmandu Post. The Kathmandu Post. November 16, 2024. https://kathmandupost.com/money/2024/11/16/nepal-begins-historic-power-export-to-bangladesh-via-india.

[iv] “Nepal’s Installed Capacity of Electricity Reaches 3,878 MW.” 2025. My Republica. Republica. July 20, 2025. https://myrepublica.nagariknetwork.com/news/nepals-electricity-installed-capacity-reaches-3878-mw-56-50.html.

[v] Kafle, Laxman. 2025. “Nepal Starts Commercial Export of Electricity to Bangladesh.” Risingnepaldaily.com. The Rising Nepal. June 16, 2025. https://risingnepaldaily.com/news/63613.

[vi] “Nepal Suffers Trade Deficit with Bangladesh for a Decade | New Business Age.” 2024. New Business Age. September 29, 2024. https://newbusinessage.com/news/40714/nepal-suffers-trade-deficit-with-bangladesh-for-a-decade.

[vii] “The Energy Roadmap.” 2025. The Rising Nepal. March 17, 2025. https://risingnepaldaily.com/news/58759.

[viii] Man Shrestha, Prithvi . 2024. “Nepal Proposes Tariff for Electricity Export to Bangladesh.” @Kathmandupost. The Kathmandu Post. February 6, 2024. https://kathmandupost.com/national/2024/02/06/nepal-proposes-tariff-for-electricity-export-to-bangladesh.

[ix] “Energy System of Bangladesh.” 2023. IEA – International Energy Agency. 2023. https://www.iea.org/countries/Bangladesh.

[x] “Energy Scenario of Bangladesh.” 2024. Energy and Mineral Resources Division (EMRD). https://hcu.portal.gov.bd/sites/default/files/files/hcu.portal.gov.bd/publications/ae775b7e_b63d_491d_81e4_b317ff8e11ca/2024-07-15-09-11-d13a3451b969fb9a3c5c74e9130c9f6c.pdf.

[xi] “Nepal, Bangladesh, India Sign 40MW Power Agreement.” 2024. Dhaka Tribune. October 3, 2024. https://www.dhakatribune.com/bangladesh/foreign-affairs/360698/nepal-bangladesh-india-signs-40mw-power.

[xii] Bhanu, Mehjabin. 2023. “India-Nepal-Bangladesh Power Diplomacy Is a Big Step for Regional Cooperation in South Asia.” South Asia Monitor. June 30, 2023. https://www.southasiamonitor.org/spotlight/india-nepal-bangladesh-power-diplomacy-big-step-regional-cooperation-south-asia.

[xiii] Birat Anupam. 2024a. “With Start of Trilateral Hydropower Trade, South Asia Begins Historic Cooperation.” Thediplomat.com. The Diplomat. November 21, 2024. https://thediplomat.com/2024/11/with-start-of-trilateral-hydropower-trade-south-asia-begins-historic-cooperation/.

[xiv] Saha, Rushali . 2025. “Three-Way Energy Play: The India-Sri Lanka-UAE Deal in Trincomalee | Lowy Institute.” Lowyinstitute.org. April 14, 2025. https://www.lowyinstitute.org/the-interpreter/three-way-energy-play-india-sri-lanka-uae-deal-trincomalee

[xv] Latief Tantray, Talha , Dr R. Sudhakar, and Shubham Singh Charak. 2024. “View of Trincomalee Harbour in the Indo-Pacific: Strategic Significance and Contemporary Geopolitical Implications for India.” Unican.es. Journal of Maritime Research. July 24, 2024. https://www.jmr.unican.es/jmr/article/view/981/968.

[xvi] Ibid.

[xvii] “List of Outcomes: Visit of Prime Minister to Sri Lanka.” 2025. Pib.gov.in. April 5, 2025. https://www.pib.gov.in/PressReleaseIframePage.aspx?PRID=2119186®=3&lang=2.

[xviii] “UAE, India, Sri Lanka Sign Tripartite MoU to Develop Trincomalee as Regional Energy Hub.” 2025. Www.wam.ae. Emirates News Agency -WAM. April 6, 2025. https://www.wam.ae/en/article/bj1itz6-uae-india-sri-lanka-sign-tripartite-mou-develop.

[xix] Loup Samaan, Jean . 2021. “Insight 268: The UAE: An Emerging Middle Power in the Indian Ocean? – NUS – Middle East Institute.” Nus.edu.sg. Middle East Institute (Singapore). October 12, 2021. https://mei.nus.edu.sg/publication/insight-268-the-uae-an-emerging-middle-power-in-the-indian-ocean/#_ftnref4.

[xx] “UAE Energy Strategy 2050 | the Official Platform of the UAE Government.” 2017. The United Arab Emirates’ Government Platform. 2017. https://u.ae/eu/about-the-uae/strategies-initiatives-and-awards/strategies-plans-and-visions/environment-and-energy/uae-energy-strategy-2050.

[xxi] UAE Embassy 2024. “UAE Energy Diversification | UAE Embassy in Washington, DC.” UAE Energy Diversification | UAE Embassy in Washington, DC. 2024. https://www.uae-embassy.org/discover-uae/climate-and-energy/uae-energy-diversification.

[xxii] International Trade Administration 2025. “United Arab Emirates - Oil and Gas.” International Trade Administration. August 25, 2025. https://www.trade.gov/country-commercial-guides/united-arab-emirates-oil-and-gas.

[xxiii] “Jebel Ali: Facilitating Dubai’s Growth Agenda.” 2024. Emirates NBD Research. November 7, 2024. https://www.emiratesnbdresearch.com/-/media/jebel-ali_facilitating-dubai-growth-agenda.pdf.

[xxiv] “Request for Expression of Interest (EOI).” 2025. Ceylon Petroleum Corporation. August 15, 2025. https://ceypetco.gov.lk/wp-content/uploads/2025/08/EOI-Document-Sapugaskanda-Refinary-Development.pdf.

[xxv] Ibid.

[xxvi] “Sapugaskanda Refinery Attracts Global Investors.” 2025. Newsfirst.lk. October 5, 2025. https://www.newsfirst.lk/2025/10/05/sapugaskanda-refinery-attracts-global-investors.

[xxvii] Jayasinghe, Uditha. 2025. “Sri Lanka Agrees with China’s Sinopec to Fast-Track $3.7 Billion Refinery.” Reuters, January 22, 2025. https://www.reuters.com/world/asia-pacific/sri-lanka-china-agree-fast-track-sinopecs-37-bln-refinery-hambantota-2025-01-22/.

[xxviii] “Sri Lanka Expecting Joint Working Team from India on Trinco Tanks : Minister.” 2025. EconomyNext. November 22, 2025. https://economynext.com/sri-lanka-expecting-joint-working-team-from-india-on-trinco-tanks-minister-249362/?utm_source=chatgpt.com.

[xxix] DeVotta, Neil. 2024. “Sri Lanka in 2024: Political Realignment and the Road Ahead – South Asian Voices.” South Asian Voices. December 16, 2024. https://southasianvoices.org/pol-m-sl-r-sri-lanka-2024-12-16-2024/.

[xxx] George, Joseph . 2023. “Cross-Border Electricity Trade in the BBIN Subregion: Status, Issues and Prospects.” ESCAP. Economic and Social Commission for Asia and Pacific. October 16, 2023. https://www.unescap.org/sites/default/d8files/event-documents/Cross-border%20Electricity%20Trade%20in%20the%20BBIN%20Subregion_Joseph%20George%2C%20SRO-SSWA%2C%20ESCAP.pdf.

[xxxi] “Grid Interconnection Coordination Committee - Home-the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic.” 2018. Bimstec.org. BIMSTEC. August 31, 2018. https://bimstec.org/grid-interconnection-coordination-committee.

[xxxii] Paul, Ruma, Krishn Kaushik, Devjyot Ghoshal, and Krishna N Das. 2024. “Insight: Bangladesh Student Protesters Eye New Party to Cement Their Revolution.” Reuters, August 16, 2024. https://www.reuters.com/world/asia-pacific/bangladesh-student-protesters-plan-new-party-cement-their-revolution-2024-08-16/.

[xxxiii] Sharma, Gopal. 2024. “Nepal PM Forms New Coalition, Dumps Old Allies.” Reuters, March 4, 2024. https://www.reuters.com/world/asia-pacific/nepal-coalition-crisis-pm-talks-with-opposition-new-alliance-2024-03-04/.

[xxxiv] DeVotta, Neil. 2024. “Sri Lanka in 2024: Political Realignment and the Road Ahead – South Asian Voices.” South Asian Voices. December 16, 2024. https://southasianvoices.org/pol-m-sl-r-sri-lanka-2024-12-16-2024/.

[xxxv] Pant, Harsh V, and Aditya Gowdara Shivamurthy. 2025. “A China-Led Trilateral Nexus as India’s New Challenge.” Orfonline.org. OBSERVER RESEARCH FOUNDATION ( ORF ). June 28, 2025. https://www.orfonline.org/research/a-china-led-trilateral-nexus-as-india-s-new-challenge.

[xxxvi] Sami, Adnan. 2024. “China’s Soft Power Play in South Asia.” Modern Diplomacy. September 12, 2024. https://moderndiplomacy.eu/2024/09/12/chinas-soft-power-play-in-south-asia/.