"India's neighbours like Nepal, Bangladesh and Sri Lanka can manage their trade deficits with India by allowing Indian investment," said Jairam Ramesh, India's Minister of State for Commerce and Power. Ramesh is in Nepal for a Power Summit organised by the Independent Power Producers of Nepal (IPPAN) and the Power Trading Corporation (PTC) of India.

Indian and international investors in Nepal's hydropower, businessmen and experts are attending the two day conference that began on Tuesday.

"With the new government, Nepal now has the political will to send a message that it is an investment-friendly destination for hydropower," said IPPAN's Sandip Shah.

Prime Minister Pushpa Kamal Dahal said during his visit to India last week that he wants to "think big" and launch projects to generate up to 10,000 MW of power in the next two years. At present Nepal generates less than 600 MW and there is a crippling supply shortfall.

However, even if Nepal can meet the target of generating 10,000MW by 2018, domestic demand will have risen to 3,000MW by then, leaving only 7,000MW for export. Meanwhile, India by 2020 will be generating 300,000MW.

"What Nepal can provide us will be a drop in the pond for India, but for you it will mean income that can help reduce your trade deficit with India," Ramesh told the conference. Nepal's trade deficit in the last fiscal year was Rs 105 billion rupees.

In a message to the conference, Prime Minister Dahal echoed the concern about the trade gap with India. "Hydropower is a sector from which both Nepal and India can remain on a win-win situation and Nepal can mitigate
its trade deficit with India," Dahal said.

However, Nepal will need $20 billion in investments to meet its 10,000MW target in the next ten years. Three Indian companies have already signed agreements to develop the Arun III, Upper Karnali and Upper Marsyangdi projects while the Australians are involved in the West Seti. The Norwegian SN Power is involved in Upper Tamakosi. Together these projects will generate more than 2,200MW of power by 2014 onwards, much of it for export to India.

SN Power's Einar Stendtadvold, who led a 20-member Norwegian delegation to the conference, said he saw a huge potential in Nepal's hydropower sector now that the political process was on track. But he also pointed
out the hurdles: streamlining decision-making, respecting contracts, reliable licensing policy, skilled manpower and investment-friendly labour laws.

Ramesh told Nepal's ministers at the conference: "You have the remote control. You can go on fast forward on hydropower, or you can pause. But please let's not press the rewind button."