The two countries are likely to sign an MoU for a Rs 2,500-crore (Rs 25 billion) project.
The government's initiative to have trading of electricity with Sri Lanka is likely to bear fruit by mid-2014, with the commissioning of a high capacity power transmission link between the two countries.
Power Grid Corporation of India (PGCIL), the country's largest electricity transmission utility and the implementing agency for the project from the Indian side, is likely to sign a memorandum of understanding (MoU) for developing the Rs 2,500-crore (Rs 25 billion) project with the neighbouring country by next month.
The 285-kilometre India-Sri Lanka power link, which includes submarine cables over 50 km, will enable the two countries to trade their surplus power with each other, thereby offering a cheaper option to bridge their power generation deficits and also manage peak demand.
"We are going to sign the MoU with the Sri Lankan side for the project in December. After this, it will take us six months to start work on the development of the project. We will complete the project within three years," Power Grid Chairman and Managing Director S K Chaturvedi said.
While India generally reels under an overall 12 per cent peak power deficit currently, minute electricity surplus in eastern and southern grids become available seasonally.
"With the commissioning of the Krishnapatnam Ultra Mega Power Project (UMPP) in Andhra Pradesh, tradeble surplus would become available," Chaturvedi said.
UMPPs are large-sized projects being developed by the private sector. The Krishnapatnam UMPP is being developed by Anil Dhirubhai Ambani-owned Reliance Power and is likely to be commissioned by 2015.
The link will help Sri Lanka reduce its use of expensive fuels and import cheaper power from India's surplus. For India, the link will help open a new market for its projected surplus of power.
The subsea line would initially have a capacity of transmitting 500 Mw, according to Power Grid's feasibility report.
"Later, the power flow could be ramped up to 1,000 Mw, beginning 2016, when the power generation capacities in the two countries improve, with surplus availability especially in the Indian southern grid," Chaturvedi said.
The completion of the proposed undersea transmission link, however, would also depend on the commissioning of NTPC's 500 Mw imported coal-based power project being planned to be set up at Trincomalee in Sri Lanka. The undersea project would be useful in evacuation of power from the plant.
"The transmission project is linked to the Trincomalee plant. It takes at least four-five years to set up a coal-based project, while my project takes only three years for completion," Chaturvedi said.
While the work on NTPC's project has not begun, an official from NTPC said the construction work would begin as soon as all the necessary approvals were obtained.
Powergrid and Ceylon Electricity Board (CEB), the largest electricity company of Sri Lanka, will lay down cables under the Gulf of Mannar between Rameswaram in Tamil Nadu and Talaimannar in Sri Lanka.
Globally, transnational undersea power transmission lines have been laid so far only between the UK and the France for transferring 2,000 Mw of electricity.
The Philippines plans to set up similar transmission links to connect its islands through the undersea electricity network.
