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SC spanner on FDI in hydels?

Sabitri Dhakal

Sabitri Dhakal

SC spanner on FDI in hydels?

The Supreme Court had issued an interim order on Nov 3 demanding to know why the firm had failed to manage funds on time

Chances of Nepal exporting 500 MW of electricity to Bangladesh appear slim, at least for the foreseeable future.

This is mainly because an interim order from the Supreme Court, issued on Nov 3 2022, has put on hold the agreement based on which the Indian promoter company Gandhi Mallikarjun Rao (GMR) was planning to sell 500 MW in Bangladesh after completing the construction of the 900-MW Upper Karnali Project.

On 15 July 2022, the Council of Ministers had extended the deadline given to GMR by two years for financial management and directed the company to finalize a relevant deal with Bangladesh within 18 months.

The Supreme Court had issued an interim order on Nov 3 demanding to know why the firm had failed to manage funds on time. Issuing its verdict on a writ petition filed by Ratan Bhandari, a single bench of Supreme Court Judge Ishwar Prasad Khatiwada had issued an interim order to not implement the decision of extending the deadline given to GMR. This, according to experts, is spoiling the environment for foreign investment in Nepal’s hydropower sector.

In mid-November last year, the government had moved the Supreme Court demanding that the interim order be vacated. The Upper Karnali project is being constructed under the build-own-operate-transfer model. If the project materializes, Nepal will receive 27 percent free equity and 12 percent free energy from the project, amounting to 108 MW of electricity, approximately equal to 15 percent of the current installed capacity in Nepal.

Bangladesh has issued a letter of intent to GMR, expressing interest to sign a contract for the purchase of 500 MW. The power purchase agreement was expected to be signed by  December, which has not happened thus far.

It is not only the case of Upper Karnali alone, with a petition filed in the SC against the West Seti project as well.

The court order will have a bearing on the overall investment climate in the country, per hydropower experts. “The order will give an impression to foreign investors that investing in Nepal is difficult. In such a case, the developers will not be willing to invest here,” said Amrit Lamsal, spokesperson at Investment Board Nepal. The experts say the decisions should not put the entire work on halt. “The court should issue verdicts on time if such projects are against national interest,” said Mukesh Kafle, former managing director at Nepal Electricity Authority.