With the license of the major hydropower project funded by a leading Indian company hanging in the balance, the Indian officials are concerned about the situation.
During his recent Nepal visit, Indian Foreign Secretary Vinay Mohan Kwatra had also raised the issue with the Nepali officials. “When he met with Deputy Prime Minister and Minister for Energy, Water Resources and Irrigation Minister Rajendra Lingden on February 14, he had asked about what was happening with the Upper Karnali project,” said a senior official at the Energy Ministry. “We notified the Indian foreign secretary that the Nepal government has owned up the issue and already demanded the court to vacate its interim order.” The official said that they also notified the Indian foreign secretary that the government has responded to the court, saying that as the Indian company was preparing to sign a power purchase agreement with Bangladesh, the deadline extension for financial closure was necessary. Indian government officials also raised the issue during the 10th joint secretary-level Joint Working Group and the secretary-level Joint Steering Committee held in Jaipur, India on February 17-18. They were concerned about the investment climate for India-invested projects in Nepal, according to one Nepali delegation member. “While they didn’t specifically focus on the Upper Karnali project, it was clear to understand that they were hinting at the problem faced by GMR Energy,” said the delegation member. Citing a number of reasons, a single bench of Justice Ishwar Prasad Khatiwada had issued the interim order not to implement the decision until the final verdict on the matter. The Supreme Court’s interim order came at a time when the Indian company was preparing to sign a trilateral power sales agreement with the Bangladesh Power Development Board and NTPC Vidyut Vyapar Nigam Limited (NVVN). Bangladesh signed a memorandum of understanding with India’s NVVN to import electricity from the Upper Karnali project via India during Bangladeshi Prime Minister Sheikh Hasina’s visit to New Delhi in April 2017. Bangladesh has already issued a letter of intent to GMR Group expressing its interest to enter into a contract to purchase 500 MW of electricity from Upper Karnali. The power purchase agreement rate was also agreed upon between GMR Energy and the Bangladeshi authority at 7.712 cents per unit for a period of 25 years. However, the court issued an interim order based on the lack of the continuation of deadline extension since its deadline was last extended on November 10, 2017, for one year. “After the expiry of the deadline, no decision was taken to continue the agreement,” the court observed. “In the context where the last deadline expired three years ago and there has been no other extension, there is no logical justification to extend the deadline by two years from July 15 this year.” Officials at the Investment Board Nepal admit that indecision on the part of the board on extending the deadline as demanded by the Indian company was the main reason why the issue reached the Supreme Court. “The Indian company failed to accomplish the financial closure in time,” a lawyer with knowledge of the matter said. “The Investment Board also failed to take timely decisions on the extension which has now cast doubt on the future of the project.”
