The financial management plan for the Upper Karnali Hydropower Project, submitted seven months ago, has yet to be approved. The project, which took 10 years to prepare its financial plan for the Investment Board Nepal (IBN), is being developed by India’s Grandhi Mallikarjuna Rao (GMR). GMR submitted the financial plan on Jan 17, but it has remained pending due to issues involving one of its proposed shareholders, the Indian Renewable Energy Development Agency (IREDA).
IREDA had committed to invest five percent in the 900 MW project, but the Reserve Bank of India (RBI) did not approve the investment, citing incomplete processes. IREDA has since reapplied for approval after addressing RBI’s requirements. Meanwhile, GMR has also prepared an alternative shareholding structure without IREDA, proposing 36.5 percent each for GMR and Sutlej Jal Vidyut Nigam (SJVN), and 27 percent for the Nepal Electricity Authority (NEA). If RBI clears IREDA’s participation, however, the shareholding will remain as earlier proposed—34 percent each for GMR and Sutlej, five percent for IREDA, and 27 percent for NEA.
Investment Board spokesperson Pradyumna Prasad Upadhyay confirmed that no official request has yet been received regarding the change in shareholding. The board had earlier approved Sutlej and IREDA as equity partners in its 60th meeting, and GMR had signed agreements with both in August 2025 to sell shares. According to IBN, GMR also retains the option of financing the project through the net worth of its parent company if IREDA’s investment is ultimately rejected.
GMR was awarded the project in 2008 after applying in 2006. However, the company has repeatedly extended deadlines for financial closure, including in 2016, 2017, 2018, 2019, and 2022. The financial plan was finally submitted in 2024 along with an action plan, under which some initial works—such as access road construction and bridge preparations—have already begun.
According to GMR’s plan, pre-construction work is scheduled from early 2025 to Feb 2026, with major construction starting afterward. Diversion works are set for Jan 2026 to Aug 2027, road tunnel construction from Jan 2026 to May 2027, and the Karnali River bridge from Jan to Nov 2026. The company also plans to complete the transmission line by Jan 2026. Key components such as the headrace tunnel, dam, powerhouse, and electromechanical works are targeted for completion between 2029 and 2031, with the entire project expected to be finished by June 2031.
The project, located in Achham district, aims to supply electricity to Nepal, India, and Bangladesh. Nepal will receive Rs 4.5bn in benefits over 25 years through equity, free energy, and royalties. Initially, GMR had signed a power purchase agreement to export 500 MW to Bangladesh, but the Bangladesh government suspended such deals under the Special Power Act, and its Power Development Board has reportedly cancelled the preliminary supply agreement. However, IBN says it has not received any official communication regarding this decision.
The Upper Karnali project is considered one of the lowest-cost hydropower projects in the world, requiring only a 2.4-kilometer tunnel and displacing relatively few households. But with delays in construction, the estimated cost has already escalated to nearly Rs 2.5trn.
