The government has decided to give two more years to the Indian company Grandhi Mallikarjuna Rao (GMR) to complete the financial management of the Upper Karnali Hydropower Project.

Government Spokesperson Gyanendra Bahadur Karki in a regular press conference on Sunday said that the meeting of the Council of Ministers held on Friday had decided to extend the deadline of completing the financial management of the project by two years.

In the 51st meeting of the Investment Board Nepal (IBN) held on June 6 under the chairmanship of Prime Minister Sher Bahadur Deuba, it was recommended to the Cabinet of Ministers of Nepal that it extended the deadline under a condition that the developer of the Upper Karnali Hydropower Project, GMR, completes the financial management within 24 months. Based on the recommendation, the meeting of the Council of Ministers held on Friday decided to extend the deadline by two years.

On July 7, the government also formed a task force under the coordination of Vice Chairman of National Planning Commission Biswo Poudel to study whether to extend the deadline for the Upper Karnali Hydropower Project.

Although a deadline of 45 days was set for the task force, the report was submitted later than that. Based on the report, the working group suggested extending the deadline by two years with conditions.

Even after eight years of signing the Project Development Agreement (PDA) of the Upper Karnali Hydropower Project, GMR has not been able to complete important tasks including the power purchase agreement (PPA) and the financial management of the project. A PDA was signed between the IBN and GMR on 19 September 2014. According to the agreement, the project was set to be completed within seven years where PPA and financial management of the project would be completed within two years while the construction was to be completed in the remaining five years.

Even after eight years of the PDA, GMR has not been able to conclude the PPA and the financial management of the project, let alone the construction of the project.

The recent meeting of the Council of Ministers decided to extend the deadline by two years after almost three years of the expiration of the original deadline of the project. IBN — the implementing body of the project — had not extended the deadline for GMR from September 2018. The Bangladesh Power Development Board issued a Letter of Intent (LOI) on January 30, 2020, to purchase electricity generated from this project. The LOI had opened a way for advancing the PPA. It had been said that the agreement would include Bangladesh purchasing the electricity produced by GMR at 7.712 cents (US currency) per unit.

However, until now, no such PPA between GMR and Bangladesh Power Development Board has been signed. On 19 December 2019, the Public Procurement Monitoring Office approved the Bangladesh government’s proposal to purchase 500 megawatts of electricity generated from the project. GMR will sell 500 MW of the electricity generated from the project to Bangladesh and 292 MW to India’s NVVN. The remaining 180 megawatts will be provided to the Nepali government free of charge. GMR will give a 27 percent share of the project to Nepal Electricity Authority.

GMR has estimated the cost of the project, which is to be built on the Engineering Procurement and Construction (EPC) model, to be USD 1.5 billion. The project falls in Achham, Dailekh and Surkhet districts. For the construction of the project, two tunnels will be constructed and 322 hectares of land will have to be acquired. The electricity generated from the project will be exported to India and Bangladesh using a 99 km double-circuit transmission line of 400 kV. The government of Nepal and GMR reached an agreement to construct the project in 2008.