The Supreme Court has barred the government from extending the deadline for the financial closure of the 900-megawatt Upper Karnali Hydropower Project.

Making public the full text of the verdict issued by the constitutional bench of the SC on the case filed against the government’s decision to extend the deadline for financial closure for the Grandhi Mallikarjuna Rao (GMR), the Indian promoter of the Upper Karnali Hydropower Project, the court allowed the government last decision to provide a two-year time period for financial closure but barred the latter from extending it further.

The SC issued its verdict on May 7 this year. However, on November 3 last year, the SC had issued an interim order against the government’s decision to give additional time for the company for the financial arrangement.

According to the court verdict, the company will get additional six months since the interim order to alter it in May – which means it can finalise the financial closure by February 2024.

Stating that the company failed to arrange financial resources to develop the project for a decade and the project had got enough time for the same, the court said that further extension of the deadline would be against the public aspirations for development and prosperity and public policy. It also asked the government to proactively implement the project.

Meanwhile, the SC also issued an order in the name of the government to complete the land acquisition in Achham district which has been remaining stalled although there had been successful coordination for the same in other locations.

A Cabinet meeting in mid-July 2022 decided to extend the financial closure deadline for the GMR till mid-July 2024. Ratan Bhandari had filed a writ at the SC against the decision.

However, the court had denied issuing certiorari and mandamus against the government as demanded by the petitioners as there was no a condition that the deadline was against the constitution or the law of land. “The project development agreement with the company was not the one which should be approved by the parliament but it is a business agreement signed with the government and company established in Nepal,” read the verdict.

The SC also refrained from questioning the government’s wisdom regarding the addendum for financial closure as it is being considered as the final extension of the deadline.

The SC verdict also directs the concerned parties not to make a negative impact on the water supply or irrigation projects in the Karnali watershed areas as the Water Resources Act-1992 maintained that the use of water resources is a priority. Likewise, it said that the people in the area should be benefitted from the revenue generated from the project.

Upper Karnali is a large picking run-of-the-river project being developed in Karnali province in Achham, Dailekh and Surkhet districts. The initial project cost was estimated at Rs. 116 billion in 2011. As per the agreement signed with the GMR, Nepal would receive revenue of Rs. 431 billion during the concession period (25 years from the date of power generation), 108 MW free energy, 27 per cent free share to the Nepal Electricity Authority, and shares worth Rs. 1.6 billion would be sold to the local people.

According to the Investment Board Nepal, the project was expected to create 3,000 direct jobs during the construction period of five years and support 2-MW energy for the rural electrification.