The implementation of the proposed 480-megawatt Phukot Karnali semi-reservoir hydropower project, which is being developed with joint investment of Nepal and India, has become uncertain.

The Indian company NHPC Limited is reconsidering the agreement to provide a certain percentage of the electricity produced to Nepal for free. Additionally, a petition filed in the Supreme Court against the government’s decision to allow the Indian company to develop the project has cast further doubt on the project's immediate implementation.

During Prime Minister Pushpa Kamal Dahal's visit to India in May last year, an agreement was signed to build the project in Kalikot district through a joint venture between Nepal’s Vidyut Utpadan Company Limited and NHPC Limited. According to this agreement, the Indian company would hold a 51 percent share in the joint venture, with the Nepali company holding the remaining share. The agreement also stipulated that 21.9 percent of the energy produced would be available to Nepal free of charge.

However, Nepali officials reported that around a month ago, the Indian company demanded an amendment to the free electricity provision in the contract.

Bakhat Bahadur Shahi, Chief Executive Officer of the Vidyut Utpadan Company Limited, stated that NHPC has sent a letter requesting a reconsideration of this provision, claiming that the project is not financially feasible with the free electricity clause.

However, it is not clear to what extent NHPC seeks flexibility from Nepal regarding the free electricity provision.

Shahi mentioned that they the issue will be resolve through mutual agreement. "Since a writ has been filed against the agreement, bilateral discussions have not been possible," Shahi explained.

In December, Yashuda Kumari Baral and Ajay Bahadur Shahi from Raskot Municipality-8 of Kalikot filed a petition in the Supreme Court demanding the agreement be canceled, arguing that the 51 percent share given to the Indian company was not in the nation's interest. Baral criticized the decision, stating that projects that could be managed by the Government of Nepal should not be handed to foreign companies.

The writ lists 10 government offices, including the Office of the Prime Minister and the Council of Ministers, the Ministry of Energy, Water Resources and Irrigation, the Ministry of Finance, the Ministry of Forestry and Environment, the Department of Electricity Development, the Nepal Electricity Authority, the Vidyut Utpadan Company Limited, and the office of the Phukot Karnali Hydropower Project, as opponents.

Shahi noted that further discussions between the parties have been stalled due to the Supreme Court case concerning the share distribution to NHPC. The issue will only be resolved after the court's decision, after which formal negotiations on the concerns raised by the Indian company will proceed. "For now, we have informally replied that we should proceed according to the agreement," he said.

One year after the agreement, the joint venture has still not been registered with the government agency, casting doubt on the project's immediate implementation. Shahi indicated that the Indian company will be registered in the joint venture following the Supreme Court's decision and contract amendments.

Previously, Nepal had proposed that China build this project on the Karnali River under China's Belt and Road Initiative (BRI). However, no solid agreement was reached between Nepal and China, leading to the Indian company's involvement. NHPC has also been tasked with constructing the 750 MW West Seti and 450 MW Setinadi-6 projects.