The expert committee of the Investment Board has suggested that the Indian company GMR (Grandhi Mallikarjun Rao) could manage the financing of the Upper Karnali project. Even though the Reserve Bank of India rejected the proposal from the Indian Renewable Energy Development Agency (IREDA) to invest 5 percent equity in the Upper Karnali project, the committee has still recommended that GMR could manage the financial arrangements.

According to Indian media, IREDA was informed through a decision letter issued by the Reserve Bank of India on March 7 that its proposal had been rejected. Investment Board spokesperson Pradyumna Upadhyaya said that the expert committee had already suggested that GMR could manage the financing even before the information about IREDA’s proposal being rejected was received.

“After the expert committee had already given its suggestion, we came to know that the Reserve Bank of India had rejected IREDA’s investment proposal,” he said. “Now, the Board meeting will decide whether or not to proceed with GMR for the financial management of the Upper Karnali project.”

In the 900-megawatt Upper Karnali project, GMR will hold 34 percent of the shares, Indian government-owned company Satluj Jal Vidyut Nigam (SJVN) will hold 34 percent, IREDA will have 5 percent, and the Nepal Electricity Authority will hold 27 percent. The 60th meeting of the Investment Board had approved the change in the share structure submitted by GMR. An expert committee was formed to review the financial management report of Upper Karnali submitted by GMR on January 15.

Spokesperson Upadhyaya of the Board stated that although the suggestion has been received, no concrete decision has been made yet because the Board meeting has not been held. “We had formed an expert committee to study the documents submitted by GMR,” he said, “and the committee has already suggested that all the financial management documents are in order.” GMR had submitted documents to the Board claiming that investment management for the project had been secured, as IREDA had given a positive response to invest 65 billion Indian rupees in loans, and a group of Nepali banks had given in-principle approval to invest 20 billion Nepali rupees in loans.

However, after the Reserve Bank of India rejected the proposal, Upadhyaya suggested that a new joint venture agreement could be made by reallocating IREDA’s 5 percent share equally between GMR and SJVN, with each taking an additional 2.5 percent. The 60th meeting of the Board had been held on November 28, but no meetings have been held since then. The next meeting has been scheduled for the upcoming Sunday.

The Board has stated that the agenda for the upcoming meeting includes the financial management of the Upper Karnali project. On January 24, 2008, the Government and GMR had signed a memorandum of understanding (MoU) for the survey and construction of a 300-megawatt power plant for the Upper Karnali project. The government had awarded the Upper Karnali project to GMR under the Build, Own, Operate, and Transfer (BOOT) model.

An international bidding process had been conducted for the project, and GMR’s proposal was deemed the best, leading to the signing of an MoU between the then government and GMR in 2008 for project development.

On December 20, 2009, GMR submitted an application to the Department of Electricity Development requesting to increase the project’s capacity from 300 megawatts to 900 megawatts through maximum utilization. After the establishment of the Investment Board in 2011, the project was brought under the jurisdiction of the Investment Board Office through a Cabinet decision, as per the provisions of the Investment Board Act, 2068.

Similarly, on September 19, 2014, a Project Development Agreement (PDA) was signed between the Investment Board and GMR.

Although financial resources were supposed to be secured within two years of the signing of the PDA, GMR failed to do so within the stipulated time, and thus a one-year extension was granted in December 2016. When financial resources could not be secured even within the extended year, the Board again granted another one-year extension in November 2017.

Since September 2018, no additional time had been granted to GMR for financial management. Later, on July 15, 2022, the Cabinet meeting decided to grant another two-year extension.

According to the PDA, Nepal will receive 12 percent of the electricity for free and 27 percent of the project’s shares will be held by the Nepal Electricity Authority. Additionally, due to an interim order issued by the Supreme Court following a lawsuit, 186 days of lost time have been added to the project timeline.

Since the Supreme Court has already ruled that no further extensions can be granted, there was an obligation to secure financial resources for the project by January 18, 2025.

Earlier, on July 15, 2022, the government had extended the deadline by two years for financial management of the project.

A case was filed in the Supreme Court challenging that decision. On November 3, 2022, during a hearing on the writ petition, the Supreme Court issued an interim order instructing that the extension not be implemented. Later, on May 7, 2023, the Constitutional Bench of the Supreme Court issued a directive order to the Council of Ministers, instructing that no further time extensions be granted, in response to the writ petition filed by Ratna Bhandari and others.

Although the Supreme Court validated the extension granted until the time the case was filed, it later prohibited any further extensions. Previously, GMR had been granted multiple extensions due to its failure to secure financial resources. The Supreme Court’s order mentioned that GMR had already been given 10 years to secure financial resources for the Upper Karnali project, and this period was considered sufficient, thus no further extension was necessary.

Source: kantipur