India’s GMR set to sell power to Bangladesh after Nepal’s top court ruling

Kathmandu: In a major relief to India’s GMR Energy, Nepal’s Supreme Court cleared the company’s path to develop the 900MW Upper Karnali Hydropower Project in western Nepal.

GMR’s project had fallen into uncertainty after Nepal’s Supreme Court in November had issued an order staying the Nepali government’s decision to extend the company’s financial closure deadline by two years.

But on May 7, a five-member constitutional bench of Nepal’s Supreme Court headed by its acting Chief Justice Hari Krishna Karki issued the verdict in favour of the Indian company by scrapping the six different writ petitions filed against deadline extension. Financial closure means ensuring enough resources to implement the project.

GMR Upper Karnali Hydropower Limited is one the largest in Nepal, targeting hydro- production of 900MW.

The ruling will benefit Bangladesh.  “Our next task will be to sign a power sale agreement with Bangladesh and accomplish the financial closure,” said a GMR source who wanted to stay anonymous.

On July 15 last year, Nepal’s cabinet had decided to extend the deadline for GMR Energy to conclude financial closure by two years.

According to the source, the GMR was preparing to sign the power sale agreement with Bangladesh in January this year but it could not happen due to intervention by Nepal’s court.

Bangladesh had signed a memorandum of understanding with India’s NTPC Vidyut Vyapar Nigam Limited (NVVN) of India to import electricity from the Upper Karnali project via India during Bangladesh Prime Minister Sheikh Hasina’s visit to New Delhi in April 2017.

Bangladesh has also issued a letter of intent to GMR Group expressing its interest to enter a contract to purchase 500 MW of electricity from the Nepal-based Upper Karnali Project.

The Nepali Supreme Court had issued an interim order at a time when the Indian company was preparing to sign a trilateral power sales agreement with the Bangladesh Power Development Board and NVVN.

However, the court had issued an interim order citing the lack of the continuation of deadline extension since its deadline was last extended on November 10, 2017, for one year. “After the expiry of the deadline in November 2017, no decision was taken to continue the agreement,” the court observed in its interim order. “Given the context that the last deadline expired three years ago and there has been no other extension, there is no logical justification to extend the deadline by two years from July 15 (last year).”

The court had also questioned why the cabinet was involved in taking the decision as the Investment Board, Nepal which deals with large-scale investment proposals, has been authorised by the law to do so.

After the Supreme Court’s interim order, Nepal’s government agencies including the Indian company moved to the same court demanding that the interim order be vacated.

Indian officials including Indian Foreign Secretary Vinay Mohan Kwatra when he visited Nepal in February, also raised concerns over the interim order issued by the Supreme Court, according to Nepali media reports.

 

Annapurna Express, an English language tabloid in Nepal reported on February 22 quoting a source at the Ministry of Energy, Water Resources and Irrigation that Kwatra had raised the issue during the meeting with the immediate Deputy Prime Minister and Energy Minister Rajendra Lingden on February 14.

“He (Kwatra) had asked about what was happening with the Upper Karnali project,” a senior official at the Energy Ministry told the Annapurna Express. “We notified the Indian foreign secretary that the Nepal government has owned up the issue and already demanded the court to vacate its interim order.”

The official had also told the newspaper that they had also notified the Indian foreign secretary that the Nepali government had responded to the court, saying that as the Indian company was preparing to sign a power purchase agreement with Bangladesh, the deadline extension for financial closure was necessary.

Indian government officials also raised the issue during the 10th joint secretary-level Joint Working Group and the secretary-level Joint Steering Committee held in India in February, the newspaper reported.

The Indian side had expressed concern about the investment climate for the Indian company hinting at the intervention by Nepal’s highest court, it reported.

Amrit Lamsal, spokesperson at the Investment Board Nepal told India Narrative that the GMR officials were complaining about the ‘opportunity losses’ for the company since the interim order was issued.

“The latest verdict of the Supreme Court has, however, opened the door for the Indian company to carry out its works,” he said. “The Investment Board will take necessary decisions on how to engage with Indian companies regarding the development of the project once the full verdict of the court is released.”

The GMR has long been struggling to accomplish the financial closure to develop the Upper Karnali project which was awarded to in 2008 through international competitive bidding on a build, own, operate, and transfer model. India’s state-owned SJVN Limited, which was awarded the 900 MW Arun 3 project at the same time, is about to complete the construction of the project, Nepali officials said.

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