A Short History Of The 300/900 MW Upper Karnali Hydroelectric Project

With the argument that GMR Energy would sell 500 MW power to Bangladesh, a two year license extension has been given. Upper Karnali is in West Nepal and to transfer this 500 MW through India’s Northern then Eastern Grids into Bangladesh is quite a troublesome ‘wheeling task’.

April 18, 2023, 6:01 p.m. Published in Magazine Issue: VOL. 16, No. 18, May.05, 2023 (Baisakh 22. 2080) Publisher and Editor: Keshab Prasad Poudel Online Register Number: DOI 584/074-75

Our Supreme Court is presently hearing the writ petition of Ratan Bhandari on the recent two year financial closure extension given to GMR Energy by the Investment Board of Nepal (IBN) for the construction of the 300/900 MW Upper Karnali Hydroelectric Project. As this Upper Karnali Project story started 17 years ago in 2006 and still ongoing in 2023, the following main historical points are being highlighted for those interested in it:

  • 2006 – Water Resources Minister, Gyanendra Bahadur Karki, tenders out for global bidding three projects: two run-of-river projects 300 MW Upper Karnali and 402 MW Arun III and the third Storage 600 MW Budhi Gandaki;
  • Ex-Finance Secretary Bhanu Prasad Acharya-led seven member Evaluation Committee (Lekhman Sing Bhandari/NEA Board member and ex-DG/DOED, Rajendra Kishore Chetri/Executive Director-WECS, Krishna Hari Banskota/Joint Secretary-MOF, Arjun Kumar Karki/MD-NEA, Sunil Bahadur Malla/SE-DOED and Anup Kumar Upadhaya/Joint Secretary-MOWR) rejected the two bidders (India’s Maytas and China’s Sinohydro) for 600 MW Storage Budhi Gandaki and recommended GMR Energy for both the 300 MW Upper Karnali and 402 MW Arun III;
  • Fortunately, the Parliament’s Subcommittee on Natural Resources and Means directed that only one project be awarded to one developer. Though GMR Energy insisted that it could develop both the Projects, it chose the 300 MW Upper Karnali and the 402 MW Arun III went to the next best evaluated bidder, Satluj Jal Vidyut Nigam – a Government of India undertaking;
  • 2008 – Joint Secretary Anup Kumar Upadhaya, who led the four member Committee (Rajendra Kishore Chetri/Joint Secretary-WECS, Sunil Bahadur Malla/DDG-DOED and Uttar Kumar Shrestha/DMD-NEA), signed the agreement with GMR Energy to commission the 300 MW Upper Karnali within 84 months – 30 months for survey license and 54 months for construction i.e commissioning by 2015;
  • 2009 – Energy Minister, Dr. Prakash Saran Mahat, approves the upgrading of 300 MW Upper Karnali to 900 MW;
  • 2011 – Investment Board of Nepal established, headed by Radhes Pant and later as all hydropower projects over 500 MW handed over to Investment Board, GMR Energy’s 900 MW Upper Karnali falls under the mandate of Investment Board;
  • 2014 – Making Void the agreement GMR Energy had signed with Joint Secretary Anup Kumar Upadhaya in 2008, Investment Board of Nepal signs the Project Development Agreement (PDA) with GMR Energy giving a two year term for Financial Closure;
  • During this period, Investment Board organized at its office an interaction with various stakeholders like the Independent Power Producers of Nepal (IPPN), governmental and non-governmental bodies where the Irrigation Ministry dropped the bombshell: the 900 MW four hour peaking operation of Upper Karnali without the Re-regulating Dam will have Adverse Impact Downstream to Nepal’s irrigation systems particularly to 11,000 ha of Rani Jamara Kulariya Project!
  • When the two year License for Financial Closure expired in 2016, three more one year extensions were given till 2018. Radhes Pant’s term at IBN also expires and Mahaprasad Adhikari takes over;
  • From 2018 to 2021 GMR Energy had no license at all as no extension was given;
  • 2022 March 28 (2078 Chaitra 14) – The Review Committee led by Bishwanath Paudel, Vice-Chairman of NPC (other members: Madhukumar Marasini, Secretary/MOF; Debendra Karki, Secretary/Energy, Water Resources and Irrigation; Udayaraj Sapkota, Secretary/ Law, Justice and Parliamentary Affairs; Sushil Bhatta, CEO/IBN; Radhes Pant, appointed by Coordinator and Bhagwan Aryal, member secretary, Joint Secretary IBN) recommends a two year extension for Financial Closure to GMR Energy.

It is in this context of two year Financial Closure extension to GMR Energy that Ratan Bhandari’s writ at Supreme Court is being heard. We, the Nepalese, question why Upper Karnali with a mere 2.4 Km headrace tunnel has not been able to complete its Financial Closure for 17 long years while the Arun III with 11.7 km tunnel is about to be commissioned in 2023-24:

i) The Kathmandu Post, February 28, 2022, headlined India’s SJVN signs paper to get Rs 101 Billion loan for Arun-3 Hydro Project and reported the following:

SJVN Chairman and Managing Director Nand Lal Sharma reaffirmed SJVN's commitment to complete the construction of 900MW Arun-3 hydropower project in Nepal by the fiscal year 2023-24, one year ahead of the scheduled commissioning of the project in February 2025, as required under Project Development Agreement and Financing Documents.

ii) 456 MW Upper Tamakoshi was licensed to NEA in 2007, about a year earlier to GMR Energy. Financed entirely through Nepal’s own resources, with a lengthy 8.4 Km headrace tunnel and another lengthy 68 Km access road (Charikot–Lamabagar), Upper Tamakoshi started commercial operation on 22nd August 2021, despite the disruption by the massive 7.8 Richter scale earthquake of 2015 and the 5 months India-imposed embargo.

With the argument that GMR Energy would sell 500 MW power to Bangladesh, a two year license extension has been given. Upper Karnali is in West Nepal and to transfer this 500 MW through India’s Northern then Eastern Grids into Bangladesh is quite a troublesome ‘wheeling task’. GMR Energy can easily sell this 500 MW power in its own hungry Northern Grid. But to get the ears of Nepalese decision makers, Bangladesh has been brought up as the ‘dekhaune dant’. This is all because GMR Energy has done nothing in the past 17 years while the two above mentioned Projects (that were licensed about the same time), Upper Tamakoshi is already commissioned and Arun III in the process of commissioning within a year. It is the responsibility of the Investment Board to tell the Nepalese people why GMR Energy has been given another 2 year extension for Financial Closure

Baisakh 4, 2080 (April 17, 2023)

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