The Sunkoshi Marin Diversion Multipurpose Project’s contract for constructing a dam and powerhouse has been cancelled just days before the financial proposals of shortlisted companies were scheduled to be opened, throwing the delayed national pride project into fresh uncertainty.

The project invited international competitive bids on June 8, giving prospective contractors 30 days to submit their proposals, seven months after terminating its previous contract. The process had reached the final stage, with three companies qualifying for financial evaluation. Their financial proposals were scheduled to be opened on Monday.

The cancellation was confirmed by Ashok Raj Gautam, a senior divisional engineer at the project. “The contract has been cancelled as directed by the Department of Water Resources and Irrigation. The department will have to decide whether to invite fresh bids or take some other course of action,” Gautam told Kantipur.

The process of opening the financial proposals scheduled for Monday will not move forward. “It has been cancelled for now,” he said, without providing further details.

According to a highly-placed police source, Director General of the Department of Water Resources and Irrigation Dinesh Rajouria and project director Krishna Prasad Rijal, who had left Kathmandu on Thursday ostensibly to inspect the project, were taken under control and handed over to the Office of the Prime Minister and Council of Ministers. Following a discussion at the Prime Minister’s Office on Friday, the cancellation notice was issued bearing that day's date.

Six construction companies had participated in the bidding process. Three Chinese companies—China International Water and Electric Corporation, Anneng-RCC JV and Sinohydro Corporation Limited—had passed the technical evaluation and qualified for the final round. The other bidders, which failed to qualify, were India's SIL, Vietnam's Song Da Corporation and China's CREGC-SWDCC JV.

The project had invited international bids because the contract exceeded Rs5 billion, allowing foreign companies to participate in joint ventures with Nepali firms under the Public Procurement Regulations.

The latest decision has raised concerns about further delays to a project intended to provide year-round irrigation to 122,000 hectares of farmland in five Tarai districts—Bara, Rautahat, Sarlahi, Mahottari and Dhanusha—and generate 31.07 megawatts of electricity.

The previous contract had been awarded to Patel-Raman JV, comprising India's Patel Engineering and Nepal's Raman Construction, for Rs14.07 billion in January 2023. The company was supposed to complete the dam and associated structures within four years and seven months, by mid-August 2027. But after 60 percent of the contract period had elapsed, physical progress had failed to cross 11 percent.

The project terminated the contract on November 11, 2025, issuing a 15-day notice after work on the dam, powerhouse and related structures failed to make adequate progress. Patel-Raman subsequently challenged the decision at the Supreme Court on November 25, 2025, naming then-energy minister Kulman Ghising, the ministry, the department, the project and its consultants as defendants.

On November 26, a single bench of Justice Tek Prasad Dhungana issued an interlocutory interim order preventing the authorities from implementing the termination and confiscating the company's bank guarantees. However, on February 9, the court revoked the interim order, clearing the way for the government to proceed.

The company had deposited Rs2.4 billion as performance security. The company received Rs1.2 billion in advance payment. Although the advance payment of Rs1.2 billion has been recovered, the performance guarantee has yet to be collected.

The Public Procurement Monitoring Office subsequently blacklisted the joint venture for three years, barring it from securing new public contracts during that period, although it can continue existing projects.

Former energy minister Ghising criticised the cancellation, saying the authorities should have moved quickly to award a new contract rather than prolonging the process.

“I don't know why the contract was cancelled,” said Ghising. “The previous contractor's agreement was terminated because it was not doing the work. The new contract should be awarded as soon as possible so that construction can move forward.”

Ghising said he left the ministry while preparations for the new bidding documents were under way. The fresh tender had already taken considerable time, he added, and the latest cancellation could delay construction by another six months to a year if authorities have to restart the procurement process.

“The previous company would not have completed the work even in 15 to 20 years,” Ghising said. “Failure to complete this project on time will cause huge losses as agricultural production in the Tarai remains below its potential because of inadequate irrigation.”

The project involves constructing a dam about 30 metres high and 158 metres long across the Sunkoshi river. Once completed, it will divert water through a tunnel to the Marin river at Kusumtar in ward 2 of Kamalamai Municipality in Sindhuli, where a powerhouse will generate electricity. The diversion tunnel has already been constructed. 

From there, water is intended to reach the five Tarai districts, providing irrigation throughout the year. The project was launched in fiscal year 2016-17, with a total estimated cost of Rs49.42 billion.

The 13.3-kilometre tunnel was excavated using a tunnel boring machine by the contractor China Overseas Engineering Group (COVEC). After a breakthrough was achieved in May, 2024, tunnel finishing was completed on August 27, 2025. Testing has also been carried out.

However, the tunnel cannot be brought into operation until the dam is completed for water diversion. The entire project is now scheduled for completion in the fiscal year 2032-33 under a revised master plan.