The Supreme Court on Thursday stayed the government’s decision to extend the deadline for GMR Energy to complete the financial closure of the 900MW Upper Karnali Hydropower Project, throwing the future of the project into uncertainty.

On July 15, the Cabinet had decided to extend the deadline by two more years. Citing a number of reasons, a single bench of Justice Ishwar Prasad Khatiwada issued the interim order not to implement the government decision until the final verdict.

On September 19, 2014, the Investment Board Nepal and GMR Energy signed the Project Development Agreement (PDA) giving the Indian company two years to conclude financial closure (generating resources to develop the project). The deadline was extended further on January 8, 2017 by one year. On November 10, 2017, the Investment Board extended the deadline by another year against which a writ petition was under consideration at the Supreme Court.

“After expiry of the deadline, no decision was taken to continue the agreement and maintain the agreement intact,” the court observed. “In the context that the last deadline expired three years ago and there had been no extension since then, no logical justification can be found in extending the deadline by two years from July 15 this year.”

The court has also questioned why the Cabinet had to extend the deadline for financial closure while the law authorises the Investment Board to do so. “There can be no justification for extending the deadline for financial closure until 2024 as the agreement was signed for two years in 2014,” the court said.

The court has attached priority to the case. The interim order has made the Upper Karnali Hydropower Project further uncertain as the GMR won’t be able to work towards financial closure now.

“As per the PDA, two sides can extend the deadline anytime,” said a lawyer familiar with the matter. “Even though the GMR applied for an extension, the IBN didn’t take a timely decision on the deadline in the past, contributing to the current situation.”

According to the lawyer, the final verdict would be subject to how the government extended the latest deadline.