Court allows GMR to continue Upper Karnali financial closure worksThe Supreme Court’s constitutional bench on May 7 scrapped six petitions that challenged government's decision to extend the financial closure deadline.
Prithvi Man Shrestha
The Supreme Court’s constitutional bench has paved the way for India’s GMR energy to continue its work on the 900MW Upper Karnali Hydropower Project.
The court on May 7 rolled back its interim order that had suspended the government’s decision to extend the deadline for GMR Energy to complete the financial closure.
The interim order issued in early November last year had thrown the 900MW Hydropower Project into uncertainty as it prevented the Indian company from working towards financial closure. Financial closure means ensuring enough resources to implement the project.
The Supreme Court confirmed on its website that six writ petitions filed against the extension of deadline on different dates were scrapped, paving the way for the GMR to proceed with financial closure.
The Constitutional Bench headed by acting Chief Justice Hari Krishna Karki and represented by justices—Bishowambhar Prasad Shrestha, Ananda Mohan Bhattarai, Sapana Pradhan Malla and Tanka Bahadur Moktan—issued the verdict scrapping the writ petitions on May 7.
“The court verdict opened the door for us to continue our work,” said a source at GMR on condition of anonymity. “We will now go on to sign a power sale agreement with Bangladesh and conclude the financial closure.”
On July 15, the Cabinet had decided to extend the deadline for financial closure by two more years.
The GMR source said that its effort to sign power sale agreement was obstructed by the Court’s interim order in early November last year. The GMR along with various ministries and agencies of the government in the middle of November had moved the Supreme Court to vacate the stay order arguing that the court’s decision would further delay the project works.
In response, Supreme Court justice duo Kumar Regmi and Til Prasad Shrestha on January 3 had forwarded the dispute involving the project to the constitutional bench, citing concerns about constitutional interpretation.
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, Nepali participants of the meeting told the Post.
Amrit Lamsal, spokesperson for the Investment Board Nepal (IBN), which was one of the defendants in the case, said that he heard about the court verdict, but the IBN has yet to receive a copy of the verdict.
“The Investment Board will take necessary decisions regarding the project once the full verdict of the constitutional bench is made available,” he said, adding that the GMR had been complaining about delays caused to its work by the court’s interim order.
The Supreme Court’s interim order had come at a time when the Indian company was preparing to sign a trilateral power sales agreement with the Bangladesh Power Development Board and NTPC Vidyut Vyapar Nigam Limited (NVVN) of India.
Bangladesh signed a memorandum of understanding with India’s NVVN to import electricity from the Upper Karnali Project via India during Bangladeshi Prime Minister Sheikh Hasina’s visit to New Delhi in April 2017.
Bangladesh has already issued a letter of intent to the GMR Group expressing its interest to enter into a contract to purchase 500 MW of electricity from the project. The power purchase agreement rate was also agreed upon between GMR Energy and the Bangladeshi authority at 7.712 cents per unit for a period of 25 years.
“The GMR was preparing pay performance securities to the Bangladeshi entity as a guarantee that it would deliver power as promised, but the interim order disrupted the plan,” Madhu Bhetuwal, spokesperson of the Energy Ministry.
Following the court verdict, the issue will once again be discussed at the joint-secretary level Joint Working Group and secretary-level Joint Steering Committee meetings scheduled to be held on May 15-16 in Bangladesh. “We will discuss the matter to facilitate the process from the government level,” said Bhetuwal.
On September 19, 2014, the Investment Board Nepal and GMR Energy signed the project development agreement, giving the Indian company two years to conclude financial closure for the project.
The deadline was extended further on January 8, 2017, by a year. On November 10, 2017, the Investment Board extended the deadline by another year against which a writ petition was under consideration in the Supreme Court.
When the interim order was issued last year, the court had also questioned why the Cabinet had to extend the deadline for financial closure while the law authorised 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.
On October 9 last year, the government had formed a task force headed by the then vice-chairman of the National Planning Commission Biswo Poudel to study whether to extend the deadline of GMR Energy to complete the financial closure. Lamsal said the deadline was extended by attaching certain conditions on the recommendation of the task force.
However, the Indian private sector company has long been struggling to conclude the financial closure for the project, which was awarded to it in 2008 through an international competitive bidding. The project is to be developed on build-own-operate-transfer (BOOT) model.
India’s state-owned SJVN Limited, which was awarded the 900MW Arun 3 project, is about to complete the construction of the project.
Since the GMR has been unable to sign power sale agreements with any buyers, it has failed to generate resources to develop the project as no investor would put money until a market for the electricity.
A lawyer familiar with the matter earlier told the Post that both the government and the Indian company should share the blame for the court’s decision. “The Indian company took an unusually long time to conclude the financial closure,” said the lawyer. “The Investment Board didn’t take a timely decision on the deadline in the past, contributing to the current situation, even though GMR had applied for deadline extension long ago.”