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Upper Karnali 900 MW (GMR) Hydropower Plant

  • 2 days ago
  • 7 min read

Current Status: Pre Construction - Bangladesh PPA Cancelled (2025) 

(Source: TET)


Upper Karnali Hydropower Plant, also known as Upper Karnali Hydro Electric Project or UKHEP in short, is an under-construction Hydropower plant situated in Surkhet, Dailekh and Achham Districts in Nepal (Location: 28.8993, 81.4875). The Power Plant is sponsored by GMR Upper Karnali Hydropower Limited, a Special Purpose Vehicle (SPV) of GMR Power & Urban Infrastructure Limited under an Indian conglomerate, GMR Group. GMR Power bagged the power project in 2008 through an internationally competitive bidding process. The project will supply power to Nepal, India, and Bangladesh for a period of 25 years.The expected commercial operation date (COD) is in 2031 and the project is supposed to retire on 2056 (Prasain, 2020).

According to GMR's construction plan, pre-construction work is scheduled from early 2025 to February 2026, with major construction commencing afterward; diversion works are set for January 2026 to August 2027, road tunnel construction from January 2026 to May 2027, and the Karnali River bridge from January to November 2026. Key components, including the headrace tunnel, dam, powerhouse, and electromechanical works, are targeted for completion between 2029 and 2031, with the entire project expected to be finished by June 2031. The financial management plan submitted by GMR on 17 January 2025 remains pending before the Investment Board Nepal due to the Reserve Bank of India's non-approval of IREDA's proposed 5% equity stake; GMR has prepared an alternative shareholding structure 36.5% each for GMR and SJVN and 27% for NEA in the event IREDA's participation is ultimately rejected. (AE, 2025)


Capacity

The installed capacity of the power plant is 900 MW which can generate 3,466 million units (gWh) of electricity per year (IBN 2022).


Context

In March 2022, during the visit of the Nepalese President, the Prime Minister of Bangladesh emphasized a tripartite agreement between Bangladesh, India and Nepal to set up Hydropower Plants in Nepal under Bangladesh-Bhutan-India-Nepal (BBIN) Connectivity (FE, 2021a). In June 2021, the State Minister for the Ministry of Power, Energy and Mineral Resources (MOPEMR) said to the media that Bangladesh planned to import 700 MW of hydropower from Nepal (FE, 2021b).


Bangladesh Power Development Board (BPDB) signed a Power Purchase Agreement (PPA) with Grandhi Mallikarjuna Rao Group (GMR Group) to import 500 MW of electricity from the power plant (Sajid, 2022). BPDB signed a Memorandum of Understanding (MOU) with GMR Upper Karnali Hydropower Limited in April 2017 to buy 300 MW of electricity from UKHP (Independent, 2017).


Bangladesh Power Development Board (BPDB) was supposed to sign a Power Purchase Agreement (PPA) with GMR Upper Karnali Hydropower Limited in July 2017 (Independent, 2017), But on 14 September 2021, in a meeting of Bangladesh-Nepal Joint Steering Committee (BNJSC), Nepalese envoy proposed to sell 200 MW of electricity to Bangladesh from UKHEP (FE, 2021). Bangladesh signed a Memorandum of Understanding (MOU) with NTPC Vidyut Vyapar Nigam Limited (NVVN) to import power from Nepal (Subedi, 2018).


On 21 November 2019, the State Minister for the Ministry of Power, Energy and Mineral Resources (MOPEMR) of Bangladesh announced that the Government of Bangladesh (GOB) and GMR Power of India had already reached an understanding and would sign a deal to import 500 MW of power from its Karnali Hydropower plant in Nepal (EB 2019).


On 30 January 2020, Bangladesh Power Development Board (BPDB) issued a Letter of Intent (LOI) to GMR Power for importing power for 25 years at a rate of USD 0.07712 (BDT 6.56 in 2021) per unit (Prasain 2020). A draft Power Purchase Agreement (PPA) was also sent to the Cabinet Committee on Government Purchase (CCGP) for approval.


But on 3 December 2019, Nepalese energy minister told the media that GMR Power had already signed a PPA with BPDB (Khanal 2019). In November 2019, GMR Energy and the Government of Bangladesh signed a Power Purchase Agreement and agreed on the tariff rate for the Upper Karnali project, with the signed PPA submitted to the Bangladesh Cabinet for review; Bangladesh planned to purchase 500 MW, to be transmitted through dedicated lines connected to the Indian grid. (SASEC, 2019) On 5 December 2024, GMR, NVVN, and BPDB initialled a tripartite Power Supply Agreement (PSA) after years of negotiations; however, Bangladesh's interim government subsequently cancelled the agreement as part of a broader policy to revoke all deals made under the Special Power Act, confirmed by BPDB Chairman Rezaul Karim (KP, 2025). On the other hand, GMR Power informed the media in February that the PPA was likely to be signed by May 2021 (MR 2021). Again in September 2021, it was revealed that the tripartite agreement between BPDB, GMR Power, NVVN was at its final stage in September 2021 (FE 2021). But in February 2022, GMR Power again said that it contacted National Thermal Power Company Limited (NTPC) and NVVN to negotiate with GOB (OK 2022).


GRM give first priority to signing an agreement with Bangladesh to sell 500 MW of electricity produced from 900 MW Upper Karnali hydropower project (TBS 2023).


Land Acquisition

The power plant will be developed in Kunathari Village within Surkhet District, part of the Bheri Zone, situated  on Karnali River in Nepal. No further information found on the acquired land for the power plant.


Contractor

Earlier GMR Energy, an Indian firm undertaking a 900 MW export-focused hydropower project, was the pioneer in exporting Nepal's hydropower energy to Bangladesh. This achievement is made possible through a trilateral agreement involving Nepal, India, and Bangladesh. The Nepalese government granted the project to GMR Upper Karnali Hydro Power Limited (GUKHL), an entity affiliated with GMR Group India, through a memorandum of understanding (MoU) established in January 2008. GMR is progressing with the project under a build-own-operate-transfer (BOOT) framework. Recently  Satluj Jal Vidyut Nigam Ltd entrusted with construction of 900 MW Upper Karnali hydropower project along witg GRM (ANI 2024)


Finance

The total budget of the project was USD 1.5 billion in 2020, of which 15% was supposed to be financed by two Nepalese banks namely Nabil Bank and Nepal Investment Bank. GMR Power was also negotiating with Asian Development Bank (ADB), Dutch Entrepreneurial Development Bank (FMO), Export–Import Bank of China (CHEXIM), the Export-Import Bank of India (INEXIM) and the World Bank to get the External Credit Agency (ECA) loan for the project (HT, 2019). But, the company could not seal any deal for financing by February 2022. In the third week of February 2022, the Government of Nepal (GON) extended the period of two more years to generate finance for the project (OK 2022).


Sponsor

Grandhi Mallikarjuna Rao a Nepalese has sponsor this power plant and it is the owner of this power plant.


Fuel Supply

The Upper Karnali hydropower project is a run-of-the-river hydropower project being developed on Karnali River in Nepal.This hydro  power plant will use water flow to generate electricity.


Power Generation

The energy produced by the Upper Karnali hydropower project will be conveyed to the North East West Northern Eastern (NEWNE) India grid using a 400kV double-circuit transmission line.

The anticipated route for transmitting the 400kV export power is to the Power Grid Corporation of India (PGCIL) owned pooling station located in Bareilly, Uttar Pradesh. Nepal has an entitlement to receive 12% of the total power generated by the project at no cost, while 56% of the generated power is designated for sale to Bangladesh through a long-term power purchase agreement (PPA). The remaining 32% is allocated for sale to India through various short-term, mid-term, or long-term bilateral purchase agreements  (NSE, 2023).

Of the total energy generated, 108 MW is allocated for Nepal's domestic consumption, with 500 MW planned for export to Bangladesh subsequently cancelled and the remaining 292 MW for sale in the Indian market (AE, 2025). Nepal is also set to receive 27% free equity in the project, amounting to approximately 108 MW of electricity, roughly equal to 15% of Nepal's installed capacity at the time of the agreement (SASEC, 2019).


Environment

According to Section 12 of the Bangladesh Environment Protection Act 1995, Environmental Impact Assessment (EIA) is obligatory for any industry (MOLJPA 1995). The polluting industries, such as power plants, have to go through an Initial Environmental Examination (IEE) and EIA as directed in the Environmental Conservation Rules 1997 (superseded by ECR 2023) (MOEFCC 1997). When a dam is constructed for hydroelectric power generation, vast areas of land are flooded, which can cause species to be displaced and natural habitats to be destroyed. This may upset ecological balances and result in a decline in biodiversity. In addition, communities may be uprooted, cultural heritage sites may be lost, and livelihoods reliant on river ecosystems may be negatively impacted by hydropower projects. The impacted communities may have disputes and difficulties as a result of these social effects. No EIA has been found for this powerplant. According to the environmental conservation rule 2023 the project falls in the “Red” indicating it as a potential harmful project for the environment (MOEFCC 2023).



References

 
 
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