The prospect of exporting 500 MW of electricity from the Upper Karnali Hydropower Project to Bangladesh has become uncertain, with the country’s interim government reportedly planning to cancel the deal signed with India’s GMR Energy.
The 900 MW Upper Karnali Hydropower Project, a peaking run-of-river (PROR) scheme, is being developed by GMR Upper Karnali Hydropower Limited (GUKHL), a subsidiary of India's GMR Energy Limited. The project spans the districts of Achham, Dailekh, and Surkhet districts in far-western Nepal. Planning began nearly 20 years ago. In 2011, the Investment Board Nepal (IBN) estimated its cost at $1.05 billion .
On Sunday, June 22, The Daily Observer, a Bangladeshi media outlet, reported that the deal is likely to be scrapped. The move comes as part of the interim government’s broader strategy to terminate agreements signed under the now-defunct Special Powers Act, which had been actively used during the former Prime Minister Sheikh Hasina administration.
“Bangladesh also raised the geopolitical concerns as India had proposed using its 117-kilometre-long, 765kV high-voltage transmission corridor to transport the electricity–raising logistical and strategic questions for Dhaka,” the report said.
“The government has decided to suspend all agreements under the Special Power Act. Therefore, the proposed deal with GMR has also been cancelled,” the paper quoted Bangladesh Power Development Board (BPDB) Chairman Er. Rezaul Karim as saying. “The cancellation comes as part of the government's broader move to terminate power and energy contracts signed under the Special Power Act, many of which have already been revoked by the current administration.”
According to the report, the issue surfaced after GUKHL Chairman S.N. Barde sent a letter in February 2025 to Bangladesh’s Power Secretary, expressing interest in finalising the Power Supply Agreement (PSA) for exporting electricity.
Read: Karnali Chisapani: Mega Hopes, Meager Progress
Bangladesh had earlier signed an MoU with India’s NVVN (NTPC Vidyut Vyapar Nigam) to import electricity from the Upper Karnali Project during then Prime Minister Sheikh Hasina’s New Delhi visit in April 2017. In 2020, it issued a Letter of Intent to purchase 500 MW of electricity. 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.
“GUKHL proposed a 25-year power supply agreement starting in 2029 under the now-defunct Special Power Act,” said The Daily Observer report.
Earlier this year in January, GMR secured the required financing for the project —17 years after it received development rights through global tender. Just two days before a Supreme Court deadline, it informed IBN that it had secured loan commitments from five Nepali banks and two Indian institutions.
Read: GMR Joins Hands with SJVN and IREDA to Develop Upper Karnali Hydel Project
To ease fundraising, GMR sold a 5% stake to India’s IREDA and 34% to state-owned Sutlej Jal Vidyut Nigam (SJVN) in September 2024. The project will be built on a BOOT (Build, Own, Operate and Transfer) model, with a 25-year concession. Ownership will be split between GMR (34%), SJVN (34%), IREDA (5%), and the Nepal Electricity Authority (NEA), which will hold the remaining stake.
GMR first signed an MoU with Nepal’s government for survey and development in 2008 and formalised a Project Development Agreement (PDA) with IBN in 2014.
Of the 900 MW generated, Nepal is expected to receive about 100 MW. The remaining 800 MW is planned for export—500 MW to Bangladesh and 300 MW to India.
“However, the tripartite PSA was finalized and initialed on December 5, 2024, between BPDB, India's NVVN (NTPC Vidyut Vyapar Nigam), and GUKHL. Negotiations began in 2016 and led to a Letter of Intent (LoI) in January 2020. GUKHL also deposited USD 5 million as proposal security,” The Daily Observer’s report added. “The draft agreement was signed during the 23rd Bangladesh-India-Nepal steering committee meeting in Khulna in May 2023, attended by Power Division Secretary Md Habibur Rahman and Indian Power Secretary Alok Kumar.”
Despite the media report, IBN spokesperson Pradyumna Prasad Upadhyay told New Business Age Tuesday that GMR and Bangladesh have yet to officially communicate anything. “GMR has been trying to secure a market guarantee in Bangladesh,” he said. “If that doesn’t work out, the project will have an option to sell the electricity generated from the plant in Nepal or India.”
Nepal currently exports 40 MW of electricity to Bangladesh via India. The latest export began on June 15.
The country first exported power to Bangladesh on November 15, 2024, for 12 hours. The milestone followed a trilateral agreement signed on October 3, 2024, among Nepal, India, and Bangladesh, enabling cross-border power trade via Indian transmission lines.
Under the five-year agreement, Nepal is set to export 40 MW to Bangladesh during the wet season (mid-June to mid-November). Of that, 18.60 MW comes from the Trishuli Hydropower Project and 21.40 MW from the Chilime Plant. Power flows through Nepal’s 400 kV Dhalkebar substation and India’s Muzaffarpur and Berhampur nodes to reach Bheramara in Bangladesh.
According to NEA, Nepal will export 146.88 million kWh this season, earning approximately $9.4 million (Rs 1.29 billion) at a unit price of $0.064.
The headline and lede have been updated for clarity.
