Supreme Court Clears Path for Construction of Phukot Karnali Hydropower Project

Construction of the 480-megawatt Phukot Karnali hydropower project, which has been stalled for nearly two years, is now set to gain momentum. The Supreme Court’s dismissal of a petition opposing the agreement to give 51 percent of shares to Indian company NHPC Limited has cleared the way for construction.

The decision came from a bench comprising Justices Hari Prasad Phuyal and Saranga Subedi on Monday. Following the court ruling, Bakhat Bahadur Shahi, CEO of Vidhyut Utpadan Company Limited (VUCL), a subsidiary of Nepal Electricity Authority (NEA), confirmed that the project can now proceed ahead.

The petition had initially led the Supreme Court, on January 5, 2024, to issue an interim order preventing the immediate implementation of the agreement between the electricity generating company and NHPC. This injunction had effectively halted all project activities.

Read: Development of Phukot Karnali Hydropower Project Stalled for a Year

The joint development agreement was signed during former Prime Minister Pushpa Kamal Dahal’s visit to India in May 2023. Under the deal, the Nepali company holds 49 percent of shares, while NHPC owns 51 percent.

Since the agreement, preparatory development of the project has already incurred expenditures of Rs 1.5 billion, covering land and house acquisition, compensation distribution, company housing construction, test tunnel excavation, and road construction, Shahi noted.

Read: Implementation of Phukot-Karnali Hydropower Project Uncertain

The Supreme Court injunction had also stalled the Environmental Impact Assessment (EIA) approval and related preparatory activities. With the petition now dismissed, these processes can resume. The total estimated cost of the project is Rs 9.2 billion.

Yashoda Kumari Baral and Ajay Bahadur Shahi of Raskot Municipality-8, Kalikot, had filed the petition arguing that the agreement with the Indian company was not in the national interest, as the project was initially proposed to be built solely with investment from the Government of Nepal and the locals. Yashoda Kumari Baral declined to comment following the Supreme Court’s dismissal and directive.

The project is expected to generate 2,446 GWh (2.44 billion units) of electricity annually, projecting approximately Rs 1.9 billion in revenue. Although the original timeline aimed for completion by 2033, legal delays have pushed the anticipated date by at least two years, said Shahi in a conversation with New Business Age.