Nepal’s Supreme Court has directed the government to increase its share of free electricity from the 480 MW Phukot Karnali Hydropower Project developed by India’s NHPC Limited. This directive is set to be a focal point in upcoming high-level bilateral energy discussions between the two countries. The Joint Secretary-level Joint Working Group and the Secretary-level Joint Steering Committee will convene to address various energy cooperation matters.
Sandeep Kumar Deo, a Joint Secretary at Nepal’s Ministry of Energy, Water Resources and Irrigation, highlighted that the progress of hydropower projects in Nepal involving Indian investment will be a key agenda item. The discussions are expected to encompass all significant energy-sector projects and issues, including the recent Supreme Court order related to the NHPC-promoted project. The court mandated an amendment to the Memorandum of Understanding for the Phukot Karnali project to adjust Nepal’s current 21.9% share of free electricity in line with its investment.
Following the court ruling, concerns were raised by NHPC and its Nepali partner, Nepal Vidyut Utpadan Company Limited, regarding the project’s financial viability if the directive is implemented. The Nepal government faces a dilemma as seeking a review could clarify the legal standing and protect financial interests, but may draw criticism for potentially compromising national interests. The MoU, signed during a visit by former Nepali Prime Minister Pushpa Kamal Dahal ‘Prachanda’ to India in 2023, stipulates that Nepal will receive a percentage of the project’s electricity generation free of cost upon commercial operation.
The upcoming bilateral discussions will also cover topics such as cross-border transmission lines, electricity trade, renewable energy, and green hydrogen. The review will encompass existing cross-border transmission infrastructure, ongoing projects, and proposed high-capacity interconnections critical for Nepal’s goal of becoming a significant electricity exporter. Notably, efforts are underway to enhance cross-border transmission capabilities to facilitate large-scale electricity trade between Nepal and India.
