Economy & Business19 Oct 2026 · about 6 min

Upper Karnali project set to advance after years of funding delays

The brief

Investment Board Nepal decided to facilitate immediate construction of the 900-megawatt Upper Karnali hydropower project. This matters because the project faced years of funding delays, legal challenges, and missed deadlines. The decision allows progress under the Project Development Agreement, rather than another broad delay. However, GMR cannot proceed until the Investment Board Office sends its official letter communicating the decision. GMR said it will act after receiving that letter and can then submit outstanding, updated documents. The board’s expert committee found GMR could achieve financial closure before the end of February 2025. GMR submitted financial-closure documents on January 15, 2025, citing an INR65 billion IREDA loan proposal. Nepali banks had also given in-principle approval for Rs20 billion. After receiving the letter, GMR must complete construction within five years. The revised ownership supports fundraising. GMR and SJVN each hold 34 percent, IREDA holds 5 percent, and Nepal Electricity Authority holds 27 percent.

What decision did Investment Board Nepal make, and what must GMR receive before it can proceed with construction?

However, GMR cannot proceed until the Investment Board Office sends its official letter communicating the decision. GMR said it will act after receiving that letter and can then submit outstanding, updated documents. The board’s expert committee found GMR could achieve financial closure before the end of February 2025.

GMR submitted financial-closure documents on January 15, 2025, citing an INR65 billion IREDA loan proposal. Nepali banks had also given in-principle approval for Rs20 billion. After receiving the letter, GMR must complete construction within five years. The revised ownership supports fundraising. GMR and SJVN each hold 34 percent, IREDA holds 5 percent, and Nepal Electricity Authority holds 27 percent.

What is the Upper Karnali Hydropower Project, and where is it being developed?

The Upper Karnali Hydropower Project is a planned 900-megawatt electricity project in western Nepal. It aims to generate power under a build-own-operate-transfer model, making it a major infrastructure project.

India’s GMR Group is developing it after winning an international competitive bid. The project began as a proposed 300-megawatt plant, but GMR requested 900 megawatts in 2009. This change aimed to use the river’s potential more fully. The Investment Board Nepal and GMR signed the project development agreement in 2014.

The project has faced funding delays, deadline extensions, and legal challenges. In January 2025, GMR reported proposed loans of INR65 billion from IREDA and Rs20 billion from Nepali banks. The Investment Board now plans to facilitate construction, requiring completion within five years. The source identifies its location only as western Nepal.

How large is the project, and what does a generating capacity of 900 megawatts mean in practical terms?

Upper Karnali is a 900-megawatt hydropower project in western Nepal. Its 900 MW capacity means it can produce up to 900 million watts. It can reach that output only when water and equipment allow. Capacity measures maximum power, not daily electricity production.

Think of capacity as the size of a power tap. Together, 900 one-megawatt units could deliver 900 million watts. In practice, river flows, maintenance, and grid limits determine how often the project reaches that level. The source does not provide annual generation or household estimates.

That scale could provide a major electricity supply for Nepal. GMR originally proposed 300 MW in 2008, then sought 900 MW in 2009 to use the site’s potential. Investment Board Nepal plans to facilitate construction, with completion required within five years. Actual output will depend on water availability and operations.

What does “financial closure” mean in a major infrastructure project, and why was it essential before construction could begin?

“Financial closure” means a project has secured and documented the money needed to build it. It turns funding plans into a reliable commitment, allowing construction to start and reducing the risk of an unfinished project.

For Upper Karnali, GMR submitted documents on January 15, 2025, saying financing was secured. IREDA proposed an INR65 billion loan, while Nepali banks approved Rs20 billion in principle. These documents mattered because the PDA required proof of financial resources and set investment shares.

The project had missed its original two-year deadline, even after a one-year extension in 2016. After a court challenge and expert review, Investment Board Nepal decided to facilitate construction. GMR must update remaining documents and finish the 900MW project within five years.

Why did the project face years of delays, including repeated deadline extensions and Supreme Court proceedings?

The 900-megawatt Upper Karnali project faced delays mainly because GMR could not complete financial closure. This meant it had not fully demonstrated that the required investment was secured. The uncertainty prevented construction from moving ahead.

The Project Development Agreement, signed in 2014, gave GMR two years to secure funding. After that deadline was missed, the government granted a one-year extension in December 2016. In December 2024, advocate Dan Bahadur Budha challenged the project, alleging that GMR missed financial closure and transferred shares without government approval.

The Investment Board then waited for the Supreme Court’s full ruling before acting. The court dismissed the petition and found the ownership changes consistent with the agreement. GMR later reported proposed funding, including INR65 billion from IREDA and Rs20 billion from Nepali banks. The board now says construction can begin, with five years allowed for completion.

How did the project’s ownership change, and why did GMR bring in SJVN and IREDA as shareholders?

Upper Karnali’s ownership shifted from GMR-led control to a four-party structure. GMR originally held 73 percent, while Nepal Electricity Authority (NEA) held 27 percent. GMR and India’s Satluj Jal Vidyut Nigam (SJVN) each received 34 percent. IREDA received 5 percent, while NEA retained 27 percent.

GMR brought in SJVN and IREDA to help mobilise the investment needed for the long-delayed project. This was especially important because GMR had struggled to secure financial closure within the required deadlines. The ownership change also became relevant in court, which found it consistent with the Project Development Agreement.

By January 2025, IREDA had responded positively to a proposed INR65 billion loan. Nepali banks had given in-principle approval for Rs20 billion. The Investment Board then approved the revised shares and decided to facilitate construction. GMR can now submit updated documents and must complete the project within five years.

What is the build-own-operate-transfer model, and how does it determine who builds, runs, and eventually receives the project?

In a build-own-operate-transfer model, a private developer builds a project. It owns and operates it for an agreed period, then transfers it to the government. This brings infrastructure sooner while sharing costs and responsibilities.

In Nepal, the government awarded Upper Karnali to GMR under BOOT. GMR must develop, finance, and operate the 900-megawatt plant before transferring it. The article does not state the transfer date or detailed operating terms.

The model does not mean GMR receives the project permanently. Nepal’s Investment Board has decided to facilitate immediate construction, and the developer must finish within five years. GMR’s partners include SJVN and IREDA, while the Nepal Electricity Authority holds 27 percent.

This brief was written by AI from the original reporting and checked by other models. Names, figures and quotes come from the source; read it for full context.