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In recent developments, tensions have escalated between India, Bangladesh, and Nepal over a power purchase agreement related to the electricity generated from the Upper Karnali Hydropower Project in Nepal. The agreement, which involved Bangladesh purchasing 500 megawatts of electricity from the project, has been canceled by the Bangladeshi government, causing uncertainty about the future of the deal.
According to a report by Bangladeshi media outlet Daily Observer, the interim government of Bangladesh has decided to cancel all agreements made under the Special Powers Act, including the power purchase deal with Nepal. This decision has raised concerns about the implications for Nepal, especially the company GMR which was tasked with constructing the power project.
Ramesh Khatri, a representative of Kansai Nepal News, expressed his opinion on the matter. “The cancellation of the agreement will have a significant impact on Nepal’s long-term plans to export electricity to Bangladesh. However, Nepali authorities believe that the market conditions are favorable, and the Indian company’s electricity consumption is substantial enough to offset any potential losses from the canceled deal.”
The Upper Karnali Hydropower Project aimed to export 500 megawatts of electricity to Bangladesh through a 765-kilometer transmission line from Nepal to India. The project, which has been under discussion since 2016, involved collaboration between Bangladesh Power Development Board, India’s NTPC Vidyut Vyapar Nigam, and GMR Upper Karnali Hydro Power Ltd., with a trilateral power supply agreement signed in December 2024.
While Bangladesh has canceled the agreement unilaterally, GMR is now looking to negotiate a new deal with potential buyers. Despite the setback, Nepali officials remain optimistic about the market conditions and the potential for electricity exports. The current transmission line has already been used to export 40 megawatts of electricity to Bangladesh through Indian territory.
GMR has been holding on to the project for an extended period, with the latest deadline extension expiring on Magh 4. However, the necessary documents have been submitted to the Investment Board for further processing. Nevertheless, the Board has not yet evaluated the investment proposal.
It is worth noting that GMR had expressed its desire to formalize a 25-year electricity supply agreement with the Bangladeshi Energy Secretary starting from February 2025. The proposal, valued at 5 million US dollars for security, was signed in January 2020, and discussions regarding the agreement were held during the 23rd meeting of the Nepal-India-Bangladesh Joint Steering Committee in May 2023.
Bangladesh has shown interest in engaging in trilateral electricity trade with Nepal and India, citing a 40-megawatt tripartite electricity trade as an example. While there is enthusiasm for joint hydropower projects between Nepal and Bangladesh, concerns have been raised about the use of Indian transmission lines, sparking geopolitical concerns in Bangladesh, as reported by Daily Observer.
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Author: MAYA | HARUTO
Posted at: June 26, 2025 7:00 pm
