The implementation of the proposed 480-megawatt Phukot Karnali semi-reservoir hydropower project, which is being developed with joint investment from Nepal and India, has become uncertain. The Indian company NHPC Limited is reconsidering the agreement to provide a certain percentage of the electricity produced to Nepal for free. Additionally, a petition filed in the Supreme Court against the government’s decision to allow the Indian company to develop the project has cast further doubt on immediate implementation of the project.

During Prime Minister Pushpa Kamal Dahal's visit to India in May last year, an agreement was signed to build the project in Kalikot district through a joint venture between Nepal’s Vidyut Utpadan Company Limited and NHPC Limited. According to the agreement, the Indian company would hold a 51% stake in the joint venture, with the Nepali company holding the remaining shares. The agreement also stipulated that 21.9% of the energy produced would be provided to Nepal free of charge.

However, Nepali officials have said that the Indian company recently demanded an amendment to the free electricity provision in the agreement. Bakhat Bahadur Shahi, CEO of Vidyut Utpadan Company Limited, said that NHPC has sent a letter requesting a reconsideration of this provision, claiming that the project is not financially feasible with the free electricity clause. However, it is not clear to what extent NHPC seeks flexibility from Nepal regarding the free electricity provision.