Nepal approves second Hydropower Project to be developed by India

Nepal on 28th May 2023 decided to grant permission to India’s state-owned company Satluj Jal Vidyut Nigam (SJVN) Limited for the development of a second hydropower project in the country. Notably, SJVN is already working on the 900-MW Arun-III hydroelectric project, a run-of-river project which is located on the Arun River in Eastern Nepal and is set to be completed by 2024.

During a meeting of the Investment Board Nepal (IBN) chaired by Prime Minister of Nepal Pushpa Kamal Dahal Prachanda, the draft project development agreement (PDA) with SJVN was approved for the development of the 669-megawatt (MW) Lower Arun Hydropower project in eastern Nepal. However, before implementation, the draft agreement needs to be endorsed by the Council of Ministers.

In a previous meeting, the IBN had approved an investment of ₹92.68 billion for the project’s development. “The development of this 669-MW transformative project will prove to be a milestone for the socio-economic development of the country,” said a statement issues by IBN.

SJVN has established a local company called Lower Arun Power Development Company in Nepal to undertake the project. The Lower Arun project, situated in the Sankhuwasabha and Bhojpur districts, will not involve the construction of a reservoir or dam. Instead, it will be a tailrace development of the Arun-III project, allowing the water to re-enter the river for the Lower Arun project.

This marks the third project on the Arun River, all negotiated through proper channels, following the Arun-III and Arun-IV hydroelectricity projects with capacities of 900 MW and 695 MW, respectively. According to ‘The Kathmandu Post’ newspaper, these three projects will collectively generate nearly 2,300 MW of electricity from the river in the Sankhuwasabha district.

Scope for India

The project is beneficial in terms of hydropower cooperation. On completion of the project, it will provide India with the much-needed leverage in future hydropower cooperation. Besides, the project is also significant due to China factor as It will help India counter the geopolitical influence of China. The project also holds the potential to enhance cross-border power exchanges between the two nations.

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