Kathmandu– Pankaj Gupta, Regional Director for South Asia at the World Bank, has indicated that the Upper Arun Hydropower Project is ready to move forward. 

After Nepal addressed certain technical concerns raised by the Indian side, Gupta clarified during discussions with the Minister of Energy that there are no remaining obstacles to advance the 1,063-megawatt Upper Arun project.

The discussion between Minister of Energy, Water Resources, and Irrigation Deepak Khadka and Gupta on Thursday was primarily focused on the Upper Arun project. 

Minister Khadka requested the World Bank to accelerate the financial closure for the project.

Gupta assured that the World Bank has prioritized the Upper Arun Hydropower Project and is ready to proceed with the remaining processes.

The Indian side has been insisting on resolving the issue related to land in the lower riparian area under construction. To address this, the Department of Electricity Development is preparing a revised design by adjusting certain land boundaries.

Once this issue is resolved, both parties have agreed, with India’s consent, to advance the Upper Arun project.

Thursday’s bilateral discussions included Energy Ministry Secretary Suresh Acharya, Joint Secretaries Chiranjibi Chataut and Sagar Raj Gautam, and World Bank Nepal Country Director David Sislen, among others.

The Government of Nepal has been holding multiple discussions with the World Bank and the Indian side regarding the construction of the 1,063 MW semi-reservoir-based Upper Arun Hydropower Project. 

The World Bank has expressed its preference for the project to move forward with mutual agreement due to concerns that a third party could raise disputes. 

The final loan agreement from the World Bank is still pending. The Bank is preparing for this final agreement once some remaining technical issues between Nepal and India are resolved.

The Indian side has demanded that the Upper Arun be awarded to an Indian company, or if not, that the project design be altered in such a way that it does not impact Indian-constructed or under-construction projects in the lower riparian areas. 

They argue that the land from the Arun III project overlaps with Upper Arun and that Nepal should not use this land and must shift the dam 100 meters upstream. 

Nepal Electricity Authority is currently in discussions on this matter.

Indian technical experts have concluded that if the Upper Arun dam is not shifted 100 meters upstream, it will negatively impact the 900 MW capacity of the Arun III project. 

As a result, India has proposed to the World Bank, Nepal’s Ministry of Energy, and the Nepal Electricity Authority that the dam should be relocated if India is not granted construction rights for Upper Arun. 

The Ministry of Energy is positively considering the proposal and continuing negotiations with India.

India argues that since Indian companies are developing projects in the lower riparian areas of the Arun basin, they should also be granted the Upper Arun semi-reservoir project. Consequently, there is ongoing correspondence between the World Bank and India on this issue.

India has hinted that if the dam is shifted 100 meters upstream, it would not obstruct the World Bank’s investment. 

Current discussions revolve around this issue. In this context, Nepal has taken the discussion with World Bank South Asia Regional Director Gupta as a positive step.

Despite years of discussion, the project in Bhotkhola Rural Municipality of Sankhuwasabha has yet to move forward. 

Construction of the access road for the 1,063 MW semi-reservoir-based Upper Arun Hydropower Project is only now beginning, with support from the Asian Development Bank (ADB).

The World Bank, under its leadership and with participation from the ADB, Japan International Cooperation Agency (JICA), and others, has already prepared an investment package worth around USD 2 billion. 

On the other hand, the Nepal Electricity Authority is expected to invest Rs 65 billion, though discussions on this aspect have yet to begin.

The estimated cost of the Upper Arun project is around Rs 214 billion (approx. USD 1.6 billion), with a financing modality of 70 percent debt and 30 percent equity.