India secures 4,700MW in Nepal, but little progress on projects

Indian companies have secured seven major hydropower projects in Nepal, with a combined capacity of about 4,700 megawatts. The article names Arun-III, Arun-IV, Lower Arun, West Seti and Seti River-6. It does not identify the remaining two projects in the supplied text.

The projects matter because Nepal plans to export 10,000 megawatts to India over ten years. They could provide investment, electricity sales and royalties. Arun-III alone is expected to provide Nepal Rs348 billion over 25 years, plus free electricity and royalties.

Only one of the seven projects is under construction. That means most planned generating capacity is not yet moving toward completion. Former energy secretary Anup Upadhyay says developers are not solely responsible. Government agencies have also delayed decisions and procedures, which could postpone exports and expected revenue.

The seven projects have a combined planned capacity of around 4,700 megawatts. Nepal's January 2024 agreement with India covers exports of 10,000 megawatts over the next ten years. On a simple capacity comparison, the projects represent 47 percent of that 10,000-megawatt figure.

This is a large share of Nepal's export ambition. The projects are not automatically the same as electricity already available for sale. They must be built, connected to transmission networks and approved for cross-border trade. Still, their planned capacity shows why delays matter.

Only one of the seven projects is under construction. The other projects cannot contribute their planned capacity until development advances. Delays could therefore leave Nepal with less electricity to export during the agreement period. They could also postpone the revenue Nepal expects from electricity sales, royalties and related project benefits.

Hydropower is electricity made from moving water. A project directs river water through a controlled channel or tunnel. The water's force spins a turbine. The turbine turns a generator, which produces electrical power. The electricity then travels through transmission lines.

Nepal's projects use different river designs. Lower Arun, for example, will have no reservoir or dam. It is planned as a tailrace project of Arun-III, so water discharged from Arun-III's powerhouse can generate more electricity at Lower Arun. The Arun projects together are expected to produce nearly 2,300 megawatts.

This system depends on more than rivers. Dams, tunnels, powerhouses, turbines and generators must be built and maintained. Electricity also needs transmission infrastructure and permission to cross the border. Until these parts work together, flowing water remains potential energy rather than reliable exportable power.

Construction delays postpone the moment when projects can generate electricity and sell it. Nepal therefore cannot receive expected export earnings on schedule. It may also wait longer for project-related royalties, free electricity and other financial benefits. The article says delays are likely to push back revenue Nepal expects from electricity exports.

The seven Indian-backed projects total around 4,700 megawatts, but only one is under construction. Those projects are important to Nepal's wider plan to export 10,000 megawatts to India over ten years. Planned capacity does not count as delivered power until construction, grid connection and approvals are complete.

If delays continue, Nepal may have less electricity available for cross-border sales within the agreed period. That could weaken its ability to meet the export ambition and reduce the trade-deficit benefits it expects. Anup Upadhyay says government agencies, as well as developers, have delayed necessary decisions and procedures.

Nepal cannot determine cross-border electricity sales by itself. The article identifies India as Nepal's principal electricity buyer and says India determines which Nepali projects are permitted to sell electricity across the border. That gives India a decisive role in turning generation capacity into export revenue.

A project may be funded, constructed and connected inside Nepal, yet still need permission for its electricity to enter India's market. This approval sits alongside physical infrastructure, such as cross-border transmission lines. Nepal is expanding that infrastructure to support electricity trade, but lines alone do not guarantee market access.

The arrangement makes India both a customer and a gatekeeper for exports. It can support Nepal's revenue plans when approvals and purchases align. It can also limit the value of projects if permission is delayed or withheld. The supplied article does not explain the detailed criteria India uses for approval, so those criteria cannot be specified here.

The supplied article ends just as it begins discussing India's January 2022 position, so it does not provide the reason for restricting electricity from projects involving Chinese investment. Based on established public knowledge outside the supplied text, India has treated Chinese participation in sensitive infrastructure as a security and strategic concern. This explanation is not stated in the article itself.

The article does show the diplomatic effect. China withdrew from West Seti and Seti River-6, and Nepal later awarded the two projects to India's NHPC through a negotiated process. India also controls which Nepali projects may sell electricity across the border.

This limits Nepal's room to use hydropower projects equally with both neighbours. The article says successive Nepali governments shifted diplomatic focus between New Delhi and Beijing according to political circumstances. Dependence on India's market and approvals can pull projects toward India, even while Nepal seeks cordial relations with both countries.

Turning river water into export revenue requires a complete chain. Nepal needs financing, construction, turbines, generators and operating powerhouses. It also needs domestic and cross-border transmission lines to move electricity toward Indian buyers. Projects must produce power consistently enough for planned sales.

The article gives Lower Arun as a practical example. It will use water released from Arun-III, so the two projects must work in coordination. Nepal is also expanding cross-border transmission infrastructure. Even then, India determines which projects are permitted to sell electricity across the border, making market approval another essential link.

The current chain is incomplete. Seven major projects total around 4,700 megawatts, but only one is under construction. Government agencies have also delayed decisions and procedures, according to Anup Upadhyay. Until construction, grid connections and approvals advance together, Nepal's 10,000-megawatt export ambition and expected revenues remain uncertain.