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Nepal's Big Dams

Updated: Nov 28, 2020

In 2016, Nepal’s government pledged to generate 10,000 MW of hydropower over the next 10 years. Against a backdrop of changing foreign investment dynamics, new hydropower technology, and shifting socio-political implications, this declaration has significant implications for the future of power in Nepal. In this article, we delve into the numerous actors involved in hydropower plants in Nepal, focusing on the ecological, social, and political ramifications of big, reservoir-style dams.

The Nepali state has long associated hydropower with economic prosperity. If every river was tapped, the country could generate up to 83000 MW of electricity, offering a significant renewable power source, but only 42000 MW of this is economically feasible. To understand the current trends in hydropower construction, it is necessary to situate the current time period in the changing narrative of hydropower plants in Nepal. Until the restoration of multi-party democracy in 1990, dam construction was a top-down process, carried out by state institutions and with little local input. Since then, private parties have been allowed to invest in dams, and there has been greater local participation and influence in dam construction. Although the total capacity of installed hydropower as of 2019 is a meagre 1130 MW, the vision of dam construction for self-sufficiency and export has endured.

As of 2020, all of Nepal’s river dams are run-of-the-river dams, meaning their power-output fluctuates with the seasons, generating less during drier months. In this context, the construction of reservoir-style dams seeks to greatly increase and stabilise hydroelectricity production. Reservoir-style dams generate much more electricity than run-of-the-river dams, but they also have an impact on local communities and ecosystems.

Example of an anatomy of a run-off-the-river dam (illustration based on Kali Gandaki A Hydropower Project)

Ecological and Social Impacts of Big Dams

Impacts on the environment

While construction of mega reservoir dams can be beneficial for large scale power generation and agricultural irrigation, they also have negative environmental impacts and long-term social and economic consequences.

One of the adverse effects of dams is their interference in fish migration. The construction of dams changes the flow of water in fast running rivers, causing habitat destruction and disrupting feeding, breeding and migrating grounds. The findings of a study done by the Asian Development Bank (ABD) highlights the declining fish population in Nepal’s river basins due to dam construction. For example, the Kali Gandaki Hydropower Project (Nepal’s largest hydropower project with a capacity of 144MW) is predicted to block upstream fish migration and exacerbate downstream drought from October to May. This is not just a problem for the Kali Gandaki project. The construction of reservoir-style dams is known to affect the state of rivers, and due to upstream hydropower projects, 6 kms of the Marshyangdi River has already run completely dry.

The physical barrier of the dams themselves cause further problems for fish populations. Lakes of stagnant water behind reservoir style dams gather sediment and promote algae growth, which cause problems for downstream aquatic life. These dams not only block fish migration and breeding but also pose a threat to their existence by altering both temperature and oxygen levels in the water.

Effects on Locals

Dams are regarded as an instrument of development, and the construction of the dams themselves are portrayed as a win-win situation for the state and for the people living around them. However, it is the local people who are mostly negatively impacted by such projects. Most downstream valleys in Nepal are hubs for the cultivation of wheat, paddy and maize. Construction of huge reservoirs upstream threatens this vital agriculture by restricting the flow of nutrients to floodplains, and diminishing the inundations of river beds.

According to an ADB report, the construction of the previously mentioned 144 MW Kali Gandaki project forced 1500 families from their homes and communities. While smaller hydropower projects that are locally designed with shared local resources cause less displacement, the current dominant discourse lies in constructing mega hydropower projects which are supposed to provide higher financial returns. However, these mega hydropower projects, which are in the interest of foreign investors, will not bring immediate benefits to the local population. Locals will not only lose their entitled land, but also lose access to the water resources they have relied on.. In theory, the state is supposed to compensate displaced populations with another piece of land or cash, but in reality this too often doesn’t happen..

Further exacerbating problems faced by local communities, when a dam project is proposed, there is a buffer period between surveying a site, and constructing the dam. This period often leaves locals in a state of uncertainty before the state finalizes relocation plans and actually find investors When the site for Upper Karnali Hydropower (proposed, 900MW) was decided in the 1990s, locals were promised relocation and cash and were also advised to buy land that they could sell to the investors for profit. Almost 40 years down the line, the project is still yet to begin. Too often, locals are kept in the dark about the water and electricity politics being discussed by investors, contractors and the higher authorities. The purpose of dams is often not communicated to local communities, and There are politics involved in who gets compensated when dams are actually built. In an interview by Firstpost, a local informed the reporter that the state and the company were only compensating influential and politically powerful people and leaving the general public behind.

Hydropower offers economic opportunity to Nepal, but too often big dams don’t take into account the needs and vulnerabilities of local communities and ecosystems. As we enter the second half of Nepal’s 10 year pledge to increase hydropower production, it is essential that new construction projects work to minimize their harm to the environments they benefit from, and the local people that live there.

The Economics – investments and concerns

Current State of Dams

With large scale dams popping up around the country, Nepal is undergoing a hydropower boom. As of August 2020, more than 200 hydropower projects (of more than 1 MW capacity) were under construction or had received license for construction in Nepal. Upon completion, these projects will add a total of 7948.8 MW in hydroelectric capacity, almost 7 times more than the 1130 MW hydroelectric capacity at present.

The planned storage dams and the four dams with foreign investment

There are even more dams that are under study or have received licenses for survey. Of the around 276 dams in this stage, 16 are particularly significant. These 16 river dams are reservoir-style dams and they signal a shift from the run-of-the-river dams now being used in Nepal.


While many hydroelectric projects create their own local problems, several so-called “mega-dams” have grown to become issues of national and international politics.

There are two important discourses to consider:

A. Export-oriented approach and possible ethical implications

Hydroelectric dam construction – and especially that of larger dams – often have localized costs, but national benefits. Spatially, dams are constructed in remote mountainous areas leading to great environmental and social effects on remote communities, while the bulk of the electricity thus produced is usually transported to population centres elsewhere.The compensation and other possible benefits to local communities are uncertain, and may come under the influence of existing social inequalities.

Such trade-offs mean that the export-oriented mentality of many large dams may require greater scrutiny. Dam construction for national energy sufficiency may be justifiable but constructing dams almost purely for export (at significant costs to locals) is more difficult to rationalize, especially when the costs and benefits of such construction are not distributed equitably. For instance, both the Upper Karnali and Arun-3 projects will be built in Nepal, but will export the vast majority of the electricity to India.

This export-oriented vision is not without criticism. Prakash Chandra Lohani, former finance minister, has criticized this approach, asserting that electricity generation should focus on creating energy security in Nepal and for its own industries, before considering exporting energy abroad. Water rights activists also question an export mentality when the country faces energy shortages. Perhaps understandably so, Maoist parties in Nepal, who practice an ideology of anti-globalism, initially met the two Indian-backed projects with resistance, possibly due to wariness of the increasing Indian influence. There has been mention of the political influence of donors in the developmental aid arena. Resistance against the current Arun-3 dam (900 MW) also evokes memories of the World Bank withdrawing funding for Arun-3 (201 MW) in the 1990s due to local resistance and macroeconomic risks.

Yet, despite these hurdles, the Arun-III project seems to be finally taking off, with various Indian and Nepali banks (as of August 2020) having committed to lend debts for the dam construction. The Upper Karnali project, however, has only ever received a survey license (as of August 2020) and there hasn’t been progress on construction.

B. Foreign investment

Chinese investment in Nepal has grown substantially over the last decade. This has been marked by Nepal’s official agreement to become a part of the Belt and Road Initiative. Until recently, Chinese companies had been involved in small to medium hydropower plants, but with Sinohydro’s involvement in the Upper Tamakoshi HPP (456 MW), China seems to be moving towards larger dams. Although China’s involvement in Tamakoshi and Marsyangdi has been largely successful, it has faced significant hurdles in the West Seti and Budhigandaki projects.

China’s Three Gorge Corporation (CTG) was given the license for the construction of West Seti dam (276 MW) in 2011, although disagreements at various levels with the government have since followed. Budhi Gandaki (1200 MW), initially linked to China’s Gezhouba Group, now remains without a promoter in official government documentation (as of August 2020).

Although China is moving towards bigger dams, the current complications with the Three Gorges Dam may have some effects on the perception of large run-of-the-river and reservoir-style dams in Nepal.

Conclusion: Viewing Rivers, Dams, and People

Aggressive hydropower construction reflects the national discourse on rivers that has been built over decades of glorification of Nepal’s real, yet socioeconomically complex, hydroelectric potential. In the context of hydroelectricity in the Mekong, Bakker mentions that the river is ‘depicted not only as a natural link between the six riparian nations, but also as a naturalised river, underutilised and unproductively variable.” The sheer number of hydropower plants in Nepal and the proposed construction of dams in many large rivers present a similar imagery and understanding of river systems in the Nepali consciousness.

The Gandaki Basin is especially vivid in this regard. The Gandaki/Narayani river is not merely a link between the Himalayas and the Ganges, or a river that links various cultures, practices, and languages; for the state, its hydro-cracy and its adherents; it is a river as yet underutilised, necessitating the construction of new hydropower projects. The four projects that dam the Marsyangdi river seem to be an extension of this thought process. The growth of hydropower plants in areas further away from the capital core of Kathmandu seems to be a diffusion of this very idea that focuses on maximizing utility through hydroelectricity generation and export.

Amidst this backdrop of the many dams that dot the rivers of the Gandaki basin, there has been concern about the region’s vulnerability to climate change-induced disturbances and the subsequent effect on communities and ecosystems (TKP 2020/08/20). In August 2020, with these considerations in mind, the Green Climate Fund approved funding of over Rs 3 billion (USD 27.4 million) The project ‘FP131 Improving climate resilience of vulnerable communities and ecosystems in the Gandaki river basin, Nepal’ has been accredited by IUCN with International Economic Cooperation Coordination Division, Ministry of Finance being the national designated authority. As the project proceeds, it will be interesting to see how a focus on climate and community resilience interacts with hydroelectricity dams and the current dominant discourse.


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