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India and Nepal agree to build Arun IV

Indian hydropower producer Satluj Jal Vidyut Nigam (SJVN), and Nepal Electricity Authority (NEA), Nepal’s state-owned power producer and transmission and distribution grid operator, have signed an MoU to develop the 695 MW Arun IV hydro project in eastern Nepal jointly. 

The MoU, which was signed on 13 May by the Executive Director of NEA, Kulman Ghising, and the Chairman of SJVN, Nanda Lal Sharma, in the presence of India’s Prime Minister Narendra Modi, and the premier of Nepal, Sher Bahadur Deuba, paves the way for the setting up of a joint venture project company to build the estimated NPR 79.1 billion (US$ 637 million) project.

Under the agreement, SJVN will hold a 51 per cent stake and NEA will have an equity share of 49 per cent. Nepal will receive 21.9 per cent of the monthly electricity production from the project free of charge, according to media reports, and has also reserved the right to purchase electricity generated from the project if required. The remaining power will be exported to India and/or Bangladesh. The project is expected to generate average annual output of around 2.1 TWh.

This agreement was among six concluded between India and Nepal during Prime Minister Modi’s visit to Nepal. The two leaders also discussed building the 750 MW West Seti hydro project in western Nepal from which India hopes to receive electricity and regulated water supply. It will be the third hydropower project on the Arun river, a tributary of the Koshi river, to be jointly developed by the two countries. SJVN, a joint venture of the Government of India and the Government of the country’s northern state of Himachal Pradesh, is currently developing the downstream 900 MW Arun III and 679 MW Lower Arun projects under 25-year concessions on a build-own-operate-transfer (BOOT) basis.

Arun III, a peaking run-of-river project in Sankhuwasabha district, will comprise a 70 m-high concrete gravity dam, which will impound a reservoir with a storage capacity of approximately 13.94 ¥ 106 m3 and a 11.7 km-long headrace tunnel and an underground powerhouse to be equipped with four 225 MW vertical Francis units that are to be supplied by BHEL of India. Electricity from the project, which is scheduled to be commissioned in 2024, is expected to be exported to India via a 217-km-long, 400 kV transmission line.

Ground-breaking occurred in 2018 with financial closure for the project, which is estimated to cost approximately US$ 983 million, reached in February 2020. The Lower Arun run-of-river project in the Bhojpur district of eastern Nepal will not have a dam and will be a tailrace development of Arun III. SJVN signed an MoU in July 2021 with the Investment Board of Nepal (IBN) for the development of the US$ 1.3 billion project.