Although the construction of hydropower projects in Nepal has accelerated recently, the construction of reservoir-based projects is very less. Most of the hydropower projects built in the country are based on river flow system, resulting in production of more electricity when the water in river is high and vice versa.

At present, hydropower projects in Nepal produce more electricity than required during the rainy season while there is a compulsion to import electricity during the dry season. Reservoir-based hydropower projects are necessary to end the import of electricity by producing enough energy even in the dry season.

Although there is enough potential and need, the construction of reservoir-based projects seems to take place at a very slow pace. According to hydropower expert Anup Upadhyaya, there are many reasons for not constructing reservoir-based projects.

“Reservoir-based projects require huge investment, which is the main challenge. Since more areas will be affected by such projects, we should also work for the management of locals and there are administrative hurdles. Another thing is the market guarantee. There is also a problem of continuous flow of water for the construction of hydropower projects with large reservoirs.”

According to experts, some political parties and non-governmental organizations are playing a negative role in the construction of hydropower projects with reservoirs. In terms of relocation of project-affected settlements, political parties are delaying and obstructing the process by taking unnecessary steps.

Similarly, some raise issues such as environmental protection, destruction of wildlife habitats to discourage investors and disrupt the investment environment even before the initiation of the project.

Foreign investors look for market guarantee before starting a project. India is the biggest and easiest market for electricity produced in Nepal. However, the electricity trade agreement and experience with India is not so encouraging.

From time to time, the issue of having to think seriously about the option of completing the project by bringing in the investment from international financial institutions like the World Bank and Asian Development Bank (ADB) is raised. However, Upadhyaya says that those organizations are not much interested in investing in reservoir-based hydropower projects considering the issue of continuous flow of water and 'social safeguard policy'.

The Independent Power Producers’ Association, Nepal (IPPAN), an organization of energy entrepreneurs who have produced a large amount of electricity in the country, argues that the Government of Nepal is not interested in the issue of reservoir-based projects.

Ganesh Karki, vice president of IPPAAN says, “The government has not set a target for large-scale hydropower production. The current target of generating 6,500 megawatts of electricity will be met through the existing process.”

Karki pointed out the lack of liquidity in the banking system, the inability to raise large investments and the difficulties in land acquisition have been discouraging the hydropower projects of reservoir type.

The Nepal Electricity Authority (NEA) stated that the reservoir-based project is its priority. Suresh Bhattarai, spokesperson for the NEA said, “Some projects are being studied, some are in the pipeline.”

Spokesperson Bhattarai, however, admitted that the construction is being delayed due to the lack of coordination between various agencies of the state. He said that if there is effective coordination, the construction of the hydropower project will proceed at a quick pace.