Since Nepal is a close neighbor of India, its partnership is vital for the development of Nepal. India has been providing direct and indirect investments and support in various areas of Nepal. However, there have been many arguments regarding Indian investment in the hydropower sector, which is considered to be a potential source of income for Nepal. Especially, there is no consensus on whether the current Indian investment is enough or too little.

According to the Nepal Electricity Authority (NEA), so far, India has invested in seven hydropower projects with a total capacity of 3,491 megawatts. The hydropower projects in Nepal with Indian investment are in three stages: obtaining survey license, obtaining construction license and under construction.

According to NEA, during the dry season, the demand for electricity in Nepal is 1,750 megawatts in peak hour while the minimum demand is 1,200 megawatts and 1,300 megawatts in average. Since most of the hydropower projects currently in operation in Nepal are based on river flow system, the country needs to import electricity from India to meet the domestic demand during the dry season while it sells surplus electricity to India during the rainy season.

Due to lack of investment, large hydropower projects have not been built in Nepal. China has shown interest in investing in hydropower projects in Nepal. But, India has adopted a policy of not buying electricity from hydropower projects built in Nepal with the investment of neighboring countries, especially China.

In such a situation, it seems that Chinese investment projects will not be able to enter the easy and accessible electricity market in India. Apart from China, the investment projects of other foreign countries also having lots of difficulties to enter the Indian market. Projects developed with Indian investment do not have to face this kind of trouble.

Indian investment will ensure that there won’t be lack of funds and there will be no problem in selling the produced electricity. The Indian government has committed to expand the use of green energy. There is a huge demand for energy in India and sufficient resources for investment but there is not enough investment coming from India.

Foreign investment expert Radhesh Panta says that Indian investment is not coming as expected due to Nepal's weakness.

“In order to attract investment in hydropower sector, there is a need for some kind of understanding at the top political level. However, there has not been much effort from Nepal. The subject of investment is also politicized. The tendency to view India with suspicion, seems to have emerged from the misconception that India will capture Nepal.”

Stating that the government should work on bringing in investment as a top priority, he added, “The government should stop bragging about having a good policy. It should first address the concerns of the investors and their wishes should be heard.”

As there is a lot of competition, investors are not forced to invest in one country. Therefore, Panta believes that the government of Nepal should also develop its competitiveness.