Arun-3 in Nepal gets a February 2028 target for commercial power

What happened

The decisions came at the board's 68th meeting, chaired by Prime Minister Balendra Shah. On Arun-3, the board agreed to facilitate the steps needed for commercial production to start by February 2028. On Upper Karnali, it agreed to move development forward under the project development agreement (PDA), but myRepublica reported no new target date. The meeting also approved two smaller semi-reservoir projects worth about Rs 21.17 billion.

Arun-3 has a long history. According to The Kathmandu Post, it was first planned in the mid-1980s. In the 1990s it was redesigned as two stages of 201 MW each, with a donor group led by the World Bank. The World Bank withdrew after criticism of the design, the plan and the environmental impacts. More than a decade later, the project was revived at 900 MW.

SJVN won the project through international bidding in March 2008 and signed the development agreement with the Investment Board in November 2014. Construction began in May 2018. Production was first slated for 2020, the Post reported, but financial closure slipped by about a year and a half. In June 2024, SJVN's chairman said the project was more than 74 percent complete and expected generation the following year. That date has also passed.

The engineering behind it

Arun-3 is a run-of-river project on the Arun River. Its 11.8 km headrace tunnel broke through in June 2024, when Prime Minister Pushpa Kamal Dahal set off the final blast. A headrace tunnel carries water from the intake at the dam to the powerhouse, under a hillside. Over that distance, the river drops a great deal, and the tunnel keeps most of that height as head, the energy the turbines use.

Long tunnels in the Himalaya are slow work. In general, crews must deal with changing rock quality, water inflow and weak zones. Each section needs a support design based on the rock found as the tunnel advances. This is one reason tunnelling schedules are hard to predict, even on well-funded projects.

Moving 900 MW out of the mountains is a separate task. The Post reported that the associated transmission line is 217 km long and was still under construction in 2024. A plant of this size needs a high-voltage line, because carrying large power at higher voltage reduces current and therefore losses. If the line is late, the plant cannot sell its output even after the turbines are ready.

The Post put Arun-3's expected generation at 3,924 million units a year. Under its agreement, SJVN gives Nepal 21.9 percent of the monthly energy free of cost. After 25 years of commercial operation, the project passes to the Government of Nepal. This is a build-own-operate-transfer arrangement. SJVN is also developing the 679 MW Lower Arun project, which the Post described as a tailrace development of Arun-3 with no reservoir or dam. It reuses the water after it leaves the Arun-3 powerhouse.

What it means in Nepal

The Post described Arun-3 as Nepal's first export-oriented project and its largest hydroelectric plant. It expected the free energy to be worth Rs 155 billion and royalties Rs 107 billion over 25 years. Total direct economic benefits to Nepal, including taxes and dividends, were put at Rs 348 billion. Each month of delay pushes those benefits further away.

Upper Karnali shows how long a project can stall. It is a 900 MW project in Achham and Dailekh districts, awarded to India's GMR. The PDA was signed on 19 September 2014 and gave two years for financial closure. Deadlines were extended several times, and a court case ended in May 2023 with a ruling in GMR's favour. The Post reported in March 2026 that further financial steps were waiting for the full text of a Supreme Court order.

The ownership has also changed. In the revised structure, GMR and SJVN hold 34 percent each, the Indian Renewable Energy Development Agency holds 5 percent and the Nepal Electricity Authority holds 27 percent. The original plan to sell 500 MW to Bangladesh was cancelled by Bangladesh's interim government, the Post reported in 2025. In July 2025, GMR invited bids for early works, including a 2,431 m access road tunnel and a 150 m bridge over the Karnali.

The Post put Upper Karnali's estimated cost at Rs 146 billion, under a build-own-operate-transfer deal with a 25-year concession. Its planned output was split into 108 MW for Nepal, 500 MW for Bangladesh and 292 MW for the Indian market. With the Bangladesh sale cancelled, the sources do not say where those 500 MW will now be sold. That question matters for lenders, who want to know who will buy the power before they commit money.