Kathmandu, November 5, 2025 — Minister for Energy, Water Resources and Irrigation; Physical Infrastructure and Transport; and Urban Development, Kulman Ghising, has stated that the investment modality of the 1,200-megawatt Budhigandaki Reservoir Hydropower Project, a national pride project, should be finalized immediately.
Minister Ghising, while discussing the progress of the project with Chiranjeevi Chataut, Secretary of the Ministry of Energy, Water Resources and Irrigation, and officials of Budhigandaki Company Limited, the project’s promoter, said that the project should not be kept in its current state. He emphasized that an immediate decision should be made regarding the investment modality. Ghising urged the company’s management to finalize and submit the investment modality promptly through a financial analysis of the project.
“If the expenses already incurred for land acquisition, compensation for the use of forest land and the trees to be cut, customs duties, and value-added tax exemptions are provided, the project can become financially viable,” Minister Ghising said. “If arrangements can be made to deposit half of the infrastructure tax currently being collected on petroleum imports directly into the project’s account, there will be no problem in financing — that amount can be utilized as needed. Funds for the project can also be raised by issuing ordinary shares of the Nepal Electricity Authority to the general public,” he added.
He further directed, “Prepare and submit immediately an investment modality with 50 percent equity and 50 percent loan financing, ensuring that the Government of Nepal does not bear the financial burden.”
According to the report prepared by the consultant in 2015, the estimated cost of the project was 2.59 billion US dollars. After a cost review at current prices, the revised estimated cost of the project now stands at 2.77 billion US dollars (approximately 332 billion Nepali rupees). The construction period of the project is estimated to be eight years.
The company has prepared two investment modalities — one assuming that government financing through the Viability Gap Fund (VGF) will be available, and another assuming it will not.
In the first option, if the government does not provide the VGF, it has been proposed that the equity-to-debt ratio be 25 percent and 75 percent respectively. Under this modality, the expenses already incurred by the government for land acquisition and related works would be included as part of the equity, while the remaining investment would be provided as additional and concessional loans.
In the second option, if the Viability Gap Fund (VGF) is made available, it has been proposed that the equity-to-debt ratio be 30 percent and 70 percent, respectively. Under this modality, the government would provide a highly concessional loan of Rs. 73 billion through the VGF to cover expenses related to land acquisition, restoration of public infrastructure, environmental protection, and the use of forest areas.
It has been proposed that the equity portion of the investment be collected from the Government of Nepal, the Nepal Electricity Authority, the Employees Provident Fund, the Citizen Investment Trust, Nepal Telecom, and the general public.
The Detailed Project Report (DPR) and tender documents of the project are currently under preparation. Progress on land acquisition — considered the most complex aspect of the project — has reached about 90 percent. A total of Rs. 42.65 billion has been distributed to landowners as compensation for land, structures, trees, and crops.
The project is expected to physically and economically affect 8,117 households in Gorkha and Dhading districts, of which 3,560 households will be fully displaced.
Because it is located close to major power load centers such as Kathmandu, Chitwan, and Pokhara, the Budhigandaki Hydropower Project holds strategic importance from the perspective of national energy security.
A 263-meter-high curved arch dam will be constructed across the Budhigandaki River, which flows along the border of Gorkha and Dhading districts. The project will affect areas of 14 former Village Development Committees (now 4 rural municipalities and 1 municipality) in Dhading and 13 former VDCs (now 4 rural municipalities) in Gorkha.
Once the dam is constructed, the reservoir formed by the impounded water will cover an area of 63 square kilometers in the upper catchment region. The 63-square-kilometer Budhigandaki reservoir will create opportunities for employment, business, tourism development, fish farming, and other economic activities.
The project’s maximum water level will reach 540 meters above sea level, and it is expected to generate 3.383 billion units (kilowatt-hours) of electricity annually.
