GS Paper - 2 (International Relations)

India and Nepal will build a 695 megawatt (MW) hydropower plant, officials said on 16 May 2022, as the Himalayan nation looks to exploit its abundant potential to generate clean energy to ease power shortages. India, which has an electricity trading deal with Nepal, is investing billions of dollars in infrastructure including hydropower plants, as New Delhi looks to grow its influence in its smaller neighbours, where China is also increasingly active.


  1. The Arun IV project will be jointly built on the Arun River in Nepal's east by India's Satluj Jal Vidyut Nigam (SJVN) Ltd and Nepal's state-owned Nepal Electricity Authority (NEA) owing 51% and 49% of equity respectively.
  2. Nepal will get 152 megawatt of free electricity from the plant for its consumption and the rest will be split between the two on the 51% and 49% basis.
  3. The power plant agreement is among six deals concluded between India and Nepal during the Indian Prime Minister Narendra Modi's fifth visit to the Himalayan nation on 16 May 2022.
  4. Indian companies are negotiating with the government for power plants that would produce a total of 8,250 MW and Nepal hopes to export excess energy to India.
  5. Nepal has the potential to produce 42,000 MW of hydropower but now generates about 1,200 MW -- less than demand of about 1,750 MW. The deficit is met by imports from India.