The World Bank (WB) has expressed its consent to expedite construction of the Upper Arun Hydroelectric Project after Nepal solves a land acquisition issue in the project related areas.

In a meeting with Energy Minister Deepak Khadka on Thursday, the WB’s South Asia Director Pankaj Gupta said the multilateral lending institution has kept the Upper Arun Hydroelectric Project (UAHP) in high priority. In response to Minister Khadka’s concern that delays in finalizing financial management had pushed the UAHP into uncertainty, Regional Director Gupta expressed that the WB is ready to finalise left over procedures to take the project into conclusion.

Although the World Bank committed to arranging financing for the project a year ago, it has reportedly shown reluctance due to India's interest in the 1,063 MW semi-reservoir project. An Indian Company Sutlej Jalvidyut Nigam has been insisting on getting the contract for all the projects based in the Arun basin including 900 MW Arun III project and 210-km long transmission line in the region.

While the government has planned to build the project, the Indian company has been putting pressure at the political and diplomatic level to grab the contract for the mega hydropower project proposed to be built in Bhot-khola Rural Municipality of Sankhuwasabha. Earlier, India had urged the WB to reconsider its involvement in the project due to ongoing Indian-led projects downstream of the Arun River.

Nepal Electricity Authority (NEA) through a subsidiary company ‘Upper Arun Hydro-Electric Limited has already carried out study on various aspects of the project. Time and again, the government has been requesting the WB to take forward the financial management of the project which was supposed to start a year ago.

Upper Arun is a game changer project of Nepal which is expected to operate at full capacity for six hours a day during the six months of winter when there is a high demand for electricity. The project that will produce around 4.53 billion units of electricity annually is estimated to cost US $2.24 billion.

In an agreement reached between the government and the WB in April, 2024, the multilateral institution had assured to start construction of the project from the beginning of 2026.