Shifting Himalayas Above Put Hydropower and Local Revenue at Risk Below

Only in the second week of Ashadh 2083 BS, after repairing structures damaged by a flood in 2082 BS, had the Rasuwagadhi Hydropower Company resumed generating electricity at full capacity. Company Secretary Naranath Neupane had sent a formal letter notifying the Securities Board of Nepal (SEBON), the Nepal Stock Exchange (NEPSE) and CDS and Clearing Limited.

Less than two months later, on 10 Bhadra 2083 BS, a flood in the Bhotekoshi River devastated the 111-megawatt project's headworks, offices, staff quarters and access road. Its underground powerhouse filled with debris and sediment, forcing the project back into rehabilitation once again.

Flood damage was not limited to the Rasuwagadhi project. According to the Nepal Electricity Authority (NEA), seven operating hydropower projects, several solar plants and transmission lines were disrupted, knocking out around 400 MW of power generation—nearly 10 percent of the country's total installed capacity. Five under-construction projects with roughly the same combined capacity were also battered by the floods.

The Bhotekoshi flood has raised a fundamental question about the way hydropower is being developed in Nepal: how durable are the projects built, and being built, in the narrow gorges of the mid-hills?

These projects sit directly downstream of high mountain terrain where glaciers, glacial lakes, rock faces and peaks are rapidly changing. In recent years, rock and ice avalanches originating in the high Himalayas have increasingly transformed into destructive torrents of water, boulders and debris by the time they reach lower elevations, battering hydropower infrastructure along the way. The impact is being felt not only by the projects themselves, but also by the local governments that rely on them for revenue and by the national power grid. This has heightenied risks for future investment.

Upheaval in the High Himalayas

The Rasuwagadhi Hydropower Project had already experienced a Himalayan disaster in 2082 BS. On 24 Ashadh 2082 BS, a supraglacial lake formed on the surface of the Purepu Glacier in Tibet burst suddenly, triggering a flood in the Bhotekoshi River. Originating about 36 kilometers north of the border, the flood tore through bridges, roads, a dry port and the Rasuwagadhi project on the Nepali side. Before those structures could be fully rebuilt, an even larger flood struck in Bhadra 2083 BS.

According to a preliminary assessment by the International Centre for Integrated Mountain Development (ICIMOD), the Bhadra 2083 BS Bhotekoshi flood was triggered when a high mountain slope collapsed in the Langtang Lirung area, setting off a massive rock and ice avalanche. On 25 Ashoj 2083 BS, a similar event occurred in the upper Himalayan reaches of the Budhigandaki River. According to a preliminary report by the National Disaster Risk Reduction and Management Authority (NDRRMA), the flood began after an avalanche at an altitude of around 6,000 meters and a massive snow-and-debris landslide at around 5,500 meters in the Thado Khola gorge between Mount Chamar and Mount Sringi.

The resulting flood damaged hydropower structures, homes and bridges downstream.

Dr. Santosh Nepal, a researcher at the International Water Management Institute (IWMI), says such events must be viewed in connection with broader changes taking place across the Himalayas. "Recent events show that the entire Himalayan region is becoming increasingly unstable," he says. "This is extremely risky."

According to a recent analysis by World Weather Attribution (WWA), July–August temperatures around Langtang Lirung were 1.5 degrees Celsius above average due to human-induced climate change. Rising temperatures melt the ice bound within rock fractures, weakening the forces that hold mountain slopes together and triggering landslides. However, the study did not examine whether this specific landslide would have occurred in the absence of climate change.

According to an assessment published by ICIMOD in March 2026, the total area of glaciers in the Hindu Kush Himalaya shrank by around 12 percent between 1990 and 2020, while estimated ice volume declined by 9 percent.

Disasters in the Himalayan region have become more frequent in recent years. The Thame disaster in Solukhumbu showed that even small lakes not listed as potentially dangerous can trigger major catastrophes. According to published research on the Thame flood of Shrawan 2081 BS, the flood began when water released from a small upper lake breached another lake below it.

Another example of a Himalayan disaster is the Bhotekoshi flood in Sindhupalchok. In Ashadh 2073 BS, a landslide into the small Gongbatongsha Glacial Lake in Tibet triggered a flood that swept up vast quantities of boulders, soil and debris along the riverbanks, turning into a destructive cascade. It caused severe damage to the Arniko Highway, the Upper Bhotekoshi Hydropower Project and other infrastructure.

In 2078 BS, a small glacial lake at the headwaters of the Pemdang River burst. Combined with heavy rainfall, the water released from the lake scoured rocks, soil and sediment accumulated at Bhemthang, unleashing a devastating flood downstream in Melamchi. In Ashoj 2080 BS, a disaster in Sikkim, India illustrated a similar chain of events on an even larger scale: a flood triggered by the breach of the South Lhonak Glacial Lake destroyed the 1,200-megawatt Teesta-III Hydropower Project on the Teesta River.

Of the 47 potentially dangerous glacial lakes identified across the Koshi, Gandaki and Karnali river basins in 2020 by ICIMOD and the United Nations Development Programme (UNDP), 21 lie within Nepal, 25 in China's Tibet Autonomous Region and one in India. In the six years since those lakes were identified, no comprehensive follow-up study of high-risk glacial lakes has been conducted. Experts say that understanding the risks facing projects in Nepal also requires studying upstream transboundary watersheds.

In Baisakh 2069 BS, a flood in the Seti River triggered by a rock and ice avalanche from the Annapurna IV area caused heavy damage downstream, including at Kharpani in Kaski. That event highlighted the threat posed by high-altitude avalanches beyond glacial lake outbursts. Similarly, the disaster in Chamoli, Uttarakhand in India in Magh 2077 BS demonstrated how a rock and ice avalanche can transform into a catastrophic downstream flow.

Dr. Nepal of IWMI says such downstream disasters point to a common pattern of change in the high mountains. "Whether a disaster starts with a rock and ice fall or a glacial lake outburst, it sets off a cascading hazard all the way downstream. This has emerged as a clear trend in recent years," he says. "It has heightened safety risks for hydropower plants and other downstream infrastructure."

Hydropower in the Line of Fire

The waters of the Marsyangdi River power the Upper Marsyangdi 'A', Middle Marsyangdi and Marsyangdi hydropower projects. At the headwaters of the Dana River, a tributary of the Marsyangdi, lies Thulagi Glacial Lake. Any disturbance in this glacial lake directly affects the future of the projects downstream. Should a major flood burst from Thulagi, all three projects—with a combined generation capacity of 189 MW—lie along its projected flow path. Thulagi's surface area has nearly doubled in the 49 years since 1970.

Much like the risk Thulagi poses to projects on the Marsyangdi, the Lower Barun Glacial Lake raises serious safety questions in the Arun River basin. Directly in the path of a potential outburst flood from Lower Barun is the under-construction Arun-III project. Glacial lake hazards thus cast a shadow over the future of projects still being built; several other hydropower plants are also under construction along the Arun River.

A study published in Hydrology and Earth System Sciences in 2025 modeled a scenario in which the natural moraine dams of Nepal's 21 potentially dangerous glacial lakes breached to their full height. According to the study, 49 hydropower projects—either operational or licensed—lie in the path of such outburst floods. Among the projects at risk are the operational Middle Tamor (73 MW) and the under-construction Tamor-Mewa (128 MW) on the Tamor River, both of which sit in the flood path should 'Unnamed Lakes 1 and 2' burst.

Threats to hydropower projects are not confined to glacial lake outbursts and avalanches; extreme rainfall in recent years has added another layer of uncertainty. In a World Weather Attribution study of the three-day extreme rainfall event of Ashoj 2081 BS, available climate models indicated that human-induced warming had increased the intensity of such rainfall by around 10 percent and its likelihood by nearly 70 percent. This shows that hydropower projects face compounding risks not only from geological instability in the high Himalayas, but also from floods triggered by intense downpours.

According to the Independent Power Producers' Association, Nepal (IPPAN), floods in eastern Nepal in Jestha–Ashadh 2080 BS affected 30 hydropower projects (including those under construction) with a combined capacity of 470 MW. The floods and landslides of Ashoj 2081 BS also damaged the dams, access roads and other structures of dozens of hydropower projects. In the second week of Ashoj 2083 BS, flooding after three days of rain damaged the Kushma–Dana 220 kV transmission line, halting power evacuation from projects with a combined capacity of around 190 MW.

Despite these recurring disasters, Nepal holds a long-term ambition of achieving economic prosperity by building hydropower plants and exporting electricity. The government's 16th Periodic Plan aims to nearly triple the country's installed generation capacity from the current 4,120 MW to 12,000 MW within the next three years.

Nepal is already earning revenue from power exports. In fiscal year 2082/83 BS, the NEA earned NPR 29.31 billion by selling electricity to India and Bangladesh. Viewing the shift from chronic power shortages to export earnings as a major milestone, the government aims to expand exports significantly.

The Energy Development Roadmap and Action Plan 2080 BS of the Ministry of Energy, Water Resources and Irrigation sets an ambitious target of reaching 28,500 MW of generation capacity by 2035 and exporting more than half of that electricity.

Beyond export revenues, the roadmap outlines a broader domestic transformation: powering local industries, replacing cooking fuel and electrifying transport. It also envisions an economic cycle in which revenues generated from rivers are reinvested in roads, schools and new power projects.

Yet recent events show a growing risk that climate disasters could derail the goal of achieving prosperity by harnessing fast-flowing Himalayan rivers.

A direct example is the 45-megawatt Upper Bhotekoshi Hydropower Project in Sindhupalchok. In Ashadh 2073 BS, the flood triggered from the Gongbatongsha Glacial Lake in Tibet wreaked havoc on the plant. Even before that, the Jure landslide in 2071 BS had damaged its transmission line, and the 2072 BS earthquake had damaged its structures. Having suffered three major disasters in two years, the project was only able to resume power generation in Poush 2076 BS.

At the Upper Tamakoshi project in Dolakha, catastrophe did not even require a glacial lake outburst. Following continuous rainfall in Ashoj 2081 BS, a massive landslide at the project's headworks completely destroyed the control room and caused extensive damage to the desanding basin and other structures. The powerhouse remained shut for nearly three months. In addition to rising reconstruction costs, the project lost substantial revenue from foregone power generation.

Experts say most hydropower projects in Nepal are designed on the basis of a "100-year flood." That does not mean a flood that occurs only once every hundred years; rather, assuming a stable climate, it refers to a flood magnitude that has a 1 percent probability of being equaled or exceeded in any given year. "Even when projects are designed on that basis," says Subarna Das Shrestha, former president of IPPAN and chief executive officer of the Sanima Mai Hydropower Project, "they do not account for catastrophic avalanche-induced floods like those seen in the Bhotekoshi or Budhigandaki."

Building structures capable of withstanding floods of such unimaginable scale would drive up costs to the point where projects are no longer financially viable, Shrestha argues. Growing instability in the Himalayas has compounded the risks facing projects built on such assumptions. A study conducted for the under-construction Upper Trishuli-1 Hydropower Project (216 MW) in Rasuwa—which was swept by the Bhotekoshi flood—had already hinted at this vulnerability. According to the Environmental and Social Review Summary published by the International Finance Corporation (IFC), a climate risk study identified extreme flows, glacial melt, sediment load and landslides, yet rated the overall climate risk as low and described the weir and foundation design—based on a 10,000-year return period flood calculation—as "climate-proof." Even so, the project being built to this supposedly safe design was devastated by the flood.

A 2026 study incorporating modeling of the Dudhkoshi River basin pointed out that by the 2050s, the magnitude of a historical 100-year flood could range from a slight decrease to an increase of up to 65 percent.

Still, Shrestha says Nepal should not conclude that hydropower projects cannot be built because of disaster risks. Instead, he emphasizes building underground structures in the safest and most suitable locations wherever possible, installing automated systems that shut tunnel gates when floods occur, and investing in research to improve hazard forecasting.

Hitendra Dev Shakya, former managing director of the NEA, emphasizes designing projects to provide safe passage for floodwaters. "Thinking you can block a catastrophic flood with a tall concrete wall is engineering arrogance," he says. He suggests designing structures so that excess flows are safely diverted through spillways or overflow corridors, ensuring that core systems survive even if outer components suffer damage when necessary. "You cannot stop a flood," he says. "You have to find ways to channel its destructive force away from critical infrastructure."

For projects under construction, floods deal a double financial blow. Capital is needed to repair structures already built, while delays in the commercial operation date push back revenues from electricity sales. Loan interest and contractor remobilization costs can also mount. The 6-megawatt Super Hewa Project in Sankhuwasabha was damaged by floods in Ashadh 2080 BS. According to records from CARE Ratings Nepal, initial damage was estimated at NPR 400 million. Commercial generation eventually began in Baisakh 2082 BS, adding NPR 160 million to the project's original cost of NPR 1.3 billion.

IPPAN records also show that the process of receiving insurance payouts after flood damage has become complicated for hydropower projects. Its March 2024 bulletin noted complaints over delayed claim settlements following the floods of June 2023; at the time, insurance claims worth NPR 7 billion filed by hydropower developers remained pending.

When floods damage hydropower projects, the repercussions ripple across the national economy. In October 2026, the World Bank lowered its economic growth projection for fiscal year 2083/84 BS from 4.2 percent to 3.7 percent, citing flood damage to electricity and transport infrastructure as a primary obstacle. That impact also reaches the revenues of riverside local governments.

Local Governments Bear the Financial Brunt

The budget of Aamachhodingmo Rural Municipality in Rasuwa illustrates how hydropower risks filter right down to the day-to-day accounts of local governments. In fiscal year 2083/84 BS, the rural municipality estimated NPR 8.565 million in internal revenue and nearly three times that amount—NPR 23.8 million—from natural resource royalties. Rural Municipality Chair Buchung Tamang says the vast majority of its natural resource royalties come from hydropower projects.

Out of its revenue, the rural municipality has allocated NPR 15 million to pay the salaries of contract employees. That means a drop in royalties does not merely shrink new development plans, it also puts pressure on the local government to find alternative sources just to cover regular operating expenses. "The damage caused by the flood to hydropower projects in our rural municipality means we are losing funds meant for development works," Chair Tamang says. "How are we supposed to balance a disrupted budget?" Aamachhodingmo and other rural municipalities have also invested in equity shares in the Rasuwagadhi project.

Tamang's concerns extend to development spending in the coming years. "Hydropower royalties had provided major support for the development of the rural municipality and the welfare of local residents. Losing this revenue means we will have to cut back on spending that benefits local people," he says, estimating that the fallout will be felt for several years.

According to royalty distribution records from the Financial Comptroller General Office (FCGO) for fiscal year 2081/82 BS, three rural municipalities in Rasuwa—Aamachhodingmo, Gosaikunda and Uttargaya—received nearly NPR 60 million in combined royalties. That amount is enough to build up to 16 four-room permanent community school buildings under the standards of the President's Educational Reform Program. Similarly, Bidur Municipality in Nuwakot received around NPR 30 million in royalties. With hydropower generation disrupted after the floods, this vital revenue source has become uncertain.

All three tiers of government benefit from hydropower royalties. According to distribution records for electricity royalties collected in fiscal year 2081/82 BS, nearly NPR 4 billion was shared among the three levels of government. Of that total, 153 local governments received nearly NPR 985 million. The combined share of the provincial governments was the same, while the federal government received nearly NPR 2 billion.

Under the Intergovernmental Fiscal Arrangement Act, 50 percent of electricity royalties go to the federal government, while 25 percent each is distributed to the concerned province and local governments. Rather than being spread across all local governments nationwide, the one-fourth share allocated to the local tier is divided among the municipalities where hydropower projects are operating.

Five-year data show that this revenue stream has been on an upward trajectory. Combined hydropower royalties received by local governments grew by around 39 percent in the five years since fiscal year 2077/78 BS. While 120 local governments received royalties five years ago, 33 more have since been added to the list. Updated records from the Department of Electricity Development (DoED) show that royalties received by the government from hydropower projects reached NPR 4.32 billion in fiscal year 2082/83 BS.

However, this income is heavily concentrated in a small number of local governments. According to data from fiscal year 2081/82 BS, Bhotekoshi Rural Municipality in Sindhupalchok received the highest hydropower royalty at nearly NPR 110 million, followed by Kaligandaki Rural Municipality in Syangja (NPR 46.9 million), Galyang Municipality in Syangja (NPR 44.3 million) and Aanbukhaireni Rural Municipality in Tanahun (NPR 40 million). Around 44 percent of all local royalties go to the top 10 recipient local governments, a figure that underscores the scale of the potential shock to their finances. Roughly half of the total hydropower royalties distributed to local governments is concentrated in municipalities across Sindhupalchok, Lamjung, Syangja, Dolakha and Rasuwa.

Among the provinces, around three-quarters of hydropower royalties go to Bagmati and Gandaki provinces. In fiscal year 2081/82 BS, around NPR 410 million was allocated to Bagmati and around NPR 370 million to Gandaki. Juddha Bahadur Gurung, former acting chair of the National Natural Resources and Fiscal Commission (NNRFC), considers the shrinking of fiscal resources that local governments can spend at their own discretion on priority projects to be the primary concern. When such revenues decline, he says, municipalities are forced to cut spending on local development plans and programs.

The 45-megawatt Upper Bhotekoshi Project illustrates why local government revenues are so exposed when disasters shut down hydropower plants. Nearly 96 percent of the hydropower royalties received by Bhotekoshi Rural Municipality in fiscal year 2081/82 BS came from this single project. Of the NPR 426.4 million the government received from the project, the entire one-fourth local share—around NPR 106.6 million—went to Bhotekoshi Rural Municipality. When repeated disasters kept the project shut for nearly four and a half years, Bhotekoshi Rural Municipality lost hundreds of millions of rupees in revenue. After resuming operations, the project paid NPR 352.8 million in royalties in fiscal year 2077/78 BS alone, a quarter of which went into the local government's account.

Upper Tamakoshi is another example. When the plant was completely shut down for 88 days following the floods and landslides of Ashoj 2081 BS, its annual generation fell by roughly a quarter, costing the government nearly NPR 30 million in lost royalties.

The 22-megawatt Bagmati River Project, bordering Lalitpur and Makwanpur, tells a similar story. According to a report by Mandu Hydropower, the project was shut down after the Ashoj 2081 BS flood and resumed partial operations in Shrawan 2082 BS. Government records show that royalties collected from the project fell from NPR 17.976 million in fiscal year 2080/81 BS to NPR 6.436 million in fiscal year 2081/82 BS. These examples illustrate how severely local government revenues are hit when climate disasters force hydropower projects to shut down.

Following the Bhotekoshi disaster in Bhadra 2083 BS, a rapid damage and needs assessment by the National Planning Commission and the NDRRMA estimated losses in the energy sector at NPR 151 billion. The report projected annual royalty losses of around NPR 290 million. On that basis, four local governments in the Bhotekoshi–Trishuli river basin stand to lose NPR 72.2 million a year in royalties until reconstruction is completed.

At a time when revenues are shrinking, local governments' expenses for disaster management and response can move in the opposite direction. When floods damage settlements, drinking water systems, roads and bridges, resources are needed for rescue, repairs and rehabilitation. In its budget for fiscal year 2083/84 BS, Aamachhodingmo allocated NPR 4.5 million for purchasing disaster relief supplies, a relief fund and response programs, along with NPR 1 million for bio-engineering works to control soil erosion and landslides. This highlights the double bind local governments face when revenues shrink on one hand and expenditures rise on the other.

The Fiscal Commission has recommended that electricity royalties be used for watershed conservation, river training, downstream drinking water and irrigation, the welfare of affected communities, and disaster preparedness and rescue. Such measures can reduce risks for both power projects and local settlements. However, former NNRFC acting chair Gurung warns that if post-disaster royalty declines end up shrinking the very investments needed for preparedness, the capacity to mitigate damage from future disasters could also be weakened.

On 16 Ashadh 2083 BS, in the letter sent to SEBON, NEPSE and CDS and Clearing Limited, Rasuwagadhi Hydropower Company Secretary Naranath Neupane had reported that repairs were complete under a plan to generate electricity "uninterruptedly at full capacity" during the upcoming monsoon season. But before that monsoon had even ended, following the Bhotekoshi flood of Bhadra 2083 BS, Neupane had to write another letter to the same agencies. That letter reported that 92 people, including a company director, were missing, and that structures from the dam to the underground powerhouse had been destroyed. In the final line of the letter, he also noted that insurance coverage for the damaged structures remained active. For Buchung Tamang, chair of Aamachhodingmo Rural Municipality, however, there is no insurance to claim to patch the hole the flood has torn in his rural municipality's budget.

Published in Himalkhabar on 16 October 2026