Nepal’s hydropower vision depends on India, both as a primary buyer and an exclusive transit route. That gives India immense power over Nepal’s ambitions.
The Pharping Power Plant, commissioned in 1911, was one of Asia’s earliest hydropower plants.
Nepal aspires to become the “hydropower battery of South Asia,” targeting an installed capacity of 28.5 gigawatts (GW) by 2035, with 13.5 GW planned for domestic use and 15 GW for export to India and Bangladesh. Besides the geo-hydrological obstacles and financial constraints, this vision must navigate a complex co-riparian hydro-political context with India. Nepal faces a vulnerability paradox stemming from the heavy dependency of its hydropower vision on India as both the primary buyer and the exclusive transit route for hydropower exports to Bangladesh, thereby subjecting it to India’s hydro-hegemonic maneuvers.
India’s hydro-politics, meanwhile, extends beyond merely hydropower purchases to satisfy the energy needs of its growing economy and population. It faces intricate water insecurities at multiple scales, including its domestic and inter-state water conflicts, the high dependency of the Ganga flow on Nepal’s rivers, and active water conflicts with other co-riparian countries, namely China, Pakistan, and Bangladesh.
Such complex hydro-political dynamics foster a sense of apprehension toward Nepal’s upstream position, prompting hydro-hegemonic determinations through legalistic measures, exploiting Nepal’s structural economic dependencies, and restricting Nepal’s international hydro-relations. In co-riparian contexts, the outcomes of water resource interventions are shaped less by national economic objectives and more by the hydro-political interests of the dominant riparian state. Thus, Nepal’s reliance on India for its hydropower ambitions reinforces India’s hydro-hegemony and could lead to Nepal relinquishing significant control over its water resources.
Nepal’s Hydropower Vision
Nepal commissioned one of Asia’s earliest hydropower plants, the Pharping Power Plant, in 1911. Despite this early start, hydropower development progressed slowly throughout the 20th century. A significant shift occurred in the early 1960s when Nepal recognized its hydropower potential of 83 GW, elevating hydropower to a central issue in political and public discourse. Since then, hydropower has been integral to Nepal’s societal outlook, modernization visions, and developmental goals.
The recent ambition to transform Nepal into a global hub for data centers is driven by the perceived abundance of freshwater, a favorable climate, and significant hydropower potential. If fully realized, this potential could provide continuous electricity to data mining centers, with rivers serving as cooling sources for large-scale data processing.
Hydropower production in Nepal is now primarily organized under neoliberal economic principles of commodifying nature, with the private sector increasingly involved in the hydro-social domain by damming and diverting rivers, thereby transforming their surrounding socio-ecological spaces to commodify the flowing energy in rivers for making money. Although Nepal has generated a surplus of hydropower during the wet season since 2024, it remains distant from its 2035 target of 28,500 megawatts.
Concerns persist in Kathmandu regarding India’s willingness to purchase surplus electricity or permit its transmission to Bangladesh. The hydropower relationship between Nepal and India underscores the complexities of India’s influence and strategic interests in both Nepal’s hydropower sector and its broader hydrological landscape.
Nepal’s Geo-hydrology and India’s Insecurity
While it may appear rational for India to prevent Nepal from developing water storage infrastructure to preserve Himalayan flows into the Gangetic basin, instead, India’s more effective strategy has been to establish legal control over Nepal’s water within Nepal. Since the 1950s, India has emulated British colonial practices by seeking and formalizing legal control over Nepal’s rivers through agreements such as the 1964 Amended Gandak Agreement, the 1966 Revised Kosi Agreement, and the 1996 Mahakali Treaty. These agreements legitimized and formalized India’s unilateral authority over the construction, maintenance, and operation of water infrastructure, including barrages. Although rooted in colonial-era strategies, notably the 1920 Sarada Agreement, the necessity for such measures is grounded in Nepal’s unique geo-hydrological characteristics.
Nepal is geo-strategically situated between India to the south and China to the north. Its diverse geological landscape features the towering Himalayas in the north and the fertile southern plains of Terai, making India the only direct co-riparian country. Thousands of rivers and rivulets originate from the high-altitude glaciers of the Himalayas and the Tibetan Plateau, traverse deep gorges, and flow southward through Nepal’s hilly terrain before entering India. These rivers, particularly in the Himalayan and hilly regions, have steep gradients and high velocities, making them ideal for hydropower generation. However, as the rivers reach the Terai plains, their potential for hydropower and storage diminishes due to reduced gradients, lower velocities, and wider channels. Additionally, heavy sediment loads from the upper regions are deposited in the lower plains of Nepal and India, reducing storage efficiency.
These geohydrological features make Nepal’s Terai and India’s northern Indo-Gangetic-Brahmaputra plains among the most challenging areas in the world for river control and damming. In addition, while the alluvium carried by Himalayan rivers enhances soil fertility in these plains, it also complicates control and storage of water, contributing to inter-state water conflicts, among other factors.
India’s Imperatives for Establishing Hydro-Hegemony
These geo-hydrological dynamics shape India’s strategic interests and influence its hydro-hegemonic ambitions. India’s hydro-political strategy toward Nepal is multidimensional, incorporating water management, hydro-territorial interests, the externalization of economic and political costs, and broader regional strategic objectives. This strategy necessitates access to and control over water resources within Nepal before they reach the Indian plains, thereby effectively navigating the technical challenges of controlling water and shifting the human, material, economic, and political burdens of managing the Himalayan rivers onto Nepal. In the mid-20th century, India pursued these objectives through bilateral agreements during a period of state-led modernization. In the current neoliberal context dominated by market forces, this strategy can be realized through the involvement of private corporations in the commodification of Nepal’s hydro-social landscapes. Alongside the technical and geo-hydrological challenges previously mentioned, India’s pursuit of hydro-hegemony, whether through bilateral agreements or market-driven approaches, is driven by both domestic and regional strategic considerations.
Domestically, the Ganga River Basin spans 26 percent of India’s land area across 11 states and sustains nearly 600 million people, accounting for 43 percent of the country’s population. As one of the world’s most densely populated river basins, exponentially rising water demand places significant strain on available resources. While Nepal’s rivers contribute 46 percent of the Ganga’s annual flows, which shoots up to 72 percent during the lean dry season, India seeks to optimize and balance water flows from Nepal during dry and wet seasons by increasing storage capacity. For India, while energy sources can be diversified, water remains irreplaceable.
Previous agreements, particularly regarding the Koshi River, enabled India to secure water and its management within Nepal, externalizing ecological, economic, and political burdens. Since the early 1960s, the Koshi barrage has experienced numerous failures, resulting in floods, loss of life, land inundation, and ecological damage. Large water storage projects have been politically contentious in India since the late 1970s due to land acquisition and displacement issues, sparking conflicts between federal and state governments and among communities. Establishing control over water flowing from Nepal through building storage infrastructure in India requires navigating complex domestic legal and political challenges. Thus, India’s hydro-hegemony is primarily motivated by long-term complex water insecurities rather than energy needs alone.
Independent and robust hydropower and water storage infrastructure in Nepal could shift control of the hydrological landscape in Kathmandu’s favor. For India, this is not merely a bilateral co-riparian issue but occurs within a broader regional geopolitical context. Nepal’s limited financial and technical resources necessitate external investment to realize its hydropower ambitions. India seeks to maintain dominance over this landscape and has implemented legal measures to restrict Nepal’s agency, such as prohibiting the purchase of hydropower from firms linked to external actors, particularly China. This lawfare reflects both hydrological and broader geopolitical concerns.
Regionally, India’s hydro-hegemony ambitions are also shaped by water conflicts with China and Pakistan, especially in the Brahmaputra and Indus basins. China’s extensive hydro-development in the transboundary basin has heightened India’s water security concerns. Planned Chinese hydropower and diversion projects on the Brahmaputra, including the Yarlung project and Medog dam near the Indian border, are perceived as threats to India’s water security. Additionally, tensions with Pakistan over the Indus river system have intensified, particularly after India’s announcement to withdraw from the Indus Water Treaty in 2025.
In this intricate hydro-political landscape, Nepal’s control of its water adds another layer of geopolitical complexity to India’s chronic and escalating water insecurities. Consequently, India seeks to leverage Nepal’s economic and geographic dependencies to assert hydro-hegemony over Himalayan river systems. To this end, India has enacted restrictive regulations to limit Nepal’s agency in pursuing its hydropower ambitions, including using its global influence to restrict Nepal’s international hydro-relations and partnerships. These measures hinder Nepal’s economic efficiency in hydropower development and pressure private enterprises to align with India’s objectives, culminating into in Nepal’s independent private producers (IPPs) exerting pressure on the government to align with India’s objectives.
A Cautionary Tale of Two Hydropower Curses for Nepal
Since the 1960s, India has supported Bhutan, another landlocked country between China and India, in its efforts to become a regional hydropower “battery.” Although Bhutan did not meet its target of 10 GW installed capacity by 2020, hydropower remains central to its economy. Bhutan currently has a total installed hydropower capacity of approximately 2.5 GW, with 60-80 percent exported to India, contributing up to 20 percent of its GDP. Advocates often characterize this relationship as mutually beneficial or “interdependent,” with hydropower providing essential revenue for Bhutan and energy for India.
However, a closer look reveals a more concerning picture. Bhutan’s hydropower success has led to chronic economic and energy dependencies on India. While hydropower revenue is vital for economic stability, it has also substantially increased the external debt. Most hydropower projects are financed through Indian loans and grants, limiting economic diversification and domestic job creation, and reinforcing dependence on Indian financing, expertise, and markets.
In Southeast Asia, Laos pursued a similar strategy in the mid-1990s, aiming to become the “battery of Southeast Asia” through large-scale, export-oriented hydropower development. Currently, Laos operates over 80 large hydropower projects with a total capacity of 11,600 MW, exporting more than 70 percent of this energy to neighboring countries, including Thailand, Vietnam, Cambodia, China, Myanmar, and Singapore. These exports account for over 12 percent of GDP and 15 percent of export revenues.
Despite its status as a major hydropower exporter, Laos faces significant economic burdens, a financial crisis, and socio-ecological costs. Unsustainable debt from hydropower projects has led to economic crisis, currency collapse, inflation, and fuel shortages by 2024. High project costs and long timelines have rendered export revenues insufficient to service debt, increasing the risk of sovereign default. Additionally, the socio-ecological impacts of these projects, including dam failures, community displacement, and environmental degradation, further intensify the challenges facing Laos.
The Way Forward for Nepal
Despite being an upstream riparian nation, Nepal’s ambition to become the “hydropower battery” of South Asia faces considerable geo-hydrological, technical, financial, and geopolitical challenges. The geopolitical dimension is particularly complex, as Nepal’s success depends heavily on India, the downstream co-riparian state with multidimensional and multi-scalar water insecurities. It may leverage this dependency to bolster its own hydro-hegemonic ambitions, heighten Nepal’s vulnerabilities, and cause its diminished control over its water and rivers.
In the highly contested geopolitical and co-riparian environment of South Asia, approaching water as a strategic resource for economic development or geopolitical gain often results in zero-sum outcomes. Furthermore, pursuing the hydropower-export-driven economy does not automatically ensure economic growth and development.
The experiences of Bhutan and Laos serve as cautionary tales, illustrating that reliance on hydropower as a primary revenue source can deepen sectoral and co-riparian dependencies. Despite a 98 percent electricity access rate, Nepal’s electricity consumption capacity remains one of the lowest in the world. Rather than pursuing the goal of becoming the “battery of South Asia,” Nepal could prioritize increasing domestic consumption and supporting community-based businesses and local industries.
For Nepal, a more prudent approach is to view water not as simply a commodity but as an integral element of nature and hydro-social spaces. This outlook can cultivate a holistic and balanced socio-ecological context for prosperity, rather than treating nature and water as a cornucopia for domestic or regional private actors, or for global data traders to accumulate wealth at the expense of millions and the environment, while overlooking local prosperity, ecology, and culture.
Crucially, not all waterfalls are meant to have turbines and dynamos installed, nor is every flowing stream and river intended to be dammed, diverted, or manipulated. Given its highly sensitive geo-hydrological landscapes, uncritical and rent-seeking interventions in its hydro-social context could have detrimental effects on various aspects of life in Nepal.
