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Indian Cabinet approves US$854.4 million investment for 900-MW Arun 3 hydropower project located in Nepal

India’s Cabinet Committee on Economic Affairs announced today it has approved investment for the generation component of the 900-MW Arun 3 hydropower project on Arun River in Sankhuwasabha district of eastern Nepal, for an estimated Rs. 5723.72 crore (US$854.4 million).

The project is expected to be completed within five years from the date of financial closure, which according to the Cabinet, is planned for September 2017.

Annually, the facility is expected to generate about 3,685 GWh and power from the project will be exported from Dhalkebar in Nepal, to Muzaffarpur in India.

A Cabinet press release said the project will provide surplus power to India, strengthening power availability in the country and will also strengthen economic links with Nepal.

SJVN Ltd., a joint venture between the federal government of India and the Himachal Pradesh state government, is contracted to develop the project. SJVN Ltd. is a subsidiary of Indian-owned SJVN Arun 3 Power Development Company Ltd. (SAPDC), which is based in Khandbari, Nepal.

The project will include a 70-meter-high concrete gravity dam, an 11.74-kilometer-long head race tunnel and an underground powerhouse that contains four 225-MW generating units.

According to the government of India, in March 2008, Nepal and SJVN Ltd. signed a memorandum of understanding for the project to execute a 30-year build-own-operate-transfer agreement that includes the five years scheduled for construction.

The project development agreement was signed in In November 2014. The power distribution agreement for the project, which provides 21.9% free power to Nepal for the 25-year concession period, was signed by Investment Board Nepal and SAPDC.