Development of large hydropower projects in Nepal has long faced criticism for marginalising local communities, particularly those living in project-affected areas. Despite this, the Upper Trishuli-1 Hydroelectric Project (216 MW) offers a noticeably different—narrative-one that places indigenous rights, consent, and community-led development activities at the center of hydropower development.

Nepal Water and Energy Development Company Pvt. Ltd. (NWEDC) is developing the 216-megawatt Upper Trishuli-1 project about 80 kilometers northeast of Kathmandu on the Trishuli River. The project is designed as a run-of-river scheme. It includes a 29.5 metre high dam, a 9.5-kilometre headrace tunnel, and an underground powerhouse. The construction of this project began in September 2021 and is scheduled to be completed by December 2026, with an estimated annual energy generation of 1,533 gigawatt-hours.

Beyond its engineering milestones, Upper Trishuli-1 HEP stands out for its Indigenous Peoples Plan (IPP)—-a comprehensive, consent-based framework designed to engage the Tamang community, one of Nepal’s recognised Indigenous Peoples (Adivasi Janajati), and ensure the fair and equitable distribution of the project’s benefits.

Financing standards of foreign investors and the FPIC Requirement

The project is financed by a consortium of nine international development finance institutions (IFC, ADB, AIIB, KDB, KEXIM, Proparco, FMO, OFID, and BII). As a result, it must comply with stringent environmental and social safeguards, including the International Finance Corporation’s Performance Standard 7, which mandates Free, Prior and Informed Consent (FPIC) for projects affecting Indigenous Peoples.

FPIC is not merely a consultation exercise; it requires that communities are adequately informed, possess the capacity to freely participate in decision-making processes, and provide consent before the implementation of projects. For Upper Trishuli-1, this meant engaging with the Tamang communities on issues related to livelihoods, cultural heritage, land use and long-term benefits.

A consultative process to shape the IPP

The groundwork for the IPP was laid in 2018. Environmental Resources Management (ERM) prepared the initial draft based on extensive fieldwork conducted both before and after the 2015 earthquake. The first draft was publicly disclosed on the IFC website in March 2018.

Subsequently, the IFC engaged Cross-Cultural Consulting Services (CCCS), led by anthropologist Gregory Guldin, to guide the FPIC process and revise the IPP. In June 2018, Nepal Federation of Indigenous Nationalities (NEFIN) was brought in to facilitate community participation, ensuring that villagers could articulate their demands through representative structures.

Multiple rounds of consultations followed, involving the FPIC and IPP Working Group and the Adivasi Janajati Advisory Council. Community feedback was incorporated into successive drafts, culminating in a final IPP approved in November 2018. On November 2, the project, which affected indigenous communities, formally granted consent for both the project and the IPP.

This achievement placed Upper Trishuli-1 in the global spotlight. It became the first FDI funding project in the South Asian Region to successfully achieve FPIC. The process was later recognised at the UN Permanent Forum on Indigenous Issues and subsequently at the International Hydropower Congress in 2019.

Disputes, delays, and dilemmas associated with the IPP Implementation

Despite this early success, implementation of the IPP did not gain momentum. Delays in financial closure and a prolonged dispute between two groups within the project-affected communities led to a temporary halt in IPP activities till early 2023, even as physical progress reached to 15 percent.

This status quo eroded the trust of Tamang communities and raised concerns among the lender group. In response, NWEDC management came up with a series of corrective measures: appointing a senior environmental and social manager as IPP focal person, formulating program committees, resolving local disputes, and developing an IPP Implementation Guideline and Finance and Human Resource Guidelines in consultation with the stakeholders, i.e., the IPP, NEFIN, and Local Governments (LGs).

By December 2023, the international social advisers were onboarded, and a joint scoping mission (International Social Advisors, NEFIN, LGs, NGO, NWEDC, and the IPP) was conducted to assess the social mapping and community aspirations. Given the delayed implementation of the IPP, the original five-year IPP grant, worth $1.125 million, was compressed into a three-year implementation period (i.e., $ 375,000 per year) by the joint consent of three parties (IPP, LG, and NWEDC), aligning with the project’s commercial operation date (COD). Before stepping into the IPP implementation, 52 (4 PCs in each community) Program Committees from 13 communities were formulated to execute the activities to be implemented under the IPP-2024.

IPP-2024: from paper to practice

The reset bore fruit in 2024. Before implementation, 52 program committees across 13 villages received capacity-building training. The community people then identified and prioritised the activities through a community consultation process, resulting in 102 activities granted under IPP-2024, with a total grant of Rs49.31 million.

To ensure transparency and effectiveness, institutional mechanisms were put in place, including 13 community monitoring teams, one internal monitoring team, one grievance redress committee, and one External Monitor (Independent Evaluator). Although progress under the IPP-2024 was initially slow-only 37 percent of the grant disbursed by the end of December 2024, the timeline was then extended, and all activities were accomplished by July 2025.

To ensure the effectiveness of the program, Dr. Sangram S. Lama was called to evaluate the IPP-2024 independently as an External Monitor. Dr. Lama, after his deep study, summarised the IPP-2024 as “a crucial space for the Tamang community to feel heard and valued,” highlighting significant gains in cultural preservation, youth engagement, institutional participation, and confidence to pursue economic opportunities.

Scaling up with the IPP-2025

While IPP-2024 was still ongoing, preparations for IPP-2025 began in March 2025. Community consultations-observed by NEFIN, LGs, and independent organisations-resulted in the selection of 47 activities to be implemented by 32 program committees, with a proposed grant amount of Rs49.51 million.

With the completion of the former IPP’s tenure, the fresh governing structure had to be reformed along with various processes associated with the IPP-2025. The formation process was initiated in time as per the IPP Implementation Guidelines: community assemblies nominated new members of the Adibasi Janajati Advisory Council (AJAC), Governing Board (GB), Program Committees (PC), and Monitoring Teams (MTs). The bottom-up approach and fair election process for finalizing the leadership of the IPP had become the hurdle for the ill intention of the so-called elites and hence they attempted to disrupt the process three times. Despite those repeated attempts to disrupt the fair election process, a majority of governing board members ultimately elected a new executive committee under NEFIN’s supervision.

The IPP governing structure assured the fundamental approaches for maintaining good governance, i.e., community consultation to prioritize the needs, document before releasing the IPP Grant, proper utilization of the grant, monitoring and supervision of all the grant processes transparently and effectively.  As anticipated, the so-called disputes raised during the IPP election process derailed the IPP grant process in 2025. However, the pressure from the grassroots people of communities led to a resolution. With the joint effort of NEFIN, LG, NWEDC, and IPP, all 13 communities were formally included under IPP-2025 and eliminated the traces of so-called disputes. As of early 2026, 31 program committees from all 13 communities have signed grant contracts worth NPR. 48.1 million to implement 46 activities under the IPP-2025. Twenty percent of the funds have been disbursed as an advance, and implementation is underway across the project-affected 13 communities.

Lessons for FDI in Nepal’s Green Energy

Upper Trishuli-1’s experience demonstrates that Indigenous consent and large infrastructure development are not mutually exclusive. The IPP’s bottom-up approach-where the communities prioritize the demands, implement, and monitor the outcomes-has strengthened accountability by fostering harmony and ownership of the activities.

Challenges remain. Some outcomes are still at an early stage to evaluate, and sustaining long-term impacts will require continued engagement beyond the construction phase. Nevertheless, the project offers a compelling model to fascinate the FDI model for future hydropower developments in Nepal, particularly as the nation seeks to expand the green energy production without indulging in social conflict and dilemma.

In a sector often defined by contention between the project promoters and affected communities, Upper Trishuli-1 HEP (216 MW) shows that respectful dialogue, institutional patience, and genuine stakeholder engagement can turn consent into collaboration and proportionate community development throughout the project-affected area with adopting the participatory and bottom-up approach.