Work has started on the $1 billion Phukot-Karnali Hydropower Project in Kalikot in Nepal's far west, spreading cheer among the residents who expect the scheme to transform the economy of the impoverished region marked by rugged mountains.

The 480-megawatt plant is located in Sannitriveni Rural Municipality of Kalikot district.

Locals hope the project will be a game changer in Karnali province, which has the lowest Human Development Index in the country, by creating jobs and firing up business activities.

"The Phukot-Karnali Hydropower Project will change the face of Kalikot," said Bir Thiruva, a civil society leader. ​​"All-round development will grow, employment will be created."

The water of the Karnali River will power the turbines to generate electricity which will be fed into the country's integrated power system at the nearest grid substation, proposed to be built at Raku. The plant will churn out 2,455 gigawatts of energy per hour.

Vidhyut Utpadan Company is executing the construction of the hydropower project. The firm has completed a detailed engineering study of the scheme. “The source of the funding for the project is yet to be decided; it could be the government or a donor agency,” said Hiraman Waiba, project chief.

"The environmental impact assessment has reached the final stage," he said. "We have also started work on land compensation as we have planned to finish land acquisition to build the dam within the current fiscal year."

Workers have started constructing a dam at Sisnegada of Sannitriveni-3 to divert the water of the Karnali River to Bhaurekuna, where the project's powerhouse will be built.

The hydro project is estimated to cost $1 billion. The main dam will be constructed by diverting water from the Karnali River through a 1.5-kilometre-long and 11-metre-wide diversion tunnel. A 6-kilometre-long main tunnel will be built which will affect some areas of Raskot Municipality, Sannitriveni, Pachaljharna Rural Municipality and parts of Khadachakra Rural Municipality.

Kashi Chandra Baral, chief of Raskot Municipality, said that about 7,000 people in Kalikot would get direct employment as a result of the plant. He added that the construction of the hydropower project would also help tourism development.

The people of Kalikot expect their days of poverty to end as 25 percent of the shares in the project have been reserved for them, and this will bring cash to the region.

A tunnel is being built as a trial at Bhaurekunabhir on the border of Narharinath and Sannitriveni located on the edge of the Karnali River. Workers have dug 65 metres of tunnel so far, Waiba said.

A 506-metre tunnel is being built at the powerhouse, and a 180-metre tunnel is being built at the dam site to study the rocks underneath, he said. According to him, there will be reservoirs at the lower part of Sannitriveni, Raskot and Pachaljharna.

As a result of the hydropower project, the alignment of a 35-kilometre stretch from Lalighat to Bhurabagar in Pachaljharna on the Khulalu-Humla road under the Karnali Corridor needs to be changed.

To this end, a survey has been carried out to build a road from Tikhati through Raku, Luyata, Tikuwa and Baddala above the power project.

Locals fear that the Karnali Corridor, which passes through the hydropower project site, will have to be rebuilt. Currently, passenger jeeps and mini-trucks carrying goods ply the road from Jite, Kalikot to Bajura.