Arun III Hydroelectric project was Nepal’s biggest project which was due for implementation in 1994 with the World Bank as the major financing agency. Besides meeting the domestic power needs, the project was expected to open the possibility of exporting electricity and thus provide a new dimension in the economic development of Nepal. The project, however, came under criticism by local, and some western, NGOs and individuals as being risky, costly and liable to bring about severe environmental and social impacts. Consequently the project was dropped on institutional, national, economic and financial grounds. Although environmental impact assessment (EIA) was carried out for the project it did not appear to have addressed all relevant issues in a comprehensive manner.
This case study will attempt to present the procedure that was adopted in carrying out the project EIA and the extent to which the EIA has been useful as a tool in decision making and in assessing the sustainability of the project.