The Nepali Electricity Authority has asked India to increase the amount of electricity exchanged between the two countries to 150MW. Under an agreement signed in 1972, India and Nepal exchange up to 50MW of electric power to meet power shortages. Payments for energy exchange between India and Nepal is made at a tariff agreed by the two governments.

Nepal currently receives more electricity from India than it supplies under the power swap arrangement. The agreement was designed to ease peak shortages in the two countries. However, currently Nepal has a shortage of peak power as it generates only about 300MW, against its peak hour demand of 330MW. Nepal expects to face shortages of electricity for the next two years until the Kali Gandaki hydroelectric plant begins generation.

The 144MW Kali Gandaki power project, currently under construction in west Nepal, is funded jointly by the Asian Development Bank and Japan.