The government has prioritized the development of the 640.40 MW Kaligandaki Reservoir Hydropower Project, which has now entered its final feasibility study phase.

The proposed project will span Parbat, Baglung, and Gulmi districts, featuring a 29-kilometer-long reservoir on the Kaligandaki River. The dam is planned approximately 10 kilometers upstream from Setibeni, on the border of Kaligandaki Rural Municipality in Gulmi and Bihadi Rural Municipality in Baglung, with a proposed height of 244 meters.

Although the project's initial survey estimated a generation capacity of 844 MW, detailed feasibility studies have revised the proposed capacity to 640.40 MW, reducing both the project's footprint and the number of affected households.

The government has allocated Rs. 11.3 million in the fiscal year 2083/84 budget to complete the remaining studies. According to the Department of Electricity Development, a detailed feasibility report will be prepared after completing the environmental impact assessment (EIA).

The EIA report estimates that approximately 2,000 hectares of land will be required for the project, including 1,101 hectares of forest area. Construction would require the removal of approximately 64,287 trees and 241,000 saplings.

The report also states that several existing and under-construction hydropower projects upstream—including Lower Modi Hydropower, the 1.5 MW Theulekhola Hydropower Project, and the 0.5 MW Lower Theulekhola Hydropower Project—would be submerged after the reservoir is created. Compensation will be required for the affected projects.