KATHMANDU, AUGUST 18

Nepal has signed a pact with an Indian company NHPC to develop a hydroelectric plant in the west of the nation years after a Chinese firm backed out, officials said on Thursday.

Nepal has opened its rivers, which it sees as having a combined potential to generate more than 42,000 megawatts of hydroelectric power, to foreign players to develop its economy and export electricity to narrow the trade deficit of more than $13 billion.

Officials said India's NHPC Ltd signed a memorandum of understanding (MOU) on Thursday allowing it to study details like feasibility, environmental impact, inundation of land and construction costs for two projects - West Seti (750 megawatts) and SR 6 (450 megwatts).

Both plants are to be located on the West Seti River in Nepal's least developed far western region.

China's biggest hydropower developer, Three Gorges International Corp, was previously lined up to develop the West Seti plant, but Nepal scrapped the deal in 2017 amid haggling over the terms, officials said.

'After decades of delays we would not have plunged into another uncertainty,' chief executive officer Sushil Bhatta of the state-run Investment Board Nepal told Reuters.

'NHPC has a good track record of developing such projects in similar terrain in neighbouring areas in India and has the potential to ensure India's market for electricity,' he said, adding that he hoped for more projects in the region.

Abhay Kumar Singh, managing director of NHPC Ltd, was similarly optimistic.

'When we enter a project, we complete it,' he said.

India is already constructing a 900 MW hydropower project on the Arun River in east Nepal at a cost $1.04 billion.

China and India usually jostle for influence in Nepal.

Currently Nepal generates about 2,000 megawatts, or less than 5% of its total hydroelectric potential, due to a lack of funds, technical know-how and the absence of political consensus on how to develop the resource.