Electricity supply to the national grid was done on a commercial basis. Power Purchase Agreement (PPA) was concluded between the state owned Nepal Electricity Authority (NEA) and HPL at the initiation of the project. As the KHP-I is a run-of-the river project, "water rights" is not an issue downstream of the project area, i.e., the river receives its natural flow downstream of the powerhouse. Prior to KHP-I, there was only one irrigation canal that used the Khimti river to service a small farmland in Khimti Bensi, about 8 km downstream of the hydropower intake site, mainly for dry season irrigation. As part of the project, HPL has been assisting farmer communities within the project area in constructing and refurbishing irrigation canals that use flows from the tributaries of the Khimti River. In addition, an Environmental Impact Assessment (EIA) was carried out in order to identify promotion of livelihood, economic enhancement and social well being of the project area communities. The project formulated an Environmental Mitigation and Monitoring Plan (EMMP) as well as bio-physical environmental mitigation and monitoring programme. Development activities for local communities were also executed along with the construction of the project:
- Improvement of existing irrigation canal and guaranteed minimum flows.
- Improvement of educational and health services and sanitation facilities.
- Conservation of local resources by promoting and empowering user’s group.
- Negotiation with the affected parties regarding project affected matters such as land use.
- Rural electrification and promotion of small-scale cottage industries.