As part of the Identification and Feasibility Study of Storage Projects, this project was planned from 1999 to 2001 to build a storage hydroelectric plant in Nepal. It was one of the best of 93 hydroelectric projects at the time. In 2012, the Nepal Electricity Authority (NEA) performed a feasibility study. To further develop this project, the Nalgad Hydropower Development Committee (NHPDC) was formed in 2012.
On April 20, 2017, the Development Committee was dissolved, and it was agreed that the project will be developed under a corporate model. The properties of the NHPDC have now been transferred to the Company. Nalgad Hydropower Company Limited was established in May 2017 as a subsidiary of Vidhyut Utpadan Company Limited (VUCL) under company law.