The site had been identified by the State of Himachal Pradesh and the central government as suitable for developing the hydropower potential of the state, which is known as the “hydrostate of India”.

This stretch of the mighty Sutlej river is the last one which is still flowing, in an otherwise overdeveloped river basin. The Sutlej basin has seen perhaps highest concentration of bumper to bumper hydropower projects, more than any other basin in India, aided also by World Bank funding to the 412 MW Rampur Project (see EJOLT sheet on the map) and the 1500 MW Nathpa Jakhri project, both developed by the same company SJVN Limited.

Residents of at least 78 villages of Kullu, Mandi and Shimla districts to be affected by the Luhri project and its earlier design involving the 38 km-long tunnel that would divert water from the river and leave at least 50 km stretch of the river dry. They had been agitating against the project from the beginning. The World Bank was also going to fund the project, but last year (2014) withdrew its support. This decision followed an inspection carried out by the United States Agency for International Development (USAID) team which visited India in November-December last year and interacted with all stakeholders including the project developer SJVN Ltd, the World Bank, affected people from the surrounding villages and concerned non governmental organizations like the Himdhara Collective in Himachal Pradesh and SANDRP in Delhi. Local NGOs also allege that the environmental impact assessment (EIA) of the project, carried out by The Centre for Inter-disciplinary Studies of Mountain & Hill Environment, was flawed and the public hearing was more of a charade. While the project’s environmental clearance had been challenged in the National Green Tribunal, local non-profits have appealed to the government to scrap the project.

In a move to appease the environmentalists and the Ministry of Environment SJVNL had reduced the capacity of the project from 775 MW to 612 MW, in 2013. “Reduction in capacity is not a solution. The project must be scrapped,” said the representatives of the front. The project proponent on 27th July 2015 submitted an application to the Ministry of Environment and Forests for the issuing of a fresh terms of reference for the Luhri project whose capacity has been now reduced to 219 MW. In the revised design the SJVN plans to construct three reservoir based projects instead of one large project with the tunnel component. Stage I involves a 86 m high dam to be built at Nirath village. In the new design there is also a reduction in the land area required for the project to less than half of what was required before. Stage II is proposed to be a 43 MW dam project at Kepu and the third stage of 330 MW at Khaira.

Environmental groups and activists however continue to be skeptical. "The Sutlej basin has seen possibly the highest concentration of bumper to bumper hydropower projects, more than any other basin in India. With three reservoir dams of more than 80 m, upstream of the Bhakra and Kol, ultimately, the river is being obstructed and massive construction activity undertaken on the Satluj. The riverine ecology and fish migration is bound to be disturbed. The Cumulative impacts have to be taken into account because this is now the only stretch of free-flowing Satluj"[4]. According to many experts in India, the Uttarakhand flooding disaster of June 2013 have clearly shown how the vulnerability of the hilly region has increased due to the development of hydropower projects. It also made more urgent, the need for a comprehensive review of energy and water management schemes in the region as well as the improvement of environmental impact assessments, including cumulative impact assessments that must take into account local people’s claims, warnings and wills.

One tunnel for water diversion (38.14 km), bypassing last 50 km stretch of flowing Sutlej river submerging 6.8 km of the river in the reservoir

Following the opposition to the project, the proponent submitted an application to the Ministry of Environment and Forests (July 2015) for the issuing of a fresh terms of reference for the Luhri project whose capacity has been now reduced to 219 MW. In the revised design the SJVN plans to construct three reservoir based projects instead of one large project with the tunnel component. Stage I involves a 86 m high dam to be built at Nirath village. In the new design there is also a reduction in the land area required for the project to less than half of what was required before. Stage II is proposed to be a 43 MW dam project at Kepu and the third stage of 330 MW at Khaira.