India has agreed principally to build a 240-megawatt storage type hydropower project in mid- western Nepal on grant basis for Nepal, the local daily Kathmandu Post reported on Thursday.

"The Naumure hydro-project planned to build in the West Rapti River, some 500 km west of Kathmandu, will help in fulfilling increased demands of electricity in the winter," the newspaper quoted K.P. Sharma Oli, deputy prime minister, as saying.

Nepal has only one reservoir type hydropower project that is Kulekhani project in the southern Nepal.

He told the media after returning from India visit on Wednesday that the Indian government was also positive to encourage Indian investment in Nepal's hydropower sector.

Oli also made it clear that steps are already being taken to renew the Nepal-India commerce treaty, which is expiring in March next year.