People living in the Himachal Pradesh region filed a complaint to the CAO in October 2004 and late 2005 alleging that water supplies would dry up due to the project's diversion of the Duhangan River The complainants also alleged that the Environmental and Social Impact Assessment (EIA) documents prepared by the sponsor neither adequately consider the legitimate concerns of the villagers nor provide a sufficient basis for informed consultation on key impacts of the project.

The IFC financed the Allain Duhangan hydroelectric dam on the Allain and Duhangan Rivers. IFC holds 10 percent equity in the project, with the sponsors (see below) holding 90 percent.

The Allain Duhangan project is a planned 192 MW run-of-river hydroelectric power plant, with an associated transmission line, to be built on the Allain and Duhangan tributaries of the Beas River near Manali, Kullu District in the state of Himachal Pradesh in India. The plant will be on the Allain River, but will be powered by the combined flows of the Allain and the diverted Duhangan River.

The project company is called Allain Duhangan Hydro Power Limited (AD Hydro), and was formed to construct, operate and maintain the power plant. The project Sponsor is LNJ Bhilwara (LNJ) Group. LNJ Group and Statkraft Norfund Power Invest AS (SNP) of Norway have concluded a shareholder agreement giving SNP a 49 percent interest in the company.

The CAO facilitated an initial agreement between the parties in March 2005.  After receiving further complaints that these agreements had not been kept, the CAO returned to the field on multiple occasions in 2006-7.

In response to the complaint, the Sponsor has provided new water infrastructure to communities. In addition, the Sponsor makes monthly reports to communities on a commitments register prepared by the CAO and based on the original EIA.

After monitoring more than 6 months progress and receiving periodic supervision reports from IFC, the CAO has concluded its involvement in this complaint and released its conclusion report in March 2008.