The compound wall of the 900 MW Arun III Hydroelectric Power Plant's office in Khandbari-9, Tumlingtar, nearly 500 km from Kathmandu, was damaged in the explosion, said Siva Raj Joshi, Chief District Officer of the Sankhuwasabha district.
The project is slated to come into operation by 2020.
The blast comes at a time when preparations are going on for laying foundation stone of the project by PM Modi during his official visit to Nepal on May 11.
No one was injured in the blast and an investigation has been launched, he said.
A Project Development Agreement (PDA) for Arun III was signed with India's state-owned Satluj Jal Vidyut Nigam (SJVN) on November 25, 2014 in the presence of the then Prime Minister Sushil Koirala and visiting Prime Minister Modi.
This is the second blast within a month in Indian properties in Nepal.
On April 17, a pressure cooker bomb went off near the Indian Embassy field office in Biratnagar damaging the walls of the premises.