Environmentalists and local communities have opposed the Sillahalla Pumped Storage Hydro-Electric Project (SPSHEP) proposed in the Kundah Taluk of the Nilgiris Biosphere Reserve by the Tamil Nadu Generation and Distribution Corporation Limited (TANGEDCO). They say that the project will be an environmental and livelihood disaster as it would submerge acres of dense forests and prime agricultural lands, along with displacing over 10,000 people.
After the Tamil Nadu government's announcement about the Sillahalla hydroelectric project, a group of environment enthusiasts sent online petitions to the expert appraisal committee (EAC) of Union Ministry of Environment, Forest and Climate Change (MoEF&CC) seeking to reconsider the terms of reference (TOR) clearance for the project. They said that the government failed to acknowledge environmental and livelihood concerns.
Furthermore, in July 2020, a group of 374 conservationists, scientists, people’s groups, members of Non-Governmental Organizations and the public together signed an appeal to the government to scrap the proposed Sillahalla hydroelectric project.
Meanwhile, thousands of farmers from over 15 villages, including Kallakorai, Bembatti, Thulithalai, Kanneri, Thangadu, Oranalli, Meekeri, Muthorai Palada and Balocola, fear that their agricultural lands will be submerged due to the project. Experts say that over 10,000 people from the community, mainly farmers, will lose their livelihoods.
According to the environment clearance report of the project, about 170 hectares of private, forest, and government land will be submerged once the reservoirs turn fully functional. The total land proposed to be acquired for the project is 315 hectares, of which about 180.3 hectares is forest/government land and 134.7 hectares is private land that is proposed to be acquired.
This project involves the construction of two reservoirs, an upper one in Bembatty village along the Sillahalla stream and a lower one downstream past the existing Kundah Dam. A 2.8-km head race and a 1.56 km-long tail race tunnel will connect the two dams. Electricity generation will occur by pumping water from the lower dam to the upper dam. Additionally, the project aims to interconnect these dams with the nearby Avalanche-Emerald Reservoir, which is at the same level. The project includes the construction of a surface storage point and an underground powerhouse.
While the project aims to address the state's power deficiency issue by adding 1,000MW to the power grid for use during peak hours, the region where the project is being proposed is ecologically fragile and prone to annual floods and landslides.
Environmentalists say the Sillahalla hydroelectric project area is adjacent to the Silent Valley National Park, the Mukurthi National Park, and the Nilgiri forest division, making it a region of unique biodiversity and rich ecosensitive zone.
During an online meeting held on 29 July 2023 between the EAC of the MoEF&CC and the Tamil Nadu officials over the issuance of TOR to the project proponent, the former took note of the representation by ecologists, scientists and the NGOs of Nilgiris. The EAC asked for further points to the TOR, including clearance from the National Board of Wildlife; study of the proposed project on the nearby wildlife sanctuary and include conservation plan/mitigation measures in the environment impact assessment and the environment management plan; and an assessment of an environmental cost-benefit analysis.
J Innocent Divya, the district collector of the Nilgiris, told Mongabay India that the implementation of the project would be undertaken only after the environmental impact study and consultations approved by the union ministry. 
Since November 2020 there has been not much news regarding the project and developments on ground. However, C Ramesh, Executive Engineer, Civil-Project Investigation TNEB, TANGEDCO, Emerald, Ooty, told LCW that the project has been stalled mainly because of technical issues. 
Amid protest, TANGEDCO has also tweaked its target for land acquisition. Ramesh explained that the original plan was to go with 2250 MCF storage in Kanneri village. But this required acquisition 1,500 acres of revenue, forest and patta land. That is why the plan was changed to reduce the height of the dam (1 TNC storage capacity) by having a minimum storage based on whatever is required for power generation per day. So now, the plan is to acquire 700 acres in the upper dam, but TANGEDCO is in the process of trying to reduce the need for land further as it is all patta land. 
Meanwhile, the Geological Survey of India has instructed the company to go for a drifting tunnel for this new plant to have more accuracy in the technical points, he added. 
Ramesh further said that all the surveys required to get permission to build the drifting tunnel have been completed and the slip is with the Collector and they are in the liaison work to get permission from the Collector. Based on prior field work, the company has sent all details to various departments and is waiting for the reports to submit to the Collector. Once this permission has been granted, there will be a public consultation with unions and patta landowners.He added that this project is important to meet Tamil Nadu's peak energy requirements. Right now, the government is at loss as they are borrowing energy from private players.
The project is anticipated to become operational in the year 2025.