The Punatsangchhu-II (PHEP-II), a 1020 MW project with scheduled date of commissioning of year 2017 at cost of Rs. 37778 millions, new approved project cost of Rs. 72900 millions ( US $ 1.04 billions), expects further escalationin its cost to Rs. 80000 millions ( US $ 1.14 billions), with already incurred cost of about Rs. 65880 millions, is delayed due to the huge rock mass failure in its underground Downstream Surge Gallery (DSSG), resulting in a huge cavity of about 91m height x 70m length and 45m width in the crown of the DSSG. The Dam foundations had encountered, a thus far unexplored, mega shear of maximum 30m width, cutting across the length all the 4 dam blocks diagonally. The shear zone with its about 35ᵒ to 45ᵒ dip, continued under the foundations to large depths.