According to sources, Pakistan has raised objections over the design of the hydel project in Jammu and Kashmir, saying it is not in line with the criteria laid down under the Indus Water Treaty between the two countries.
India has, however, asserted the project design is "well within parameters" of the treaty and urged the World Bank to appoint a neutral expert as the issue is a "technical matter" as suggested in the treaty.
The sources said that both India and Pakistan presented their respective facts relating to the project separately to the World Bank on September 27 in Washington.
"They (Pakistan) have objected to the design of the project. Under the treaty, there are design criteria which say the design of the project should be like this.
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Pakistan, a lower riparian state, had flagged the issue relating to the project, which will divert water from the Kishanganga River to the power plant in the Jhelum river basin, in the past too and approached the International Court of Arbitration in 2010.
It had claimed that the project will affect the flow of Kishanganga, known as Neelum in the neighbouring country, "adversely".
The matter though was settled in India's favour in 2013.
Notwithstanding the fresh objections raised by Islamabad and beginning of the dispute resolution process, India can continue its work on the hydel project, estimated to generate 360 MW electricity, the sources said.
"Unlike the popular perception, nowhere in the treaty it is written that the work has to be stopped when the dispute resolution process is going on. The work can go on," the source said.
Under the Indus Water Treaty, which was signed by the country's first Prime Minister Jawaharlal Nehru and Pakistani President Ayub Khan in September, 1960, water of six rivers -- Beas, Ravi, Sutlej, Indus, Chenab and Jhelum -- were to be shared between the two countries.
Pakistan has been complaining of not receiving enough water.
The meeting in Washington took place a day after Prime Minister Narendra Modi met with officials to review provisions of the Indus Water Treaty with Pakistan.
In that meeting, held at Prime Minister's official residence, it was decided that India will "exploit to the maximum" the water of Pakistan-controlled rivers, including Jhelum, as per the water-sharing pact.