"That (matter) is already in arbitration in Geneva. But there are some signals that we might be able to settle it outside arbitration," Union Water Resources Minister Salman Khurshid told reporters here.
Pakistan has instituted proceedings in the International Court of Arbitration on the 330-MW project on Kishenganga, a tributary of the Jhelum river in Jammu and Kashmir.
Islamabad's bid to stall construction work at Kishenganga till the case was decided was foiled last month as it was forced to withdraw a petition in this regard at the International Court of Arbitration.
Pakistan contends that the power project would lead to diversion of Kishenganga waters to Bonar Madumati Nallah, another tributary falling in Wullar Lake, which India rejects.
On China reportedly constructing a dam across the Brahmaputra close to Indian border, the Minister said there was no need to be "alarmist."
"We are keeping in touch with Ministry of External Affairs and the Environment Ministry. And if there is any position to take we will certainly take that position," he said.
"There are different views on this. But I think we should not be alarmist on this. Whatever needs to be done will be done," Khurshid said.
On inter-state water disputes, especially the ongoing Mullaperiyar dam stand-off between Tamil Nadu and Kerala, he said he will not handle the issue in public.
"If there is issue between the states I will only handle it in my chamber and not out in public. We have standard procedures by which such conflicts are resolved," he said.
Kerala and Tamil Nadu are locked in the dispute over constructing a new dam in place of the existing over a century old structure. Kerala is insisting on a new dam which Tamil Nadu feels will harm irrigation prospects in the state.
Responding to a query on inter-linking of rivers, Khursid said it was "still very futuristic."
"Linking of rivers is not going to be a unilateral act of the Government of India. It will have to be the collaboration and participation of all the states. So the actual structure of how it is to be done is still to be worked out," he said.
The Supreme Court, which is monitoring this activity, was being informed (of the progress)."But it is too early to actually go into any specifics particularly delicate specifics that could lead to an immediate reaction," he said.