This paper presents a derivation of optimal operation policies for hydropower production in the Upper Seti Hydro-Power Reservoir system in Nepal using particle swarm optimization (PSO) technique. A reservoir operation model for the Upper Seti project is formulated with an objective of maximising the annual hydropower production operated at a weekly time scale subjected to various physical and operational constraints. An elitist-mutated PSO (EMPSO) technique is applied for solving the weekly reservoir operational model, and the EMPSO-based solutions are found to result in 3% more hydropower than the planned hydropower production. The reservoir operation policies are also compared for wet, dry and normal water years, and it is noted that there exist significant differences among the release policies for those hydrologic conditions. Later, the reservoir operation model is modified with an objective of minimising the annual sum of squared deviation between weekly energy production and target hydropower. Then ...