The hydro-abrasive erosion poses challenges for smooth and efficient operation of existing as well as new hydropower plants (HPP). The loss in revenue is caused due to reduced generation on account of reduced efficiency, erosion of plant machinery, down time for repair and maintenance as well as additional expenditure on restoring the machinery and efficiency. In this study, simultaneous measurement of suspended sediment properties (particle size, concentration, shape and mineral content), hydro -abrasive erosion and reduction in efficiency was carried out in a HPP located in Indian Himalayas. The measured values were used, with available models, to calculate gradual loss of efficiency of the turbine and other losses due to repairs, replacements and shutdowns caused by hydro-abrasive erosion. In the financial analysis, costs involved in preventive measures such as coating was included to find out an optimum strategy regarding hydro -abrasive erosion. The losses in operating the uncoated turbine were found about 16% whereas the cost of coating was calculated as 11% of the uncoated turbine cost at the study HPP. The gradual efficiency loss, a major loss, increased rapidly with operation time and amounted to 37% of the total loss. A criterion for decision making was also developed.