India says its air force helicopters are on emergency rescue standby as fears grow that a lake may overflow in Tibet and flood an Indian state.
Officials in the northern state of Himachal Pradesh say that the chances of flooding remain high.
A spokesman for the External Affairs Ministry told journalists that the situation was serious as water was now flowing overflowing from a dam.
Indian satellite images show that the level of the lake in Tibet has risen.
Thousands evacuate
Indian Foreign Ministry Spokesman Navtej Sarna said China had told India that water was overflowing from a dam near the lake, although the dam had not burst.
"Naturally the situation is not stable," Mr Sarna said.
But he said essential commodities had been stocked on the Indian side.
The Indian states of Himachal Pradesh and Punjab have been on alert since early August, and thousands of people have been evacuated after China warned that water from the melting glacial lake in could spill into northern India.
"We have moved people from the danger zone," Mr Sarna told the AFP news agency, "and farmers have even herded their cattle to higher ground.
"Therefore, we are not worried about people getting swept away but we are very worried about standing crops, homes and buildings being destroyed. The financial damage will be high."
Mr Sarna said the army had also been alerted and was on standby to help the state's crisis management group.
He said that a wireless network along the banks of Sutlej River in the state which would be used for warning and alerting locals in case the water levels rise in the river.
"
We are very worried about standing crops, homes and buildings being destroyed
"
Indian Foreign Ministry Spokesman Navtej Sarna
Nearly 3,000 villagers living along the banks of the Sutlej river have been evacuated, according to reports, following news that the level of the Parechu lake in Tibet has risen.
"It is still raining in Tibet and water in the lake is going up. Our experts are on the spot closely studying the situation," Chinese Embassy spokesperson in Delhi, Yang Shuying, told BBC News Online.
Remote lake
The lake has been created by a landslide in the Parechu river in Tibet. It is located some 35km from the Indo-China border.
The Parechu, which drains into a tributary of the Sutlej river, has been blocked by a landslide since last July, Ms Yang said.
The blockage of the river has happened in Tibet's Ali Prefecture "that features high altitude, remoteness, difficult terrain, poor transportation and communication," said Ms Yang.
Any increase in rainfall and water flow from the upper reaches could result in "dam bursting or overflowing at any time".
"The possibility of a breach depends upon the material blocking it," said H.K. Sharma, director of an Indian power project downstream from the lake.
"If there are big boulders at the mouth then overflow will be less intensive and water will gradually flow out. But if there is soft material there, a sudden outburst is possible," he said.
Parts of South Asia have suffered heavy flooding in the past month, leaving hundreds dead.
On Monday, emergency teams rescued 20 workers from a tunnel at Kullu to the north-west of the Sutlej.
The construction workers became trapped after a storm blocked the entrance to the tunnel.
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