Hydropower Law and Policy landscape in Nepal

This article outlines the governing laws, responsible authorities, regulatory framework, and step by step procedures for obtaining the necessary licenses required for developing and operating hydropower projects in Nepal.

 

i) The Governing laws

    The primary legislation regulating the hydropower sector in Nepal includes:

• Electricity Act, 1992 (2049) ("Electricity Act") 

• Electricity Rules, 1993 (2050) ("Electricity Rules") 

 

Other relevant legal instruments are: 

• Nepal Electricity Authority Act, 1984(2041) 

• Water Resources Act 1992(2049)

• Water Resources Rule 1993(2050)

 

Additionally, the Government of Nepal has issued:

• Directives relating to the Licensing of Hydro Electricity Project, 2018(2075) and

• Directive Regarding Recommendation of Foreign Exchange Facilities for Hydro Electricity Project, 2074 

 

ii). General and Regulatory Framework of the Hydropower Sector

    The below mentioned table outlines the basic regulatory framework governing the hydropower sector of Nepal.

 

S.N.	Heading	Description
1	Relevant Laws and Policies	1. The hydropower sector in Nepal is regulated under: (a) The Electricity Act 1992 (2049) ("Electricity Act") (b) The Electricity Rules 1993 (2050) ("Electricity Rules") (c) Directive issued by the Ministry of Energy from time to time to govern the internal procedure for the development of Hydropower Project. 2. If the installed capacity of the hydropower project is 500 MW or more, then the provisions of the Investment Board Act 2011 (2067) also apply. 3. The Government has also issued the following policy documents: - The Hydropower Development Policy 2001 - The Hydropower Development Policy 1992 (2049) - Water Resources Strategy, 2002 - National Water Plan, 2005 4. The provisions of the Project Development Agreement (if entered between the Government of Nepal and the project company) will also apply. The Ministry of Energy has made public: (1) Model Project Development Agreement for projects with installed capacity of less than 500 MW (2) Internal Procedures defining the rules and processes for negotiating and entering into the project development agreement.
2	Relevant Government Authority	The authority to grant, renew, amend or revoke the regulatory license lies with the Ministry of Energy ("Line Ministry"), and such decisions are taken by the Secretary of the Line Ministry. The administrative authority responsible for regulation of the hydropower sector is the Department of Electricity Development (DOED), established under the Line Ministry. However, the Investment Board has authority to grant approval for investment in hydropower projects if the installed capacity is 500 MW or more.
3	Term of the License	1. Pursuant to Section 5 of the Electricity Act, the maximum term of the different types of licenses is as follows: (a) Survey license – 5 years (b) Transmission license – 50 years (c) Distribution license – 50 years (d) Generation license – 50 years If the license period is granted for less than the above maximum period, it can be renewed up to the maximum term. After expiry of the maximum period, the license cannot be renewed further. In practice, the generation license is generally granted for a period of 30–35 years. For export-oriented projects, the generation license period is generally 30 years.
4	Nationalization of Hydropower Project	Pursuant to Section 10 of the Electricity Act, after expiry of the generation, transmission, or distribution license, project assets must be transferred to the Government for free. Specifically: (i) If more than 50% of the project is owned by foreign investors, all project assets (land, building, plant, machinery, and related structures) must be transferred to the Government of Nepal for free after the license period. (ii) If the project is owned locally or up to 50% by foreign investors, the former license holder can enter into an agreement after expiry for continued operation of the project. 2. Pursuant to Section 10(2), the former license holder can purchase project assets transferred to the Government. The purchase price is determined by a Government-appointed committee. After purchasing, the developer can enter into an agreement with the Government for generation, transmission, and sale of electricity.
5	Import and Export of Electricity	Licensees can import and export electricity as follows: Import of Electricity: Licensees desiring to distribute imported electricity within Nepal may do so by obtaining prior approval from the Government of Nepal. Export of Electricity: Licensees wishing to export electricity generated on their own must enter into an agreement with the Government of Nepal and pay export duty as agreed. To date, the Government of Nepal has not entered into an electricity export agreement with the private sector.
6	Sale of Electricity	Electricity generated by the licensee can be sold in two ways: (1) Pursuant to Section 21(1) of the Electricity Act – the licensee may sell electricity to the Government of Nepal by connecting it to the national grid. (2) Pursuant to Section 18(1) of the Electricity Act – the licensee may sell electricity independently without using the national grid. However, to date, there are no known instances of such independent sales. The Nepal Electricity Authority (NEA) under the Ministry of Energy is currently the only authority purchasing electricity from licensees.
7	Standard of Electricity	Pursuant to Section 23 of the Electricity Act, while generating, transmitting, or distributing electricity, licensees must maintain the quality standard prescribed by the Government of Nepal.

 

iii.     Licensing requirements relating to the generation, transmission and distribution of electricity in Nepal

Pursuant to Electricity Act, company desiring to invest in hydropower need to take licensee approval on three subject matter:

1. Generation of Electricity, 

2. Transmission of Electricity

3. Distribution of Electricity

The licensing process comprises two main stages:

Stage 1: Survey License Approval (For Generation, Transmission and Distribution of Electricity)

Stage 2: Generation, Transmission, and Distribution License approval (After approval of Survey License)

 

iv)  Step wise Licensing Procedure

 

Steps	Particulars	Remarks
Step-1	Registration of Project Company	Company Registration Office Department of Industries Income Tax Office DOI and NRB (If Foreign Investment)
Step-2	Study and Take Approval of Survey License	Approval Authority: Ministry of Energy through DOED
Step-3	Conduct Feasibility Study and Environmental Studies	Prepare IEE/IEA Report Require to prepare IEE Report: For Hydropower Project less than 50 MW Approving Authority: Ministry of Energy Prepare EIA Report: For Hydropower Project more than 50 MW Approving Authority: Ministry of Environment
Step-4	Execution of Power Purchase Agreement (PPA)	Requirements: Feasibility Study Report Letter of Intent from the Financial Institution EIA/IEE or TOR Survey License
Step-5	Additional Approval Requirement	Ministry of Forestry DOE, DFO, Local Forest Post, Ministry of Energy Department of Natural Protection and Watershed Conservation Road Department, etc.
Step-6	Financial Closure	Requirements: Feasibility Report Company Profile PPA Promoters’ Profile Survey License Project Cost
Step-7	Obtaining the Generation License	Approval Authority: Ministry of Energy
Step-8	Construction of Project
Step-9	Generation of Electricity and Operation of Project	Operation of the project within the license period. May renew license up to 50 years after the approval of the Government of Nepal if initially granted less.
Step-10	Hand over the Project	Should hand over the project after the expiry of the license period.

 

 

 

Model (Route) 1: Survey Licenses

Generally, licensing regime in Nepal for hydropower follows two stage license: (a) investor need to obtain survey license for generation/ transmission/distribution of electricity (Survey license is issued to conduct the feasibility and environmental study of the hydropower project), (b) if the project is found to be feasible technically, environmentally and financially, then relevant generation/ transmission/ distribution license is issued. Separate licenses are required for (a) generation of electricity, (b) transmission of electricity, and (c) distribution/sale of electricity.  

 

(a)  Obtaining the Survey License and Conducting the Feasibility and Environmental Study

Conducting the Feasibility and Environmental Study includes:

1. Initial Environmental Examination (IEE) if the installed capacity of the project is up to 50 MW, and 

2. Environmental Impact Assessment (EIA) if the installed capacity of the project is more than 50 MW

 

(b)     Obtaining the Generation/Distribution/ Transmission License

    Within the term of the Survey License after the completion of the Feasibility study and environmental studies, the Project Company has to apply for the relevant Generation/distribution/transmission license.

 

Rule 9 and Rule 18 of Electricity Rules provide that the survey licenses and generation, transmission and distribution license relating to the same project can be issued at once by the Government. 

 

Documents to be submitted for the Survey Licenses

(i)     Survey License for Generation (Rule 4 of the Electricity Rules)

(a)     Map of the project-site (in which preliminary sketch of the proposed power-house, dam, reservoir, canal, tunnel, sub-station, transmission line, and village, town, historical places, way etc. inside the project site also should be clearly shown),

(b)     Area of water-resources to be surveyed and quantity of water to be utilized,

(c)     Estimated amount of cost and time for the completion of project (both the survey and construction),

(d)     Total capacity of the project and estimate of annual production,

(e)     In case the electricity is to be produced through other means except other than water resources, types of fuel and method of acquiring the fuel should be mentioned,

(f)    Documents to prove the economic and technical eligibility or capacity of the promoters

(g)     Other necessary matters as per the directives relating to the Licensing of Hydro Electricity Project, 2018(2075).

 

(ii)     Survey License for Transmission (Rule 5 of the Electricity Rules)

(a)     Preliminary route-map of electricity transmission line (proposed main transmission line and alternative line also should be shown),

(b)     Necessity, purpose and total length of the transmission line,

(c)     Standard and capacity of voltage to be used for transmission,

(d)     If the electricity is to be supplied at once Maximum load of electricity and types of consumers,

(e)     Estimated amount of cost and time for the completion of transmission line (both the survey and construction),

(f)     Other necessary matters.

 

(iii)     Survey License for Distribution (Rule 6 of the Electricity Rules)

(a)     Map of the distribution area (in which the geographical description of the said area, present distribution system and preliminary sketch of proposed distribution system also should be clearly shown),

(b)     Necessity and purpose of the distribution system,

(c)     Estimated number and types of consumers to be benefited from the distribution system,

(d)     Point where the electricity is to be purchased or acquired and other particulars relating to sale and distribution,

(e)     Estimated amount of cost and time for the completion of construction of distribution line (both the survey and construction),

(f)     Other necessary matters.

 

Documents to be submitted for the final license 

(i)     Electricity Generation License (Rule 12 of the Electricity Rules)

    An application for the Generation License will need to be submitted in the prescribed format and following documents are required to be submitted along with the application:

1. Project Description: Detail description of the Project (map of the project site, source of the electricity to be generated, estimated time and cost for the construction of the project, name of the participants in the project and type of their involvement, the name of the individual or corporate body which will have the ultimate ownership over the project and name and address of the directors of such corporate body)

2. Feasibility Analysis: Analysis of the feasibility (technical details along with the detail map of the project and financial analysis, details of the customers, estimated quantity of the electricity that can be sold, if the transmission or distribution system owned by any other person or corporate body is to be used for the supply of the electricity, the details of such system)

3. Financial Arrangement: Financial arrangement (estimated financial arrangement for the project, financial capacity of the project investors, commitment of the financial institutions which will be directly involved in the project, obligations of the investors, debt and equity ratio)

4. Use or acquisition of the lands and building: Use or acquisition of the land and buildings (total area of the lands owned by the government or any other person which will be required to be used or acquired on a temporary or permanent basis for the project and details of the owners of such lands).

5. Environmental studies: Environmental Impact Assessment (measures that will be adopted for the mitigation of the material adverse impact by the project, social and economic impact that will be caused by the project, use of locally available labor and resources for the project, benefit that the local community will get from the project after its completion, the number and details of the population that will be displaced and the necessary arrangement that will be made for their resettlement, etc)

6. Power Purchase Agreement: Details of the sale and purchase of the electricity (purchase and sale agree of the electricity generated from the project or intent letter and other related documents)

7. Transmission line related: Arrangement for transmission of the electricity generated from the project.

8. Fuel related: Details related to supply, transportation and stockings of the fuel (Agreements entered for the supply, transportation and stockings of the electricity and other fuels that will be required for the project)

9. Other necessary matters as per the directives relating to the Licensing of Hydro Electricity Project, 2018(2075).

 

(ii)     Electricity Transmission License (Rule 13 of the Electricity Rules)

(a)     Detail description of the project (source of electricity to be transmitted, estimated cost and time to complete the project, name of partners in the project and types of their association, full name and address of the person or corporate body and its directors with whom the ownership of the project shall be vested at last should be clearly shown),

(b)     Route-map of the transmission line and substations to be required for transmission, right-of-way to be required and single line diagram,

(c)      Standard transmission-voltage, transmission-capacity, standard of construction, size of wire and its distance to each other, kinds of poles and insulators and detailed map relating to the construction,

(d)     Analysis of feasibility (technical description and economic analysis of the project, if the electricity is to be supplied at once description of clients and consumers, estimated quantity of electricity to be sold, and if any transmission or distribution system belonging to other person or corporate body is to be used in supplying the electricity, description of the same),

(e)     Mode of finance (estimated cost of the project, economic condition of the investors of the project, commitment of the financial institutions to be involved directly in the project, and percentage of liability, share capital and debt of the investors),

(f)     Acquisition or utilization of house and land (land-owners' description and total area of the public or private land to be required for the project for utilization or acquisition temporarily or permanently),

(g)     Analysis of environmental effect (measures to be taken to minimize the adverse effect due to project on environment, social and economic effect of project on the said area, utilization of local labor, source and materials, benefits to be taken by the local people after the completion of the project, training to be provided for local people in relation to construction, maintenance and operation, facilities to be required for construction site, safety arrangements and effect on landowners due to operation of the project, details of people to be evacuated and necessary plan for their rehabilitation also should be clearly shown),

(h)     Description regarding sale and purchase of electric power of the project (if there is any agreement or letter of intention and related any other documents relating to the same the copy should be enclosed),

(i)     Map showing the other structures relating to electricity within the periphery of one and half kilometers of the transmission line,

 

(iii)     Electricity Distribution License (Rule 14 of the Electricity Rules)

(a)     Detail description of the project (source of electricity to be distributed, estimated cost and time to complete the project, name of partners in the project and types of their association, full name and address of the person or corporate body and its directors with whom the ownership of the project shall be vested at last should be clearly shown),

(b)     Analysis of feasibility (technical description and economic analysis of the project, estimated quantity of electricity to be sold, and if any transmission or distribution system belonging to other person or corporate body is to be used in supplying the electricity, description of the same),

(c)     Mode of finance (estimated cost of the project, economic condition of the investors of the project, commitment of the financial institutions to be involved directly in the project, and percentage of liability, share capital and debt of the investors),

(d)     Map of the distribution area (geographical description, present distribution system and distribution system to be newly constructed of that area),

(e)     Standard of the distributing voltage and standard of construction,

(f)     Number and types of consumers to be benefited from the service,

(g)     Description regarding sale and purchase of electricity (if there is any agreement or letter of intention and any other documents relating to the sale and purchase of electricity to be distributed, the copy should be enclosed).

 

Procedures

Following are the key steps that are involved in the process of granting licenses:

(i)     Applicant to submit the application in the standard form along with the required documents to the Ministry of Energy through Department of Electricity Development. Such an application should also be accompanied by the prescribed application fees.

(ii)     The Ministry of Energy examines the documents so submitted through the DOED and asks for the additional documents/information from the applicant if applicable. 

(iii) If the Ministry of Energy decides to grant the relevant licenses, it issues the license to the applicant. The decision is made by the Secretary, Ministry of Energy.  Then, the application fee is transferred as the license fee to the Government bank account. 

(iv)  In case of the license for generation, transmission or distribution, the Ministry of Energy is also required to publish a public notice in the national daily prior to granting of the license. Such notice is intended to provide an opportunity to the individuals/entities to object to the grant of the licenses on the ground that the same would cause material adverse effect. The timeline for submission of such a complaint/objection is 35 days.

 

Timeline 

(a)    Pursuant to Section 4(2) of the Electricity Act, the decision to grant the survey license for generation/transmission/distribution is required to be made by the Ministry of Energy within 30 days. In the case of the electricity licenses for generation/transmission/distribution, it is 120 days. The timeline is calculated from the date of the submission of the application or submission of the additional documents/information at the request of the Ministry of Energy whichever is later. 

(b)    In practice, the statutory timeline is hardly met by the Ministry of Energy. There are instances where the Ministry of Energy has taken even more than a period of 1 year.

 

 

Model (route) 2: Entering into an agreement with Government of Nepal (GON)

The Project Company and the GON can enter into Agreement for the generation, transmission or distribution of electricity.  Such an agreement sets out the timeline by which a company has to complete certain project activities. The Project company will obtain the license if it complies with the terms and conditions set out in such Agreement.

 

The Project Company needs to submit the application with the details to the Secretary of the Ministry of Energy through the DOED pursuant to Rule 12 of the Electricity Rules, 1993. The details which should be submitted along with the application are discussed above in the Process 1.

The Company should be compliant of the other requirements as discussed above in the process 1.

 

Model (Route) 3: Competitive bidding process

The Government of Nepal may also follow the competitive bidding process for the development of hydroelectricity. Such a competitive bidding process is generally followed for the projects, survey study of which has already been completed by the Government or Nepal Electricity Authority or for the projects the initial license holder could not complete the financial closure.   The same licensing and regulatory requirements apply to the companies obtaining the right to develop the project through the competitive bidding process.

 

As a part of policy to increase private sector participation in the hydropower sector, the government has been distributing licensing through a competitive bidding process. Some of the pertinent hydropower projects that have been distributed through a competitive bidding process are Upper Karnali (900 MW), Upper Marsyangdi (600 MW), Arun III (900 MW) hydropower project etc. 

 

 

4.  

 

a. Transfer of Survey, Generation, Transmission and Distribution License: 

    Section 4 of the Electricity Act authorized the Licensee to transfer the survey, generation, transmission and distribution license. Pursuant to Rule 89 of Electricity Rules, Licensee desiring to transfer the license should submit application to DOED. DOED after the review of the application may provide the permit for the transfer of license. Companies to whom license is going to be transferred should also show the evidence having position as prescribed by Hydropower Licensing Directive. However, if DOED finds that the Licensee submitted for the transfer is noncompliant with law, then DOED has authority to cancel the license. Pursuant to Number 14(1) of Licensing directive on following condition only DOED will approval for the Transfer of Survey, Generation, Transmission and Distribution License: 

 

1.   If Scoping and Term of Reference of EIA has been approved for the hydropower project       which requires EIA Approval 

2.  If Term of Reference is approved for the has been approved for the hydropower project              which requires IEE Report 

 

b. Transfer of other various licensee and permit required for development of Hydropower Project:

 Besides Survey, Generation, Transmission and Distribution License there are other various licensee and permit required for the development of Hydropower Project such as a) approval for use of land of forest, national parks, conservation land and buffer zone, (b) licensee to use Radio Communication, (c) approval of Bunker Construction, (d) approval for exploration of minerals and various others approval. Law has not specified the status of such approvals but in practice transfer of Survey, Generation, Transmission and Distribution License leads to automatic transfer of such license and permit to new owner.  As per our understanding all other licenses granted for the development of hydropower projects such as the land use rights transfers automatically with the transfer of Survey, Generation, Transmission and Distribution License. There doesn’t require any further approval.

 

 

Section 29 of the Electricity Act provides security against nationalization of the Hydropower Project. Hydropower Development Policy, 2001 also incorporate the same provision. In addition, IEA 2020) also safeguard the industry established under the Act. Pursuant to the Section 29, industry established under the Act will not be nationalized. 

 

Government shall not take handover of hydropower project till the License period granted to hydropower project.  However, after completion of Licensee period Government of Nepal can  undertake all the property of Hydropower Project for free if there is more than 50% investment made by foreign investor. 

 

Precedent of Nationalization of Hydropower Project: 

Pursuant to information provided by DOED there are no instances where Hydropower Project are nationalized by Government till the date.

 

 

In order to systematize and regularize the the process for granting foreign exchange facilities to hydropower project developers, the Ministry of Energy has introduced the Directive on Recommendation of Foreign Exchange Facilities, 2074.

 

Under this framework, any company engaged in the survey or development of hydropower projects or transmission infrastructure (the "Company") must secure a formal recommendation from the Department of Electricity Development (DOED) prior to making payments in foreign currency to contractors or service providers (the "DOED Recommendation").

 

Nepal Rastra Bank (NRB), the country’s central bank, will authorize such foreign currency transfers only upon receiving the DOED Recommendation.

 

APPLICABILITY OF THE DIRECTIVE

The requirement to obtain DOED’s recommendation applies exclusively when foreign currency payments are intended for the following categories:

 

a. Procurement of Consultancy Services 

The consultation engagements are classified into three groups:

• Survey-related services 

• Services for project Construction 

• Administrative and audit-related services 

To access foreign exchange for these services, licensees involved in the generation, transmission, or distribution of electricity must submit an application to the DOED in the format prescribed in schedule 1 of the directive along with the supporting documents.

 

b. Procurement of Goods

For importing goods against foreign currency payments, license holders responsible for electricity generation, transmission, distribution, or project construction/maintenance must apply to DOED and submit the necessary documents.  

 

S.N.	List of Documents
1	Copy of survey, construction and repair and maintenance license to generate, transmit and distribute electricity.
2	Copy of notarized agreement related to the procurement of goods and services.
3	Bill of Quantities.
4	Report of the work in progress as mentioned in the Agreement.
5	Payment Schedule.
6	Invoice.
7	Power of Attorney issued by the promoter of the Company in the name of a person asking for recommendation for foreign currency exchange facility.
8	Documents mentioning the maximum amount required for foreign exchange as per the Agreement.
9	Record (as per Schedule 3) of the recently obtained Foreign Exchange Facility.
10	Proof of the recently obtained Foreign Exchange Facility.
11	Declaration that there won’t be misuse of foreign currency as per Schedule 2 of the directive.
12	Tax clearance certificate of the recently passed fiscal year.

 

c. Procurement of Repair and Maintain Services

When seeking to make foreign currency payments for repair and maintenance activities, the licensee must similarly file an application with the DOED, accompanied by the necessary documents.

 

S.N.	List of Documents
1	Copy of the notarized Agreement related to regular repair and maintenance of the project in operation.
2	Payment Schedule.
3	Report of the work in progress.
4	Invoice.
5	Power of Attorney issued by the promoter of the Company in the name of a person asking for recommendation for foreign currency exchange facility.
6	Documents mentioning the maximum amount required for foreign exchange as per the Agreement.
7	Record (as per Schedule 3) of the recently obtained Foreign Exchange Facility.
8	Proof of the recently obtained Foreign Exchange Facility.
9	Declaration that there won’t be misuse of foreign currency as per Schedule 2 of the directive.
10	Tax clearance certificate of the recently passed fiscal year.

 

As per the directive, in addition to the above mentioned documents, the department may also request any other documents it deems necessary, prescribing a time period of 15 days for their submission.

 

 

 

 

Section 24 of the Electricity Act provides that while carrying out electricity generation, transmission or distribution, it shall be carried out in such a manner that no substantial adverse effect be made on the environment by way of soil erosion, flood, landslide, air pollution etc.

 

Matters related to protection of environment are covered under the Environment Protection Act, 2019(2076) (“EPA”) and Environment Protection Regulation, 2020 (2077) (“EPR”), National Parks and Wildlife Conservation Act, 1973 (“NWPCA”) and Forest Act, 1993 (“Forest Act”).  A company willing to develop a hydropower project in Nepal is subject to compliance requirement under EPA and EPR. 

 

The EPA prescribes the requirement for environmental studies prior to the execution of any development or construction work (including hydropower projects).  EPA prohibits implementation of any such work without obtaining the approval of the relevant ministry or government agency. EPA provides that the prescribed projects need to conduct "Initial Environment Examination" (IEE) or Environmental Impact Assessment (EIA). 

 

Hydropower Project need to take approve IEE or EIA report after the approval of Survey Licensee.  IEE or EIA report has to be submitted at DOED while applying for the licensee of Generation, Transmission and Distribution of Electricity.  

 

Pursuant to EPR, IEE required to be conducted on following conditions:

 

• Any water resources development activities which has effect of replacing from 33 to 66 KV persons residing permanently, or
• Developing the hydropower generation project using forest sector with capacity of less than 66 KV.
• Any water resources development activities which has effect of replacing more than 100 persons residing permanently.

 

    Pursuant to, the EIA will need to be conducted for:

• Construction of transmission line up to 132 KV or more.
• Construction of outdoor substation having 220 KV or more
• Developing the hydropower generation project with capacity of more than 5 MW, or
• Any water resources development activities which has effect of replacing more than 100 persons residing permanently.

 

7.1. IEE Approval Process :

 

Steps	IEE Approval Process
Approval of Work Schedule	Approval of Work Schedule from the DOED. Based on the Work Schedule, the company will prepare the IEE Report.
Publication of Notice	Notify the Village Assembly, Municipal Assembly, District Development Committee, or other stakeholders about the development of the hydropower project through a notice published in a National Daily Newspaper of Nepal. Stakeholders should provide their recommendations within 15 days from the publication or receipt of the notice.
Preparation of Report	Preparation of the IEE Report based on suggestions received from stakeholders.
Submission of Application	Submit an application to the DOED for the approval of the IEE Report.
Approval by DOED	Approval should be granted within 21 days from the date of application. However, in practice, approval of the IEE Report often takes longer than the time prescribed by law.

 

7.2. EIA Approval Process in Practice: 

The EIA report approval process can be broadly divided two categories; (a) process relating to the approval of Scoping and TOR for conducting EIA study, and (b) process relating to the preparation and analysis of EIA study report.

 

Steps for the Approval of EIA: 

 

Steps	EIA Approval Process
Publication of Notice	The company should publish a notice in a National Daily Newspaper seeking suggestions from stakeholders regarding the development of the hydropower project. Stakeholders should provide their suggestions within 15 days from the date of publication of the notice.
Application for Scoping	The application for scoping should be submitted to the Department of Electricity Development (DOED).
Decision for Scoping	The DOED will send the application with its recommendation to the Ministry of Environment. The Ministry of Environment will review and approve the Scoping.
Application of Work Schedule	The project company must apply to the Ministry of Environment for the approval of the Work Schedule. The Ministry of Environment will approve the Work Schedule for preparing the EIA Report.
Public Hearing	The hydropower project must conduct a public hearing to collect comments and suggestions from stakeholders. The EIA Report should be finalized by taking into consideration the opinions, concerns, and suggestions of stakeholders.
Submission of EIA Report to Ministry of Energy	The completed EIA Report should be submitted to the Ministry of Energy. The Ministry of Energy will review and forward the report to the Ministry of Environment with its own suggestions and recommendations.
Notice Publication by Ministry of Environment	The Ministry of Environment will publish a notice in a National Daily Newspaper to solicit comments and suggestions from stakeholders. The Ministry will also conduct a stakeholder meeting to discuss the EIA project and grant approval of the EIA Report based on received comments and feedback.
Days of Approval	The EIA approval process typically takes around 90 to 100 days according to law. However, in practice, the timeline is rarely met, and it may take up to one year to obtain final approval.

 

7.3 Monitoring of the Compliance of terms and condition of EIA Study Report: 

EPR provides that the concerned body (in present case, Ministry of Energy) will carry out the monitoring of the environmental impact of the project and status of implementation of mitigation measures as promised by the company in approved EIA study report.  EPR requires the company to mandatorily carryout the projects according to EIA study report. In case the actual environment impact is found higher then approved in EIA study report, the concerned department can issue necessary directives to reduce, minimize or control impact. 

 

7.4. Additional Environment Compliances:

In addition to approval of EIA requirements –the hydropower project will be required to meet other compliances requirements. The other compliances are prohibitions to emit waste beyond the prescribed standard, prohibition to contaminate water resources etc. However, almost all of the environmental compliances requirement under the existing law will be properly set out in the Approved EIA study report. 

 

 

Licensee can acquire/purchase the real property inside Nepal on two perspectives (a) Purchase of real property required for the development of hydropower project and (b) Purchase of real property required for operation of administration of the investor. 

 

Purchase of real property required for the development of hydropower project

1. Pursuant to Section 33 of Electricity Act for the purpose of generation, transmission and distribution of electricity Licensee have right to use land and building with approval of government of Nepal. 

2. For the purpose of hydropower project Licensee can acquire land with two option (a)  Government Land can be obtained only on lease form Government (it cannot be purchased) and (b) Private land/house: Licensee can either purchase or obtain the private/house on lease for the Project. Approval of Ministry of Forest and Soil Conservation with the recommendation of DOED and MOE is required for the use of the Government land on lease. 

 

In addition special approval is required from Ministry of Forest and Soil Conservation for the use of land of National Park, Buffer Zone , Conservation Area or use of any forest part for the operation of hydropower project

 

 

Types of Approval	Related Law and Provision	Competent Authority	Required Documents	Timeline	Applicable Fees
Acquisition and Conversion of Lands: Land can be obtained for the purpose of the Hydropower Project under two options: Government Land: Government land can be obtained only on lease from the Government of Nepal (GoN). It cannot be purchased. Private Land: The company can either purchase private land or obtain it on lease for the Project. The company can request the GoN to acquire private land for electricity production, transmission, and distribution if such land cannot be purchased under reasonable terms. If the project area includes forest area, the Forest Act of Nepal also applies, requiring additional approvals. Below are the land acquisition and conversion procedures and related approvals.
1. Approval for obtaining Government land on lease	Electricity Act 2049 (1992) – Section 33 (1), (2)	Recommendation: Department of Electricity Development (DoED) Ministry of Energy (MoE) Approval: Ministry of Forest and Soil Conservation (MFSC)	For Recommendation at DoED and MoE: - Application for recommendation (no specific format) - Copy of Generation License - Company Registration Certificate, MOA/AOA - Land/house details - Recommendation from DoED (for MoE submission) For Approval at MFSC: - Application for approval - Recommendation from MoE - Supporting documents submitted to DoED/MoE	No definite timeline. Tentatively within 15 days if all documents are in order.	No fees for recommendation and approval. Lease amount payable to GoN based on area of land.
2. Approval to acquire the Private Land	Electricity Act 2049 (1992) – Section 33 (1), (2) Land Acquisition Act, 2034 – Section 4	Government of Nepal (Council of Ministers)	Application requesting to acquire land for the Project.	No definite timeline. Tentatively 3 to 6 months.	- Expenses incurred by GoN for acquisition - Compensation amount to landowners as determined by the Compensation Determination Committee (CDC)
3. Approval for converting privately owned road to public road	Land Acquisition Act, 2034 – Sections 3, 4, 5, 6 Land Administration Directive, 2058 – Section 417(1)	Land Revenue Office under the Department of Land Reform and Management, GoN. Recommendation from: Local Bodies (Village Assembly/Municipality)	- Deed/Agreement between Land Owners and Company - Application to register private road as public road - No-objection letter from landowners For Recommendation: - Application (cover-letter) - Land Ownership Certificate - Agreement with Land Owners For Approval: - Deed/Agreement - Land Ownership Certificate - Recommendation from Local Bodies * Coordination with Road Division may be required if linking with public roads.	No specific legal timeline. In practice, about one month.	No fee for de-registration/cancellation. Survey fees apply case-by-case and borne by Company.
Deforestation / Use of Land of Forest Area, National Park, Conservation Area, Buffer-zone: Pursuant to the Forest Act and related procedures (2063 & 2066), the following conditions must be met to use forest or protected areas: - The project must be of national priority (decided by the Cabinet). - No viable alternative to using the forest/protected area. - No significant adverse environmental impact. Obligations after approval: - Plant trees equal to the project area and maintain them for 5 years. - For every tree cut, the Company must plant trees in a 1:10 ratio.
4. Permission for construction and use of resources in protected areas	National Parks and Wildlife Conservation Act, 2029 (1973) – Section 5 Conservation Area Management Act, 2053 – Rule 39 Buffer Zone Management Regulation, 2052 – Rule 17(d) Action Plan (2066)	Ministry of Forest and Soil Conservation	- Application requesting area for Project - Letter from National Planning Commission declaring national priority - EIA Report	No definite timeline specified.	No fixed fee. Company must maintain the environment at its own cost and pay applicable taxes and royalties.
5. Approval for use of Forest Area for the Project	Forest Act, 2049 (1993) – Sections 22(2), 68 Procedures related to providing Forest Area for other purposes, 2063	Ministry of Forest and Soil Conservation	- Application for required area - National Planning Commission letter (national priority) - EIA Report	No definite timeline specified.	Company bears actual costs, environmental management expenses, and applicable royalties.

 

 

 

The development and operation of hydropower projects in Nepal are guided by a clear legal and regulatory framework that balances investor interests, environmental protection, and national energy needs. With defined procedures for licensing, compliance, and investment, the system encourages both domestic and foreign participation in the sector. While the framework provides opportunities for sustainable hydropower growth, effective coordination among authorities and timely compliance remain essential to fully realize Nepal’s vast hydropower potential and contribute meaningfully to the country’s economic development and energy security.

 

Date of Publication: October 30, 2025 

 

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