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Process to Get Hydropower Generation License Nepal

Hydropower generation has remained a primary source of electricity supply and economic development in Nepal. The process to obtain a hydropower generation license in Nepal is strictly regulated under the Electricity Act 2049 (1992), the Electricity Regulation 2050 (1993), and subsequent rules, guidelines, and directives issued by the Department of Electricity Development (DoED) under the Ministry of Energy, Water Resources and Irrigation (MoEWRI). The licensing process involves multiple stages including survey license, environmental approvals, power purchase agreements (PPA), and finally the generation license.

This article prepared by Medha Law and Partners – a leading corporate law firm in Nepal provides a comprehensive guide to the regulatory and compliance framework, authorities involved, documents required, step-by-step procedure, cost, and timeline for obtaining a Hydropower Generation License in Nepal.

Introduction

Hydropower development in Nepal is regulated under the framework established by:

  • Electricity Act 2049 (1992)

  • Electricity Regulation 2050 (1993)

  • Water Resources Act 2049 (1992)

  • Environment Protection Act 2076 (2019)

  • Environment Protection Regulation 2077 (2020)

The responsible authority for granting licenses is the Department of Electricity Development (DoED). Any individual, company, or foreign investor seeking to build and operate a hydropower project in Nepal must obtain the hydropower generation license after fulfilling all compliance requirements.

Hydropower generation licenses are issued after survey licenses are completed, feasibility studies are approved, environmental impact assessments (EIA/IEE) are cleared, and power purchase agreements (PPA) with the Nepal Electricity Authority (NEA) are signed.

Legal Framework for Hydropower Generation License in Nepal

  1. Electricity Act 2049 (1992)

    • Section 3 and Section 4 regulate licensing for generation, transmission, and distribution.

    • Section 4 mandates that no person or entity shall generate, transmit, or distribute electricity without a license from the Government of Nepal.

  2. Electricity Regulation 2050 (1993)

    • Specifies the application process, required documents, and licensing terms.

  3. Water Resources Act 2049 (1992)

    • Governs the utilization of water resources for hydropower.

  4. Environment Protection Act 2076 (2019) and Regulation 2077 (2020)

    • Require IEE/EIA depending on the project capacity.

  5. Foreign Investment and Technology Transfer Act (FITTA) 2019

    • Governs foreign investment in hydropower projects.

Authorities Involved

  • Ministry of Energy, Water Resources and Irrigation (MoEWRI)

  • Department of Electricity Development (DoED)

  • Nepal Electricity Authority (NEA) – for Power Purchase Agreement (PPA)

  • Ministry of Forest and Environment (MoFE) – for EIA/IEE approval

  • Investment Board Nepal (IBN) – for large-scale hydropower projects (above 500 MW or foreign investment-based)

  • Local Government and Ward Offices – for land acquisition and local approvals

Documents Required for Hydropower Generation License in Nepal

The following documents must be submitted to the DoED for obtaining a hydropower generation license:

  • Application form as prescribed under Electricity Regulation 2050

  • Copy of approved Survey License

  • Feasibility Study Report of the project

  • Power Purchase Agreement (PPA) with NEA

  • Environmental clearance: IEE or EIA Report approved by MoFE

  • Detailed Project Report (DPR)

  • Technical and financial capability documents of the applicant company

  • Tax clearance certificate

  • Memorandum and Articles of Association (for companies)

  • Company Registration Certificate from the Office of the Company Registrar (OCR)

  • Citizenship certificates of promoters (for individuals)

  • Land ownership documents or lease agreements

  • Hydrological data and water use rights documents

  • Approval from local municipalities or ward offices

  • Copy of registration with Inland Revenue Office (PAN/VAT)

  • Proof of payment of prescribed fees

Step-by-Step Process to Obtain Hydropower Generation License in Nepal

1: Obtain a Survey License

  • Apply to DoED for survey license as per Section 4 of the Electricity Act 2049.

  • Submit project proposal, financial documents, and company details.

  • Timeline: 3–6 months.

2: Conduct Feasibility Study and Survey

  • Complete technical and financial feasibility studies.

  • Submit feasibility report to DoED.

3: Obtain Environmental Approval (IEE/EIA)

  • Conduct Initial Environmental Examination (IEE) for projects below 50 MW.

  • Conduct Environmental Impact Assessment (EIA) for projects above 50 MW.

  • Get approval from the Ministry of Forest and Environment.

4: Power Purchase Agreement (PPA) with NEA

  • Submit feasibility and financial data to NEA.

  • Negotiate tariff rates and capacity.

  • Sign PPA.

5: Submit Application for Generation License

  • File application to DoED with all required documents.

  • Pay the prescribed application fees.

6: Review and Approval by DoED

  • DoED reviews technical, environmental, and financial compliance.

  • Recommendation to MoEWRI for license issuance.

7: Issuance of Hydropower Generation License

  • License granted under Section 4 of the Electricity Act 2049.

  • Valid for up to 35 years for generation.

  • Renewable after expiry subject to conditions.

Timeline for Hydropower Generation License

  • Survey License: 3–6 months

  • Feasibility Study: 12–18 months

  • Environmental Approval (IEE/EIA): 6–12 months

  • PPA with NEA: 6–12 months

  • Final License Approval: 3–6 months

Overall estimated timeline: 3–5 years depending on project size and capacity.

Cost and Fees for Hydropower Generation License in Nepal

  • Application fee: NRs. 50,000 – 100,000 (depending on project size)

  • Survey License fee: Based on capacity (MW)

  • Generation License fee: Prescribed by DoED depending on capacity

  • Annual Royalty:

    • NRs. 100 per kW for first 15 years

    • NRs. 1,000 per kW thereafter

  • Energy Royalty:

    • 2% of revenue for first 15 years

    • 10% of revenue thereafter

Compliance Obligations After Obtaining License

  • Commence construction within stipulated time.

  • Submit progress reports to DoED.

  • Pay annual royalty and energy royalty.

  • Maintain safety and environmental compliance.

  • Renew license as required.

Advantages of Obtaining Hydropower Generation License

  • Legal authority to generate electricity.

  • Eligibility to sign PPA with NEA.

  • Access to financial incentives and tax benefits under Income Tax Act 2058.

  • Eligibility for foreign investment approval under FITTA 2019.

Pitfalls and Common Challenges

  • Delays in EIA/IEE approval.

  • Land acquisition disputes.

  • Delays in PPA negotiations with NEA.

  • Compliance burden of multi-authority approvals.

 

FAQs

What is a generation license?
It is a legal permit to generate electricity from hydropower resources in Nepal.

Who gives the hydropower license?
The Department of Electricity Development (DoED) issues the license.

How long is a generation license valid?
Typically valid for up to 30 years for private developers.

Is an EIA report mandatory?
Yes, especially for projects above 5 MW installed capacity.

What is the fee for licensing?
It includes application and capacity-based fees; NPR 100 per kW is common.

Can one person hold a license?
Yes, if the individual is legally eligible and registered.

Are foreign companies eligible?
Yes, subject to compliance with Nepal’s investment and licensing laws.

Is land ownership required first?
Yes, ownership or lease documentation must be submitted during licensing.

 

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