Hydropower Development Policy Of Nepal An Overview of Its Implementation : Hari Bahadur Thapa

After the restoration of democracy in 1990, the state's efforts were focussed on participatory development with a liberal economic policy. Considering the potentiality of harnessing the vast natural water resources, hydropower sector was given priority, and a Hydropower Development Policy, 1992 was announced by the government. After nine years of its implementation, the then government approved and implemented a new policy, Hydropower Development Policy, 2001, which is still in practice. In this context, it is already late in reviewing and updating the policy in the new changing environment.

Limited scope

The Hydropower Development Policy, 1992, which was formulated for the first time, was quite limited in scope. Yet it was able to involve the private sector in hydropower development in the country. With the lessons learn from this policy implementation and incorporation of the latest legal provisions like Environmental Protection Act and Rules (1997) and Local Self Governance Act (1999), the government formulated the Hydropower Policy in 2001 by incorporating all new criteria and private sector demands as well.

The provisions made in the policy emphasised generating electricity at low cost by utilising the water resources available in the country, extension of reliable and qualitative electricity service throughout the country, tie-up of electrification with economic activities, rendering support to the development of the rural economy by extending rural electrification and development of hydropower as an exportable commodity. However, research shows that the policy has been unable to achieve its objectives as targeted.

Nepal's hydropower policy notes that generation and consumption of electrical energy in Nepal is minimal. The major sources of energy are still agriculture and forest-based resources. Despite the abundant possibility of hydropower generation as a renewable energy source, it has not been harnessed to the desired extent. Industrial enterprises have not developed at the desired pace due to the lack of electricity. An opportune hydropower policy is, thus, seen as a prerequisite for the supply of energy at a reasonable price, which has the pivotal role in the development of rural electrification, supply of domestic energy, creation of employment and in the development of industrial enterprises.

Based on the experiences gained in the course of implementing the principles followed by the Hydropower Development Policy, 1992, emerging new concepts in the international market and their impacts, technological development, possibility of exporting hydropower energy, possibility of foreign investment and commitment to environmental protection, the revision and improvement of the hydropower policy has become imperative with a view to making it clear, transparent, practical and investment-friendly.

The new hydropower policy should clearly reflect the direction on vital issues such as development of multipurpose plans for maximum utilisation of available water resources, appropriate sharing of benefits, role of public and private sector, utilisation of internal as well as external market, and clarity and transparency in the activities of government with the private sector.

Study shows that there have been a few and remarkable achievements from the implementation of the hydropower policy in the form of power generation, royalty collection, private sector encouragement in hydropower development and capacity building. This has ultimately contributed to social and economic transformation of the country.

However, on the other side, there are many gaps in the policy due to which the private sector and international investors are in a wait and see position. The policy is unable to harmonise with the strategies set by the Water Resources Strategy, 2002 and targets set by the National Water Plan, 2005. The main gap is found in policy and legal harmonisation and regular updating of the policy as per the requirement.

According to the study, the following scenario appears to be the impact of the Hydropower Development Policy:

Up to the year 2014/15, a total of 733.557 MW of hydropower has been produced, of which 255.647 MW has been generated through private sector investment. Some 83 projects with an installed capacity of 1,521.28 MW are in the construction phase. In addition to these, 33 hydropower projects of 532.542 MW installed capacity are in different stages of development. This has opened the door for national and international private sector investment, but the government should do more to convince the private sector to lure foreign investment.

Nepal's hydropower policy has strongly recommended rural electrification, meeting the domestic needs and exporting energy, but still the country is facing an acute power outage even in the summer season. The policy has clearly made provisions about royalty collection, energy quality, energy inspectors, institutional arrangement, but still no clear guidelines and implementation plans are in operation to realise them.

The policy has strongly recommended the regulatory body, Nepal Electricity Regulatory Commission (NERC), for regulating electricity, but the council is yet to be established. The bill is still pending in Parliament. Due to this reason, monitoring and regulation of the electricity sector is weak and like a ship without a captain.

The Department of Electricity Development (DoED) and Water and Energy Commission (WEC) have been established as per the policy, which can be considered a good initiation, but both the organisations are not functioning as per the mandate, due to which energy planning and private sector promotion in hydropower development are not being effective. Institutional strengthening and capacity building of these organisations are essential.

Conflicts, both violent and non-violent, social movements, financial structure, political instability and a multi-window process for approval of projects are other factors leading to the delay in identification, study/investigation and construction of projects.

o address these issues and challenges, Nepal's hydropower policy should be updated, harmonised with the prevailing laws/plan/strategy while the enactment of a new electricity act and regulatory body act is essential. The private sector is not fully encouraged and convinced by the current policy. The policy lacks clear provisions and an operational mechanism for the projects which will be handed over by the private sector developers to the government after their license period expires.

As the private sector has already achieved significant progress in hydropower development, the Nepal Electricity Authority needs to be reformed. A master plan for hydropower development of the country has become most urgent. As The Water Resources Strategy, 2002 and National Water Plan, 2005 give emphasis to basin planning and adoption of an Integrated Water Resources Management approach for the holistic development of water resources, the policy has not recognised these provisions.

As multipurpose and reservoir projects are different from conventional run of the river and daily peaking power plant in view of construction technology, coverage and financial investment, the policy has no such provision to attract private sector investment. Due to the load pattern and current situation, multi-purpose and reservoir projects development is essential for the long run.

Various government agencies are involved in the sector, however the policy does not emphasise on collaboration and coordination mechanism among them. For the fast and sustainable development of hydropower, a single window policy and effective coordination between all the agencies are necessary.

Social and political problems

The policy does not foresee social and political problems, which are major issues and concerns in recent days. The private sector is a profit making sector, hence the private sector always seeks profit and investment assurance. Private hydropower developers are seeking clearer provisions and assurances against their investment in projects like hydropower. The policy, however, fails to give such assurances to international developers/multi-national companies. If assurance is there and ambiguous legal provisions are removed, huge investment is possible in mega hydropower projects in Nepal.

Thapa is Senior Divisional Engineer,

National Vigilance Centre.

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