PUBLIC-PRIVATE PARTNERSHIP OF HYDRO

PROJECTS IN NEPAL

A Seminar Paper

By

YASHASWI GHIMIRE
BBM Second Semester,
Section 'A', Roll No 20
TU Reg. No: 32427

Submitted to
NEW SUMMIT COLLEGE
BBM Program
Kathmandu

In a partial Fulfillment of Requirement of for the Degree of

BBM Second Semester Macro Economics for Business.

January, 2023
 Declaration

I hereby declare that seminar paper entitled PUBLIC PRIVATE PARTENERSHIP IN

HYDRO PROJECT IN NEPAL submitted to the BBA program, Everest College, Thapathali,
Kathmandu is an original place of work under the supervision of Mr.Sanjip Karki, faculty
member of New Summit College, Santinagar, Kathmandu, and is submitted in partial
fulfillment of the requirement for degree of BBM second semester. This seminar paper has
not been submitted to any other collage for the award of any degree.

Signature
Name of the student: Yashaswi Ghimire
Date: January 2023

ii
 Supervisor's Recommendation
(In a Campus Letter Head)

The seminar paper entitled PUBLIC PRIVATE PARTENERSHIP IN HYDRO PROJECT IN

NEPAL submitted by Yashaswi Ghimire of BBM second semester, section A, is prepared
under my supervision as the procedure and format requirement laid by Faculty of
Management, Office of the Dean, Tribhuvan University, as partial fulfillment of the
requirement for the degree of BBM second semester, Macro Economics for Business. I,
therefore, recommend the seminar paper for final evaluation.

Signature
Name of Supervisor:
Date: January 5, 2022

iii
 Table of Content
Page No.

Title page ….………………………………………………………………………………………………………………………

i

Supervisor's Recommendation..........................................................................................iii

Table of Content................................................................................................................iv

List of Tables......................................................................................................................v

CHAPTER 1.........................................................................................................................1

INTRODUCTION..................................................................................................................1

Background..................................................................................................................................1

Objective......................................................................................................................................2

Method of the Study....................................................................................................................3

Review of Literature.....................................................................................................................3

Limitations of the Study...............................................................................................................4

CHAPTER 2.........................................................................................................................5

ANALYSIS AND RESULT.......................................................................................................5

Data Presentation........................................................................................................................5

Analysis of Result.........................................................................................................................9

Findings......................................................................................................................................11

CHAPTER 3.......................................................................................................................15

SUMMARY AND CONCLUSION..........................................................................................15

Summary....................................................................................................................................15

Conclusion..................................................................................................................................15

REFERENCE.......................................................................................................................17

iv
 List of Tables

Table 1:Catchment area and basin hydro capacity of major rivers of Nepal.............................2
Table 2: Hydropower generation unit 10th periodic plan..........................................................9
Table 3: Project capacity and investment needed to execute project successful.....................14

List of Figures
v
Figure 1: Major Hydroelectric Projects of Nepal.......................................................................6
Figure 2: Graph of Hydropower generation unit 10th periodic plan.......................................10
Figure 3: Load Forecast of Power Consumption.....................................................................11

vi
 CHAPTER 1

INTRODUCTION

Background of the Study

Nepal is one of the richest countries in water resources and has abundant
hydroelectric potential roughly estimated as high as 83GW, out of which 45,610 MW from
114 projects of WEC, 2011 considered economically feasible. Such ideal conditions for the
development of hydropower with huge capacity even with the relative low water discharge is
possible because of the steep gradient typography of the country with rich snow-capped
mountains, resulting to numerous tributaries with waterfalls from elevated slope to the plain
region. On the other hand, the country’s pyramidal sloppy terrain gives large catchment area
and the accumulation of the tributaries form four major rivers: Sapta Koshi, Narayani,
Karnali and Mahakali, which have made possible of huge hydropower in single plants like
Karnali Chisapani with 10800MW and Pancheshwor with 6480MW capacity as per in given
table. Another interesting fact about Nepal’s huge hydropower potential is related to the
chilled cold water current from the glacier that gives higher strength and produces relatively
high energy with the same installed hydro capacity.

Constructing a thermal plant is not a big deal but its operating cost is a big issue due to long
terrestrial transportation of 600KM from Biratnagar dry port to Kolkata Port harbor and 840
KM from Biratnagar dry port to Chittagong Harbor are the shortest path to access the sea
port. Energy experts of Nepal say a typical 60- 80MW plant running at 85 percent load factor
consumes approximately 230-250 liters of diesel per MW per hour. If the plant is operated all
day, it will cost the government more than Rs 20 million per day. And the energy production
cost from such plants will be more than Rs 30 per unit. This is a very high rate compared to
energy generated by hydropower which is generally less than Rs. 2 per unit. Thus exploiting
renewable sources for energy is not only the sustainable solution but also reduces the CO 2
emission in a developing country without fossil fuel resources. While building the
hydropower project, there might be the cases of protests from environmental activists but the
environmental hazards by hydro power is not comparable to those by the thermal power. On
the other hand, despite such protests by environment activists and water tourism
entrepreneurs, it is the lesson and proof that the Supreme Court of Nepal has already clear
1
the writ against the Middle Bhotekoshi hydropower by giving the priority to hydropower
project over such protests, which shows the national priority given to the energy industry.

Table 1:Catchment area and basin hydro capacity of major rivers of Nepal

River Basin Estimated Catchment Area Average Discharge Basin Capacity

Km2 m /s /s
3
(GW)
3

SaptaKoshi 60,400 1658 >22

Narayani 34,960 1753 >20
Karnali 44,000 1441 >32
Mahakali 15,260 698 >6

(Source:
WEC, 2008)

Objective of the Study

Public-private partnerships (PPPs) in the hydroelectric sector in Nepal can have a
variety of objectives. Some of the main objectives of PPPs in hydroelectric projects in Nepal
could include:
1. To leverage private sector expertise, technology, and financing to develop
hydroelectric projects that might not be feasible for the government to develop on its
own.
2. To transfer the operational and maintenance responsibilities of hydroelectric projects
to the private sector, allowing the government to focus on other priorities.
3. To create new job opportunities and economic development in the areas where
hydroelectric projects are located.
4. To increase the capacity and reliability of Nepal's electricity grid, helping to meet the
growing demand for electricity in the country.
5. To contribute to Nepal's efforts to increase the use of renewable energy and reduce its
reliance on fossil fuels.
6. To improve the financial sustainability of the hydroelectric sector in Nepal by sharing
the risks and rewards of project development and operation between the public and
private sectors.
The main objective of PPPs in hydroelectric projects in Nepal is to achieve a win-win
situation for both the public and private sectors, with the private sector bringing its expertise
2
and resources to the table and the public sector ensuring that the projects are developed and
operated in a way that serves the public interest.

Method of the Study

There are several methods that can be used to study public-private partnerships (PPPs) in
the hydroelectric sector in Nepal. Some common methods include:
1. Desk review: This involves reviewing existing literature, reports, and documents
related to PPPs in the hydroelectric sector in Nepal. This can provide a broad
overview of the current state of PPPs in the sector and identify key issues and
challenges.
2. Case studies: This involves in-depth analysis of specific PPPs in the hydroelectric
sector in Nepal, including their design, implementation, and outcomes.
3. Comparative analysis: This involves comparing and contrasting the experiences and
outcomes of PPPs in the hydroelectric sector in Nepal with those of other countries or
sectors.
A combination of these methods can provide a comprehensive understanding of PPPs in the
hydroelectric sector in Nepal, including their strengths and weaknesses, and inform policy
and decision-making.

Review of Literature
Public-private partnerships (PPPs) have been a popular means of financing and
delivering infrastructure projects in Nepal. There is a significant body of literature on PPPs in
Nepal, which includes research studies, policy documents, and reports from international
organizations and think tanks.
The literature suggests that PPPs have been used in Nepal as a means to address
infrastructure gaps and mobilize private sector investment. However, the effectiveness of
PPPs in Nepal has been a subject of debate, with some studies highlighting their potential
benefits and others pointing to challenges and limitations.
Some of the key issues addressed in the literature on PPPs in Nepal include:
 Feasibility and viability: Many studies have examined the feasibility and viability of
different PPP projects in Nepal, considering factors such as market demand, technical
feasibility, and financial viability.

3
  Risk allocation: The allocation of risk between the public and private sector is a key
issue in PPPs. In Nepal, there have been concerns about the ability of the government
to effectively manage and mitigate risks, and about the impact of risks on the private
sector.
 Contract design: The design and structure of PPP contracts is critical to their success.
In Nepal, there have been debates about the appropriate balance between flexibility
and rigidity in PPP contracts, and about the role of performance-based contracts.
 Governance and transparency: Good governance and transparency are essential for the
successful implementation of PPPs. In Nepal, there have been concerns about the
transparency of the procurement process and the accountability of PPP projects.
The literature on PPPs in Nepal highlights the importance of careful planning and design,
effective risk management, and transparency in order to ensure the success of PPP projects.

Limitations of the Study

There are several limitations that could be encountered when studying public-private
partnerships (PPPs) in Nepal. Some of the main limitations could include:
1. Data availability: Data on PPPs in Nepal may be limited, particularly for older
projects or projects that were not completed. This could make it difficult to conduct a
comprehensive analysis of PPPs in the country.
2. Stakeholder engagement: It may be challenging to engage with all relevant
stakeholders, such as private sector partners, community representatives, and
government officials, particularly if they are located in different parts of the country
or have competing interests.
3. Political considerations: PPPs in Nepal may be influenced by political considerations,
such as changes in government, shifts in policy priorities, and the influence of lobby
groups. This could make it difficult to draw reliable conclusions about the success or
failure of PPPs in the country.
4. Cultural and social factors: Cultural and social factors, such as local customs,
traditions, and values, may influence the success or failure of PPPs in Nepal. These
factors may be difficult to quantify and may vary from one region to another.
It is important to be aware of these limitations and to take them into account when
interpreting the findings of a study on PPPs in Nepal.

4
 CHAPTER 2

ANALYSIS AND RESULT

Data Presentation
The first hydropower, Pharping micro hydro project of 500KW capacity, was built in 1911
and the second, Sundarijal micro hydro project of 600KW, in 1936. Since the beginning,
Nepal’s development of energy infrastructure has been very slow and it was able to construct
around 3MW of power in 50 years after the installment of the first micro hydro. After the end
of Rana dynasty in 1948, the energy infrastructure development faced many political turmoils
and the consecutive governments were not seen paying due attention to it though they
announced the periodic development plans. Remarkable hydropower generation plants were
surveyed .
The constructions of hydro power plants were started only after the restoration of democracy
in 1990. The move was later immediately paralyzed by 12 years of Maoist insurgency. The
economy of Nepal is based on agriculture and 83% of populations are still living in the rural
region which poses a challenge for infrastructure development. Though the rate of
urbanization is very high, the government has only able to provide electricity to 43.6% of
population until 200914. In some rural areas few micro hydro plants have been installed with
the initiation from the community but are limited to few thousands of households for lighting
purpose only. According to the Central Bureau of Statistics, the households of urban area do
not have adequate electricity for lighting and less than 0.2% of households use electricity for
cooking purpose. Due to the poor availability of electricity, public should find another source
even for lighting. And installed industries are not running full time due to the shortage of
electricity, it means the demand of electricity is much higher than the prediction by the load
dispatch center of Nepal Electricity Authority (NEA).

NEA implemented the advanced power distribution system called Integrated Nepal Power
System (INPS) which experienced sustained growth in peak demand of 946.10 MW power
with annual energy demand of 4,833.35GWh in Fiscal Year (FY) 2010/11. The NEA load

5
dispatch center maintains the demand of electricity in the region by cutting power
periodically and announces the load shedding schedule which took place 70 hours per week
in residence and 12 hours a day in factories just before the start of monsoon season.
Presuming normal supply of all available power sources, NEA forecasted a maximum
fourteen hours of load shedding per day per consumer during driest months of January,
February and March to glow the light installed in household. Despite the heavy power cutoff,
the annual energy demand growth is 10.67% (NEA, 2011). This bitter truth is that if this issue
is not addressed on time either by installing hydropower projects or thermal power plants, the
economy will be badly affected.

The current scenario reveals that less than 2% capacity has been exploited out of the feasible
hydro capacity after 100 years of the construction of the first power plant. Similarly only
43.6% of the population has electricity so this reveals that Nepal needs more than 3 times of
power capacity should be installed to provide electricity to all population. And also the
national grid is limited to only southern belt and central region of the country. Alternative
Energy Promotion Center, one of the government bodies to look after the energy sector and
empowering people in rural area by supporting small scale power projects such as home solar
system, micro hydro, pico hydro, wind energy projects supporting their life but these small
scale projects are generating low power and are limited to lighting purpose only.
Approximately 120,000 households in rural areas have access of electricity from the capacity
of about 12MW produced from number of community- managed micro/pico hydro plants
and about 261,000 households have solar home system, but they cannot run home appliances
which need high voltage power. In addition, according to AEPC 137 micro hydro systems in
different locations are in the process of completion in 2011. Once completed, they will
generate 4,441KW of power, providing electricity services to more 42,113 households.

Nepal’s liberal foreign investment policy attracted donor’s assistance in hydropower sector
since the 1980s. Among the areas of investment in industry manufacturing, services, tourism,
construction, agriculture, minerals, and energy, hydropower sector has a widespread
investment opportunity due to liberal policy and environmental friendly enacted legal
instruments. The government has prioritized the hydropower sector for foreign and domestic
investment. As a result, the hydropower sector has received 46% of total Foreign Direct
Investment (FDI) in Nepal, investing commitment for Rs 87.56 billion, out of the total FDI

6
commitment of Rs 190 billion received by the end of 9 month in 2016. The Constitution of
the Kingdom of Nepal 2015 (2072 BS) has emphasized the development of energy and
protection of natural resources. Nepal is governed as per the new Constitution of Nepal,
which came into effect on Sept 20, 2015, replacing the Interim Constitution of 2007.
The prevailing policies, acts, and regulations are: Hydropower Development Policy 1992,
Water Resources Act 1992, and Electricity Act 1992. For management and development of
electricity services, Electricity Act, 1992, Electricity Rules, 1993, and Electricity Tariff
Fixation Rules, 1993 are the major legal regimes. The major objectives of the Hydropower
Development Policy 1992 were to involve private investment in hydropower generation: in
order to fulfill these objectives, concept of BOOT (Build, Operate, Own, and Transfer) in
developing hydro projects were introduced. The Hydropower Development Policy 1992,
supported by the Electricity Act, 1992, provides incentives to develop hydropower in Nepal.
Similarly, Foreign Investment and One Industrial Policy, 1992, Industrial Enterprises Act
1992, Foreign Investment and Technology Transfer Act, 1992, Environment Protection Act
and Environment Protection Regulation, 1997 were enacted to strengthen the sector together
with protecting the natural environment. The promulgated Ninth Five-Year Plan (1997–2002)
of the government had included institutional reforms to attract private sector in power
generation and distribution and various programs such as generation and supply of electricity,
power transmission, system strengthening, feasibility study, and design for rural
electrification. Likewise, Tenth Five-Year Plan Period (2002–2007) emphasized small,
medium, large, and reservoir types of hydropower construction and formulated Water
Resources Strategy, 2002 and National Water Plan, 2005. The plan intended to promote
integrated development of water resources involving private and public sectors with emphasis
on rural electrification and control of unauthorized leakage of electricity. The second Three-
Year Plan (2010/2011–2012/2013 (2067/2068–2069/2070) has given special encouragement
to not only public sectors but also for private sectors with public-private partnership aspects.
Considering the existing legal regime, the total 733.557 MW hydropower has produced up to
the year 2014/2015 including 255.647 MW from the private sector. There are 83 projects
equivalent to 1521.28 MW installed capacity that are in the construction phase and 33 HEP
with 532.542 MW installed capacity that are in different development phases.
Nepal’s concern toward conservation and sustainable economic development has signatory of
more than 20 international treaty and conventions such as Biological (CBD) and UN
Framework Convention on Climate Change in 1992, UN Convention on Combating

7
Desertification,1994 and Kyoto Protocol in 1997. The climate change issues raised in Nepal
formed Climate Change Council in 1999 and adopted Climate Change Policy in 2011 with its
main aim to improve socioeconomic development with improvement of livelihoods by
mitigating and adapting adverse impacts and adoption of low-carbon emission-based
development.
Nepal’s Climate Change Policy has envisaged protection of environment and sustainable
human development by promoting the use of clean energy, reducing GHG emissions,
enhancing the climate adaptation, and resilience capacity of local communities. The
emissions of carbon threaten basic elements of society like water, food production, health,
and the environment imposing a huge social cost as anywhere from $8 per ton to as high as
$100 per ton of CO2. Fossil fuel combustion for transportation and electricity generation are
the main source of CO2 generation, contributing more than 50% of the emissions, and
generation of electricity with thermal power plants contributes 66% the world's electric
generation capacity. However, the hydropower represents only 20% of the electricity
generation capacity of the world, which emits 35–70 times less GHGs per TWh than thermal
power plants . To achieve energy efficiency and energy security, the hydropower projects aim
to access affordable and reliable energy service and reduce high carbon emission replacing
petroleum products to the extent possible in transport, industry, and household sectors.
The main objective of Thirteenth Three-Year Plan (2013–2016) on Water Sector is to
upgrade living standards of the people with their socioeconomic development and reduction
of poverty line as below 18% . The plan emphasized to upgrade Nepal accessing people
toward drinking water from 85 to 96.25%; sanitation from 62 to 90.5%, and grid-connected
electricity generation from 758 to 1426 MW accessing electricity from 67.3 to 87% and
ranked Nepal as a developed country by 2022.

Analysis of Result
The analysis of the results of public-private partnerships in Nepal has shown that these
initiatives have had a mixed impact on the country. On one hand, PPPs have brought in
much-needed investment and technological expertise, helping to improve infrastructure and
services in various sectors. However, there have also been challenges and controversies
surrounding some PPP projects, including issues with transparency, accountability, and the
distribution of benefits. It is important to carefully assess the successes and limitations of
PPPs in Nepal in order to inform future policy decisions and ensure that these partnerships

8
are aligned with the country's development goals. From the given table we can analysis the
result of Hydropower generation unit of 10th periodic plan

Table 2: Hydropower generation unit 10th periodic plan

Periodic Plan Years Progress KW Hydel Diesel Accumulated

Before the First up to 1956 6,280 2077 4203 6280

Plan 1956-1961 3580 1000 2580 960

1st Plan 1962-1965 7500 4000 3500 17360

2nd Plan 1965-1970 19960 17000 2980 37320

3rd Plan 1970-1975 12314 12314 0 49634

4th Plan 1975-1980 18710 16220 2490 129600

5th Plan 1980-1985 61220 51256 10000 258000

6th Plan 1985-1990 51256 126850 2050 271500

7th Plan 1992-1997 13000 10000 3000 584500

8th Plan 1997-2002 313000 297000 20000 619000

9th Plan 2002-2007 34500 28300 6200 689000

10th Plan 2007-2014 5557 24800 7800 658000

Total 546,877 590817 64803 3321154

(Source:
CBS, 2011)

9
Figure 1: Major Hydroelectric Projects of Nepal

Figure 2: Graph of Hydropower generation unit 10th periodic plan

10
 Hydropower generation unit 10th periodic plan

Total

10th Plan

9th Plan

8th Plan

7th Plan

6th Plan

5th Plan

4th Plan

3rd Plan

2nd Plan

1st Plan

Plan

Before the First

0 0 0 0 0 0 0 0 0 0 0
00 00 00 00 00 00 00 00 00 00
00, 00, 00, 00, 00, 00, 00, 00, 00, 00,
5 0 5 0 5 0 5 0 5 0
1, 1, 2, 2, 3, 3, 4, 4, 5,

Progress KW Hydel Diesel Accumulated

(Source: CBS,
2011)
To get rid of the power shortage, concerned authorities have forwarded the “Vision 2020
Hydropower” by formulating the authoritative committee to implement and achieve the goal
of 10GW power plant installation by 2020. According the WEC (2008), Nepal needs more
than 2000MW of power even if our economy growth is less than ever have we experienced in
2020. Therefore, the development of energy infrastructure that we need for tomorrow is
necessary and stake holders should give high priority to the power projects to secure the
energy for future demand. In the initiation of the Department of Electricity Development and
other authorities, energy policy has been revised to attract private sector and FDI to invest in
hydropower.

11
Figure 3 shows the energy demand forecasting by the NEA with current infrastructure and
access scenario, according to this data we need at least 1200 MW of power by 2018 and
showing need to add more than 100MW of the power projects per year to meet the power
demand.
Thus the only sustainable way to protect the economy is to produce as much as the power
from either alternative, having the huge hydro potential and favorable condition for
hydropower; it is the only one solution so the government and the individual energy group
should give their priority for the power projects from cumulative efforts. According to the
Central Bank of Nepal and Water Energy Secretariat, Nepal will achieve the growth of
maximum 10% requiring the 5GW of power after ten years which could be possible if all
efforts are applied on the power sector but without building infrastructure it will be only
limited in the paper dream.

Findings
Since the release of the first hydropower policy in 1992, the government made several
amendments to make investment friendly environment to IPPs. Those formulated policies are
not only targeting to meet the household demand of electricity within the country, industrial
revolution but also explore the opportunity to export the neighboring countries in large
extent. Government declared the favorable policy to motivate and attract the investment from
private sector, foreign investment, local entrepreneur, energy users group or institution in
electricity grid and construction of hydro power. Government also formulated the one
window system to make easy to work and reduce the complexity for the power producers.
The departments of electricity development ,Water and Energy Commission Secretariat,
Tariff Fixation Commission are the concerned departments in the electricity industry of
Nepal.

1. Projects (run of river/ storage) which are economically viable either domestic purpose
or exports oriented are developed as per the requirement on the competitive basis.
2. The development of hydropower projects based on the PPP, Build Operate Own and
Transfer is encouraged.
3. Appropriate incentive provisions are provided on transparent process to attract foreign
and national investors in hydropower sectors.

12
 4. Government will facilitate to provide the land, houses to the IPP under the prevailing
laws.
5. After obtaining license of the project, exclusive water right will be provided to
prevent any adverse effects on the project.
6. Government will provide the grant through the AEPC to the domestic private sector to
generate and distribute the electricity, building hydropower less than 100KW in rural
area and also if private sector needs loan then government will prioritize it.
7. The customs and value-added tax facilities equivalent to which a new project may be
entitled under this Policy shall also be provided for upgrading the capacity of the
electricity generation center or for carrying out the repair and maintenance required
because of exigency or natural calamity
8. The project supplying the internal demand: Thirty-five years from the date of issuance
of the generation license
9. The export-oriented hydropower project: Thirty years from the date of issuance of the
generation license

The Electricity demand along with the urbanization rate is increasing but the development of
new hydro project is very low to address the demand. To develop and explore sustainable
energy source government set a priority development project in energy sector and identified
the potential projects which are economically feasible and also announced the interim policy
to attract the investor in hydro electricity sector. In addition to the previous policy the
government formulated new policy to support investors. Promoting small hydro and micro
hydro projects in the rural areas where big hydro power projects are not possible will be
benefitted with the incentive and subsidy provided by the government. Developing this kind
of micro hydro will greatly reduce the consumption of traditional energy sources and
increases the economic activities of the poor dwellers along with the value chain created by
this kind of projects are very accountable to national development. This time framed vision is
intended to reduce the uncertainty and national commitment in hydropower development to
the investors. Thus this vision is considered to be properly addressed the issues of royalty,
PPA issues for domestic and export oriented projects and tax incentives to IPP showing that
Nepal has given the priority to private sector, energy groups producing any size of the
project.

13
 1. Until mid April, 2019, government will not ask any income source of
industries who uses more than 50% indigenous raw materials manufactured
domestically.
2. No income tax for the first 7 years and only 50% of tax for next 3 years
3. VAT and customs duty exemption on construction material, machinery, tools
4. License is not needed up to 3 MW and waivers of EIA for up to 50 MW.
Nepal needs 4,833GWh of energy to address the power demand increasing 10.67% per year
out of which only 3850.87 GWh (79.67%) could be served and the rest of energy had to be
curtailed as the load shedding to keep the system operation (NEA, 2011). After the
government brought the private sector promotion policy for the development of hydropower,
the remarkable amount of power purchase agreements (PPAs) has been signed, showing a
great interest of the private sector. The concerned authorities got convinced about the role of
independent power producer (IPPs) in hydropower sector to address the electricity demand in
a short period of time. This shows the importance of the private sector and the exploitation of
techno-managerial, financial, entrepreneur efficiencies to develop hydropower and meet the
goal of “VISION 2020”. NEA signed PPAs with IPPs worth 714.77MW during year 2010/11
which is almost double the total capacity of PPA signed in the past. Total capacity of PPA
signed with IPP so far has reached 1,118.35MW where 174.526MW from 23 projects are
already producing power (NEA, 2011). NEA signed first PPP project as Chilime Hydro-
power of 22.1MW and started generating power in 2003. This project has 51% of equity
share from NEA and 49% from the private sector including the people from the project
affected area. With sound management and efficient manpower, Chilime succeeds to produce
150.110GWh of energy from the 22.1MW of plant capacity. Chilime Hydropower Company
Limited was formed as a special proposed vehicle with structurally complex equity shares
from private body general public, employees of promoters company, people from project
affected area and the government authority; able to achieve the great success of undertaking
the development of other hydropower projects totaled amount of 270MW in a short period of
time and recently signed the agreement to construct Utter Ganga 300MW, a reservoir type
project. The investment model practiced by Chilime enables people’s participation in energy
infrastructure projects and now this model is applied to other power projects like Upper
Tamakoshi 456MW and the subsidiaries of Chilime without the involvement of FDI. The
impact of the Chilime is now visible in the local economy , apart from this project able to
share the assets worth Rs. 4,439 per head additional to the cash dividend which impacted their

14
life styles ranking their human development to 40th district out of the 75 districts. Thus the
people’s participation on the hydropower project not only helps to find the financial source
within the country but also will make economically sustainable along with the success of the
project. Developing larger hydropower projects with the same methods applied in the
Chilime and other projects might not be feasible for the large hydro power and also the
international expertise will be needed to strengthen the projects and diffuse knowhow in the
hydro power sector. Thus, for the bigger projects like Upper Arun 335MW, more funds
would be necessary with the involvement of FDI.

15
 CHAPTER 3

SUMMARY AND CONCLUSION

Summary
The construction of the hydropower plant in the nations where the people are facing deficit of
energy brings the fortune. The lack of sufficient amount of energy is like a car without fuel,
the deficiency in energy reflects the poor state of industrialization, education, and overall
economy will become very weak. Thus, the construction of the hydropower plant with the
participation of people will help to find the financial source within the country by mobilizing
people fund and also it will create the opportunity to be the owner of the project equally to all
people which will make simultaneous development.

Conclusion
Despite huge natural resources in Nepal, the exploitation of hydro resources is very low
which is even not sufficient for the current demand on existing national grid. To address the
deficiency in energy, more power projects should be built not only for current need but also
for the rising demand of tomorrow. The development of power projects only from the
government side is not the viable solution, which we see from the history of the development
of hydropower in Nepal. That is why, the participation of the private sector in electricity
industry is necessary. Toward this end, the government should facilitate and promote the
private sector to attract it to the hydropower projects with favorable policies such as heavily
subsidized tax incentives in the hydropower sector for a certain period.

In the meantime, the participation of the community should be increased and secure by the
government by which it is not only counted on the successful execution of large hydropower
plants like Upper Tapakoshi but also empowered local people and energy consumer group to
invest in micro-hydro and pico-hydro projects. This enthusiasm of the private sector and the
local public should further increase with the goal of jointly constructing large hydropower
projects following PPP models. The government has further announced a hydropower
development plan to attract foreign investment, further investment from the Nepalese private
16
sector and is ready to work with any IPP project as long as certain requirements such as
ensuring a 10% share to local people are met
Communities are the vital player in every kind of the development projects and the active
participation on the power project speed it up. We have seen the cases of Chilime and the
active participation of communities not only made the success story of it but also
communities are getting benefited from the project. Thus, we have the opportunities to
develop the community financed projects along with securing our future.
The government has recently made the one window system in electricity line departments to
make easy access and work with the IPPs. This departmental reengineering is one of the
milestones. Meanwhile, the government should establish the electricity investment fund and
allocate the resources in it. Citizens seem to be eager to participate in power projects, which
could be further driven through the use of such a fund to accelerate hydropower development
for the economic and overall development of the country.

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 REFERENCE
 https://www.intechopen.com/chapters/53350
 https://www.adb.org/sites/default/files/publication/612641/hydropower-development-
economic-growth-nepal.pdf
 http://utkhpl.org.np/wp-content/uploads/2022/07/Annual-Report-2077.78.pdf
 http://utkhpl.org.np/annual-reports/
 http://www.nepalnews.com/archive/2013/jun/jun06/news19.php
 http://www.tamakoshihydro.org.np/

 https://ekantipur.com/the-kathmandu-post/2013/03/29/money/personnel-for-

 http://thehimalayantimes.com/fullTodays.php?
headline=Public+share+in+hydro+projects+must&NewsID=379836
 http://nea.org.np/images/supportive_docs/Loadsheddingbaisakh22.pdf

 http://www.cignepal.org.np/news/supreme-court-scraps-writ-petition-sought-halt-middle-bhotekoshi-
hydropower- project

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