According to the history of Nepal’s hydropower development, it appears that the entry of the private sector alone brought about a meaningful turning point. The Electricity Act of 1992, opened the door for private sector participation in the energy sector. That was a historic beginning. Only after that did a qualitative leap occur in electricity generation. At present, the private sector contributes nearly 80 percent of the total electricity generation capacity. This is not just a statistic—the impact and achievements clearly show that Nepal’s energy future is not possible without the active participation of the private sector.
The entry of private investment has made the hydropower sector increasingly commercial and competitive. Investor confidence, the use of technology, adherence to timelines, and cost efficiency—all these factors have helped streamline energy projects. Unlike government projects, which often face delays and escalating budgets, there are numerous examples of private projects being completed within the stipulated time and budget.
The expansion of hydropower has also brought multifaceted benefits such as thousands of direct jobs, development of local infrastructure, social responsibility, and financial literacy. It is due to the government’s liberal policies that the private sector has been increasingly attracted to the energy sector. Just 30 years ago, in 1990, Nepal was producing only 270 megawatts of electricity; today, it is producing over 3,500 megawatts. The majority of this total generation is operated by the private sector.
Moreover, the government has set an ambitious target to produce 28,500 megawatts of electricity by the year 2035 The private sector is fully prepared to help achieve this goal, and this message has already been formally conveyed to the government. However, the government must continue removing policy and legal obstacles to create a more investment-friendly environment.
Policy and Procedural Obstacles
The private sector is facing various obstacles in the implementation of projects. To execute a single project, it is often necessary to approach more than 200 government agencies. Among them, the procedures of the Ministry of Forests are the most complex and obstructive. Even obtaining approval for conducting a study has proven to be very difficult due to the need for consent from the Ministry of Forests. As a result, hydropower projects with a combined capacity of 19,000 megawatts currently under construction have been stalled due to forest-related complications.
The government does issue licenses for project construction and also collects annual fees, but in practice, the required forest approvals for implementation are not being granted, leaving the projects stranded. This issue is being neglected.
Hydropower is the very foundation upon which Nepal can move toward prosperity. Internationally as well, Nepal’s hydropower potential is considered to hold great promise. However, the legal framework that makes it difficult to even utilize forest areas necessary for development is hindering the progress of this sector.
In Nepal, where 47 percent of the total land area falls under forest cover, the Forest Act of 1972 is still in use. That law was formulated considering the forest cover of that time, which was around 32–33 percent. In the present context, the Act is neither timely nor supportive of development.
If Nepal is to produce 28,500 megawatts of electricity by 2035 and consume 13,500 megawatts domestically, it is estimated that per capita electricity consumption will increase fourfold from the current 400 units. Additionally, projections suggest that Nepal could earn an annual income of around NPR 400 billion solely from electricity exports. To achieve this, the government must immediately focus on infrastructure development, policy stability, and facilitation.
Energy development cannot progress without policy stability and collaboration. Recent policy changes, such as the introduction of ‘take and pay’, have created an environment of uncertainty in the private sector. Such policies are not investment-friendly. They have discouraged investors, and decisions like these not only risk sinking billions in investment but could also eliminate the environment for future project investments.
Nepal’s path to prosperity lies through hydropower. The private sector is taking risks, investing capital, and delivering results in an effort to support the government. Now it is the government’s turn to implement policy reforms. The government and legislature must work to review outdated laws, ensure policy stability, implement a one-stop approval system, and introduce clear, development-friendly policies on sensitive issues like forests. Public awareness has grown, the private sector has become capable, and the government appears committed—what is now needed is coordination and reform.
