Kathmandu: The Independent Power Producers’ Association Nepal has urged the government to provide special incentives, tax exemptions, and policy facilitation to the private hydropower sector through the proposed “Sunset Law.”
In a memorandum addressed to the Prime Minister and the Minister for Energy, Water Resources and Irrigation, IPPAN Vice President Bharat Khatri stated that, in line with international practices, a “Sunset Law” is a legal framework that grants special facilities for a fixed period, and Nepal should adopt it in an investment-friendly manner.
The memorandum notes that many countries around the world use the “sunset” concept to attract investment in strategic sectors by offering time-bound tax exemptions, investment protection, concessional loans, and regulatory ease. According to IPPAN, Nepal should adopt a similar model to achieve its goals of energy export and economic transformation.
IPPAN stated that Nepal’s hydropower sector is a key pillar for national prosperity, energy self-sufficiency, and the development of an export-oriented economy. However, it said that the sector has failed to achieve the expected pace due to various legal, administrative, and structural barriers.
Under proposed reforms to electricity laws and regulations, IPPAN has demanded that the private sector be granted clear rights not only in electricity generation but also in the construction, operation, and ownership of transmission lines. It has also called for direct private sector participation in electricity trading, simplification of electricity import-export permit systems, and implementation of a one-door mechanism for all project approval processes.
The association further urged amendments to forest and environmental laws to simplify and expedite approval procedures for hydropower projects located in national forest areas. It also demanded clear timelines for tree felling, land use approvals, and environmental clearances, along with more practical forest royalty and compensation provisions.
Similarly, the memorandum calls for fast-track land acquisition for transmission lines and hydropower infrastructure under the public interest framework, simplification and transparency in compensation distribution, and provision of long-term leases of government land to private projects.
IPPAN has also proposed customs duty exemptions on equipment, spare parts, and machinery used for construction, maintenance, and operation, as well as VAT and other tax facilities on necessary imports throughout the project operation period.
The memorandum further recommends establishing a separate “Energy Exchange Authority” to allow open energy trading for the private sector, direct access for private producers to cross-border markets including India and Bangladesh, and implementation of a competitive energy market structure.
Under financial and banking reforms, IPPAN has sought the creation of a special fund to provide long-term low-interest loans, simplification of foreign investment and loan approval procedures, and easier arrangements related to bank guarantees and letters of credit (LCs).
IPPAN also proposed that the planned “Sunset Law” should provide tax exemptions to private hydropower projects for a fixed period, grant special incentives to projects coming into operation by 2035, and prioritize export-oriented projects. It further requested simplification of license renewal and transfer procedures.
Concluding the memorandum, IPPAN stated that if the proposed “Sunset Law” is designed to be investment-friendly, result-oriented, and focused on sustainable development, Nepal could establish itself as an energy-exporting nation. The association urged the government to incorporate its recommendations into the law-making process.
Jalasarokar
