In its first 100 days in office, the government has placed the energy sector at the centre of its economic transformation agenda, introducing a series of policy reforms, governance measures, and infrastructure initiatives aimed at accelerating hydropower development, expanding domestic electricity consumption, strengthening transmission networks, and promoting regional electricity exports.
With an ambitious target of generating 30,000 MW electricity over the next decade, the government has shifted its focus beyond electricity generation alone to building an integrated energy ecosystem that promotes domestic consumption, transmission, export and private sector participation.
As a part of the government’s 100-point governance performance agenda unveiled the very first day of the government formation, the Ministry of Energy, Water Resources and Irrigation has initiated a range of reforms from restructuring the electricity market and reviving stalled projects to introducing legal reforms, promoting technology and building a more service-oriented administration.
Soon after taking office, Minister for Energy, Water Resources and Irrigation Biraj Bhakta Shrestha issued a 32-point directive to improve governance, speed up project implementation and enhance accountability across the agencies under the ministry. The directive outlined key priorities for the energy, water resources and irrigation sectors while clearly defining the responsibilities of each agency.
Along with electricity generation, the government has already paved the way for private sector participation in electricity trading and transmission infrastructure. The government looks forward to partnering with the private sector to accelerate the overall development of the energy sector.
Policy reforms
As part of long-term reforms, the ministry has initiated structural changes in the electricity market. Key measures include determining wheeling charges for the implementation of the ‘Open Access’ system, introducing seasonal and peak-demand-based tariff structures for reservoir and pumped storage hydropower projects, and extending the license period for reservoir-based hydropower projects to 50 years.
The government has also proposed legal provisions allowing the private sector to engage in cross-border electricity trade and invest in transmission lines, enabling investors to earn revenue through wheeling charges. The reforms are expected to improve the financial viability of large storage projects, attract greater private investment and make the electricity market more competitive.
The government has adopted a policy to revoke the licences of hydropower projects that have signed Power Purchase Agreements (PPAs) but have failed to begin construction, and to sign new PPAs under the “Take or Pay” model.
Some impractical laws that have discouraged investment are being amended. The Ministry has prioritised four key bills: the Water Resources Bill, the Renewable Energy and Energy Efficiency Bill, the Electricity Bill, and the Irrigation Development and Management Bill.
As part of this initiative, the Ministry has prepared drafts of the Water Resources Bill and the Renewable Energy and Energy Efficiency Bill and submitted them to the Ministry of Law, Justice and Parliamentary Affairs for its opinion before tabling them in the upcoming session of Parliament.
Preparations are also under way to introduce the Electricity Bill and the Irrigation Development and Management Bill in the upcoming parliamentary session. The government is confident that these laws will play a positive role in advancing the country’s energy and irrigation sectors.
With the objective of increasing domestic energy consumption while exporting surplus electricity, the ministry has prepared the “Energy Consumption Growth and Export Strategy, 2026.”
The strategy provides Nepal’s first comprehensive roadmap for simultaneously increasing domestic electricity consumption and expanding electricity exports. It targets raising per capita electricity consumption from the current level of around 450 kilowatt-hours to 1,500 kilowatt-hours within the next ten years.
Besides the energy sector, the ministry has focused on improving irrigation infrastructure and strengthening integrated water resources management. Priority has been given to accelerating ongoing irrigation schemes, improving project monitoring and ensuring better utilisation of water resources for agricultural productivity.
Hydropower boost
For years, Nepal’s hydropower ambitions have been hampered by inefficiency, licence hoarding, and weak governance. Many developers secured project licences and even signed PPAs but failed to move their projects into the construction phase for years. These practices not only blocked serious investors from entering the sector but also delayed the country’s broader energy development goals. In this situation, the government has also prioritised completing projects that have remained stalled for years. A high-level committee formed to address issues such as stalled projects, budget shortages, land acquisition disputes, and contract management has already submitted its report.
The recent recommendation by a high-level committee to revoke the license of 38 hydropower projects totaling 1,388 MW sends a strong message that the government is finally prepared to end the longstanding weakness—holding a license without meaningful progress.
The committee further proposed issuing survey licenses through competitive bidding based on national priorities, preparing a five-year electricity development plan, and reforming legal provisions governing ownership transfer and license expiry.
Development overhaul
The government has taken a major step to expand private sector participation in Nepal’s power sector by adopting a public-private partnership (PPP) model for transmission infrastructure.
As part of this initiative, it has established the West Seti Transmission Company to develop a 400 kV transmission line in western Nepal. The initiative reflects the government’s broader policy of opening the transmission sector to private investment. The construction of the long-delayed Hetauda–Dhalkebar 400 kV transmission line has resumed after the settlement of land compensation disputes. Likewise, the Balkumari GIS Substation Project in Lalitpur has regained momentum after four years. These projects are expected to strengthen electricity supply in the Kathmandu Valley and reinforce the national transmission system.
‘Grid evacuation’ has been made a mandatory prerequisite for moving forward with new projects. Now, construction permits will be issued only after the Nepal Electricity Authority and the Rastriya Prasaran Grid Company Limited ensure adequate transmission infrastructure.
It has planned to expedite the construction of the New Khimti–Barhabise–Kathmandu and Hetauda–Ratmate–Lapsiphedi–New Damauli–New Butwal 400 kV transmission lines.
To expand cross-border electricity trade, priority has been given to the Butwal–Gorakhpur, Inaruwa–Purnia, Dhalkebar–Muzaffarpur–Sitamarhi, Lamki–Dodhara–Bareilly, Lamahi–Lucknow, Nijgadh–Motihari, and Chilime–Kerung cross-border transmission line projects
Similarly, the government aims to complete the Rahughat Hydropower Project within the current fiscal year while expediting the implementation of the Tanahun Hydropower Project, Upper Modi, Upper Trishuli-3B, and the Budhiganga Hydropower Project.
Under irrigation, priority has been given to national pride projects such as Bheri Babai, Sikta, Sunkoshi-Marin, Rani-Jamara-Kulariya and underground and lift irrigation.
Way forward
So far, several policy reforms have been initiated, but major challenges still remain. These include accelerating the construction of transmission infrastructure, increasing domestic electricity consumption, and completing large reservoir-based hydropower projects. Nevertheless, the Ministry’s initial focus on administrative reform, investment mobilisation, and regional electricity trade has positioned Nepal’s energy sector for sustainable development. If implemented effectively, these initiatives could strengthen energy security, increase export earnings, and support the government’s broader objective of using the energy sector as a key driver of economic transformation.
Rising Nepal