Government moves to revoke licenses of 38 hydropower projects with zero progress

A high-level review committee has recommended canceling the permits of projects that secured power purchase agreements but failed to advance, as Nepal pushes to end the long-criticized “license raj” in the hydropower sector.

KATHMANDU: A high-level committee formed by the Ministry of Energy, Water Resources and Irrigation has recommended the cancellation of licenses for 38 hydropower projects with a combined capacity of 1,388 MW that have remained largely inactive despite signing power purchase agreements (PPAs).

The recommendation follows a review of hydropower licenses issued by the Department of Electricity Development under the government’s 100-point governance reform action plan. The committee concluded that these projects had shown virtually no meaningful progress over a prolonged period and should face permit revocation.

By the numbers

Projects recommended for license cancellation

38 projects (1,388 MW)

Priority projects with over 50% progress

15 projects (220 MW)

Projects nearing 50% progress

131 projects (5,642 MW)

Projects needing facilitation

38 projects (1,124 MW)

Problematic projects recommended for action

75 projects (4,121 MW)

Small projects identified for immediate PPA

176 projects (1,164 MW)

Project categories identified

The committee categorized licensed projects into several groups based on their progress:

Priority projects

15 projects totaling 220 MW that achieved more than 50% progress within five years of obtaining production licenses.

Projects nearing completion threshold

131 projects with a combined capacity of 5,642 MW that are approaching 50% completion and should be encouraged to proceed.

Projects requiring facilitation

38 projects totaling 1,124 MW that are under construction but facing delays due to various constraints.

Problematic projects

75 projects with a combined capacity of 4,121 MW that have shown extremely weak progress and should face corrective action.

Budget policy and additional cancellations

The move aligns with the government’s fiscal year 2083/84 budget statement, which explicitly states that projects with PPAs but no construction progress may have their licenses revoked.

In addition, the committee noted that the Department of Electricity Development has separately recommended the cancellation of 11 projects totaling 169 MW that received production licenses before 2076 BS but have made no progress to date. According to the report, these projects failed to comply with the conditions of their licenses and did not meet requirements under Rule 21 of the Electricity Regulation, 2050, warranting cancellation proceedings under Section 8 of the Electricity Act, 2049.

End of ‘license raj’

The report calls for an end to the long-standing practice of holding hydropower licenses without developing projects. It recommends that future survey permits be issued through a competitive process based on national priorities.

Among the policy reforms proposed are:

1. Review and harmonization of conflicting provisions in the Electricity Act, Electricity Regulation, Hydropower Development Policy and licensing guidelines.
2. Clearer division of responsibilities among the Investment Board Nepal, the Ministry of Industry, and the Ministry of Energy.
3. Elevation of key issues such as license amendments, project bank management, and license transfer rules from guideline level into formal regulations.
4. Restrictions on changes to a developer company’s shareholding structure during the five-year survey license period, unless a production license has already been obtained.
5. Preparation of a five-year national electricity development plan covering generation, transmission, distribution, domestic consumption and exports.
6. Clear legal provisions on ownership transfer, operation management and revenue arrangements after production licenses expire.

Committee and next steps

The five-member committee was chaired by Joint Secretary Mohan Shakya and included members Dr. Diwas Bahadur Basnyat, Nikunj Bhandari, Shalikram Bhandari and Jeevan Rana Magar. The report was submitted to Energy Minister Biraj Bhakta Shrestha.

The committee also identified 176 projects below 10 MW capacity that should receive immediate PPAs. Those projects have a combined capacity of 1,164 MW.

If implemented, the recommendations would mark one of the most significant clean-ups of Nepal’s hydropower licensing system in recent years, potentially freeing up stalled capacity and encouraging more credible investment in the sector.