Hydropower Doing Business Guide

In Nepal

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Introduction �  Nepal has a huge hydropower potential. In fact, the perennial

nature of Nepali rivers and the steep gradient of the country's topography provide ideal conditions for the development of some of the world's largest hydroelectric projects in Nepal.

�  Current estimates are that Nepal has approximately 40,000 MW of economically feasible hydropower potential

�  Present situation is that Nepal has developed only approximately 600 MW of hydropower.

�  Although bestowed with tremendous hydropower resources, only about 40% of Nepal's population has access to electricity

�  The electricity demand in Nepal is increasing by about 7-9% per year.

�  Nepal's Tenth Five Year Plan (2002– 2007) aims to extend the electrification within country and export to India for mutual benefit.

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Opportunities �  Nepal’s hydropower sector is the nation’s crown jewel. It is

widely recognized that this largely unexploited asset is the key that will unlock the nation’s development potential.

�  Nepal’s hydropower potential is ranked second in the world, behind only Brazil which is geographically, fifty times larger. Nepal’s river systems comprise approximately 83,000 MW of hydropower potential, of which only approximately 800 MW, less than one per cent of its proven potential, has been harnessed.

�  The hydropower sector has attracted most of the country’s foreign direct investment (FDI). According to the Department of Industry, 73 (only 2% of the total) projects have been registered as energy projects. But in terms of the foreign investment pledged, energy-based projects comprise 46% of the total.

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The major hydropower plants in Nepal

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Project Name Capacity Project Owner Kaligandaki Hydropower Plant, Syangja  

144,000 kW Nepal Electricity Authority  

Middle Marsyangdi Hydropower Project, Rasuwa  

144,000 kW Nepal Electricity Authority

Marshyangdi Hydropower Plant, Tanahun  

69,000 kW Nepal Electricity Authority

Khimti Hydropower Plant, Dolakha  

60,000 kW Himal Power Limited

Kulekhani I Hydropower Plant, Makawanpur  

60,000 kW Nepal Electricity Authority

Bhotekoshi Hydropower Project, Sindhupalchok

36,000 kW  

Bhote Koshi Power Company

Kulekhani II Hydropower Plant, Makawanpur

32,000 kW  

Nepal Electricity Authority

Trishuli Hydropower Plant, Nuwakot 24,000 kW  

Nepal Electricity Authority  

The major hydropower plants in Nepal

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Chilime Hydropower Project, Rasuwa  

20,000 kW Chilime Hydropower Company

Gandaki Hydropower Plant, Nawalparasi  

15,000 kW  

Nepal Electricity Authority

Devighat Hydropower Plant, Nuwakot  

14,000 kW  

Nepal Electricity Authority

Modi Hydropower Plant, Parbat  

14,000 kW Nepal Electricity Authority  

Upper Modi Hydropower Project, Parbat 14,000 kW GITEC Nepal Private Limited

Jhimruk Hydropower Plant, Pyuthan  

12,300 kW  

Butwal Power Company

Sunkoshi Hydropower Plant, Sindhupalchok  

10,050 kW  

Nepal Electricity Authority  

Indrawati Hydropower Project, Sindhupalchok  

7,500 kW  

National Hydropower Company

  Puwa Hydropower Plant, Ilam  

6,200 kW Nepal Electricity Authority  

  Andhikhola Hydropower Plant, Syangja  

5,100 kW  

Butwal Power Company

Chatara Hydropower Project, Sunsari  

3,200 kW  

Nepal Electricity Authority  

Panauti Hydropower Project, Kavre  

2,400 kW Nepal Electricity Authority  

�  Water Resource Act, 1962 �  Electricity Act, 1992 & Electricity Rules ,1993 �  Land Acquisition Act, 1977 �  Hydropower Development Policy, 2001 �  Private Financing in Build and Operate of Infrastructures

Rules, 2064 (2007) �  Industrial Enterprises Act 2016 �  Investment Board Nepal Act �  Income Tax Act and Rules �  Value Added Tax and Rules �  Labor Act 2074 and Labor rules 2075 �  Bonus Act 2030

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Regulatory Framework

Income Tax Tax Rates �  Build, Own, Operate and Transfer Model (BOOT) projects; Construction of

powerhouse, hydro power generation and transmission: 20% �  Income generated by entity from export: 20% �  For hydro generation and transmission entities listed in the stock exchange:

15% exemption in normal tax rate. Tax Holiday �  Licensed person or entity producing electricity through hydro, solar, wind

and bio fuel, starting its commercial production, transmission or distribution within April 12, 2024 (Chaitra end 2080): 100% exemption for 1st 10 years and 50% exemption for next 5 years.

Disclosure Norms �  Income source disclosure not required for investment made in hydro

projects of national priority until Chaitra end 2075.

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Incentives

Income Tax Carry Forward of Losses : 12 Years Depreciation �  33.3 % additional accelerated depreciation for BOOT projects,

construction of powerhouse, hydro power generation and transmission. �  Investment made during a year on replacement of old machineries after

deduction of the accumulated depreciation till that year allowed to be booked as expense.

 Value Added Tax (VAT) �  VAT exemption on the import of machinery, equipment, tools and their

spare parts, penstock pipes or iron sheets used in hydro power projects and not produced in Nepal (based on the recommendation of the Alternative Energy Promotion Center or the Department of Electricity Development).

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Incentives

Custom Duty Concessions �  Duty on Generation plant having a capacity equal to or

exceeding 10 kW: 1% �  Duty on generating parts imported by VAT registered

industries producing generators: 1%. �  Duty on alternative energy based industries: 1%

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Incentives

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Address- Patandhoka, Post Box No. 252, Lalitpur -3,Nepal Contact Number- +977 1 5521605 Email- FDI@bakertilly.com.np Website- http://www.bakertilly.com.np