Details regarding fees, tenure, taxation policy, royalty, VAT and custom

Here are some details regarding the fee structures and tenure of licenses.

SURVEY LICENSE

A survey license is required to conduct investigations at a project site to assess its feasibility and preparation of an IEE/EIA. A survey license provides the survey licensee exclusive right to study the site for a certain period and provides a right-of-first-refusal to develop the project as provided in the Electricity Act, 2049. Survey licenses are needed to study production, transmission, and distribution facilities and are termed Production Survey License, Transmission Survey License, and Distribution Survey License respectively.

SURVEY LICENSE FEES

Details	Annual Fees (NPR)
1 to 5 MW	1 million
5 to 10 MW	2 million
10 to 25 MW	3 million
25 to 100 MW	4 million
100 MW to 500 MW	5 million
More than 500 MW	6 million

SURVEY LICENSE RENEWAL

Renewal of a survey license is possible if the original license term is less than five years. The proponent may request for renewal prior to its expiry. The proponent shall submit copies of all progress reports, a complete description, a list of pending activities and a schedule for completion. The proponent shall pay renewal fee.

TERMS OF THE LICENSE

a. Survey license

The term of the survey license shall be for a maximum period of five years.

b. Hydropower generation license

The term of generation license, depending upon the nature of the project, shall be as follows:

Project supplying the internal demand

Thirty-five years from the date of issuance including five years of construction.

Export-oriented hydropower project

Thirty years from the date of issuance including five years of construction.

In the case of captive plant producing energy of which at least 60% is utilized by any national industrial enterprise on its own. As long as the concerned industry remains in operation. If the industry does not remain in operation, up to 30 years from the date of issuance.

For storage project, the term of generation license may be extended for a maximum period of five years on the basis of construction period.

DETAILS REGARDING PPA WITH NEPAL ELECTRICITY AUTHORITY

Work Schedule for the Power Purchase Agreement (PPA) between Nepal Electricity Authority (NEA) & Private Power Producer (PPP) up to 25 MW.

SERVICE FEE

1 MW	NPR. 75, 000/-
1 MW to 5 MW	NPR. 1,50,000/-
5 MW to 10 MW	NPR. 3,00,000/-
10 MW to 25 MW	NPR. 4,50,000/-

PPA DURATION

Duration for PPA will be 30 years from date of commissioning.

PPA RATES

The prevailing PPA rates for the Projects below 25 MW:-

Details	NPR. per kWh
Wet Seasons (8 months)	4.80
Dry Season (4 months)	8.40

*There is an escalation of 3 percent from the date of commercial operation for the first five years.

For Projects above 25MW:- Determined through negotiation between developers and NEA

ROYALTY

Developers will pay royalty to Government of Nepal (GoN) as follows after the commencement of electricity generation.

a. Internal consumption project

Electricity Capacity	Up to 15 years		After 15 years
	Annual capacity Royalty, per kW	Energy Royalty, per kWh	Annual capacity Royalty, per kW	Energy Royalty, per kWh
Up to 1 MW	-	-	-	-
From 1 MW to 10 MW	NPR. 100/-	1.75%	NPR. 1000/-	10%
From 10 MW to 100 MW	NPR. 150/-	1.85%	NPR. 1200/-	10%
Above 100 MW	NPR. 200/-	2.00%	NPR. 1500/-	10%
For captive use	NPR. 1500/-	-	NPR. 3000/-	-

b. Export-oriented hydropower project

Electricity Capacity	Up to 15 years		After 15 years
	Annual capacity Royalty, per kW	Energy Royalty, per kWh	Annual capacity Royalty, per kW	Energy Royalty, per kWh
Export oriented run-of-the-river project	NPR. 400/-	7.5%	1800/-	12%
Export oriented storage project	NPR. 500/-	10%	NPR. 200/-	15%

The royalty rates referred to in clause (b) above will be applied on the projects built on commercial basis with installed capacity up to 1000 MW. In the case of the projects with capacities up to 1000 MW and built on non-commercial basis, 15% (fifteen per cent) of electricity and energy will be charged as royalty per annum on the basis of monthly power and energy generation capacity from the date of commencement of production.

TAX

As stipulated in Income tax act, the applicable corporate tax rate for enterprises undertaking electricity generation is 20 percent. However, the income tax shall be exempted fully for ten years after the operation and 50% exemption for the next five years for those projects that starts generating electricity within fiscal year of 2020-21 A.D. (2079-80 B.S.).

Corporate Tax	20%
Dividend Tax	5%
Capital Gain Tax	10%

CUSTOM

Plant, machinery and equipment are entitled to one percent and to full exemption from VAT.

VAT

Machinery and Equipments required for the hydropower projects which are not produced in Nepal such as Electro-mechanical equipment and their spare parts, penstock pipe or steel sheet to build penstock pipe are exempted from the VAT. 

SUBSIDY
The recently announced budget has declared that the developers will get NPR 5 million per every MW. Additional 10 percent subsidy will be given to the projects that connect to the national grid within fiscal year 2017-18 A.D. (2074-75 BS).
Hydropower gets a huge boost with unveiling of this year budget.