New directive for hydropower licensing

Government of Nepal is preparing a new directive for hydropower licensing related to the projects that are in government’s basket. There are 210 hydropower projects with a total capacity of 10,125 MW, according to Department of Electricity Development (DoED). These projects are actually the cancelled hydropower projects. They were previously developed by government, foreign investors and local developers. One of the main reasons for the cancellation was the failure to meet the deadlines.

According to the new directive, these licenses will be awarded to private sector (foreign or local developers) in a competitive bidding method. The minimum bidding amount shall be the current applicable survey license fee for five years. At the moment, the survey license fee is NPR. 1 million, NPR 2 million, NPR 3 million, NPR 4 million, NPR 5 million and NPR 6 million per year for 1 to 5 MW, 5 to 10 MW, 10 to 25 MW, 25 to 100 MW, 100 to 500 MW and above 600 MW respectively. License will be awarded to the highest bidder.

The new directive will encourage genuine developers only. We have suffered a lot from the brokers. They hold the license with no intention of constructing projects. Their main purpose is to sell the license to either domestic or foreign investors. Previously, the cost of holding licenses was peanuts.

However, the new directive will be applicable for the cancelled projects only. ‘First come first basis” as in the past will be continue to be the process for getting fresh licenses.

Experts are demanding for competitive bidding method to award hydropower license regardless of fresh or cancelled license. This will discourage brokers and ease out the basin wise study. Also, it can be a good source of income to the government.

Government of Nepal awarded six projects to private developers through competitive bidding in 2010 for the first time to bring private developers in mainstream hydro. These projects are referred as “Super Six”. The lowest bidding amount was NPR. 10.11 million for a 10 MW project while the highest offered value was NPR. 260 million for a 40 MW project. Please view Practical approach to get involved in Nepalese hydro for foreign investors for detail information.