Policy, Institutional and Regulatory Framework

Policy, Institutional and Regulatory Framework

The Government of Nepal (GoN) has introduced a host of policies, rules, and guidelines to accelerate the effective development of the hydropower sector. GoN has established generation, transmission, and power trading companies, which implies the disbanding of the monopoly held by the Nepal Electricity Authority (NEA) in the electricity market. With the setting up of a transmission and trading company, its purpose will be to conduct Power Purchase Agreements (PPAs) with the power producers and to institutionalize the trading market in the energy sector. In order to attract the FDI, GoN has issued sub-legislation governing licenses, the grant of financial incentives, and the provision of foreign exchange facilities for electricity projects. Further, the GoN has recently issued the policy for hedging of FDI towards ensuring benefits to foreign investors. In addition, some sector restructuring has been endorsed by the GoN and has been implemented. Moreover, the GoN has also highlighted the importance of employing Public-Private Partnerships (PPPs) and of using PPPs to construct transmission lines on a build/ transfer (BT) model. All these developments in policy and infrastructure point towards a future with more production of electricity through hydropower and a shift towards electricity-intensive consumption both at the household and industrial level.