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A high-level committee has recommended that the government revoke the licenses of 38 hydropower projects with a combined capacity of 1,388 MW that have failed to begin meaningful construction despite having signed Power Purchase Agreements (PPAs).

The five-member committee, formed by the Ministry of Energy, Water Resources and Irrigation, reviewed licenses issued by the Department of Electricity Development (DoED) and suggested canceling the permits of projects that have made no progress or only negligible progress. The committee has already submitted its report to Minister for Energy, Water Resources and Irrigation, Biraj Bhakta Shrestha.

As part of the government’s 100-point governance reform agenda, the study identified 15 projects with a total capacity of 220 MW that have achieved more than 50 percent progress within five years and placed them on a priority list. Likewise, the committee recommended providing support and incentives to 131 projects totaling 5,642 MW that have reached around 50 percent completion.

The report also advised facilitating and expediting the completion of 38 projects with a combined capacity of 1,124 MW that are under construction but have been unable to meet their targets due to various challenges. However, it concluded that 75 projects totaling 4,121 MW have made extremely poor progress and recommended placing them on a list of problematic projects and initiating disciplinary action.

The provision included in the budget statement for fiscal year 2026/27, which allows the cancellation of licenses for projects that have signed PPAs but failed to commence construction, has paved the way for action against such projects.

According to the report, 11 projects with a combined capacity of 169 MW that obtained generation licenses before 2019 but have made no progress to date should also face license cancellation. The committee concluded that these projects failed to comply with the conditions attached to their licenses and did not operate in accordance with prevailing legal provisions.

The committee further recommended ending the long-standing “license raj” in Nepal’s energy sector and introducing a system for issuing survey licenses based on national priorities and competitive selection. The report emphasizes the need for policy and legal reforms to make the licensing process more transparent, competitive, and aligned with national interests.

It also recommends harmonizing conflicting provisions in the Electricity Act, Electricity Regulations, Hydropower Development Policy, and licensing directives. In addition, the committee pointed out the need to eliminate overlapping responsibilities among the Investment Board Nepal, the Ministry of Industry, and the Ministry of Energy by clearly defining their respective mandates.

The report suggests that matters such as license amendments, project bank management, and the sale or transfer of licenses should be governed by higher-level legal instruments rather than directives. It also recommends restricting changes in the shareholding structure of project developers during the five-year survey license period, allowing such changes only after a generation license has been obtained.

176 Projects Below 10 MW Eligible for Immediate PPA

The report has identified 176 hydropower projects with capacities below 10 MW that are immediately eligible for Power Purchase Agreements. Together, these projects have a total installed capacity of 1,164 MW.

For the long-term development of the energy sector, the committee has proposed preparing a five-year electricity development plan that integrates generation, transmission, distribution, consumption, and export. It also highlighted the need for legal provisions to clarify issues related to ownership transfer, operation and management, and revenue collection after the expiry of generation licenses.

The Ministry of Energy had formed the five-member committee under the coordination of Joint Secretary Mohan Shakya, with Dr. Diwas Bahadur Basnyat, Nikunj Bhandari, Shaligram Bhandari, and Jeevan Rana Magar serving as members.

Nepalpurbadhar