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The government has clarified the basis and framework for the distribution of royalties generated from hydropower projects and has urged relevant agencies and local governments to implement the provisions accordingly.

The Department of Electricity Development (DoED) stated that the geographical location of a hydropower project, the area of the affected region, and the population of the affected area have been designated as the main indicators for royalty distribution. According to the department, geographical location carries a weight of 50 percent, while the affected area and population are each assigned a weight of 25 percent.

Under the geographical location criterion, royalty distribution will consider the main project area, affected area, and upstream and downstream riverbank zones. Similarly, evaluations based on affected area and population will categorize regions into main, affected, and surrounding areas.

The department has defined the main area as the wards of local governments where the physical infrastructure of hydropower projects has been constructed. The determination of the main area varies depending on whether the project is reservoir-based, semi-reservoir-based, or run-of-river.

For semi-reservoir projects, all wards touched by the project, as well as areas containing water conveyance structures and powerhouses, will be included within the royalty distribution framework. Additionally, wards located on both sides of the river between the dam site and powerhouse, along with upstream and downstream riverbank areas, will also be entitled to royalties as affected areas.

The Constitution of Nepal places hydropower under the concurrent jurisdiction of the federal, provincial, and local governments. Under the royalty-sharing arrangement for natural resources, including electricity, mountaineering, forests, mines and minerals, and water resources, 50 percent of the revenue is allocated to the federal government, while provincial and local governments each receive 25 percent.

The federal government’s share of royalties will be deposited into the Federal Consolidated Fund, while provincial and local shares will be deposited into their respective Provincial and Local Consolidated Funds.

According to the department, the Human Development Index (HDI) has not yet been used as a criterion for electricity royalty distribution. However, HDI is currently an important indicator in revenue-sharing arrangements and fiscal equalization grant allocations.

At present, 191 hydropower projects are in operation across the country, while 264 projects have already obtained power generation licenses. Under the newly established indicators, districts hosting a larger number of projects are expected to receive comparatively higher royalty allocations, while districts with fewer projects will receive smaller shares.

Nepal’s total installed electricity generation capacity has now reached 4,296 MW. The government has set a target of increasing this capacity to 5,535 MW by the end of the next fiscal year.

jalasarokar