Procedures for License

Application for Hydropower

Development in Nepal
A GUIDEBOOK

June 2005

Department of Electricity Development, HMG, Nepal,

in Collaboration with
United States Agency for International Development and
International Resources Group
Background Table of Contents
This guidebook on Procedures for License Application for
Hydropower Development in Nepal is based on the Electricity Act Background
2049, Electricity Regulation 2050, Environment Protection Act Acronyms
2053, Environment Protection Rules 2054, Water Resources
Act 2049 and Water Resources Regulation 2050. The purpose of I. Application Process for Hydropower 1
this guidebook is to present the license application processes in Projects with Installed Capacity less
a simplified and stepwise manner to assist hydropower developers. than 100 kW

For projects with installed capacity less than 1,000 kW, no II. Application Process for Hydropower 2
licenses are required. However, certain approvals/acceptance Projects with Installed Capacity from
100 kW up to 1000 kW
of project details are necessary. For projects with installed
capacity greater than 1,000 kW, a survey license is required III. License Application Process for 5
to study the project. For such projects, separate licenses are Hydropower Projects with Installed
Capacity more than 1000 kW
required for construction and operation of production,
transmission and distribution facilities.

Applications may be submitted in Nepali or English. Tables

Table 1 License Application Fees 6
This guidebook presents a step-wise procedure of licensing
processes and includes the following: Table 2 Royalty Schedule 20

Application processes for hydropower projects with
installed capacities less than 100 kW, 100 kW to 1000
Figures
kW and greater than 1000 kW
Figure 1 4

Process for screening for Initial Environmental Examination Application Process for Hydropower Projects with
(IEE)/Environmental Impact Assessment (EIA) Installed Capacity from 100 kW up to 1000 kW

Process for conducting IEE and EIA Figure 2 9
While the guidebook has been prepared for hydropower Application Process for Production/Transmission/
developers, we expect it to be useful to other stakeholders Distribution Survey License
in the hydropower sector as well. Figure 3 12
If this guidebook contradicts the prevailing laws, the Process for Screening for IEE/EIA
provisions of the law shall prevail. Figure 4 13
Process for Conducting IEE
Figure 5 14
Process for Conducting EIA
Figure 6 19
Application Process for Production/Transmission/
Distribution License

i ii
 I. Application Process for
Acronyms Hydropower Projects with Installed
DOED Department of Electricity Development Capacity less than 100 kW
DWRC District Water Resources Committee 1. A project proponent (who may be a citizen or corporate
EIA Environmental Impact Assessment body) does not require a license for survey, construction,
HMG/N His Majesty's Government of Nepal and/or operation of production/transmission/distribution
of a hydropower project with installed capacity less than
IEE Initial Environmental Examination
100 kiloWatt (kW) (Section 3 of Electricity Act, 2049).
kV kilovolt
However, the proponent will have to obtain a permit from
kW kiloWatt
the District Water Resources Committee (DWRC) prior to
kWh kiloWatt hour the commencement of survey, construction and operation
MW MegaWatt of production/transmission/distribution facility (Water
MOEST Ministry of Environment Science and Resources Act, 2049).
Technology 2. The proponent independently fixes the selling price of
MOFSC Ministry of Forests and Soil Conservation electricity generated from the project in consultation with
MOWR Ministry of Water Resources the buyer(s).
PAN Permanent Account Number
PPA Power Purchase Agreement
TOR Terms of Reference
T/L Transmission Line
VDC Village Development Committee

1
iii
Procedures for License Application for Hydropower Development in Nepal A Guidebook

I. Application Process for

Hydropower Projects with Installed
Capacity less than 100 kW
1. A project proponent (who may be a citizen or corporate
body) does not require a license for survey, construction,
and/or operation of production/transmission/distribution
of a hydropower project with installed capacity less than
100 kiloWatt (kW) (Section 3 of Electricity Act, 2049).
However, the proponent will have to obtain a permit from
the District Water Resources Committee (DWRC) prior to
the commencement of survey, construction and operation
of production/transmission/distribution facility (Water
Resources Act, 2049).

2. The proponent independently fixes the selling price of

electricity generated from the project in consultation with
the buyer(s).

1
 Procedures for License Application for Hydropower Development in Nepal A Guidebook Procedures for License Application for Hydropower Development in Nepal A Guidebook

II. Application Process for
Hydropower Projects with Installed
Capacity from 100 kW up to
1000 kW
A project proponent does not require a license for survey,
construction and operation of production/ transmission/
distribution of a hydropower project with installed capacity
from 100 kW up to 1000 kW (Section 3 of Electricity Act,
2049). However, the proponent shall submit the following
information before commencing the work of the project, in
the format as prescribed in Schedule 1 of Rule 3 of Electricity
Regulation, 2050. Submittal shall be made to the Secretary
of Ministry of Water Resources (MOWR) through the
Department of Electricity Development (DOED).
1. If the proponent's application is for survey of the project
only, the proponent shall submit the following
information to the DOED:
a. Desk study of the proposed project which includes
salient features (e.g., name of the water body),
scope of work and work schedule
b. Topographical map showing all the major
components of the project (in scale of 1:25000 or
1:50000)
c. Electricity distribution area and estimated number
of customers to benefit, if any
d. Information regarding other water uses in the area
e. Letter of recommendation addressed to DOED for
project development (survey, production,
transmission and distribution) from concerned
Village Development Committee (VDC)/Municipality
with a copy addressed to DWRC
f. Boundaries of the survey area with latitudes and
longitudes including VDC/Municipalities
submit the following to the DOED in addition to the
information listed in (1) above:
a. Schedule for completion of Feasibility Study Report
b. Construction work schedule
c. Cost of development
d. Letter of intent regarding Power Purchase
Agreement (PPA) if sold in bulk to utility and/or a
letter of intent regarding Power Sales Arrangement
if sold to consumers isolated from the National Grid,
providing information on types and number of such
consumers.
e. Financial evidence to support construction of
the project.
Figure 1 summarizes the application process for hydropower
projects with installed capacity from 100 kW upto 1000 kW.
Steps to be taken by the proponent after obtaining
an approval letter from the DOED:
a. If the approval letter from the DOED is for survey only,
then the proponent starts surveying, and submits six
monthly progress report and Feasibility Study Report
(Rule 3 of Electricity Regulation, 2050) to DOED
b. If the approval letter from DOED is for survey, production,
transmission and distribution, the proponent:

Completes survey, submits Feasibility Study to
DOED and starts construction

Submits six monthly progress reports to the DOED
until construction is complete

2. If the proponent's application is for survey, production,

transmission and distribution, the proponent shall

2 3
 Procedures for License Application for Hydropower Development in Nepal A Guidebook Procedures for License Application for Hydropower Development in Nepal A Guidebook

III. License Application Process for

Hydropower Projects with Installed
Capacity more than 1,000 kW
Four types of licenses may be required to develop a hydropower
project with installed capacity more than 1,000 kW:
A. Survey License (to study a project)
B. Production License (for construction and operation of
a production facility)
C. Transmission License (for construction and operation
of a transmission facility)
D. Distribution License (for construction and operation of
a distribution facility)

Licenses for construction and operation of the facilities

are only needed after the studies are completed under a
Survey License. A proponent requires a license for each
type of facility that is part of the proposed project.

A. Survey License
A survey license is required to conduct investigation 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 the term of the license
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. The maximum term of a Survey License
is 5 years.

The proponent shall submit three copies of application to

the Secretary of MOWR through the DOED in the format as
prescribed in Schedules 2,3,4 of Rules 4,5,6 of the
Electricity Regulation, 2050 respectively for Production
Survey License, Transmission Survey License, and
Distribution Survey License. The proponent shall also submit
an application fee of an amount equal to fifteen percent of
the license fee to the DOED as shown in Table 1 (Schedule

4 5
 Procedures for License Application for Hydropower Development in Nepal A Guidebook Procedures for License Application for Hydropower Development in Nepal A Guidebook

11 of Rule 24 of the Electricity Regulation, 2050).
Authorization letter appointing a contact person in
the company for DOED to correspond with regarding
A Survey License is issued within 30 days of receiving
the application.
complete and adequate application package.

Contact address of applicant
Table 1: License Application Fees
Details of other water uses in the requested survey
Installed Capacity (kW) License Fees (Rs) area like water supply, irrigation, water mill, etc or
1,000 - 5,000 1,000 details of licenses issued by DWRC regarding such
5,001 - 25,000 5,000 uses
25,001 - 1,00,000 25,000
Details of in-house technical capability of applicant
1,00,001 - 4,00,000 1,00,000 to conduct survey or details of technical capability
4,00,001 - 10,00,000 4,00,000 of consultant in case consultant is to be hired.
10,00,001 - above 10,00,000
Based on: Schedule 11 relating to Rule 24 of Electricity Regulation, 2050 2. Transmission Survey License
Proponent shall submit the following additional supporting
Figure 2 shows the application process for production/ documents along with the application:
transmission/distribution survey license. a. Preliminary route-map of electricity transmission line
(proposed main transmission line and alternative lines
1. Production Survey License in scale of 1:25000 or 1:50000)
Proponent shall submit the following supporting documents b. Survey area including related VDCs/Municipalities
along with the application: c. Need and purpose of the project
a. Topographical map showing all the major components d. Total length of the transmission line
of the project (in scale of 1:25000 or 1:50000) e. Transmission voltage and capacity
b. Survey area in longitude and latitude including f. Maximum transmission load and types of consumers
related VDCs g. Estimated cost of the project and cost break-down
c. Estimated cost of the project and cost break-down of survey
of the survey h. Other requirements:
d. Other requirements
In case of company - Certificate of registration,

In case of a company - Certificate of registration, Memorandum of Association, Memorandum of
Memorandum of Association, Memorandum of Articles, PAN
Articles, Permanent Account Number (PAN)
In case of individual - copy of applicant's

In case of an individual - copy of applicant's citizenship certificate
citizenship certificate
Desk study report including detailed scope of work

Desk study report including detailed scope of work
Work schedule
according to HMGN Guidelines for Study of
Financial evidence to support survey activities
Hydropower Projects, 2003.
Authorization letter appointing a contact person in

Work schedule the company for DOED to correspond with regarding

Financial evidence to support survey activities the application.

Contact address of applicant

6 7
 Procedures for License Application for Hydropower Development in Nepal A Guidebook Procedures for License Application for Hydropower Development in Nepal A Guidebook

Details of in-house technical capability of applicant

to conduct survey or details of technical capability
of consultant in case consultant is to be hired.

3. Distribution Survey License

Proponent shall submit the following additional supporting
documents along with the application:
a. Map of the distribution area (geographical description,
present distribution system and preliminary sketch of
proposed distribution system in scale of 1:25000
or 1:50000).
b. Need and purpose of the project.
c. Estimated number and types of consumers to benefit
from the distribution system.
d. Location of purchase or acquired point.
e. Particulars relating to purchase and sale.
f. Estimated cost of the project and cost break-down
of survey
g. Other requirements:

In case of a company - Certificate of registration,
Memorandum of Association, Memorandum of
Articles, PAN

In case of an individual - copy of applicant's
citizenship certificate

Desk study report including detailed scope of work

Work schedule

Financial evidence to support survey activities

Boundaries of the survey area including
VDCs/Municipalities

Information of concerned VDCs/Municipalities
within distribution line

Authorization letter appointing a contact person in
the company for DOED to correspond with regarding
the application.

Contact address of applicant

Details of in-house technical capability of applicant
to conduct survey or details of technical capability
of consultant in case consultant is to be hired.

8 9
 Procedures for License Application for Hydropower Development in Nepal A Guidebook Procedures for License Application for Hydropower Development in Nepal A Guidebook

Steps to be taken by the proponent after obtaining
Route Survey with alternative route
Survey License from the DOED:
Geotechnical Survey
1. Production Survey License
Design of Structure
a. Starts actual physical work within three months.
Project Optimization
b. Submits six monthly progress reports to the DOED [Rule
Financial and Economical Analysis
21(2) of Environment Protection Rules, 2054]
c. If found feasible, applies for Transmission License
c. Completes survey; submits Feasibility Study Report
including: 3. Distribution Survey License

IEE (If the generating capacity of the project is a. Submits quarterly progress reports to the DOED
between 1-5 MegaWatt (MW) or if the project falls (Environment Protection Rules, 2054)
under the categories mentioned in Schedule 1 of b. Completes survey; submits Feasibility Study
Environment Protection Rules, 2054) Report including:

EIA (If the generating capacity of the project is 5
IEE (If the distributing capacity of the project is
MW or if the project falls under the categories between 1-6 MVA or if the project falls under the
mentioned in Schedule 2 of Environment Protection categories mentioned in Schedule 1 of Environment
Rules, 2054) Protection Rules, 2054)

Topographical Survey
EIA (If the distributing capacity of the project is

Hydrological Survey greater than 6 MVA or if the project falls under the

Geotechnical Survey categories mentioned in Schedule 2 of Environment

Design of Structure Protection Rules, 2054)

Project Optimization
Route Survey with alternate route

Financial and Economical Analysis
Design of Structure
d. If found feasible, applies for Production License
Project Optimization

Financial and Economical Analysis
2. Transmission Survey License c. If found feasible, applies for Distribution License
a. Submits six monthly progress report [Rule 21(2) of
The screening process determining which power projects
Electricity Regulation, 2050]
(production, transmission, and distribution) require an
b. Completes the survey; submits Feasibility Study Report
EIA or IEE study is shown in Figure 3, and processes for
including:
conducting IEE and EIA are shown in figures

IEE (If transmission voltage level of the project is
4 and 5 respectively.
between 33-66 kilovolt (kV) or if the project falls
under the categories mentioned in Schedule 1 of
Environment Protection Rules, 2054)

EIA (If transmission voltage level of the project is
greater than 66 kV or if the project falls under the
categories mentioned in Schedule 2 of Environment
Protection Rules, 2054)

10 11
 Procedures for License Application for Hydropower Development in Nepal A Guidebook Procedures for License Application for Hydropower Development in Nepal A Guidebook

12 13
 Procedures for License Application for Hydropower Development in Nepal A Guidebook Procedures for License Application for Hydropower Development in Nepal A Guidebook

Survey License Renewal

Renewal of a survey license is possible if the original license
term was less than five years. The proponent may request
for renewal of a survey license prior to its expiry. The
proponent shall submit copies of all progress reports, a
complete description of the status of the remaining
activities, or a list of pending activities and a schedule for
completion of the activities. The proponent shall pay renewal
fee of an amount equal to ten percent of the license fee
prescribed in Schedule 11 of the Electricity Act, 2049.

B. Production License
A Production License is required to construct and operate
a production facility after completion of the survey. The
proponent shall submit three copies of the production
license applications to the Secretary of MOWR through the
DOED in the format as prescribed in Schedule 6 of Rule 12
of Electricity Regulation, 2050, and an application fee of
an amount equal to 33.33 percent of the license fee as
prescribed in Schedule 11 of Rule 24 of Electricity
Regulation, 2050 to the DOED. The maximum term of a
Production License is 50 years (Electricity Act, 2049).

The Production License is issued within 120 days of

receiving complete and adequate application package.

The proponent shall submit the following supporting

documents along with the application:

a. Feasibility Study Report including:

Detailed description of the project

Description of related transmission line to
evacuate power

Approved IEE/EIA Report from concerned ministry

b. Names of partners in the project and type of their

association, full name and address of the person or
corporate body and its directors with whom the
ownership of the project shall be vested at last.

14 15
 Procedures for License Application for Hydropower Development in Nepal A Guidebook
c. Mode of Finance (Detail Financing Plan)

Estimated cost of the project

Financial capability of the investors of the project

Commitment of the financial institutions to be
involved directly in the project

Percentage of liability of investors

Equity and debt ratio
d. Agreement regarding sale and purchase of the power
(i.e., PPA)
e. Other requirements:

Certificate of registration, Memorandum of
Association, Memorandum of Articles, Industrial
Registration Certificate

PAN

Details of in-house technical capability of applicant
to implement construction works or the technical
capability of contractor/construction company in
case contractor/construction company is to be hired
for construction works.
Figure 6 shows the application process for the
production license.
C. Transmission License
A Transmission License is required to construct and operate a
transmission facility after completion of the survey. The
proponent shall submit three copies of the transmission
license applications to the Secretary of MOWR through the
DOED in the format as prescribed in Schedule 7 of Rule 13 of
Electricity Regulation, 2050, and an application fee of an
amount equal to 33.33 percent of the license fee to the DOED
along with the application as prescribed in Schedule 11 of
Rule 24 of Electricity Regulation, 2050. The maximum term
of a Transmission License is 50 years (Electricity Act, 2049).
The Transmission License is issued within 120 days of
receiving complete and adequate application package.
16
Procedures for License Application for Hydropower Development in Nepal A Guidebook
The proponent shall submit the following supporting
documents along with the application:
a. Feasibility Study Report including:

Detailed description of the project

Transmission voltage and capacity

Approved IEE/EIA Report from concerned ministry
b. Names of partners in the project and type of their
association, full name and address of the person or
corporate body and its directors with whom the
ownership of the project shall be vested at last.
c. Mode of Finance (Detail Financing Plan)

Estimated cost of the project

Financial capability of the investors of the project

Commitment of the financial institutions to be
involved directly in the project

Percentage of liability of investor

Equity and debt ratio
d. Agreement regarding sale and purchase of the power
(i.e., PPA)
e. Other requirements:

Certificate of registration, Company's license,
Industrial Registration Certificate

PAN

Details of in-house technical capability of applicant
to implement construction works or the technical
capability of contractor/construction company in
case contractor/construction company is to be hired
for construction works.
Figure 6 shows the application process for the
transmission license.
D. Distribution License
A Distribution License is required to construct and
operate a distribution facility after completion of the
survey. The proponent shall submit three copies of the
distribution license applications to the Secretary of MOWR
17
 Procedures for License Application for Hydropower Development in Nepal A Guidebook Procedures for License Application for Hydropower Development in Nepal A Guidebook

through the DOED in the format as prescribed in Schedule 8 of

Rule 14 of Electricity Regulation, 2050, and an application fee
of an amount equal to 33.33 percent of the license fee to the
DOED along with the application as prescribed in Schedule 11
of Rule 24 of Electricity Regulation, 2050. The maximum term
of a Distribution License is 50 years (Electricity Act, 2049).

The Distribution License is issued within 120 days of receiving

complete and adequate application package.

The proponent shall submit the following supporting documents

along with the application:

a. Feasibility Study Report including:

Detailed description of the project

Map of distribution area

Distribution voltage and capacity

Approved IEE/EIA Report from concerned ministry

b. Names of partners in the project and type of their

association, full name and address of the person or
corporate body and its directors with whom the
ownership of the project shall be vested at last.
c. Mode of Finance (Detail Financing Plan)

Estimated cost of the project

Financial capability of the investors of the project

Commitment of the financial institutions to be involved
directly in the project

Percentage of liability of investors

Equity and debt ratio

d. Agreement regarding sale and purchase of the power (i.e.,

PPA)
e. Other requirements:

Certificate of registration, Company's license,
Industrial Registration Certificate

PAN

Details of in-house technical capability of applicant to
implement construction works or the technical
capability of contractor/construction company in case
contractor/construction company is to be hired for
construction works.

Figure 6 shows the application process for the

distribution license.
18 19
 Procedures for License Application for Hydropower Development in Nepal A Guidebook Procedures for License Application for Hydropower Development in Nepal A Guidebook

Steps to be taken by the proponent after obtaining

Production/Transmission/Distribution License from
the DOED:
1. Production License
a. Starts construction work within 1 year
b. Completes financial closure within 1 year of license
issued date
c. Submits bi-annual progress report until construction
is completed
d. Testing and commissioning
e. Starts commercial operation
f. Pays Royalty
Table 2: Royalty Schedule
Royalty Up to 15 years After 15 years
Annual Capacity Rs. 100/kW Rs. 1000/kW
Royalty
Annual Energy 2 % of average 10 % of average
Royalty tariff/kWh tariff/kWh
generated generated
Based on: Schedule 11 relating to Electricity Act, 2049

2. Transmission License
a. Starts construction work within 1 year
b. Completes financial closure within 1 year of license
issued date
c. Submits bi-annual progress report until construction
is completed
d. Testing and commissioning
e. Starts commercial transmission

3. Distribution License
a. Starts construction work within 1 year
b. Completes financial closure within 1 year of license
issued date
c. Submits bi-annual progress report until construction
is completed
d. Testing and commissioning
e. Starts commercial distribution

20 21
 Procedures for License Application for Hydropower Development in Nepal A Guidebook

For further details, please contact:

Department of Electricity Development

Director General

Deputy Director General (Privatization Division)

Senior Divisional Engineer (Project Promotion Section)

Senior Divisional Engineer (License Section)

Anamnagar, Thapagaon
Kathmandu, Nepal
Tel: +977 1 449-6800
Fax: +977 1 448-0257
Email: doed@pshdp.wlink.com.np
Website: www.doed.gov.np
Front Cover : BhoteKoshi Hydropower Project, Sindhupalchowk District, Nepal.

22 Back Cover : Kulekhani Hydropower Project, Makawanpur District, Nepal.

Photo Courtesy : BhoteKoshi Power Company Pvt. Ltd. and Department of Electricity Development.