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Hydropower Doing Business Guide
In Nepal
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Introduction � Nepal has a huge hydropower potential. In fact, the perennial
nature of Nepali rivers and the steep gradient of the country's topography provide ideal conditions for the development of some of the world's largest hydroelectric projects in Nepal.
� Current estimates are that Nepal has approximately 40,000 MW of economically feasible hydropower potential
� Present situation is that Nepal has developed only approximately 600 MW of hydropower.
� Although bestowed with tremendous hydropower resources, only about 40% of Nepal's population has access to electricity
� The electricity demand in Nepal is increasing by about 7-9% per year.
� Nepal's Tenth Five Year Plan (2002– 2007) aims to extend the electrification within country and export to India for mutual benefit.
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Opportunities � Nepal’s hydropower sector is the nation’s crown jewel. It is
widely recognized that this largely unexploited asset is the key that will unlock the nation’s development potential.
� Nepal’s hydropower potential is ranked second in the world, behind only Brazil which is geographically, fifty times larger. Nepal’s river systems comprise approximately 83,000 MW of hydropower potential, of which only approximately 800 MW, less than one per cent of its proven potential, has been harnessed.
� The hydropower sector has attracted most of the country’s foreign direct investment (FDI). According to the Department of Industry, 73 (only 2% of the total) projects have been registered as energy projects. But in terms of the foreign investment pledged, energy-based projects comprise 46% of the total.
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The major hydropower plants in Nepal
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Project Name Capacity Project Owner Kaligandaki Hydropower Plant, Syangja
144,000 kW Nepal Electricity Authority
Middle Marsyangdi Hydropower Project, Rasuwa
144,000 kW Nepal Electricity Authority
Marshyangdi Hydropower Plant, Tanahun
69,000 kW Nepal Electricity Authority
Khimti Hydropower Plant, Dolakha
60,000 kW Himal Power Limited
Kulekhani I Hydropower Plant, Makawanpur
60,000 kW Nepal Electricity Authority
Bhotekoshi Hydropower Project, Sindhupalchok
36,000 kW
Bhote Koshi Power Company
Kulekhani II Hydropower Plant, Makawanpur
32,000 kW
Nepal Electricity Authority
Trishuli Hydropower Plant, Nuwakot 24,000 kW
Nepal Electricity Authority
The major hydropower plants in Nepal
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Chilime Hydropower Project, Rasuwa
20,000 kW Chilime Hydropower Company
Gandaki Hydropower Plant, Nawalparasi
15,000 kW
Nepal Electricity Authority
Devighat Hydropower Plant, Nuwakot
14,000 kW
Nepal Electricity Authority
Modi Hydropower Plant, Parbat
14,000 kW Nepal Electricity Authority
Upper Modi Hydropower Project, Parbat 14,000 kW GITEC Nepal Private Limited
Jhimruk Hydropower Plant, Pyuthan
12,300 kW
Butwal Power Company
Sunkoshi Hydropower Plant, Sindhupalchok
10,050 kW
Nepal Electricity Authority
Indrawati Hydropower Project, Sindhupalchok
7,500 kW
National Hydropower Company
Puwa Hydropower Plant, Ilam
6,200 kW Nepal Electricity Authority
Andhikhola Hydropower Plant, Syangja
5,100 kW
Butwal Power Company
Chatara Hydropower Project, Sunsari
3,200 kW
Nepal Electricity Authority
Panauti Hydropower Project, Kavre
2,400 kW Nepal Electricity Authority
� Water Resource Act, 1962 � Electricity Act, 1992 & Electricity Rules ,1993 � Land Acquisition Act, 1977 � Hydropower Development Policy, 2001 � Private Financing in Build and Operate of Infrastructures
Rules, 2064 (2007) � Industrial Enterprises Act 2016 � Investment Board Nepal Act � Income Tax Act and Rules � Value Added Tax and Rules � Labor Act 2074 and Labor rules 2075 � Bonus Act 2030
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Regulatory Framework
Income Tax Tax Rates � Build, Own, Operate and Transfer Model (BOOT) projects; Construction of
powerhouse, hydro power generation and transmission: 20% � Income generated by entity from export: 20% � For hydro generation and transmission entities listed in the stock exchange:
15% exemption in normal tax rate. Tax Holiday � Licensed person or entity producing electricity through hydro, solar, wind
and bio fuel, starting its commercial production, transmission or distribution within April 12, 2024 (Chaitra end 2080): 100% exemption for 1st 10 years and 50% exemption for next 5 years.
Disclosure Norms � Income source disclosure not required for investment made in hydro
projects of national priority until Chaitra end 2075.
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Incentives
Income Tax Carry Forward of Losses : 12 Years Depreciation � 33.3 % additional accelerated depreciation for BOOT projects,
construction of powerhouse, hydro power generation and transmission. � Investment made during a year on replacement of old machineries after
deduction of the accumulated depreciation till that year allowed to be booked as expense.
Value Added Tax (VAT) � VAT exemption on the import of machinery, equipment, tools and their
spare parts, penstock pipes or iron sheets used in hydro power projects and not produced in Nepal (based on the recommendation of the Alternative Energy Promotion Center or the Department of Electricity Development).
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Incentives
Custom Duty Concessions � Duty on Generation plant having a capacity equal to or
exceeding 10 kW: 1% � Duty on generating parts imported by VAT registered
industries producing generators: 1%. � Duty on alternative energy based industries: 1%
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Incentives
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Address- Patandhoka, Post Box No. 252, Lalitpur -3,Nepal Contact Number- +977 1 5521605 Email- [email protected] Website- http://www.bakertilly.com.np