The government has adopted a policy of encouraging the private sector to develop large and reservoir-based projects in the budget for the coming fiscal year. The budget statement states that up to 40 percent of shares (IPO) will be allowed to be sold to the public in the first year if the promoter ensures that 100 percent of the amount will be invested in the reservoir-based project.

The budget states that arrangements will be made to allow the private sector to trade electricity in the international market through the budget. Finance Minister Swarnim Wagle said that legal arrangements will also be made to build transmission lines and trade electricity by charging wheeling charges. The budget statement also states that arrangements will be made to adjust the forest land tenure and tree cutting fees when the ownership of the project is transferred to the Nepal government after the permit period of the hydropower project.

Former Secretary Dwarikanath Dhungel says that the budget cannot be called good when looking at the budget in general. ‘The new government has come, it is trying to show that we will do something,’ he said, ‘It has been said that the private sector will open the way for electricity trade in the international market. India seems to have its own control over Nepal's electricity.'

Dhungel said that India's approach is to buy electricity from projects with its own or Nepal's investment alone. The budget also encourages investment from other countries besides India. However, he said that if the private sector tries to bring investment from third countries and export the electricity produced from it, India risks becoming an obstacle.

There are many issues in the energy sector, from investment to PPA, and the government seems to have given good priority. - Ganesh Karki, Chairman, IPPAN The government is going to proceed with the construction of the 1200 MW Budhi Gandaki Hydropower Project under the Empowered Authority model. The then Finance Minister Bishnu Poudel had said in the budget for the current fiscal year that the Budhi Gandaki Hydropower Project would be constructed under the Public-Private-Partnership (PPP) model. The government has already spent Rs 46 billion on the distribution of compensation for the project. The promoter company has already started the pre-construction work as soon as the investment modality of the project has been finalized.

Finance Minister Wagle has stated that the total installed capacity will reach 5,535 MW in the coming fiscal year, including 670 MW from hydropower projects and 370 MW from solar projects. The budget mentions that the construction of the 40 MW Rahughat Hydropower Project will be completed within the current fiscal year and that the construction of the under-construction Tanahun Reservoir Project, Upper Modi 'A', Upper Modi, Upper Trishuli-3 B and Budhiganga projects will be accelerated.

The government is preparing to start the contract process by financially managing the 1,061 MW Upper Arun, 828 MW Uttarganga, 210 MW Chainpur Seti, 99 MW Tamakoshi-5 and 77 MW Ghunsakhola projects. The budget statement also mentions that the study process for the 417 MW Nalgad, 490 MW Arun-4 and 281 MW Naumurai projects will be taken forward and the contract process will be started for the construction of the 439 MW Betan Karnali Hydropower Project with the investment of the Employees Provident Fund depositors.

Finance Minister Wagle said that the government will provide necessary facilitation to develop projects with a capacity of about 3,000 MW, including the 900 MW Arun III and the 669 MW Lower Arun, which are being built through the Investment Board. The budget statement also mentions that the contract process will be started after completing the financial closure of the 670 MW Dudhkoshi reservoir project.

Ganesh Karki, President of the Independent Power Producers Association of Nepal (IPPAN), said that the budget for the upcoming fiscal year is useful for the energy sector. However, he said that the budget has not clearly addressed the Power Purchase Agreement (PPA) for run-of-river hydropower projects.

‘The government has made arrangements to cancel the licenses of projects that have PPAs but have not started construction and make arrangements to make new PPAs on the take-or-pay method,’ Karki said. ‘It has not been made clear whether PPAs will be made only for projects whose licenses have been cancelled or for other projects as well.’

Karki said that allowing the private sector to trade in energy has also been a priority, and this has encouraged them. ‘There are many issues in the energy sector, from investment to PPAs, and it seems that the government has given good priority,’ he said. ‘But there is no clarity about PPAs, and energy trade is not possible unless it is opened immediately. It is important to see how the Nepal Electricity Authority and the Ministry of Energy interpret the provisions in the budget.’