IMAGE: REUTERS
BY SAROJ KOIRALA
NEPAL ONCE spent its evenings in darkness. A decade ago power cuts stretched to 18 hours a day. Factories stalled. In Kathmandu the diesel generators hummed and the inverters beeped, a nightly soundtrack of national failure. The crisis forced a frantic burst of construction. Hydropower licenses were handed out like festival sweets. Private developers rushed to dam the country’s fast-flowing rivers. And new plants appeared along the riverbanks.
Today the soundtrack has changed. On a good day during the rainy season, Nepal exports enough electricity to India to keep its own grid humming and its treasury slightly healthier. Politicians speak confidently of becoming a regional energy powerhouse, of selling power to Bangladesh, of turning water into hard currency.
Yet the institutions that govern this suddenly thriving sector remain fossils from the era of scarcity. The lights came on. The reforms did not.
That contradiction now confronts the Rastriya Swatantra Party (RSP), whose recent electoral gains have raised hopes that Nepal’s stagnant governance might finally shift. Its manifesto promises much for energy: 30,000 MW of installed capacity, longer licences, expanded trade with India and Bangladesh. These are sensible ambitions but they slam into an inconvenient reality. Nepal’s electricity sector is governed by a patchwork of bodies designed for a command-and-control system, not a competitive market.
Consider the reality. The Ministry of Energy sets policy but tends to lack the focus to steer a rapidly changing industry. The Department of Electricity Development issues licenses despite having no strong statutory authority of its own; its power is delegated. The Electricity Regulatory Commission exists on paper as an independent watchdog but it lacks the teeth, or the legal clarity, to bite. Planning is scattered between a secretariat originally conceived in a different era and a renewable-energy agency that now bumps up against mainstream electricity policy. The result is overlap in some areas, a vacuum in others.
This institutional muddle was not designed: it just happened. When the crisis was at its worst, the government’s only objective was to build capacity, fast. Licenses went to the first in line. Developers rushed to stake claims, and soon the license itself became the asset, bought and sold before a single feasibility study was done. Central planning died. Some of the best river sites were chopped into smaller, less efficient projects. But the lights came back on, so nobody much complained about the fragmentation.
Now the sector is entering a new phase. Installed capacity has surged. Cross-border trade is growing. Markets are slowly replacing administrative fiat. That shift needs institutions built for transparency, competition as well as complex transactions. The current framework was built for something smaller and more static. The gap is starting to show.
An electricity bill debated in the last parliament tried to modernise the legal framework but struggled to reconcile the roles of existing bodies. Responsibility among the regulator, the licensing authority and the planners remains blurred. Worse, some politicians now suggest devolving licensing authority to local governments, a proposal that would open a new frontier of rent-seeking and regulatory confusion. For serious investors uncertainty is expensive. For a country hoping to export electricity, it is dangerous.
If the RSP wants to deliver on its promises, it must turn from manifesto rhetoric to administrative reality. Five steps would help.
First, consolidate regulatory authority. Nepal needs a single federal electricity regulator with clear statutory powers and real independence. Fragmented oversight deters investment. A capable regulator should oversee not just licensing but long-term grid planning, with a technical agency setting the standards it then enforces.
Second, evolve the national utility. The Nepal Electricity Authority has carried the sector through hard decades, but modern markets rarely work well with vertically integrated monopolies. Separating grid ownership from distribution would improve transparency. Long-promised laws to license independent power traders should also be passed, so that generation does not rely solely on the utility’s purchasing power.
Third, create an independent system operator. Electricity markets need neutral grid management. An independent operator safeguards security while letting the market function. It must be financially autonomous to preserve its independence.
Fourth, diversify the workforce. Nepal’s electricity institutions are dominated by engineers, a legacy of the era when the government built things. Modern markets need economists, lawyers and financial analysts. Institutions should have the financial autonomy to pay competitive wages and attract them.
Finally, redefine the ministry’s role. It should steer not row. Strategic guidance matters more than administrative control.
Hydropower is Nepal’s great economic opportunity. But opportunities shrink. Solar power gets cheaper. Batteries improve. Regional markets evolve. If Nepal wants to capture the full value of its rivers, it must build institutions capable of managing a sophisticated electricity economy. Ambition is plentiful. Manifestos are easy. Institutions are harder. Without them, the country’s hydropower promise will stay what it has too often been: immense potential, permanently deferred. ■
The writer is a Kathmandu-based consultant specialising in energy regulation and policy.
