Laws and Regulations

Related to Hydropower

in Nepal, Bhutan & India

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1. Laws Related to Hydropower in Bhutan:

Electricity Act of Bhutan 2001

2. Laws Related to Hydropower in India:

The Electricity Act 2003, GoI, Ministry of Power

3. Laws and Regulations Related to Hydropower in Nepal

Electricity Act 1992, GoN

Electricity Regulation 2050

NEA Act 2041

Water Resources Act 1992

Water Resources Regulation 1993

The Constitution of Nepal, 2072

Industrial Enterprises Act, 1992

Environment Protection Act, 1996

Environment Protection Regulation, 1997

Land Acquisition Act, 2034

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 Electricity Act, 2001 India

• Act defines roles, responsibility of Central, State governments relating to

hydropower
• Formation and working of Central Electricity Authority, Regulatory
Commission, Appellate Tribunal, etc.
 Electricity Act of Bhutan 2001

• The Electricity Act enables the restructuring of the power

supply industry and the possible participation of the private
sector, by providing mechanisms for licensing and regulating
the operations of power companies. The establishment of the
Bhutan Electricity Authority as an autonomous body will
ensure a transparent regulatory regime; the Authority also
has the role of laying down the standards, codes, and
specifications of the Electricity Supply Industry. By this means
the Electricity Act will define the roles and responsibilities of
suppliers and protect the interests of the general public
ELECTRICITY ACT, 2049 (1992)
Nepal
 Survey, Generation, Transmission or
Distribution of Electricity:
• No person shall be entitled to conduct survey, generation,
transmission or distribution of electricity without obtaining
license under this Act.
• Provided that no license shall be required to be obtained by a
national or a corporate body for the generation, transmission
or distribution of electricity up to 1000 kilowatt and for
conducting necessary survey thereof.
• Before generating, transmitting or distributing hydro-
electricity of the capacity ranging from 100 kilowatt to 1000
kilowatt, information to that effect shall be given to the
prescribed officer in a manner as prescribed
 Provisions of License
License procedure for Survey, generation, transmission or distribution of
electricity:
• Application along with the economic, technical and environmental study
report, etc.
• Issuance of license within 30 days of receipt of such application for survey
relating to electricity and within 120 days for generation, transmission or
distribution of electricity.
• For the projects prior to this Act, application should be submitted to the
prescribed officer within one year from the date of the commencement of
this Act.
• On receipt of an application as above and after examining necessary
enquiries, license shall be issued within 60 days of receipt of such
application.
• For selling or transfer of license, approval has to be taken from the
prescribed officer.
 Terms of License

• For survey of electricity: maximum of 5 years

• For generations, transmission or distribution of electricity:
maximum of 50 Fifty years
• In case a license is issued for a term less than prescribed term
above it shall be required to be renewed before one year of
expiry of the term stipulated in the license.
• If the license is not renewed as mentioned above such license
shall be void.
 Restriction of the Issuance of License

• Distribution license cannot be issued to two persons or

corporate bodies for the same area
• If one entity cannot supply electricity to the entire area then
distribution license can be issued to other entity
 Cancellation of license

• If the licensee performs any act contrary to this Act or rules

made under this Act, the prescribed officer may issue an order
to the concerned licensee by prescribing necessary
improvements to be made on such activity within the specified
period.
• If the licensee makes no improvement within the prescribed
period its license may be cancelled.
• Prior to the cancellation of license as above, the prescribed
officer shall give the licensee a reasonable opportunity to
explain one's own innocence.
 Ownership
Agreement may be Entered with the Licensee: GoN may enter into agreement
with the licensee for bulk purchase of electricity, guarantee for the necessary
capital to be invested or other financial and technical matters.
Ownership of GoN:
1) The land, building, equipment and structure related to electricity generation,
transmission and distribution established by the foreign national or corporate
body as more than 50 (Fifty) percent of the total investment, shall be under
the ownership of GoN after the expiry of the license.
2) The assets coming under the ownership of GoN as above may be purchased
by the prior licensee on the amount as assessed pursuant to sub-section 3) for
generation, transmission or distribution of electricity through an agreement.
3) GoN shall constitute a committee comprising of at least five persons for the
purpose of assessing the amount pursuant to sub-section 2).
4) The electricity generation plant, transmission or distribution line established
by the foreign national or corporate body as up to fifty percent of the total
investment or established without foreign investment shall be operated or
managed by the prior licensee by entering into an agreement with GoN after
the expiry of the term as prescribed in the license.
 Annual Royalty

• Rs. 100 for each installed kW plus 2 % of the average tariff per
kWh for fifteen years from the date of generation of
electricity for commercial purpose.
• After 15 years at a rate of Rs. 1000 for each installed kW of
electricity plus 10 % of the average tariff per unit.
 Income Tax, Other Tax and Charges
• No Income Tax upto 100 kW capacity
• Income Tax for hydro-electricity generation, transmission or
distribution lessened by 10% of Corporate Income Tax
• Income tax exempt for fifteen years from the date of generation,
transmission and distribution of electricity for commercial purpose
• Income tax exempt for hydro-electricity transmission or distribution,
for ten years from the date of transmission or distribution of electricity
• If the licensee takes the responsibility to operate and manage the
hydro-electricity generation plant, transmission or distribution line
owned by GoN or purchases the same, such licensee shall be
exempted from income tax for five years form the date of such
undertaking or purchase.
 Income Tax, Other Tax and Charges
• If the licensee reinvests in hydro-electricity generation plant, transmission or
distribution line for its diversification or extension of installed capacity by 25
% or more for modernization of technology and develops subsidiary industry
such licensee shall be entitled to deduct 50 percent of the cost of new
additional fixed assets from the net income earned from such hydro-
electricity generation plant, transmission and distribution line.
• Customs duties and sales tax levied as per the prevailing schedule for the
import of construction equipment, machines, tools and equipment required
for repair and maintenance as well as the spare parts thereof for hydro-
electricity generation, transmission or distribution which are produced and
sold by local industries.
• Only 1 % customs duties shall be levied for the import of materials which are
not produced in Nepal and no charge for import license and sales tax shall
be levied for such imports.
 Other provisions

• Facility of Foreign Exchange for repatriation

• Facilities under the Prevailing Law shall be Enjoyed
• Tariff Fixation Commission for the purpose of fixing electricity
tariff and other charges
• Separate Tariff and Other Charge may be Assessed who distributes
electricity in isolation
• Electricity Service may be Stopped to consumers by the
distributor under prescribed conditions
• National Transmission Line of Grid: GoN may specify any
transmission line or grid as national transmission line or grid
 Other provisions contd..

• Sale of Generated Electricity to GoN

• Import and Export of Electricity after approval of GoN
• Fixing of Quality Standard of Electricity by GoN
• No Substantial Adverse effect be made on Environment
• Volt level and other Technical Matters shall be prescribed and has
to be followed
• Arrangements for Security Measures as prescribed
• Prior notice of 24 hrs for shutdown due to Repair and Maintenance
• GoN may issue short term notice to supply or stop electricity
distribution, licensee will get compensation
• No Nationalization to be made for > 1000 kW
 Other provisions contd..

• Infrastructure of <1000kW may be nationalized after

compensation for Extensive Public Use
• Security of Electricity Structure: GoN may provide security to
important infrastructure
• If the security is provided at the request of the licensee it has
to bear the cost
• To Enter into Others' Premises after prior notice to the
concerned
• Utilization or Acquisition of Other's Land and House by GoN
after request by the Licensee at the Licensee’s cost
• GoN may Generate and Develop Electricity
 Other provisions contd..

• GoN may enter into contract with any person or corporate

body for Generation, Transmission or Distribution of
Electricity
• Hydro-electricity Development Unit to be established by GoN
• Appointment of Inspector with power to Penalty (DoED was
established and given authority of the Inspector)
• Power to Frame Rules: GoN may frame necessary rules in
order to carry out the objectives of this Act
Thank you

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