Private hydropower developers’ take on Benefit Sharing

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On March 24, 2016 Samriddhi Foundation hosted an ‘Econ-ity’ discussion on the cost imposed on private developers of hydropower project due to lack of a clear benefit-sharing policy framework, at Hotel Himalaya. The parliamentarians, policy makers, bureaucrats, academicians, economists and journalists present at the event discussed over the following issues related to benefit-sharing:


Who is the affected and the beneficiary?
When to share the benefits?
How to share the benefits?


Due to lack of clear policy framework regarding Benefit Sharing, the burden of all of these issues falls on the private developers of hydropower project. These issues ideally should fall on the government’s shoulder, and clear and enforced policies should have taken care of it.

When it comes to issue of- how to share benefit, the existing mechanism of energy royalty being redistributed to the area where project is located, should have taken care of the problem but it is not working effectively. The mechanism has provision of distributing 38% of total royalty to the development region where the project is located and 12% of total royalty to the district but due to the weak governance the royalty amount gets lost in the system. That is why, locals demand all the services like roads, health clinics, schools from the private developers- these basic services could have been provided in the area with the re-distributed royalty.


One of the panelist in the Econ-ity discussion was Kumar Pandey, General Secretary of Independent Power Producers’ Association of Nepal (IPPAN). His take on the issue, especially focused on when to share benefit, was– We are private developers and thus we are guided by the profit. Benefit sharing is big and burning issue, and we agree, it should fall into our business plan. But the big question is-

Popular practice today, due to the lack of clear regulatory framework and strong governance, is we have to share the benefit with locals before any benefit from the project is realized as without sharing the benefit with locals, it is difficult to develop any project.


Against this background, his argument was that if there were some clear guideline on pre-benefit Benefit Sharing, it would greatly facilitate private developers. Once the construction is completed and the project goes into operation, energy royalty should then take care of the after-benefit Benefit Sharing.
Going by Pandey’s deliberation, it appears that the private developers are still willing to spend benefit-sharing with the locals but they want stable business environment . Our study also shows that private developers are willing to spend 0.5% to 2% (depending on the size of the project) of total cost of project on benefit sharing.

Dhruba Bhandari

About Dhruba Bhandari

Dhruba Bhandari is Research Fellow at Samriddhi, The Prosperity Foundation. He joined the Foundation in July 2015. He completed PhD in Development Economics from Oklahoma State University (USA) in 2013. Prior to Joining Foundation, he worked as Research Associate at Oklahoma State University.

1 comment

  1. Anonymous

    The subject matter that you chose is much more rich in content than what you have reflected in your writing. Since you quoted Sambriddhi did organize discussion session on ” the cost imposed on private developers of hydropower project due to lack of a clear benefit-sharing policy framework”, why is the subject matter covered superficially merely? I would like to seek answers to these questions from the author:

    1) What are the steps that IPPAN has taken to bring-about-change in those ‘policies’ that dates back to decades?
    2) What was the proposed solution to these problems?
    3) Are we technically/professionally sound and well structured to battle through misty Nepali Bureaucracy?

    The subject matter may be of less significance today. Many hydropower projects from private industry have recently gone for construction and will pay royalty post COD. So, with significant increase in number of hydropowers, it can be guessed that NEA will take necessary measures in pooling royalty amount and disseminating it through proper channel.

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