A major policy objective of theGovernment of Nepal is to develop its vast hydro powerresource potential, to serve electricity needs, and generateexport revenue. But, while recent progress has been made indeveloping regulations, and policies to attract investmentsfor hydropower development, institutional constraints arechallenging implementation. The report attempts to analyzekey implementation constraints in hydropower development,proposes options for reform, and, notes four prominent keyconstraints: overlaps in policy, regulatory, and operationalfunctions of public institutions operating in the sector;inadequacies of the existing institutional structure of theNational Electricity Authority to meet future needs of thepower sector; insufficient institutional arrangements forthe promotion of power trade; and, weak institutionalsupport for improving electricity access to rural areas.Recommendations suggest that the role of policy makingshould rest with the Ministry of Water Resources, having theDepartment of Electricity Development, and the Water andEnergy Commission given the role of executing bodies, whileredefining other Departments to evolve as independentregulatory authorities. Elimination of conflict of interest,creditworthiness improvement, and appropriate regulatoryframework, should attract private investments, giving anopportunity to create a policy environment for independentpower producers, and favorable for medium-sized export projects.
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