Lack of law delays hydropower royalty distribution to local units

September 14, 2017 08:09 AM Republica


KATHMANDU, Sept 14: Rs 1.43 billion royalty collected from 
different projects in Fiscal Year 2016/17

The Department of Electricity Development (DoED) collected Rs 1.43 billion as royalty from different hydropower companies in Fiscal Year 2016/17.

It is supposed to distribute 5 percent of the royalty to local bodies where hydropower projects are based and 10 percent to concerned provinces, and contribute remaining 85 percent to the central government as per the Inter-governmental Finance Management Bill tabled in the parliament in May. But the department has not been able to distribute the amount to local bodies because of the lack of clarity in the provision specified in the bill as most of the projects are located in more than one local unit. 

It had, so far, been distributing royalty to District Development Committee (DDC) of the concerned districts which are now defunct.

“We are required to distribute royalty as per the federal setup. But there is no law yet. Also, the Ministry of Federal Affairs and Local Development (MoFALD) has not responded to our request of clarifying the matter,” Nabin Raj Singh, the director general of DoED, told Republica. 

 The 85 percent of the royalty contributed to the central fund will be distributed by making separate federal laws, Section 7 of the Bill reads. The Bill is under discussion at the parliament’s Finance Committee.

Newly elected office-bearers of local units are unhappy with the allocation of mere 5 percent, saying that the royalty proposed in the Bill is too little, officials of the MoFALD told Republica. 
“The size of the allocated royalty will be much higher than the development programs each unit would get through District Development Committees in the past,” Mahesh Bhattarai, undersecretary of the MoFALD, said. Bhattarai further added that as the Bill is prepared by Ministry of Finance, he knows nothing about its content.

There are 62 hydropower plants in operation in different parts of the country. They pay royalty to the government in two categories. They pay two percent of the average tariff per unit (per kilowatt hour) and Rs 100 per kilowatt installed capacity per year for the first 15 years of generation (for commercial purpose). Thereafter, the rate of royalty is set at 10 percent of average tariff per unit (per kilowatt hour) and Rs 1,000 for each installed kilowatt per year.

The new royalty distribution formula is different from the existing 50:50 revenue sharing modality among the central government and the project-affected districts.

A total of 12 percentage point used to be distributed, as agreed, amongst affected districts, while remaining 38 percentage point was equally distributed amongst districts of the affected development region.


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