--- title: "HDP 2001 features and private sector" subject: "Hydropower Engineering" chapter: 1 key: "semester_7/hydropower_engineering:hdp-2001-private-sector" source: https://www.bctengineer.com/q/semester_7/hydropower_engineering/hdp-2001-private-sector site: BCT Engineering --- # HDP 2001 features and private sector Hydropower Engineering · Chapter 1: Introduction - Asked in: 2070 Ashad, 6 marks - Answer checked by Claude Opus 5.5 (high effort) on 2026-10-14 - Page: https://www.bctengineer.com/q/semester_7/hydropower_engineering/hdp-2001-private-sector - Whole chapter: https://www.bctengineer.com/md/semester_7/hydropower_engineering/chapter-1 ## Question List out the major features of the Hydropower Development Policy 2001. Is the policy able to attract the private sector? Write your comments. ## Short answer Features: BOOT, licences up to 35/30 years, simple DoED licensing, PPA with NEA, low early royalty, tax holiday, duty relief, export allowed after domestic, IEE/EIA and local benefit. It attracted private investment (e.g., Chilime, many IPPs) but weaknesses like unattractive tariffs, slow approvals, no transmission guarantee and political instability limited full success. ## Answer #### Major features of HDP 2001 - Main aim: develop hydropower at low cost to serve domestic needs and for export. - The private sector (domestic and foreign) can build, own, operate and transfer (BOOT) projects. - Projects up to 1 MW are free of licence; the survey licence is for up to 5 years; the generation licence is for up to 35 years (domestic supply) or 30 years (export-oriented). - Simple licensing procedure through DoED; NEA buys power under a PPA. - Royalty set at a low rate in the early years; tax holiday and customs duty relief. - Foreign investors may repatriate capital and profit; the right of ownership is protected. - Encourages power export, rural electrification and micro-hydro with local participation. - IEE/EIA, environmental flow and local benefit sharing are compulsory. - The government's role is limited to policy, regulation and facilitation. #### Comments: can it attract the private sector? **Yes, to a good extent.** Private investment had already begun under the 1992 policy (Khimti and Bhote Koshi), and after 2001 a large number of private projects were licensed and built (Chilime and many IPP projects). Clear legal rights, BOOT permission, PPAs with NEA and tax relief made investment possible. **But some weaknesses remain:** - The PPA tariff and escalation were not always attractive, and NEA was the only buyer. - Approval of the licence, forest land and IEE took too long. - There was no clear provision for transmission lines and no guarantee of export. - Political instability, security issues and delays in local clearances. - Financing from local banks is limited, and currency risk exists for foreign investors. Hence the policy did attract the private sector, but it should be improved with a one-window system, a bankable PPA, secure transmission and clear export rules. ## Check yourself The answer's key points as multiple-choice questions, with the correct option and why. 1. Does HDP 2001 attract the private sector? A. Yes completely with no weakness B. No, no projects were built C. Only foreign investors came D. Yes to a good extent, but weaknesses remain Answer: D. Many projects were licensed and built, though issues like PPA and delays remain. (Key point: Private attraction) 2. Which provision helps foreign investors? A. Mandatory government 100% share B. Ban on profit transfer C. Right to repatriate capital and profit, and ownership protected D. No tax relief Answer: C. Foreign investors may repatriate capital and profit and ownership is protected. (Key point: Incentives) 3. Which is a weakness that discourages private investors? A. Fast approvals B. PPA tariff not always attractive and NEA the only buyer C. Guaranteed export D. Too many buyers of power Answer: B. NEA was the only buyer and tariff/escalation was not always attractive. (Key point: Weakness) 4. What improvement is recommended? A. Remove BOOT B. One-window system, bankable PPA, secure transmission and clear export rules C. Stop IEE D. Government only projects Answer: B. These changes would remove the main barriers. (Key point: Improvement) ## Related in Hydropower Engineering - [Hydropower Development Policy 2001 (2058 BS)](https://www.bctengineer.com/question.md?key=semester_7%2Fhydropower_engineering%3Ahdp-2001-objectives-features) — Hydropower Engineering, chapter 1, asked 4× - [Opportunities, challenges and HDP comments](https://www.bctengineer.com/question.md?key=semester_7%2Fhydropower_engineering%3Aopportunities-challenges-hdp) — Hydropower Engineering, chapter 1, asked 2× - [Major institutions and HDP outline](https://www.bctengineer.com/question.md?key=semester_7%2Fhydropower_engineering%3Ainstitutions-and-hdp-outline) — Hydropower Engineering, chapter 1 - [Licensing provisions in hydropower policy](https://www.bctengineer.com/question.md?key=semester_7%2Fhydropower_engineering%3Ahdp-licensing-provisions) — Hydropower Engineering, chapter 1, asked 2× - [HDP objectives, strategies and institutions](https://www.bctengineer.com/question.md?key=semester_7%2Fhydropower_engineering%3Ahdp-objectives-strategies-institutions) — Hydropower Engineering, chapter 1 - [Institutions in Nepal's hydropower sector](https://www.bctengineer.com/question.md?key=semester_7%2Fhydropower_engineering%3Ainstitutional-setup-hydropower) — Hydropower Engineering, chapter 1, asked 2× ## Related in other subjects - [Capital budgeting; ARR/ROE; attract private sector](https://www.bctengineer.com/question.md?key=semester_7%2Fproject_engineering%3Acapital-budgeting-arr-roe-private-hydropower) — Project Engineering, chapter 6