Demands for Free Shares and Royalties Frustrate Hydropower Investors

Private investors in Nepal’s hydropower sector are increasingly frustrated by demands for free shares, separate royalties, and other benefits in the name of local communities and Gen Z groups, which they say are disrupting project construction.

Although energy projects issue 10 percent of shares to local residents and pay royalties as mandated by the government, investors say new demands, sometimes running into millions of rupees, have left them bewildered. Some groups, they say, are also demanding payments for the use of rivers, canals and government land, in addition to free shares.

Ganesh Karki, President of the Independent Power Producers Association, Nepal (IPPAN), said such demands are not legally sanctioned and are impossible for investors to meet. He warned that these activities are obstructing project construction and raising concerns across the private sector.

“We have been giving shares as per government regulations, and the projects have been paying royalties as required by law,” said Karki. “Recently, various groups have started demanding free shares and money illegally, which discourages private investors.”

Karki added that some local governments, including in Solukhumbu and Dolakha districts, have arbitrarily set additional royalties, further frustrating investors.

IPPAN said it has repeatedly raised the issue with the Prime Minister, Finance Minister, Energy Minister, Federal Affairs Minister, and other agencies, urging action to stop such illegal demands and maintain security. However, Karki said the government has largely ignored the concerns.

In September, production at the 45 MW Bhotekoshi Hydropower Project was halted for 32 days due to demands for 10 percent free shares from Gen Z groups in Bhotekoshi Rural Municipality. The dispute was resolved in October after an agreement to issue the shares at a nominal value of Rs 100.

Despite this resolution, similar demands have emerged at other projects, including Bhotekoshi-1 and Brahmayani, disrupting construction at multiple hydropower sites across the country. 

Projects affected include Balephi (36 MW), Moonlight (22 MW), Sewa (1.5 MW), Rising (1.5 MW), Gaunghar (1.5 MW), Yambulung (7 MW), Upper Balephi (36 MW), Neshum Khola (41 MW), and Sita Hydro (46 MW).

IPPAN has urged the government to develop a clear energy security policy, establish special units to protect hydropower projects, and deploy security personnel at each site. The association warned that unchecked demands for free shares could discourage private investment, which accounts for more than 80 percent of Nepal’s electricity production.

Added Karki: “The government must urgently act to encourage the private sector and ensure smooth progress in energy development.”