Land, Forest, Environmental and Social Approvals for Energy Projects

Four different ministries wrote the consent regimes that decide whether a Nepali power project reaches its site, across four different decades, and none of the four refers to the others. A developer holding a generation licence, an approved environmental study, a forest clearance and a compensation determination holds four independent permissions, each with its own appeal route and its own clock. There is no consolidated consent, no deemed approval, and no authority able to resolve a conflict between them.

Environmental assessment

The Environment Protection Act 2076 (2019) and the Environment Protection Rules 2077 (2020) set up a tiered assessment regime. A proposal needs a brief environmental study, an initial environmental examination or a full environmental impact assessment, depending on its type and scale as set out in the schedules to the Rules. The Ministry of Forests and Environment keeps a public register of proposals.

We do not state the megawatt thresholds. The Rules PDF published by the Department of Electricity Development exceeds the size we can retrieve, and the Department’s copy of the Act is a scanned image with no extractable text. Figures for those thresholds circulate widely in secondary material, and we have not been able to test them against the schedules. Anyone sizing a project close to a tier boundary should read the schedules directly. The difference between an initial examination and a full assessment is measured in months.

What can be said with confidence is where the requirement sits in the sequence. Section 4 of the Electricity Act 2049 makes the economic, technical and environmental study report part of the generation licence application. Environmental assessment is a licensing precondition, completed during the five-year survey licence window, rather than a compliance exercise before construction. A project’s environmental scope is therefore fixed long before its financing structure or its offtake.

Forest land

Where a project touches national forest, the Forest Act 2076 and its rules govern the use of that land. Transmission corridors run into forest far more often than powerhouses do. The framework was under active revision through 2082 and 2083. The Ministry of Forests and Environment issued a notice on 1 Bhadau 2082 inviting comment on the Forest (Third Amendment) Rules 2082, and separately circulated a draft amendment to the Forest Act 2076 for stakeholder comment.

We have not verified section 42, the compensatory afforestation ratio or the land-for-land requirement at primary level, and none of those is stated here. The planning consequence can be stated. A project whose forest approval is granted under one version of the rules and constructed under another carries a change-in-law exposure that a Nepali power purchase agreement does not obviously price.

Private land acquisition

Private land is acquired under the Land Acquisition Act 2034 (1977). The Government may take land for a public purpose against compensation. The acquiring officer must post notice in public places and at the local body office, and preliminary survey work such as mapping, soil sampling and boring may begin three days later.

Compensation is fixed by a committee constituted under section 13(2): the Chief District Officer, the land administrator, the project chief or a designated officer, and a representative of the district body. The basis of compensation depends on who is acquiring. Where government or a local body acquires, guidelines issued by the Government of Nepal apply, together with losses arising from relocation. Where any other institution acquires, which is the position of a private hydropower company, compensation rests on the current land price at the date of notification, plus the value of property on the land and losses from displacement.

Two features of that design drive most of the disputes. Valuation is fixed at the date of notification, so a long-gestation project acquires at yesterday’s prices in a district where the project itself has moved the market. And the appeal is administrative rather than judicial. A complaint to the Ministry of Home Affairs must be made within seven days plus travel time, a compensation appeal within fifteen days under section 25(7), and the Ministry’s decision is final. There is no ordinary appeal on quantum.

State land and use restrictions

Section 33 of the Electricity Act provides a separate route. A licensee applies to the Government, and state-owned land may be leased for the duration of the licence rather than transferred. The Government may also restrict the use of land near the project against prescribed compensation. That is how transmission corridors and reservoir margins are handled without full acquisition.

For a lender the distinction is material. Leased state land held for the licence term is not an asset the project owns, cannot be mortgaged in the ordinary way, and expires with the licence. That expiry is also the moment the structures may pass to the Government.

The local layer

Nepal restructured into federal, provincial and local government in 2015. The Land Acquisition Act dates from 1977 and its committee is a district committee. The Hydropower Development Policy 2058 still allocates royalty shares to Village Development Committees and District Development Committees, bodies that no longer exist. The Department of Electricity Development was still publishing guidance on the basis and pattern of royalty share distribution in Jestha 2083 (June 2026).

Negotiation fills the gap between those instruments and the institutions that now exist. Local governments and affected communities expect consultation, employment commitments, local infrastructure and often a shareholding. Some of that is anchored in the statutory public notice under rule 16 of the Electricity Rules 2050, which allows thirty-five days for public reaction to a licence application, and in the Electricity Regulatory Commission’s public hearing directive of 2076. Much of it is anchored nowhere at all. It is still the layer on which schedules most often slip, and a lender’s social due diligence will read the unwritten agreements as closely as the written ones.

What lenders examine

Four questions recur in diligence on Nepali energy projects, and each maps onto something specific above.

Whether the land the project stands on is owned, leased or merely permitted. Freehold acquired under the Land Acquisition Act, state land leased for the licence term, and land subject only to a use restriction are three different assets with three different security profiles. A project can be built across all three at once.

Whether compensation is final. The appeal route on quantum ends at the Ministry of Home Affairs, so an unresolved compensation dispute is a residual claim with no judicial ceiling and no defined end date.

Whether the environmental approval matches the project as built. The study report is prepared for the licence application, sometimes years before detailed design. Where the constructed scheme differs from the assessed one, the approval that supports the licence may not support the asset.

Whether the site can survive the river. No abstraction, this one. On 26 August 2026 a flood in the Bhotekoshi basin took 405 MW of hydropower and 25 MW of solar offline across eleven projects, damaging generation and transmission infrastructure together. Geological and hydrological exposure is why insurance scope, contingency sizing and dry-season revenue assumptions draw more attention in Nepali project diligence than the consent stack does.

What to sequence first

Land is rarely the last problem. It decides whether the survey licence can produce a fundable study report inside five years. The environmental assessment depends on defining the footprint, the footprint depends on the corridor, the corridor depends on forest clearance, and forest clearance depends on rules that were still in draft in 2026.

Sources

1. Land Acquisition Act, 2034 (1977) [unofficial reproduction, nepalarchives.com]

   Government of Nepal; text consulted via the Nepal Archives repository · 1977 — in force, as amended · Tier 6 — Professional or news source

   Supports: Section 3 acquisition for public purpose; section 6 notification and preliminary survey after three days; section 11 complaint to the Ministry of Home Affairs; section 13(2) composition of the compensation determination committee; section 16 basis of compensation; section 25(7) appeal to the Ministry within 15 days with a final decision.

   Accessed 26 August 2026

2. Electricity Act, 2049 (1992) — English text

   Government of Nepal, published by the Department of Electricity Development · 1992 — in force · Tier 1 — Primary legal instrument

   Supports: Section 4 requirement for an environmental study report with the licence application; section 33 on land for licensees, lease of state land for the licence term and restriction of neighbouring land against compensation.

   Accessed 26 August 2026

3. Environment Protection Act, 2076 (2019) and Environment Protection Rules, 2077 (2020)

   Government of Nepal, published by the Department of Electricity Development among its policies, acts and rules · 2019 and 2020 — in force · Tier 1 — Primary legal instrument

   Supports: That the environmental assessment regime applying to electricity projects is the 2076 Act and the 2077 Rules, and that the Department publishes both as the applicable instruments. The schedules setting capacity thresholds could not be extracted from the published PDFs.

   Accessed 26 August 2026

4. Notices on the Forest (Third Amendment) Rules 2082 and on a draft amendment to the Forest Act 2076

   Ministry of Forests and Environment · Notice on the Third Amendment Rules dated 1 Bhadau 2082 · Tier 2 — Official publication

   Supports: That the Ministry invited public comment on amendments to both the Forest Rules and the Forest Act, and that the forest land regime was under revision through 2082 and 2083.

   Accessed 26 August 2026

5. Environmental Impact Assessment portal

   Ministry of Forests and Environment · Accessed 26 August 2026 · Tier 2 — Official publication

   Supports: That the Ministry maintains a public register of environmental assessment proposals.

   Accessed 26 August 2026

6. Floods take 430 MW of electricity offline, damage 11 hydropower projects

   Republica · 26 August 2026 · Tier 6 — Professional or news source

   Supports: 405 MW of hydropower and 25 MW of solar taken offline across eleven projects in the Bhotekoshi basin, with damage to generation and transmission infrastructure.

   Accessed 26 August 2026

7. Electricity Rules, 2050 (1993) — English text

   Government of Nepal, published by the Department of Electricity Development · 1993 · Tier 1 — Primary legal instrument

   Supports: Rule 16 requiring a public notice with 35 days for public reaction on a generation, transmission or distribution licence application.

   Accessed 26 August 2026