Public–Private Partnerships and Government-Linked Investment

Four overlapping regimes

There is no single Nepali law of public-private partnership. Four bodies of rule can apply to a private party contracting with the State, and which one applies turns on who owns the asset and how large the project is.

The Public Private Partnership and Investment Act 2075, authenticated on 27 March 2019 and in force from that day, is the federal statute. It passed in the same fortnight as FITTA and immediately before the Nepal Investment Summit of March 2019. It restructured Investment Board Nepal and created the PPP framework in one instrument, and its implementing regulation followed in 2077 (2020).

The Public Procurement Act 2063 (2007), administered by the Public Procurement Monitoring Office, governs ordinary public contracting. A great deal of what gets loosely called PPP in Nepal — an operations and maintenance contract, a design-build contract paid from the budget — is procurement rather than partnership, and is tendered accordingly.

The Public-Private Partnership Policy 2072 (2015) stays in circulation and is still cited in international descriptions of the framework. It is a policy instrument and it predates the Act. Read its institutional architecture with that in mind — a PPP Board of Directors chaired by the Finance Secretary, a PPP Centre under the National Planning Commission, a viability gap fund, mandatory international bidding above NPR 1 billion. We have not established which parts of it survived the 2019 Act in their described form. Treating it as current law is a mistake that appears in otherwise careful secondary sources.

The fourth regime is the one most often missed. Nepal’s federal structure gives provinces and local governments their own legislative competence, and metropolitan cities have passed their own public-private partnership and investment acts. Birgunj Metropolitan City’s is dated 2078. A private party contracting for a municipal bus park, market or waste facility contracts under municipal law, with municipal approval. The federal Act is not the operative instrument.

Who approves what

Investment Board Nepal is the body foreign developers deal with on large infrastructure. It was established in 2011, it is chaired by the Prime Minister, and its own published mandate is stated in two limbs: public-private partnership projects with estimated cost above NPR 6 billion, and hydropower and energy projects with capacity above 200 MW.

The capacity limb catches people, because it runs independently of the money. A 220 MW hydropower project is a Board matter on capacity whatever its financing mix. A NPR 4 billion municipal project is not a Board matter at all, however international its sponsor.

The Board’s threshold has moved. Before the 2019 Act it was NPR 10 billion. The reduction to NPR 6 billion deliberately widened the Board’s caseload and aligned it with the figure in section 17 of FITTA for foreign investment approval. A project above NPR 6 billion with foreign investment therefore sits with the Board on both counts, which is the design intention.

Two things the Board is not. It is no substitute for sectoral licensing — a generation licence still comes from the Department of Electricity Development under the Electricity Act 2049 (1992), which remains the governing electricity statute. And it is not a financier. Board approval is a permission and, in larger cases, a negotiated project agreement. The money is still the sponsor’s problem.

Approvals against delivery

Approval volume and delivery volume are different series, and the first is published far more prominently than the second. That is the most useful thing anyone can know about Nepali PPP.

In FY 2023/24 the Board approved nine projects carrying NPR 271.26 billion of investment. Eight were electricity generation, from a 22 MW run-of-river scheme to the 900 MW Upper Karnali project and a 250 MW solar development. The ninth was a cement plant expansion. The Board’s reported monitoring in the same period included Arun III at around 75% progress on generation works.

The same divergence shows in the national foreign investment numbers. NPR 39.25 billion was approved across 476 projects in the first half of FY 2082/83 (2025/26), up 52% on the year before, while actual inflow over five months of that period was NPR 7.47 billion. Approval is a permission granted on a project report. Inflow is money that has cleared a Nepali bank.

We looked for an official series showing how many Board-approved projects have reached financial close or construction, and found none. The absence is itself informative. The metric that would answer the question most investors are asking is the one nobody publishes routinely. Anyone assessing a Nepali PPP pipeline should ask the Board directly for the status of its approved portfolio rather than inferring delivery from approval announcements, and should read a large approval figure as a statement about intent.

The recurring constraints

Three constraints recur in Nepali infrastructure whichever regime applies, and none of them is a drafting problem.

Land. Acquisition and resettlement are public-sector obligations under the risk allocation the 2015 policy describes, and they are the commonest source of delay. The policy’s own answer — requiring a high proportion of land to be acquired before the project agreement is signed — concedes that the risk cannot safely be passed to the sponsor.

Currency. A project earning rupees and servicing dollar debt carries a mismatch that Nepal’s pegged exchange arrangement relocates rather than removes. Hedging arrangements and the terms on which foreign loans may be taken are central bank matters rather than Board matters, negotiated on a different track from the project agreement.

Continuity. Governments in Nepal change often, and a project agreement signed by one administration is implemented by several. The protection is contractual: the arbitration clause, the change-in-law provision and the termination compensation formula. With only four bilateral investment treaties in force and none covering Nepal’s largest capital sources, those clauses are where a sponsor’s real protection sits.

Unsolicited proposals

Many Nepali infrastructure projects originate with the sponsor rather than the State. The 2015 policy treats unsolicited proposals restrictively. It admits them only where an earlier procurement failed to produce a bidder, where the project depends on proprietary technology available only from the proposer, or where the Council of Ministers designates it strategically important. Bid preparation costs are compensated where the proposer is ultimately not selected.

The position is conventional and defensible, and it sits awkwardly with how a pipeline actually fills in a country with limited public project preparation capacity. Feasibility work costs money the sponsor is usually better placed to spend, and a State that contracts only for projects it identified itself will contract for fewer of them. The strategic-importance route through the Council of Ministers is the pressure valve, and it carries the least procedural discipline of the three.

A sponsor needs to know which of the three gateways its proposal is going through, and to know it before money goes into feasibility. A proposal advanced on the assumption that its quality will carry it has no procedural route at all.

What is unsettled

The Act itself is the gap in this account. We confirmed its authentication date, its immediate commencement and part of its definitions. We could not confirm its operative provisions on project selection, unsolicited proposals, the project investment agreement or the Board’s statutory jurisdiction. The thresholds above come from the Board’s own institutional material and from reporting of the bill.

That matters more here than it would in a jurisdiction with a reliable consolidated statute service. FITTA section 17 still confers the upper tier of foreign investment approval on “the Investment Board under the Investment Board Act, 2011 (2068),” a statute the 2019 Act was reported to supersede. Anyone taking a project above NPR 6 billion should have counsel read the current text of the 2075 Act, including its repeal and saving provisions, before relying on any secondary description of what the Board can and cannot do.

Sources

1. Public Private Partnership and Investment Act, 2019

   Government of Nepal (English text hosted by the Royal Thai Ministry of Foreign Affairs) · Authenticated 27 March 2019 — in force at once under section 1(2) · Tier 1 — Primary legal instrument

   Supports: The date of authentication, the immediate commencement provision, and the definition of a licence as the letter of approval issued to implement a partnership or private investment project.

   Accessed 26 August 2026

2. Investment Board Nepal — Partnering for Economic Prosperity (institutional brochure)

   Investment Board Nepal · Undated institutional publication, hosted on the Government of Nepal content network · Tier 2 — Official publication

   Supports: Establishment in 2011, chairing by the Prime Minister, jurisdiction over PPP projects above NPR 6 billion and energy projects above 200 MW, and that the Board's responsibilities were refined by the 2019 Act.

   Accessed 26 August 2026

3. Public-Private Partnership Policy, 2072 (2015) — unofficial translation

   Government of Nepal, published in the World Bank PPP Resource Centre library · 2015 — policy instrument, predates the 2019 Act · Tier 2 — Official publication

   Supports: The policy-level approval thresholds, the viability gap fund concept, the risk allocation framework, the treatment of unsolicited proposals and the requirement for international bidding above NPR 1 billion.

   Accessed 26 August 2026

4. Public Procurement Act, 2063 (English, as amended)

   Public Procurement Monitoring Office · 2007 — in force, as amended · Tier 1 — Primary legal instrument

   Supports: That ordinary public procurement in Nepal is governed by the Public Procurement Act 2063 and administered by the Public Procurement Monitoring Office.

   Accessed 26 August 2026

5. Public Private Partnership and Investment Act, 2078 — Birgunj Metropolitan City

   Birgunj Metropolitan City, Integrated Data Management System · 2078 (2021/22) · Tier 2 — Official publication

   Supports: That local governments have enacted their own public-private partnership and investment legislation alongside the federal Act.

   Accessed 26 August 2026

6. IBN approved nine big projects to inject investment of Rs 271.26 billion in last FY

   myRepublica / Nagarik Network · Reporting on FY 2023/24 · Tier 6 — Professional or news source

   Supports: The nine approved projects and their aggregate value, the predominance of hydropower and solar, and the reported 75% generation-works progress at Arun III.

   Accessed 26 August 2026

7. FDI commitments see over 52 percent rise despite political uncertainty

   The Kathmandu Post · 16 January 2026 · Tier 6 — Professional or news source

   Supports: NPR 39.25 billion of commitments across 476 projects in the first half of FY 2082/83 against NPR 7.47 billion of actual inflow over five months.

   Accessed 26 August 2026