Although various mechanisms for sharing benefits from hydropower projects have evolved in Nepal, payment of royalty to the government is the single most formalized benefit-sharing policy in the hydropower sector, a study report says.

The system is being applied uniformly across all projects generating electricity in Nepal, says the report prepared by the International Centre for Integrated Mountain Development (Icimod) and the Niti Foundation, a public policy institute.

Based on the prescriptive right given to hydropower projects by the government and prevailing laws, the government collects royalties for the use of water resources and distributes some of the funds to the communities through local governments, it said.

According to the report entitled ‘Benefit Sharing and Sustainable Hydropower: Lessons from Nepal’, other methods practiced in Nepal are equity investment, support for local livelihoods, investment in community development and local infrastructure and environmental enhancement activities.

Similarly, in recent years, several hydropower companies have offered a certain percentage of their stock to local citizens as a benefit-sharing model. “Equity share in hydropower projects for local citizens is a rather unique and innovative mechanism designed in response to the contested nature of foreign investment in hydropower in Nepal and the pronounced demand from local citizens to own shares in hydropower projects,” the report said.

Also, a majority of project developers have shared benefits by providing livelihood support to locals through employment. The majority of local hiring is typically unskilled and casual labour, hired through the project contractors or as drivers or entry-level office staff by project developers, the report said. The practice of investing in community development and local infrastructure is the most commonly cited example of benefit sharing in Nepal, and it is implemented by hydropower developers as a means of gaining social acceptability too.

However, on environmental enhancement related benefits, a majority of hydropower projects in Nepal focus only on compliance with formal requirements as per the environmental laws and do not go beyond mitigation efforts to improve or enhance the environmental conditions to the point where they could be classified as benefits, according to the report. Unveiling the report on Monday, National Planning Commission Vice-Chairman Yubraj Khatiwada said that the county must have a proper mechanism for benefit sharing to reduce friction and development disputes between communities and project developers. “Such a mechanism could be crucial in identifying rights of locals over resources and developing projects in a way that affected communities can derive benefits from them,” said Khatiwada. “Currently, there are instances of never ending demands for compensation by locals from the developer which is affecting the progress of the project.”

The development of a proper mechanism at the national level could be crucial in resol-ving these issues, he added.