International seminar highlights importance of benefit sharing in hydropower development in Nepal

28 Jun 2016


The International Centre for Integrated Mountain Development (ICIMOD) and Niti Foundation hosted the first international workshop on ‘Benefit Sharing in Hydropower: Examples from Nepal and Implications for Other Countries in the Hindu Kush Himalayas’. The Vice Chairperson of the National Planning Commission, Yubraj Khatiwada, and the Director General of ICIMOD, David Molden, launched a report on Benefit Sharing and Sustainable Hydropower: Lessons from Nepal. 

Photo: Rashmi Kiran Shrestha/ICIMOD

Yubraj Khatiwada highlighted the need to empower people to make good decisions, as every citizen of Nepal is a beneficiary of hydropower development. “There should be a proper mechanism to define the specific beneficiaries of hydropower development projects”, he said.

“Equitable and inclusive development is crucial, and benefit sharing is an important way to address the tradeoffs of hydropower development”, said Mr Molden, highlighting upstream and downstream linkages as an important aspect of benefit sharing. 

“This seminar brought the issue of benefit sharing from hydropower development to the forefront of policy discourse among relevant stakeholders in Nepal, including communities, power project, civil society organizations, and the government”, said Aditi Mukherji, Theme Leader for  Water and Air at ICIMOD. Discussions during the two-day event also drew from the experiences of policy makers and practitioners from India, Laos, Pakistan, and Peru. 

Deliberations during the event brought about increased clarity over the concepts of benefit sharing, which will help improve understanding of the relationship between hydropower development in Nepal and the country’s sustainable and inclusive development.

Benefit Sharing in Nepal

The royalty mechanism is the most formalized benefit sharing approach in Nepal’s hydropower sector, through which the government collects royalties and distributes some of these back to the communities through local governments. However, it is not without its challenges. 

“A lack of clarity in the redistribution of royalties to project-affected villages and uneven distribution when the project is located in two or more adjoining districts can create issues”, said Padmendra Shrestha, lead author of the report and Research and Programme Manager at Niti Foundation.

The participants also discussed the increasing trend of offering ‘shares’ in hydropower projects, which is commonly presented in Nepal as a win-win scenario for all: a strategy for developers to raise capital, financial benefits (if profitable) for local populations, and a way to increase ownership of local communities and avoid disputes during project development. However, experts flagged the lack of uniform legal requirements for different ownership models of hydropower and the lack of knowledge about shares among local citizens as policy concerns under the ‘shares’ model.

Other benefits from hydropower development include support for local livelihoods through employment and trainings, community and local infrastructure development, electrification, and other benefits related to water and environmental enhancement.

Key Findings of the Benefit Sharing Report

The report by ICIMOD and Niti Foundation points out that effective governance, including elected local governments, is required for implementing benefit sharing and other policies related to hydropower development in Nepal. Hydropower developers get exposed to the just and unjust demands of local populations who feel that their voices have long been ignored. Given the current situation, innovations in benefit sharing by hydropower developers are laudable efforts to promote community development, but they can also create unnecessary risks and can lead to a perverse incentive problem.

It also acknowledges that benefit sharing is not a panacea to solve all the issues of hydropower development in Nepal. Finding an appropriate mechanism for sharing benefits requires balancing the competing interests and agendas of differently positioned project stakeholders.

The report Benefit Sharing and Sustainable Hydropower: Lessons from Nepal is available for download at: 

For more information please contact

Aditi Mukherji
Theme Leader, Water and Air, ICIMOD


Padmendra Shrestha
Research and Programme Manager, Niti Foundation


Nira Gurung
Senior Communications Officer, ICIMOD


Key Highlights - Benefit Sharing and Sustainable Hydropower in Nepal