Water Resource Development Policy and Legal Regime

Nepal hasn’t so far formulated an integrated water resources policy, however, the strategies stipulated in WRS themselves constitute the policy of the sector as a whole. Besides, there exist policies in all sub sectors of water sector, including irrigation, hydropower and water induced disaster management. Policy principles adopted by the
Water Resources Strategy include the followings:

  1. Development and management of water resources shall be undertaken in a holistic and systematic manner, relying on the concept of Integrated Water Resources Management.
  2. Water utilization shall be sustainable to ensure conservation of the resource and protection of the environment. Each river basin system shall be managed holistically.
  3. Delivery of water services shall be decentralized in a manner that involves autonomous and accountable agencies (e.g. public, private, community and users based agencies).
  4. Economic efficiency and social equity shall guide water resource development and management.
  5. Participation of and consultation with all the stakeholders shall constitute the basis for mutual benefit.
  6. Sharing of water resources benefits among the riparian countries shall be on equitable basis for mutual benefits.
  7. Institutional and legal frameworks for coordination and transparency shall be an essential feature of water sector management.
  8. Wider adoption of the best existing technologies and practices, and rapid innovation and adaptation of both institutional arrangements and new technologies, shall be ensured.

Thus Nepal has adopted IWRM principles as the cardinal ones in the development and management of water sector and the entire effort in the sector is geared towards social and economic development and environmental sustainability.

Irrigation Policy

The Irrigation Policy was formulated at first in 1992, which was later amended in 1997. It has been reformulated in 2003. The objectives of the prevailing Irrigation Policy are as follows:

(1) To make an optimal use of water resources in providing round the year irrigation services to the cultivable areas as far as possible.
(2) To encourage and enhance participation of beneficiary farmers in the sustainable management of the irrigation system.
(3) To enhance institutional capacity of the government, non-government, farmers and beneficiaries related with development of the irrigation sector.

The major features of the Irrigation Policy, 2003 could be enumerated as follows:

  1. Declaration of irrigated area so as to protect it from encroachment;
  2. Development and management of irrigation systems on the basis of IWRM principles;
  3. Use of reservoirs, rain water harvesting and groundwater for year round irrigation;
  4. Formulation of master plans for inter-basin transfer of water from surplus to deficit basin;
  5. Development of irrigation systems in conjunction with hydropower projects with involvement of both public and private sectors;
  6. Transfer of agency managed irrigation systems to users’ groups;
  7. Capacity building of local bodies in planning, development and management of irrigation systems;
  8. Quantitative measurement of irrigation water for each crop for evaluating the effectiveness of irrigation and also for determining irrigation service fees (ISF); and
  9. Legal and institutional reform, including capacity enhancement of involved personnel.

Hydro-power Policy

The Hydropower Policy of 1992 was amended in 2001 to update it based on the experience gained. The main objectives of the hydropower development could briefly be enumerated as:


  1.  To generate electricity at low cost by utilizing water resource in the country;
  2.  To extend reliable and quality electricity service throughout the country at an affordable price;
  3.  To tie up electricity with economic activities;
  4.  To render support to the development of rural economy through rural electrification; and
  5.  To develop hydropower as an exportable commodity.

The major features of the Hydropower Policy, 2001 are as follows:

  1.  Utilization of hydropower potential to meet the domestic demand;
  2.  Development of hydropower projects on competitive basis;
  3.  Involvement of private sector on BOOT concept;
  4.  Appropriate incentive provisions and simplified and transparent procedure to attract domestic and foreign investors;
  5.  Efforts to implement large multipurpose projects so as to maximize the benefits to the nation including that resulting from the downstream benefits;
  6.  Public private partnership in hydropower projects including that tied with irrigation use;
  7.  Development of hydropower projects so as to contribute to environmental conservation with biomass and thermal energy substitution;
  8.  Appropriate provisions for appropriate resettlement and rehabilitation of displaced people;
  9.  Mobilization of internal capital market for investment in the hydropower sector;
  10.  Small and mini hydropower schemes for off-grid supply of electricity to remote areas;
  11.  Establishment of Rural Electrification Fund;
  12.  Appropriate technical and legal measures for loss prevention;
  13.  Mechanism to encourage use of electricity in water supply, irrigation, industries, etc., during off-peak hours;
  14. Appropriate provision for providing benefits to people of areas, where hydropower projects are located;
  15.  Proper provisions to cover risks in hydropower projects;
  16.  Encouragement to export oriented projects;
  17.  Restructuring of existing public sector institution to enhance competition and enhanced involvement of local bodies, cooperatives and private sector in generation, transmission and distribution for reliable and quality electricity at reasonable price;
  18.  Protection of consumers’ interest;
  19.  Rational and transparent mechanism for fixation of electricity tariff;
  20.  Priority of domestic labour and skill use;
  21.  Establishment of a hydropower development institute for imparting training and conducting research activities; etc.

The Hydropower Policy is an elaborate document with stipulation of licensing procedure, functions of major government agencies, royalty structure, etc.

Water Induced Disaster Management Policy

The prevailing Water Induced Disaster Management Policy is a recent one formulated and approved by the Government only in 2006. The objectives of the Water Induced Disaster Management Policy, 2006 could briefly be enumerated as:

  1.  Prevention of life and property from water induced disasters;
  2.  Enhancement of sustainability of infrastructures and their utility by conserving water resources, watersheds and aquatic life;
  3.  Reclamation of flood damaged lands so as to use them for resettlement of landless people and other economic activities;
  4.  Institutional development for water induced disaster management and flood plain management; and
  5.  Prevention of duplication of efforts and resource use by clearly defining the roles and responsibilities of Government agencies including local bodies, NGOs, CBOs, private sector, etc., in water induced disaster management.

The Water Induced Disaster Management Policy, 2006 has specified various policy
provisions under five headings:


  • Emergency protection and relief
  • Water induced disaster mitigation
  • Conservation of natural resources
  • Utilization of reclaimed land; and
  • Institutional mechanism and development.

The policy provisions include that related to early warning system, mobilization of men and material during emergency, zoning and classification of disaster prone areas depending upon risk, and various structural and non-structural measures of disaster mitigation. The policy has also a provision of involvement of private sector for reclamation and use of flood affected area on commercial basis.

Legal Provisions

The prevailing Acts, which directly concern water resources sector including irrigation and hydropower sub sectors are Water Resources Act, 1992 and Electricity Act, 1992. The prevailing Water Resources Act is an umbrella Act of water sector and it has given priority order of use of water. The Act states that State has the ownership of water; which is not transferable, but the right to use is conferred by way of licensing while no license is required for individual and collective use of water within the community. Water Resources Rules, 1993 has detailed out most of the procedures required to make the Water Resources Act effective. Likewise, Electricity Act, 1992 and Electricity Rules, 1993 have defined the prevailing legal regime for the development, management and regulation of electricity services in Nepal including hydropower. Electricity Tariff Fixation Rules, 1993 is also an effective legal instrument, which mainly deals with fixation of electricity tariff as the name suggests. In irrigation sub-sector, no Act is in place, however, the sub-sector is regulated by Irrigation Rules, 1997, which has undergone an amendment in 2004. No legal instrument has so far been enacted to put Water Induced Disaster Management Policy, 2006 in effect. The legal instruments are already overdue.

As the legal instruments in electricity sub-sector are older than the prevailing policy and WRS & NWP, the prevailing policy provisions are not effective yet. Hence, a new Electricity Act and the Nepal Electricity Regulatory Commission Act are on the anvil. They are expected to be enacted by the parliament any time. Once these Acts are enacted, an autonomous regulatory commission will be established to regulate generation, transmission and distribution of electricity ensuring quality of service and reasonable pricing for the consumers and at the same time a level playing field will be created for healthy competition for both public sector agencies and private entrepreneurs involved in the sector.

Apart from the above policies and legal instruments, which are directly related with the sector, there exist a host of policies and legal instruments which have indirect bearing for the development and management of the water sector. These include, Environmental Protection Act and Rules, Local Self Governance Act and Rules, Forest Act and Rules, National Park and Wildlife Conservation Act and Rules, and so forth.