Government Reviews Possibility of Allowing Private Sector to Trade Electricity Under Existing Laws

After previously withholding licenses for electricity trading on the grounds that new legislation was required, the government has now initiated a study to determine whether the private sector can be granted such licenses under existing laws.

For this purpose, the Ministry of Energy, Water Resources and Irrigation has recently formed a study committee led by former secretary Dinesh Kumar Ghimire.

“We are analyzing whether private sector entities can be issued electricity trading licenses based on the current laws,” a committee member told New Business Age. “Our review focuses on the provisions of the Electricity Act 1992, the Electricity Regulation 1993, the Electricity Regulatory Commission Act 2017, and related regulations to explore how the private sector can be involved in electricity trading.”

According to the member, the committee is in the process of drafting its report, which is expected to be released soon. However, they did not specify which provisions of the current laws could be used to authorize private sector participation in electricity trading.

Independent Power Producers’ Association of Nepal (IPPAN) Vice-President and committee member Anand Chaudhary said the committee is examining the relevant clauses of the existing laws and will prepare a report accordingly. “We are identifying which provisions could support the issuance of licenses,” he said. “The committee will meet again on Wednesday to discuss the matter, and some details may emerge after that meeting. At this stage, it is too early to reveal much.”

Current legislation does not explicitly provide for granting electricity trading licenses to private companies. Citing this, the Ministry of Law, Justice and Parliamentary Affairs had, three years ago, rejected the government’s attempt to draft regulations under existing laws to issue such licenses, insisting instead that new legislation would be required.

However, with a new bill already registered in Parliament—and facing strong opposition from the private sector—the government has now commissioned this study to assess whether licensing can be done under the current legal framework.

The private sector argues that licenses can be issued under Section 22(2) of the Electricity Act 1992, which states that a power developer may sell electricity it generates to a foreign buyer after signing an agreement with the government. The bill currently under consideration in Parliament also contains provisions to grant trading licenses to the private sector, but the legislative process has made little progress.

A committee source said the report will outline why it is necessary to involve the private sector in electricity trading and will justify the issuance of such licenses. Chaudhary noted that the analysis will also assess the potential benefits of selling electricity to India or other neighboring countries. “To achieve the target of generating 28,000 megawatts, it is essential to engage the private sector in electricity trading,” he said.

Currently, around half a dozen private companies are waiting for electricity trading licenses. Among them, Nepal Power Exchange Ltd., established by several IPPAN members, has already signed a memorandum of understanding with India’s Manikaran Power Ltd. for electricity trading. “If the private sector is allowed to trade electricity, we won’t have to rely solely on the Nepal Electricity Authority. Instead, we can seek alternative buyers, which will also support increased electricity production,” Chaudhary said.