Home Minister Orders Immediate Restart of Upper Bhotekoshi Hydropower

9th October 2025, Kathmandu

The directive by Home Minister Om Prakash Aryal to immediately resume operations at the 45 MW Upper Bhotekoshi Hydropower Project, following its prolonged shutdown due to demands for 10% free shares from a group identifying as “Gen-Z youth,” highlights a critical and escalating conflict in Nepal’s energy sector.

Restarting Upper Bhotekoshi Hydropower

This situation is more than a local labor dispute; it represents a major challenge to investor confidence, national energy security, and the rule of law in the development of essential infrastructure.

I. Financial Damage and Economic Instability

The immediate financial impact of the 28-day shutdown is staggering. The loss of an estimated NPR 27 crore (NPR 9.8 million per day) in revenue for the Upper Bhotekoshi project underscores the extreme vulnerability of energy infrastructure to political and social unrest. This quantifiable loss translates into:

Reduced Revenue for the State: A halt in production directly cuts into the government’s expected royalty and tax revenues from energy generation, undermining the national budget’s reliance on the hydropower sector.

Breach of Power Purchase Agreements (PPAs): As a commercial entity, the Bhotekoshi Power Company has a PPA with the Nepal Electricity Authority (NEA), often on a “Take or Pay” or similar basis. A prolonged shutdown, even if caused by force majeure (such as social unrest), could trigger complex contractual penalties or at least a significant loss of guaranteed revenue, eroding the project’s bankability.

Increased Project Cost: The threat of similar demands extending to under-construction projects, such as Balefi A and Dudh Khola, signals a future of increased risk premiums. Developers must now factor in potential costs related to prolonged delays, security, and forced equity distribution, making capital raising more expensive and potentially stalling projects altogether. This directly contradicts the private sector’s NPR 15 trillion investment in the sector, as highlighted by IPPAN.

The demand for 10% free shares is fundamentally different from a mandated allocation of shares at the project’s face value, which is common in major projects like Upper Tamakoshi to foster local ownership. An enforced, uncompensated transfer of a significant equity stake directly dilutes the ownership of existing shareholders and lenders, causing a severe rupture in the project’s original financial model and loan agreements.

II. The Complex Legal and Social Precedent of Share Demands

The core of the conflict lies in the ill-defined legal framework surrounding community benefits and ownership in hydropower.

Lack of Unified Legal Mandate: While the Securities Registration and Issue Regulation mandates that companies issuing shares to the public must allocate at least 10% to project-affected locals, the Upper Bhotekoshi project began commercial operation in 2000, before this legal requirement was in place. Furthermore, it is a private company that does not issue public shares, which historically exempts it from the rule. This ambiguity creates a vacuum exploited by activist groups.

Historical vs. Current Agreements: Reports suggest a previous, unimplemented agreement for 6% local shares in 2014, which the current Gen-Z demand now seeks to enforce and increase to 10%. This cycle of escalating, non-binding demands, often brokered by local political leaders in the past, establishes a dangerous precedent where past promises—or even perceived entitlements—supersede established legal contracts.

The Rise of “Gen-Z” as a Political Force: The utilization of a “Gen-Z” label indicates a new, politically astute, and socially networked generation utilizing direct action to demand a share in the national wealth generated by the exploitation of their local natural resources. While their motivation for community benefit is understandable in a country where wealth concentration is an issue, their method—the forced shutdown of a critical national asset—is an act of economic sabotage that the Home Minister rightly deemed “not acceptable.”

III. The Government’s Role and the Need for a National Energy Security Policy

The Home Minister’s directive, though crucial for the immediate resumption of power generation, is a short-term, administrative fix to a structural problem. A long-term resolution requires a policy overhaul:

Enforcement of the Rule of Law: The Minister’s insistence that the project must resume operations, coupled with the call for dialogue, correctly prioritizes energy security and the protection of infrastructure as a national priority. The government must move beyond verbal assurances and ensure that local administrative and security bodies strictly enforce the right to operate, making it clear that such disruptions will be met with decisive legal action.

Establishing a Mandatory Benefit-Sharing Mechanism: The IPPAN’s plea for a stable environment and the project operators’ demoralization necessitate a permanent solution. The government needs to formulate a clear, mandatory, and unified national policy, ideally through an amendment to the Electricity Act or the Hydropower Development Policy, that defines a standardized revenue or equity-sharing model for all hydropower projects. This policy must:

Standardize Local Shares: Clearly define the minimum percentage of shares allocated to locals and the criteria (at face value or free) for all new and potentially existing projects.

Institutionalize Royalty Sharing: Establish transparent mechanisms for local bodies (e.g., Rural Municipalities) to receive a defined percentage of the project’s royalty or revenue, as mandated by previous policies, and use those funds for local development, thereby giving the community a stake without demanding forced ownership.

Formulation of an Energy Security Policy: The appeal by IPPAN for a dedicated Energy Security Policy is entirely justified. Such a policy should classify all operational hydropower projects as Essential National Infrastructure and provide them with guaranteed, centralized security protocols to prevent politically motivated or social disruption-based shutdowns.

In conclusion, the Upper Bhotekoshi episode is a microcosm of the systemic risks in Nepal’s journey to becoming an energy-rich nation. While the Home Minister’s order reasserts the state’s authority, the persistent and escalating nature of the demands across multiple projects indicates a deeper entitlement issue that can only be resolved by the creation of a clear, legally binding, and equitable national framework for sharing the economic benefits of hydropower development with the host communities. Failure to do so will continue to deter the private investment necessary to unlock Nepal’s full energy potential.

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