The World Bank has approved a credit of US$20 million to Nepal for a project designed to help strengthen the capacity of power sector agencies in Nepal to plan and prepare hydropower generation and transmission line projects along international standards and best practice.

The Government of Nepal’s Power Sector Reform and Sustainable Hydropower Development Project will also help improve the readiness of power sector agencies to undertake regulatory and institutional reforms, the bank said.

The first project component will support the preparation of the Upper Arun hydroelectric project and the Ikhuwa Khola hydroelectric project, identified as priority public investments by the Government. It will also support the preparation of transmission line projects to be identified by the ongoing Transmission System Master Planning.

A second component will finance studies and propose policy recommendations critical for power sector reforms. It will also promote river basin planning in an integrated water resource management approach for selected river basins and recommend improvements in water resource management and regulations. The third component will support capacity building for safeguards management and sustainable hydropower development.

"Reforms initiated under this project will underpin the agenda of transformational hydropower development that the World Bank Group intends to support in Nepal over the coming years," said Julia Bucknall, Practice Manager for Energy and Extractives at the World Bank. "This project will help identify and address key challenges that stand in the way of Nepal achieving its full potential in the power sector," she said.

"Hydropower development in Nepal involves many partners," added Takuya Kamata, World Bank Country Manager for Nepal. "This project benefits from the inputs of a wide range of knowledgeable stakeholders which we hope can help define a broadly owned vision for hydropower development in Nepal," he said.

"As coordination will be key to the success of the project, implementation will bring together a wide range of power sector agencies in Nepal including the Ministry of Energy, the Water and Energy Commission Secretariat, the Department of Irrigation, Ministry of Environment, Ministry of Water Supply, academic institutions, civil society organizations and development partners" explained Jie Tang, Program Leader at the World Bank.

In additional to concessional credit financing from the International Development Association (IDA), the project will also receive a $2.5 million grant from the South Asia Water Initiative (SAWI), a Multi Donor Trust Fund administered by the World Bank.