The World Bank (WB) on Sunday approved a credit of $20 million to Nepal for the Power Sector Reform and Sustainable Hydropower Development Project.

According to the WB, the project will help strengthen the capacity of power sector agencies in Nepal to plan and prepare hydropower generation and transmission line projects in line with international standards and best practice. The project will also help improve the readiness of power sector agencies to undertake regulatory and institutional reforms, according to the WB.

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

The 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 WB 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.”

Takuya Kamata, World Bank Country Manager for Nepal, said hydropower development in Nepal involves many partners and that this project benefits from the inputs of a wide range of knowledgeable stakeholders which the WB hopes can help define a broadly owned vision for hydropower development in Nepal.

According to Jie Tang, Program Leader at the World Bank, 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 Ministry of Finance, the Ministry of Environment, the Investment Board of Nepal, the Department of Electricity Development, the Department of Irrigation, the Department of Water Supply, the Water and Energy Commission Secretariat, the Electricity Tariff Fixation Committee, Nepal Electricity Authority, the Alternative Energy Promotion Center, as well as academic institutions, CSOs and development partners including Asian Development Bank, US Agency for International Development, Japan International Cooperation Agency, KfW and the Norwegian government.

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