A proposed Water Resources Bill seeks to overhaul Nepal's legal framework governing water resources by aligning it with the country's federal governance structure. It defines the powers of the federal, provincial and local governments while introducing stricter provisions on water use, environmental protection and dam safety.

The draft legislation covers everything from the division of authority in irrigation and electricity development to water resource utilisation, dam security and water accounting.

Once enacted, it will replace the three-decade-old Water Resources Act, 1992, and establish clearer jurisdictional boundaries as well as revenue-sharing mechanisms among the three tiers of government.

The bill also proposes to give statutory recognition to the Water and Energy Commission, which has so far operated under a government formation order.

Among its key provisions, the bill introduces a system of water accounting that requires authorities to maintain records of water availability and utilisation. It also mandates comprehensive assessments of water resources, including surface water, groundwater, rainwater and other sources.

The proposed law also requires authorities to account for water reserved for religious, cultural and ecological needs, alongside allocations for drinking water, irrigation, hydropower generation, and other uses.

Prakash Chandra Dulal, vice-president of the Independent Power Producers' Association Nepal (IPPAN), said several provisions undermine the spirit of federalism by keeping key decision-making powers concentrated at the centre.

"The Constitution established three tiers of government, but requiring approval from the commission effectively keeps decision-making centralised," Dulal argued.

The bill also strengthens environmental safeguards for river-based infrastructure projects.

It requires developers constructing projects on rivers and streams to maintain environmental flows downstream throughout the year. They must release at least 15 percent of a river's minimum flow—or the amount recommended by an environmental impact assessment, whichever is higher—below dams. Environmental flow refers to the minimum quantity of water that must be allowed to continue downstream to sustain the river's ecosystem and the people who depend on it

The existing Water Resources Act only requires users to utilise water in ways that do not adversely affect others. Meanwhile, the Hydropower Development Policy, 2001, requires developers to release at least 10 percent of a river's minimum monthly average flow, or the amount specified by an environmental impact assessment.

According to Dulal, increasing the mandatory release from 10 percent to 15 percent could significantly reduce electricity generation by private hydropower projects.

"The bill requires either 15 percent of the minimum flow or the amount recommended by the environmental study, whichever is higher. That will reduce the generation capacity of our projects," he said. "It will particularly affect projects that have already been invested under the existing legal framework."

The proposed legislation also introduces a comprehensive framework for dam classification, security and safety.

It authorises the government, based on recommendations from the Water and Energy Commission, to classify dams according to their capacity, structure, design and intended purpose.

Under the draft law, the government will be responsible for dam security. Dam operators may request the government to provide security for dams they own and operate. However, if such protection is provided, operators will have to bear the full cost. The government is also authorised to establish national standards for dam security.

Dulal said the provisions remain ambiguous.

"The bill says the government will provide dam security only if operators request it, but it does not explain what happens if the government refuses the request," he said. "At the same time, if the government provides security, the operator has to pay the entire cost. That raises questions about the purpose of requesting government security in the first place."

The bill also requires dam operators to carry out comprehensive safety assessments every five years through an independent panel of experts, depending on the classification of each dam.

Energy Minister Biraj Bhakta Shrestha said the long-awaited legislation clearly defines the rights, responsibilities and duties of federal, provincial and local governments in accordance with Nepal's federal structure.

He said the proposed law prioritises the conservation, sustainable development and multipurpose utilisation of water resources while promoting intergenerational equity and reducing water-related disasters.

"Our commitment is to make water resources the foundation of the nation's prosperity through the effective implementation of this law," Shrestha wrote on social media. "Only through the proper utilisation, conservation and management of water resources can sustainable development be achieved."

The bill formally incorporates the Water and Energy Commission into law. The commission was established by the government in 1975 to promote the integrated development, management and utilisation of the country's water and energy resources but has never had statutory status.

Dulal criticised the proposed governance structure, saying it excludes provincial and local governments from the commission's leadership and is therefore at odds with Nepal's federal system.

"The proposed bill is neither fully federal nor private sector-friendly because provincial and local governments have been excluded from the commission's leadership," he said.

The existing Water Resources Act prohibits the use of water resources without obtaining a permit, except in limited cases such as drinking water for personal use, irrigation of one's own land, operation of traditional water mills, local boat transportation and limited use of water resources located within private property.

The proposed legislation also provides a detailed division of responsibilities among the three tiers of government.

Under the bill, the federal government will oversee irrigation projects covering more than 200 hectares in the Himalayan and hill regions and more than 5,000 hectares in the Tarai, Madhesh and Inner Madhesh. It will also be responsible for landslide control projects exceeding 5,000 square metres and river training or river control works extending beyond 10 kilometres.

Provincial governments would oversee irrigation projects covering up to 200 hectares in the hills and mountains and up to 5,000 hectares in the Tarai. They will also oversee deep tube wells, lift irrigation systems, projects spanning more than one municipality within a province, landslide control works covering between 1,000 and 5,000 square metres, and river control projects extending up to 10 kilometres.

Local governments will be responsible for irrigation systems based on shallow tube wells and landslide management projects covering less than 1,000 square metres.

In the electricity sector, the federal government will regulate power generation projects that extend across two or more provinces, projects falling outside provincial and local jurisdiction, and electricity trade.

Provincial governments will oversee hydropower projects with installed capacities of more than 5 megawatts and up to 25 megawatts, as well as projects of up to 5 megawatts that extend across more than one local government.

Local governments will have authority over electricity generation projects with installed capacities of up to 5 megawatts.