Nepal could receive $300 million from the World Bank (WB) and the Asian Development Bank (ADB) in the first phase of the planned $1 billion Development Policy Credit in Energy (DPCE), a senior government official has said.

During a meeting between Finance Ministry officials and a joint mission of the WB and the ADB on Friday, the two sides discussed the prior actions that need to be taken to get the interest-free credit from the two largest multilateral donors. Once finalised, Nepal will receive the credit in different phases.

Baikuntha Aryal, chief of international economic cooperation coordination division at the Finance Ministry, said Nepal could receive $300 million in the first phase subject to policy reforms implemented.  “We agreed to identify reform areas jointly and actions to be taken concretely,” he said. 

Issues like introducing new Electricity Act and other legal reforms, unbundling Nepal Electricity Authority (NEA) and modality of unbundling, reforms in tariff mechanism, and establishment of regulatory bodies are among some of the measures which are being discussed, according to officials.

The government had sought up to $2 billion from the two donors after announcing that a number of reform initiatives would be implemented under the Energy Emergency Plan unveiled last February.

These reforms include unbundling the NEA, signing power purchase agreements in US dollar terms for 10 years, reducing procedural delays and conducting legal reforms by issuing a new Electricity Act and Act on National Electricity Regulatory Body.

Some progress has been made in unbundling the NEA with the registration of the National Transmission Grid Company, but nothing has been done with regard to a new Electricity Act and other reform commitments.

A source at the ADB said that although the mission discussed ways to go forward with the reforms plans, no concrete size of financing has been finalised yet. “There are many reports about size of assistance, but it is still premature to discuss,” said the source.

The donor agency source said that implementation of reforms would largely depend on political situation in Nepal and the reforms that can be implemented which will determine the actual figure of assistance.

The ADB has around accumulated assistance of $1 billion in the energy sector so far, but many projects financed by it have been facing problems over the last few years.