Nepal wants private money in its roads, bridges, energy plants, airports and urban infrastructure. The Public Private Partnership and Investment Act, 2075 (2019) (PPPIA) and the Public Private Partnership and Investment Rules, 2077 (2021) (PPPIR) are the dedicated framework for that. They sit alongside, and separate from, the framework for public-private partnerships.
The route is not complicated to describe, but it has many moving parts. You need an investment approval first. Then you set up a project vehicle, handle registrations, and if the money comes from abroad, deal with Nepal Rastra Bank (NRB). Only after that do you move into implementation, which ends with a signed Project Investment Agreement (PIA).
This guide walks through that pathway for private investment projects. It is written for investors, developers and lenders who need a working map before they commit time and capital. It does not cover the public-private partnership model.
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1. What Counts as an Infrastructure Project
Two laws define infrastructure: Schedule 5 of the Industrial Enterprises Act, 2076 (2020) and Section 2(j) of the PPPIA. The PPPIA list is broad. It covers roads, tunnels, bridges, canals, water dams, sewers, cable cars, railways, tramways, metro rail, mono rail, sky rail, trolley buses and bus rapid transit. It also covers dry ports, airports, hospitals, cold storage, warehouses, stadiums and exhibition halls.
Energy is on the list too: production, transmission and distribution of renewable, thermal and geo-thermal energy. So are waste processing, information technology and communication, and infrastructure for special economic zones and the agricultural, educational, hotel and tourism sectors. A catch-all covers any other similar infrastructure project.
2. Which Law Applies: Domestic or Foreign Investment
Infrastructure projects can be funded by domestic or foreign investors. The estimated cost decides which law governs foreign investment.
Investment type | Estimated cost | Governing law |
|---|---|---|
Foreign investment | Less than NPR 6 billion | Foreign Investment and Technology Transfer Act, 2075 (2019) (FITTA) |
Foreign investment | More than NPR 6 billion | PPPIA and its Rules |
Either way, a project under the PPPIA needs two approvals: an Investment Approval and a Project Implementation Approval. The first comes before the second.
3. Who Approves and Who Implements
Investment approval and project implementation sit with different bodies. The cost threshold of NPR 6 billion is the general dividing line.
Stage | Authority |
|---|---|
Investment approval, estimated cost up to NPR 6 billion | Department of Industries (DOI) |
Investment approval, estimated cost above NPR 6 billion | Investment Board of Nepal (IBN) |
Company registration | Office of Company Registrar (OCR) |
Foreign investment | Nepal Rastra Bank (NRB) |
The implementing agency depends on who holds jurisdiction over the project.
Project | Implementing agency |
|---|---|
Within local level jurisdiction | Concerned local level body |
Within provincial jurisdiction | Concerned Province Government |
Federal, estimated cost up to NPR 6 billion | Concerned Ministry |
Federal, estimated cost above NPR 6 billion | IBN |
Hydropower or energy, up to and including 200 MW | Ministry of Energy, Water Resources and Irrigation (MOEWRI) |
Hydropower or energy, above 200 MW | IBN |
Projects can also be solicited or unsolicited. A solicited project is identified and listed by an office within the IBN, working with the implementing entity and the private sector, and then submitted to the IBN for approval. An unsolicited project is one you propose yourself. You can apply to the IBN even if the project has not been identified.
4. Phase One: Investment Approval
You apply to the IBN in the prescribed format under Sections 3 and 32 of the PPPIA and Rule 31 and Schedule 7 of the PPPIR.
4.1 How long it takes
Rule 31(5) of the PPPIR says approval should come within 15 days of your application. In practice, expect longer. Approval typically takes one to two months, depending on how complex the project is and how complete your documents are.
4.2 What to submit
Document | What it covers |
|---|---|
Application documents (Rule 31 of PPPIR) | Project name, nature, location and other details; estimated project cost; source of investment; implementation action plan and timeline; updated shareholder registry of the investors; other required documents |
Joint Venture Agreement (JVA) | Formation and business of the SPV, share capital and allotment, funding, management, dispute resolution and governing law, reserved matters and deadlock, share transfers, representations and warranties, exit rights, termination |
The IBN has the authority to decide the shareholding pattern of the SPV based on the nature of the project (Section 32(2) of the PPPIA and Rule 33(8) of the PPPIR). Plan your cap table with that in mind.
5. Setting Up the Project Vehicle
After approval, you should set up a Special Purpose Vehicle (SPV). You can also develop the project through a company that already exists.
Step | What happens |
|---|---|
Investment approval | Required for both domestic and foreign investment. The approving authority varies with the amount of investment. |
Register the SPV at the OCR | Form a private limited company, or a public limited company if you plan to issue shares to the public later. Get the name approved online, then file the application with the draft MOA and AOA under the Companies Act, 2063 (2006). |
Tax registration | Register at the Inland Revenue Office and obtain a PAN certificate. |
Business registration | Register at the ward office where the SPV's registered office sits. |
Industry registration | Register at the DOI as an industry under the Industrial Enterprises Act, according to the type of industry. |
Bank account | Open an account at an A class commercial bank. You need it for transactions and for injecting foreign investment. |
The PPPIA also sets up a One Stop Service Centre within the IBN (Section 46). It is meant to help with SPV formation, industry registration, land acquisition and environmental study approvals. In practice, it is not in operation at the moment, so plan to handle these steps yourself.
6. Foreign Investment: Dealing With Nepal Rastra Bank
If your funding comes from abroad, you have three more steps. Miss one and you can run into trouble at repatriation.
Prior notification. Under the NRB Foreign Investment and Foreign Loan Management By-Laws, 2078, you must notify the NRB about the legitimacy of the source of funds before you inject the money. The package includes the investment application, board decision, FDI approval, incorporation certificate, charter documents, PAN certificate, a not-blacklisted certificate from the Credit Information Bureau, the approved share transfer agreement and a notarized share valuation report. You also file investor documents, such as the investor's incorporation certificate, latest audit report, documents showing the actual investors and a passport copy for individuals.
Recording. Any amount brought into Nepal must be recorded at the NRB. You must apply within six months of the injection. The company files its board decision, the investment approval, incorporation and charter documents, PAN, latest audit report, latest tax clearance certificate, updated shareholders' register and proof of the injected amount in a Nepali bank. It also files the approved share transfer agreement, NRB's approval and proof of tax payment where applicable.
Repatriation. Licensed commercial banks provide the foreign exchange facility and must decide on applications within 15 working days. You also need an approval or recommendation from the IBN or DOI. You can repatriate only after all applicable taxes are paid and the foreign investment is properly recorded.
7. Phase Two: Project Implementation
Once the SPV exists and is registered as an industry, you move into implementation. The PIA is the destination.
Stage | What happens |
|---|---|
I. Application for licence | The SPV applies to the IBN for a project implementation licence under Chapter 4 of the PPPIA and Rule 33(3) of the PPPIR, as a solicited or unsolicited proposal. The IBN may ask for a detailed project proposal. |
II. MOU and survey or study licence | If the IBN accepts the proposal, it grants a survey licence on signing an MOU covering project details, each party's obligations and the project schedule. |
III. Submission of details | Under Rule 34 of the PPPIR, the SPV submits to the Project Implementation Body, within the MOU timeline: feasibility study, estimated cost, source of investment, business plan, environmental impact assessment, estimated consumer tariff, estimated royalty to the government, technical design and sustainability, and other items in the MOU. |
IV. Negotiation | The Project Implementation Body forms a Negotiation Committee and calls the developers. After several rounds, the PIA draft is finalised. Schedule 10 of the PPPIR has a sample. For private investment, you sign a PIA, not a Project Development Agreement. |
V. Execution | Both sides sign the final draft. You must submit a Project Implementation Plan within three months of signing. The PIA should generally be signed within one year of investment approval. |
7.1 What it costs
Item | Amount |
|---|---|
Investment approval application fee at the IBN | NPR 150,000 |
SPV registration fee at the OCR | Depends on the SPV's authorized capital |
Fee after negotiation and before PIA execution | 0.2% of the estimated project cost |
Payment or bank guarantee before PIA execution | 0.1% of the estimated project cost |
8. What Investors Get in Return
The PPPIA framework offers several facilities and protections.
Facility | What it means |
|---|---|
One Stop Service Centre | A single window for approvals, registrations, permits, foreign exchange, labour approvals and visas, land, EIA and utilities |
Added incentives | The Board may recommend extra economic and non-economic incentives, including for projects finished early, built to superior quality standards or using advanced technology |
Foreign exchange | Repayment of foreign loans, interest, dividends, royalties and repatriation of investment under prevailing law |
Protection from nationalization | Projects under a valid permit are protected during the permit period, and assets can be acquired only under law and for public purposes |
Stabilization | Later adverse legal, policy or administrative changes do not affect existing project agreements and permits during their validity |
National treatment | Treatment equivalent to other domestic industries, unless a specific law says otherwise |
Government coordination | Coordination among federal, provincial and local governments, with fast-track decision making |
9. Grey Areas to Plan For
Some parts of the process are not clear, and you should price that uncertainty into your timeline.
- Survey licences. Some licences, such as those for hydropower, come from the sector regulator, the Department of Electricity Development. It is not clear whether you also need a survey licence from the IBN.
- Project-specific approvals. It is not clear whether approvals such as a generation licence, land acquisition approval and environmental clearance come from the relevant regulator or from the IBN.
- The One Stop Service Centre. It exists in law but is not operating.
- Approval timelines. The statutory period is 15 days. Real timelines run longer.
10. What to Do Now
- Classify. Confirm your project category, development model and which level of government has jurisdiction.
- Approve. Work out whether the DOI or the IBN approves your investment, and who the implementing body is.
- Structure. Form the SPV and finish the corporate, tax, ward and industry registrations. Draft the JVA.
- Fund. If the capital is foreign, plan the NRB notification, injection, recording and repatriation steps together.
- Implement. Complete the MOU and licence route, file the required submissions and negotiate the PIA. Keep the one year signing window in view.
This article is meant for informational purposes only and should not be considered a substitute for legal consultation. It is imperative to provide proper citation if any part of this document is used as an information source. This document is not intended for advertising or promotional use.
