Directive on the Foreign Exchange Facility Recommendation

The Ministry of Energy exercising its power pursuant to Rule 94A of Electricity Rules (2050) 1993 has issued a directive titled” Directive on the Foreign Exchange Facility Recommendation for the Hydropower Projects 2014 (2071)” on December 11, 2014 (2071/08/25 B.S.) on the recommendation for foreign exchange facility for the hydropower project   (the ‘Directive’).

Any company undertaking the survey and development of hydropower project or transmission lines (the “Company”) is required to obtain recommendation from Department of Electricity Development (DOED) for any foreign currency payment to any service provider and contractor (the “DOED Recommendation”).

As a matter of process, Nepal Rastra Bank, the Central Bank of Nepal (NRB) will grant the approval for transfer of such foreign currency payments only on the basis of the DOED Recommendation.

The Directive can be found in the DOED”s official website at http://www.doed.gov.np/procedure/Foreign-Currency-Exchange-Directive-2071.pdf. The Directive is in Nepali language.

Scope of the Directive

The requirement to obtain DOED Recommendation is applicable only when the payment is made in foreign currency for-(A) consultancy fee (including audit fee), (B) procurement of goods, and (C) payment for repair and maintenance service.

Consultancy Fee

The consultancy work/service has been divided into three categories; a) Survey work b) Project construction work c) Administration and Audit work.  An application should be submitted to DOED along with the documents listed in Schedule of 1 of the Directive to obtain the facility of making payment for any of the consultancy services in foreign currency by the licensee for electricity generation, transmission and distribution for electricity project development.

Procurement of Goods

An application should be submitted to DOED along with the documents listed in Schedule of 1 of the Directive to obtain the facility of making payment for the import of goods in foreign currency by the licensee for electricity generation, transmission and distribution, construction and repair and maintenance.

Payment for Repair and Maintenance Services

An application should be submitted to DOED along with the documents listed in Schedule of 1 of the Directive to obtain the facility of making payment for the repair and maintenance service in foreign currency by the licensee for electricity generation, transmission and distribution, construction and repair and maintenance.

Declaration regarding the commitment not to misuse/abuse the foreign currency shall be made as per Schedule 2 of the Directive by the Company along with the documents required to be submitted.

In addition to the above, for providing the recommendation for the foreign exchange facility, the DOED can ask for other additional documents if it finds necessary. Such documents shall be submitted within 15 days to the DOED.

Documents to be submitted

Payments not Covered

The Directive has not provided the requirement to obtain the DOED Recommendation for payment or repatriation of the investment proceeds/returns to the foreign investor.

In view of this, though not specifically covered under the Directive and given the provisions of the Foreign Investment and Technology Transfer Act 1992 (2049) and Foreign Exchange Regulation Act 1962 (2019), the DOED Recommendation is not required for the repatriation of investment and investment proceeds to the foreign investor (for example, dividend, sale proceeds, loan, interest, etc.). In such a case, recommendation from Department of Industries (DOI) will be required.