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Good practice Imported

Kulekhani Hydropower Watershed — Nepal's Statutory Royalty-Sharing PES Scheme

Nepal · Markhu · See the Nepal profile

Evidence: Observational / pre–post Top 81% 33/100 · Ask Evidence Copilot about this practice

Nepal channels 12% of Kulekhani hydropower royalties to Makwanpur district, split 50/50 between upstream and downstream communities — a long-running PES-like scheme, coinciding with a 31% rise in annual water inflow and declining reservoir sedimentation since 1996.

12%
Royalty share allocated to Makwanpur district
50/50
Benefit-sharing split (upstream/downstream)
31%
Rise in average annual water inflow (1999-2003 vs 1991-1995)
55%
Rise in dry-season inflow (1999-2003 vs 1991-1995)
declining
Reservoir sedimentation rate (since 1996)

Details

Maturity
Established
Promoter
Makwanpur District Coordination Committee, with Nepal Electricity Authority hydropower royalties
Period
1996–present
Keywords
hydropower, watershed conservation, royalty revenue-sharing, sedimentation control

Context

The Kulekhani hydropower reservoir in Makwanpur District, Nepal, once supplied around a fifth of the country's electricity, but upstream catchment erosion has long threatened the reservoir with sedimentation.

Objectives

Compensate upstream communities for land stewardship to protect the catchment and reduce sedimentation, via statutory hydropower-royalty revenue-sharing.

Activities

Nepal's central government allocates 12% of Kulekhani's generation revenue to the Makwanpur district government. A locally endorsed benefit-sharing guideline, formalised in the 1990s, splits these funds 50/50 between upstream watershed communities and downstream/other communities, funding conservation and livelihood activities. It is cited as a reference model for later schemes, such as the proposed Sardukhola watershed PES.

Results

Long-term hydrological monitoring shows the reservoir's sedimentation rate declining since 1996, alongside a 31% rise in average annual water inflow and a 55% rise in dry-season inflow when comparing 1999-2003 to 1991-1995.

Conclusions

An institutional case-study analysis (Khatri, published via ForestAction Nepal/IASC) finds the scheme's actual effectiveness at fostering ecosystem services 'limited,' attributing this to weaknesses in institutional design and poor integration with pre-existing community-forestry institutions - a reminder that the royalty flow alone should not be assumed to be the sole driver of the hydrological trend.

Implementation
Indicative cost
Low (< €50k) — Funded via a 12% statutory share of Kulekhani hydropower generation revenue; no total monetary figure disclosed
Time to results
Long (> 3 years) — Formalised in the 1990s; ongoing since 1996
Staffing & skills
Makwanpur District Coordination Committee - fund administration, Nepal Electricity Authority - hydropower royalty source, Central government of Nepal - statutory royalty rule

Conditions for success

  • Statutory royalty-sharing rule with a clear percentage allocation
  • Locally endorsed benefit-sharing guideline splitting funds between upstream/downstream communities

Common failure modes

  • Independent institutional case-study analysis (Khatri) finds the scheme's actual effectiveness at fostering ecosystem services 'limited'
  • Weaknesses in institutional design and poor integration with pre-existing community-forestry institutions
  • Hydrological improvement trend cannot be solely attributed to the royalty scheme

Commonly funded by

National / regional programmes

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Data sources

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