Kathmandu-For the past two decades, hydropower has been a key driver of national prosperity for Nepalis. To achieve this, the government implemented liberal policies that encouraged private investment and mandated the issuance of shares to the public.

The primary goals were to boost energy production, achieve energy self-sufficiency, and facilitate electricity exports. However, numerous distortions during project development have hindered affordable energy production. Some individuals exploited investment tools for capital mobilization and profit sharing, leading to significant irregularities.

A government-led study in 2019 identified hundreds of distortions, but the report remains unpublished.

Three major forms of malpractice were identified:

1. Cost inflation: Instead of reducing production costs, costs were artificially inflated, burdening ordinary investors while promoters secured substantial profits.

2. Tax evasion: Fake bills and deliberate tax avoidance were used during project development.

3. Misuse of foreign currency: Hydropower projects were exploited to legally transfer domestic capital abroad.

Despite the government’s decision to bury the report, the Revenue Investigation Department has launched a comprehensive investigation, which aligns with the earlier government study’s findings.

The department launched a wide-ranging investigation into operating companies, IPOs, and pipeline projects. Serious files revealed tax evasion, foreign currency misuse, and fraud.

An official involved in the investigation said several major cases are nearing completion.

Projects with approval and power purchase agreements showed abnormal cost escalation before operation, imported equipment prices were inflated, and foreign currency was managed abroad. Non-transparent procurement and internal tax evasion were widespread.

'This is a major systemic corruption,' an official said. 'The department plans to file the first cases soon.'

The distortion in hydropower projects is severe. Promoters bought machinery and equipment without verifying international market prices, leading to deliberate cost inflation. The cost bubble defrauded public investors, causing losses to the state.