The Constitutional Bench of the Supreme Court recently overturned the government’s decision to allow construction of infrastructure inside the country’s environmentally protected areas. This has sparked a debate. The ruling followed a writ petition challenging government’s approval to amend Section 5 and Section 6 of the National Parks and Wildlife Conservation Act, 1973. The now overturned amendments allowed the Government of Nepal to approve national priority projects, Investment Board approved projects, or national pride projects within areas of national parks, reserves or conservation or any buffer zones while maintaining coexistence of nature and humans.
The government had pushed for these amendments ahead of the Investment Summit 2024 to attract investment. However, the majority verdict ruling, despite dissenting opinions, reflects a broader perception that development and conservation are mutually exclusive rather than complementary. This raises concerns about the broader implications of the decision for a developing country like Nepal, emphasizing the necessity of prioritizing national economic interests and energy promotion.
Impact of the decision
The ruling comes at a critical juncture for Nepal’s investment climate. The BB Minus credit rating awarded by Fitch Rankings anticipated to attract foreign investors to Nepal as well as facilitate borrowing for national development. However, the recent ruling could potentially dampen the investment climate by limiting the resources available for investment in the country. Critics argue that many projects located in the vicinity of the protected area are both financially and technically feasible.
A major consequence of the ruling, as highlighted by energy experts, is its impact on hydropower projects. An estimated 20,000 MW now faces uncertainty, directly affecting investments from nearly 6 million individuals.
Furthermore, the goal of the government to be zero carbon emissions by 2045 is likely to face setbacks. The country requires approximately 50,000 MW of energy production to meet projected national consumption and export commitments to transition into net zero carbon emission. The Ministry of Energy, Water Resources, and Irrigation has set a target of 1,500 units of per capita energy consumption by 2035. Nepal has also entered into agreements to export 10,000 MW electricity to India over next decade and a 40 MW tripartite agreement with Bangladesh. However, the court ruling may disrupt these commitments, could trigger domestic power shortages, job creation and stall regional developments.
Current Energy Development Status
Nepal’s fiscal budget aims to increase the national grid capacity to 4500 MW in the next fiscal year. Energy Development Roadmap and Action Plan 2081 has set the target to generate 28,500 MW by 2035. However, given the current generation capacity hovering around 3400 MW, achieving this target appears increasingly challenging.
The growth of Nepal’s hydropower sector has been largely driven by private sector participation, including investment from Non-Resident Nepalis (NRN) and foreign investors, all of which require a stable and predictable regulatory environment. However, the ruling has created uncertainty among investors, who are now hesitant to invest due to perceived conflicts between the judiciary and legislature. Critics argue that the judiciary’s stance does not align with the legislative intent of elected representatives.
As a result, nearly 267 hydropower projects, collectively capable of generating 19,736 MW, now face potential stagnation. This could lead to an estimated annual economic loss exceeding NPR 400 billion for the state.
International Precends
Globally, the courts have often ruled in favour of large-scale development projects when they align with national interests, economic stability, and long-term energy security, even in the environmentally sensitive areas. While such decisions have drawn criticism from environmental groups, these projects have also significantly contributed to economic growth of the country.
One prominent example is the Belo Monte Dam Case in Brazil, where the Supreme Court decided that building a hydropower dam on the Xingu River in the protected rainforest in the Amazon was critical for national energy needs. The project led to the contribution of 11,233 MW to Brazil's power grid.
Likewise, courts in India have ruled prioritizing economic stability in cases such as Goa Foundation V. Union of India and Narmada Bachao Andolan V. Union of India. The rationale behind the decision was the project's significant contribution to employment and generating state revenue. In Kenya, the Supreme Court favoured Lamu Coal Plant stating that the project was essential for the country's energy security and industrialization. The court had directed new environmental assessments but did not permanently stop the project. These international cases highlight the need for a project-sensitive approach rather than total ban.
Need for a Balanced Approach: Conservation vs. Development
Conservation and Development must be complementary to each other. Even in 2025, we should not be forced to choose between the two. Rather, a sustainable approach must be adapted. The assumption that development will necessarily hamper the environment must be reconsidered. As Justice Malla rightly pointed out that human existence is not possible without nature, and nature holds no significance without utilization.
While the majority has approached the litigation towards a stringent green approach, it is important to note other economic and development realities. With 23.39% of Nepal’s land designated as protected areas, an outright prohibition of infrastructure development is neither practical nor beneficial. Many high-flowing rivers originate from the Himalayas and pass through these protected zones. Especially important for Run of River (RoR) projects which utilize the natural flow of the river with minimal environmental impact.
A more balanced approach could have been adapted rather than a blanket ban. Capacity-based and project-specific restrictions approach would have been a more feasible alternative. The court’s ruling overlooks the long-term benefits of clean energy production, which aligns with Nepal’s development goals and international climate commitments.
Way Forward
The assumption that developers and government agencies will disregard environmental regulation is flawed, as these projects already face stringent bureaucratic and legal scrutiny. The focus should be on strengthening implementation mechanisms and ensuring strict adherence to the existing environment protection measures, particularly within the conservation areas.
A balanced approach to promote environmental responsibility among the stakeholders while at the same time enabling economic growth must be adopted. The court should push for constructive policy measures rather than confrontational legal battles focusing on economic realities of the country. A conservation only approach risks economic stagnation and forces the citizens to choose between livelihood opportunities and environmental preservation.
Developing countries like Nepal must pursue a middle ground between conservation and economic progress. A pragmatic approach that ensures environmental sustainability while fostering development is crucial to Nepal’s energy security and economic prosperity.