USAID-FUNDED NEPAL HYDROPOWER DEVELOPMENT PROJECT (NHDP) Compensation Models for the Land Use in Transmission Right of Way (ROW) – Global Case Studies

The GoN has incorporated the requirement to address land use for Right of Way (RoW) of TLs into its 99-point Action Plan. The development of TLs affects Project Affected People's (PAPs) means of livelihood and sources of income, as TL RoWs generally reduce the value of the land they cross. PAPs contend that the current land valuation mechanism used by the GoN's land revenue office is unfair and unacceptable. The mechanism does not reflect market prices, and there are no clear guidelines on post-RoW land use. International best practices suggest that compensation amounts must reflect market rates, and valuation should be made by an independent agency or valuation firm according to parameters such as fair market value, replacement cost, type of land, location of land, and recent transactions. The GoN has identified several key challenges in the development of TLs and RoW in Nepal, including the land valuation mechanism, current practice of easement fee for RoW, challenges in raising capital, lack of awareness about the project, and land use policy. To address these challenges, the GoN should revise the payment mechanism and consider optional annual payment and early resolution incentives. Additionally, the GoN should modify the legal framework to require banks to accept RoW land as collateral for loans and develop a land use policy to guide post-RoW land use. A study on compensation mechanisms for land and Right of Way in selected countries has been conducted to identify best practices. The study examined TL RoW land compensation mechanisms in countries including the USA, Canada, India, Georgia, and Laos PDR. The study found that in the USA, TL developers compensate landowners pursuant to the Uniform Relocation Assistance and Real Property Acquisition for Federal and Federally-Assisted Programs Act. The compensation is based on the area of the easement, calculated in acres, and the fair market value of the land within the easement. In the case of The Plains & Eastern Clean Line in Texas, the utility seeks to negotiate all easement agreements on a voluntary basis and make every effort to obtain an agreement that is fair and reasonable to both parties. The utility presents landowners with a written offer and an Easement Agreement to purchase the easement, and offers a one-time easement payment representing 100% of the fair market value of the land crossed by the easement area, as determined by a market data study or an appraisal. The study also found that in other countries, such as Canada and India, TL RoW land compensation mechanisms are similar to those in the USA. In Canada, the utility pays 100% of the fair market value of the land within the easement area, and in India, the utility pays a one-time easement payment representing 100% of the fair market value of the land crossed by the easement area. Overall, the study suggests that the GoN should adopt a compensation mechanism for land and Right of Way that reflects market rates and provides clear guidelines on post-RoW land use. The GoN should also revise the payment mechanism and consider optional annual payment and early resolution incentives to address the challenges in the development of TLs and RoW in Nepal.