The government has hinted at revising its decision on the take-and-pay clause enforced for the hydropower companies through the announcement of the budget for the next fiscal year.

Bowing to the pressure from the private sector electricity producers, the government now looks forward to revisiting its own decision in just two weeks of implementation. Speaking at a program on Friday, Energy Minister Deepak Khadka said the take-and-pay clause might not help the country achieve its energy production target.

The government aims to produce 28,500 MW of electricity by 2035 in line with the Energy Development Roadmap. According to Minister Khadka, the Energy Ministry has already written to the Ministry of Finance (MoF) to reconsider the previous decision of the government.

In the annual budget announced on May 29, the government introduced the condition that the electricity generators can carry out power purchase agreement (PPA) with the Nepal Electricity Authority (NEA) only on the basis of the take-and-pay. The condition requires that electricity generated by private producers will be purchased by the NEA only when there is demand.

Private power developers, however, have been protesting the government’s new decision arguing that the policy will significantly dampen investment in the sector. According to them, banks and financial institutions will not finance such projects citing that it might not guarantee good returns.

According to the Independent Power Producers’ Association Nepal (IPPAN), more than 350 hydropower projects with a combined capacity of 17,000 megawatts are either undergoing feasibility studies or awaiting government approval for PPAs. The association warned that the Rs 66 billion already invested in these studies is now at risk due to the policy shift.

“The government’s insistence on this modality contradicts its own Energy Development Roadmap 2081, which targets generating 28,500 megawatts,” IPPAN stated in a press release. “It also poses a significant barrier to achieving the energy goals outlined in the 16th Five-Year Plan of the National Planning Commission.”

Meanwhile, Finance Minister Bishnu Prasad Paudel, who had been reiterating to implement the decision, has now started consultation with stakeholders to discuss the issue of take-and-pay. Shyam Prasad Bhandari, spokesperson for the MoF, said there have been several discussions at the ministerial and secretary levels regarding the issue of take-and-pay.

IPPAN President Ganesh Karki expressed his hope on the review of the government policy soon. “As the NEA and Energy Ministry were already convinced over the probable drawbacks of the new rule, the MoF is reported to be positive to amend the clause,” Karki told Republica.