The budget for the fiscal year 2082/83 (2025/26) states that the Power Purchase Agreement (PPA) for run-of-river (RoR) hydropower projects will be based on the ‘take and pay’ model. However, the Independent Power Producers’ Association, Nepal (IPPAN), has expressed concern that this declaration has closed the path for the construction of hydropower projects with a total capacity of 17,000 megawatts.

Despite it being clear that banks and financial institutions do not provide financing for PPAs based on the ‘take and pay’ model, the government has made a budget announcement that, according to IPPAN, effectively pushes the energy sector toward collapse.

“This declaration has not only blocked the construction of around 300 projects with a combined capacity of 17,000 megawatts, but also put at risk more than NPR 66.22 billion already invested by private developers in these projects,” stated IPPAN in a press release issued on Saturday.

IPPAN President Ganesh Karki said that the budget announcement has deeply discouraged the private sector, which has already invested over NPR 1.5 trillion in the hydropower sector and was preparing to invest more than NPR 3 trillion.

According to IPPAN, while the country’s electricity generation capacity has reached 3,600 megawatts, the private sector holds more than 80 percent of the share. The total capacity of run-of-river (RoR) projects that have applied for construction and survey permits from the Department of Electricity Development and are awaiting PPAs stands at 17,117 megawatts. Of this, only 190 megawatts worth of projects have been initiated by the Nepal Electricity Authority or the government, IPPAN stated.

“After the Department of Electricity Development issued permits and over NPR 66 billion has already been invested, the government’s budget announcement to allow PPAs only under the ‘take and pay’ model is seen by us as a highly anti-private sector move,” the statement reads. “Had the budget simply announced that it would open the door for the private sector to trade electricity, we could have found markets ourselves and proceeded with PPAs. However, instead of doing so, the provision presented in Parliament discourages the majority of the private sector, which is actively involved in RoR projects, and has created a sense of disillusionment within the private sector.”

IPPAN has demanded that the ‘take and pay’ provision, which it says is anti-private sector and aimed at eliminating private sector involvement in the energy sector, be immediately revised. It has called for the restoration of the environment for PPAs under the ‘take or pay’ model, which the Nepal Electricity Authority has been using from the beginning. Otherwise, IPPAN has warned that the private sector will launch a protest against the decision.

Nepal Electricity Authority spokesperson Rajan Dhakal said that although the provision has been mentioned in the budget, it has not been clearly defined. “It’s included in the budget, but it’s not clear,” he said. “The Ministry of Finance and the Ministry of Energy will likely clarify the matter.”

Source: Kantipur