The Independent Power Producers’ Association, Nepal (IPPAN), has urged Deputy Prime Minister and Finance Minister Bishnu Paudel not to remove the “Take and Pay” provision from Power Purchase Agreements (PPA) under any circumstances in the upcoming fiscal year’s budget.

During a meeting held at the Ministry of Finance on Sunday, Minister Paudel reiterated that the relevant clause in the budget would not create any obstacles to energy production. However, the producers insisted that the clause would discourage further investment in the sector and strongly requested that it be amended.

IPPAN President Ganesh Karki stated that the provision of purchasing electricity solely under the “Take and Pay” model would prevent banks from investing in hydropower projects, resulting in no developers approaching the Electricity Authority for PPAs. He further said that if the government reimburses the amount spent during project studies after obtaining permits, the developers would be willing to return the project licenses to the government.

IPPAN Senior Vice President Mohan Kumar Dangi stated that IPPAN has no objections to other aspects of the budget. However, he emphasized that the inclusion of the term “Take and Pay” has deeply disappointed developers who have been in the pipeline since 2018 (2075 B.S.) with the hope of securing PPAs, and therefore, that term must be removed.

IPPAN Vice President Uttam Bhlon stated that the “Take and Pay” provision should not be introduced when the private sector is not permitted to engage in electricity trade. He explained that if the private sector were allowed to produce and trade electricity, they could independently find markets and develop projects. However, since the Nepal Electricity Authority remains the sole purchaser, introducing “Take and Pay” is equivalent to shutting the door on the private sector.

IPPAN Deputy General Secretary Prakash Dulal stated that there is no meaning in signing a PPA under the “Take and Pay” model. “What is the point of signing such a PPA if banks won’t invest?” Dulal questioned.

After listening to the statements from IPPAN officials, Finance Minister Paudel said that he has no intention of discouraging the private sector and assured that he would take the initiative to resolve any problems that arise in project development.

After the budget was made public on May 29, which stated that electricity from run-of-river projects would be purchased only under the “Take and Pay” provision to align production with consumption, developers strongly objected. In response, IPPAN has already met with the Energy Minister, Finance Minister, and former Prime Ministers, warning that this provision would have far-reaching impacts on the energy sector.

Currently, over 350 projects with a combined capacity of 17,000 megawatts are in the study phase or have applied for PPAs, and since they are run-of-river projects, their future has become uncertain. The NPR 66 billion already spent on studying these projects is also at risk of being lost.

Energy Minister Deepak Khadka has stated that the Energy Ministry did not propose the provision and that he objects to it. Meanwhile, IPPAN has announced that if the clause is not amended, they will launch a phased protest.

Source: Kantipur