-
Independent power producers have alleged that the government is planning to include the ‘Take and Pay PPA’ provision in the budget without any proposal from the Ministry of Energy.
-
According to them, this poses a risk of setting back the energy sector and jeopardizing investments, and it has also created uncertainty over the construction of 17,117 megawatts of projects.
-
IPPAN has demanded the immediate withdrawal of the ‘Take and Pay’ provision, stating that it.
June 17, Kathmandu — Independent power producers have accused Finance Minister Bishnu Paudel of attempting to undermine the energy sector by secretly including the ‘Take and Pay PPA’ provision in the budget for the upcoming fiscal year 2025/26, without any proposal from the Ministry of Energy.
They have alleged that by including the ‘Take and Pay PPA’ in the upcoming fiscal year’s budget statement, Finance Minister Paudel has acted against his official responsibilities and the principles of the budget.
Ganesh Karki, President of the Independent Power Producers’ Association of Nepal (IPPAN), stated that it is unfortunate for the country that the government, the Ministry of Finance, and Finance Minister Paudel himself are involved in an attempt to dismantle the private sector, which has successfully generated 2,900 megawatts of electricity in just two and a half decades.
“Due to the ‘Take and Pay’ provision, all energy entrepreneurs—both directly and indirectly—have been affected, from small-scale entrepreneurs to public limited companies,” said IPPAN President Ganesh Karki at a press conference organized by IPPAN on Tuesday. “This provision does not seem to push the energy sector forward; instead, it appears to drag it backward. Therefore, this provision must be withdrawn immediately.”
According to President Karki, under the ‘Take and Pay’ provision, banks and financial institutions are unwilling to provide financial arrangements for Power Purchase Agreements (PPAs) made on that basis. As a result, the construction of around 350 megawatts of Run-of-River (RoR) projects—either approved for survey and construction or in the application process—has become uncertain, putting a total capacity of 17,117 megawatts at risk.
Karki stated that a total of Rs. 66.22 billion has already been invested in projects with a combined capacity of 17,117 megawatts, and due to the ‘Take and Pay’ provision, this investment is now at risk of being lost.
According to IPPAN, Power Purchase Agreements (PPAs) for projects with a combined capacity of 4,965 megawatts that have applied for approval have been affected. Additionally, even projects below 10 megawatts have been impacted by the ‘Take or Pay’ provision.
“Having the ‘Take and Pay PPA’ provision included in the budget passed by the Cabinet and reaching the point of opposing it and writing a letter to the Ministry of Energy shows the Energy Minister’s negligence,” said IPPAN President Karki. “However, having the courage to write a letter to the Ministry of Finance against the very budget he helped pass is a positive step by the Energy Minister.”
IPPAN states that the ‘Take and Pay’ provision goes against the Electricity Act 2049, the Hydropower Policy 2058, the 16th Five-Year Plan and its targets, the Energy Development Roadmap 2024 approved by the Cabinet with a production target of 28,500 megawatts, the 15,000-megawatt export plan to India and Bangladesh, and the long-term electricity trade agreement of 10,000 megawatts with India over 10 years.
According to IPPAN, currently, Nepal has a total electricity production of 3,600 megawatts. Of this, the private sector’s share is 2,900 megawatts, which is more than 80 percent.
Similarly, out of the 4,200 megawatts under construction, the private sector accounts for 4,000 megawatts, and projects with Power Purchase Agreements (PPAs) that are in the stage of financial arrangement also total 4,000 megawatts.
Nepal Electricity Authority, the sole purchaser of the electricity produced, is currently operating PPAs under the ‘Take or Pay’ system. IPPAN warns that switching to the ‘Take and Pay’ system will cause serious problems.
Source: Online Khabar
