KATHMANDU, MAY 25 –
The Finance Ministry has refused to offer value added tax (VAT) exemption on construction materials citing existing legal provisions, while the Nepal Electricity Authority (NEA) has not signed power purchase agreement (PPA) with the developers at higher rate.
The NEA’s reluctance to sign PPA at increased rate also prevented the government from providing another facility — concessional loans — to the developers as such loans are sanctioned only after PPA signing. The projects were promised such loans at 10 percent interest on the basis of Rs 20 million per megawatt. Currently, the average cost of hydropower projects stands at Rs 140 million per megawatt.
NEA has cited its deteriorating financial health for not signing the agreement with the 16 projects. The NEA has signed the agreement at increased rate with seven of the 23 power projects recommended by the Energy Ministry for the state facilities.
NEA Managing Director Rameshor Yadav said the power utility “cannot afford signing PPA at increased rate” as it is “financially vulnerable”.
An NEA official expressed dissatisfaction over the Energy Ministry’s commitment to revise the PPA rate despite being well aware about the poor financial health of the NEA and that NEA can no longer afford the upward revision in the rate.
Showing the organisation’s bad financial situation, the NEA has been avoiding signing PPA with projects whose capacity is above 25MW of late. NEA has been avoiding signing PPA with the projects that supply majority of energy in the wet season but fail to do so in dry season.
Shyam Kishor Yadav, senior divisional engineer at the Energy Ministry, said the projects were deprived of the government facilities due to the NEA’s reluctance to sign PPA at increased rate despite the ministry’s repeated request to do so.
The private developers have questioned over the ministry’s capacity to convince its subordinate agency. Subarna Das Shrestha, president of the Independent Power Producers’ Association of Nepal, expressed surprise over the NEA’s refusal to sign PPA at increased rate although the facility was announced through a Cabinet decision.
Private power developers have been seeking government support citing difficulties in completing construction due to high bank interest rates and low PPA rate, among others. In order to rescue troubled hydropower projects and ensure their operation by 2014, the government had announced a number of relief measures, including the aforementioned facilities.
Yadav said the failure to provide the promised incentives has created confusion as whether to continue the provision. According to the Energy Ministry, an additional 70 projects have applied for such facilities.
Source : The Kathmandu Post