Kathmandu- The Independent Power Producers’ Association of Nepal (IPPAN) has announced the first phase of protests following Finance Minister Bishnu Paudel’s lack of commitment to removing the controversial ‘Take and Pay’ provision from the power purchase agreement (PPA) clause in the upcoming fiscal year 2025/26 budget.
Acting President of IPPAN, Mohankumar Dangi, stated that the association will continue with strong protests until the budget and programs are endorsed by the House of Representatives. If the ‘Take and Pay’ PPA is not revoked, Dangi warned that the symbolic keys to hydropower projects will be handed over to the government.
IPPAN argues that the proposed policy threatens the sustainability of private investments, which currently contribute over 80% of Nepal’s total electricity production. The association has expressed concern that banks are unlikely to finance hydropower projects under the ‘Take and Pay’ model, which they believe undermines the private sector. According to IPPAN, more than 66 billion rupees of investment in over 350 projects totaling 17,000 megawatts—currently under study by the private sector—could be at risk.
As outlined in Item 227 of the new budget, Run-of-River (RoR) projects would now be contracted under a ‘Take and Pay’ model. Under this arrangement, the Nepal Electricity Authority (NEA) would only pay for the electricity it consumes, rather than the full amount agreed upon in the PPA. This contrasts with the existing ‘Take or Pay’ model, under which the NEA must pay the agreed amount regardless of whether the electricity is consumed.
Historically, all PPAs in Nepal have followed the ‘Take or Pay’ format. However, the NEA has reportedly limited payments for older agreements to a ‘Take and Pay’ basis when transmission lines are delayed or under capacity.
Energy, Water Resources, and Irrigation Minister Deepak Khadka has claimed that the ‘Take and Pay’ clause will be revised in the final budget. But Finance Minister Paudel, speaking in the House of Representatives on June 16, signaled no intention of removing it. He argued that the government is preparing legislation to enhance private sector participation in power generation, transmission, and trade.
The proposed Electricity Bill 2024, currently under parliamentary review, aims to liberalize the electricity market. Minister Paudel stated that once the bill is passed, the private sector will be able to sell surplus electricity to buyers other than the NEA. He defended the ‘Take and Pay’ model as an interim arrangement during this legislative transition.
IPPAN’s Protest Program Schedule:
June 20: Submission of memorandums to the Prime Minister, Energy Minister, and Finance Minister
June 21: SMS campaign urging withdrawal of the ‘Take and Pay’ clause
June 22: Social media campaign calling for the reversal of the policy
June 23: Coordination with private sector associations and publication of a joint statement
June 24: Mass SMS sent to the Speaker and Chief Whip of the House of Representatives urging policy reversal
Source: Kantipur
