Fiscal Nepal
First Business News Portal in English from Nepal
KATHMANDU: Nepal’s hydropower sector, where private investment accounts for over 80% of the 2,900 MW out of the country’s 3,600 MW total capacity, faces an unprecedented crisis following the introduction of the ‘Take and Pay’ policy in the 2082/83 budget. With over 4,000 MW of projects under construction and 12,889 MW awaiting Power Purchase Agreements (PPAs) with the Nepal Electricity Authority (NEA), the policy has plunged the sector into uncertainty, risking Rs 66 billion already invested, warns the Independent Power Producers’ Association, Nepal (IPPAN).
Energy Minister Deepak Khadka, opposing the policy—absent from his ministry’s recommendations—wrote to the Finance Ministry post-budget, blaming Finance Minister Bishnu Poudel for its inclusion. IPPAN President Ganesh Karki labeled it a “betrayal of 25 years of private sector contribution,” noting it jeopardizes over Rs 10 trillion in potential investments. The shift from the ‘Take or Pay’ model, where NEA guaranteed payments, to ‘Take and Pay,’ allowing NEA to avoid buying power, threatens bank loans and could halt credit flows.
Khadka criticized the lack of consultation, while Poudel’s conflicting statements—claiming ignorance in a recent investor meeting yet defending it in Parliament—highlight government discord. The budget’s silence on the Energy Development Roadmap, targeting 28,500 MW by 2035 and 15,000 MW exports to India and Bangladesh, exacerbates concerns. IPPAN threatens protests if the policy isn’t withdrawn, demanding guarantees for private sector trading and transmission roles.
This uncertainty could cripple construction, consulting, and ancillary industries, stalling economic activity and jobs, contradicting Nepal’s hydropower-friendly policies since 2058.
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