As the backlash intensifies against the ‘take-and-pay’ power-purchasing provision introduced in the latest budget, Finance Minister Bishnu Paudel has stepped forward to defend the policy.

Meanwhile, Energy Minister Deepak Khadka has distanced himself from the deepening conflict, saying that it was not endorsed by his ministry and that he personally opposes it.

Read: IPPAN Urges Government to Remove ‘Take and Pay’ Provision from Budget

The Independent Power Producers’ Association Nepal (IPPAN), which represents private hydropower developers, has strongly objected to the new policy. On Sunday, June 8, an IPPAN delegation met Minister Paudel at the Ministry of Finance and urged him to rescind the provision, which they argue undermines the viability of ongoing and future projects.

Finance Minister Paudel, however, maintained that the measure would not pose an obstacle to achieving Nepal’s energy goals. IPPAN members vehemently disagreed, warning that the change could shatter investor confidence and stall momentum in the hydropower sector.

The provision shifts Nepal Electricity Authority’s (NEA) power purchase model from a longstanding ‘take-or-pay’ approach—under which NEA must pay for power whether it consumes it or not—to a ‘take-and-pay’ system, where NEA pays only for electricity it actually purchases.

IPPAN President Ganesh Karki argued that the shift would make it difficult for developers to secure bank financing, as lenders require guaranteed cash flows to underwrite loans. “If banks don’t see guaranteed returns, they won’t invest,” said Karki. “Without financing, these projects simply can’t move forward.”

IPPAN says developers who have already spent heavily on feasibility studies are now considering returning their licenses—if the government agrees to reimburse their incurred expenses.

Senior Vice President Mohan Kumar Dangi echoed the concern, emphasizing that while the private sector welcomes other budget provisions, the ‘take-and-pay’ clause has deeply discouraged those who have been waiting for years to secure Power Purchase Agreements (PPAs). “This provision must be removed,” he said.

Vice President Uttam Vhlon called the new model “illogical,” especially in a system where NEA remains the monopoly buyer. “If private companies are not allowed to trade electricity independently, a ‘take-and-pay’ model effectively shuts the door to private investment,” he argued.

In response, Finance Minister Paudel said the government had no intention of sidelining the private sector and promised that necessary steps would be taken to address legitimate concerns.

The budget, presented on May 29, includes the clause requiring NEA to purchase electricity from run-of-the-river hydropower projects strictly under the ‘take-and-pay’ arrangement. The policy has sparked widespread alarm among power producers, who fear that it will derail over 350 projects—representing a combined capacity of 17,000 megawatts—currently under development or awaiting PPAs.

Industry stakeholders warn that the Rs 66 billion already invested in these projects could be at risk if the provision is not rolled back.

IPPAN has announced it will launch phase-wise protests if the government fails to amend the policy.