The Independent Power Producers’ Association Nepal (IPPAN) has urged the government to withdraw the 'Take and Pay' provision included in the current fiscal year’s budget for power purchase agreements (PPAs), warning that it could discourage private investment and severely harm the energy sector.

On Tuesday, IPPAN submitted a memorandum to Minister for Energy, Water Resources and Irrigation Deepak Khadka, expressing strong concern over the provision. The association argued that the shift from the existing ‘Take or Pay’ model to ‘Take and Pay’ could lead to an exodus of private investors from the hydropower sector.

Minister Khadka acknowledged the concern, stating that the inclusion of the 'Take and Pay' provision was a serious policy error. He emphasized that the Ministry had already laid out a roadmap for generating 28,500 MW of electricity, which includes both domestic consumption and exports to India and Bangladesh by 2035. He added that there is currently no justification for adopting the ‘Take and Pay’ model, which allows the Nepal Electricity Authority (NEA) to pay only for electricity it actually consumes, unlike the ‘Take or Pay’ system, which guarantees payment regardless of usage.

Secretary of the Ministry of Water Resources, Sarita Dawadi, said she was unaware that such a provision had been included in the budget without the ministry’s recommendation. This raised further concerns about the policy’s legitimacy and intent.

During the meeting, IPPAN President Ganesh Karki highlighted the growing electricity exports to India and the recent commencement of exports to Bangladesh, as well as rising domestic demand. He criticized the new provision for undermining investor confidence. “The government seems to be envisioning a return to the days of kerosene lamps,” he remarked.

IPPAN Senior Vice President Mohan Kumar Dangi warned that failure to revise the provision could tarnish the legacy of the current Energy Minister. Referring to the historical precedent set in 1994 (2051 BS), when Minister Sailaja Acharya introduced PPAs with the private sector, Dangi urged Minister Khadka to use this opportunity to reinforce and revitalize the energy sector.

Dangi alleged that the ‘Take and Pay’ clause was not included by mistake, but deliberately introduced, citing prior remarks by the executive director of the NEA that hinted at such a move. According to IPPAN, if the policy remains unchanged, it could jeopardize the development of hydropower projects with a combined capacity of 17,000 MW and put over Rs 66 billion in existing investments at risk.