The Independent Power Producers’ Association, Nepal (IPPAN), submitted a memorandum to Prime Minister KP Sharma Oli on the first day of their previously announced protest program.

A delegation from IPPAN, led by Acting President Mohan Kumar Dangi, met Prime Minister Oli at the Office of the Prime Minister and Council of Ministers in Singha Durbar on Friday. They handed over a memorandum warning that unless the government retracts the “Take and Pay” provision announced in the budget, they will have no option but to escalate their protest.

While receiving the memorandum from IPPAN, Prime Minister Oli stated that there should be a detailed discussion with energy entrepreneurs regarding the “Take and Pay” issue. He instructed his secretariat to arrange a meeting for this either on Sunday or Monday.

Following the announcement of the budget and program for the upcoming fiscal year 2025/26 on May 29, the government stated that power purchase agreements (PPAs) would be implemented in a way that balances electricity production and consumption. It also mentioned that PPAs for Run-of-the-River (RoR) projects would be signed only under the “Take and Pay” model. In response, IPPAN, the umbrella organization of energy producers, has been strongly opposing this policy.

In an effort to have that particular budget provision removed, IPPAN held meetings and discussions with various agencies for three weeks. However, after none of the concerned bodies showed seriousness in addressing their demand, IPPAN announced the first phase of protests starting from june 20. Mohan Kumar Dangi, coordinator of the protest committee and acting president of IPPAN, stated that on the first day of the pre-announced protest, they met with Prime Minister Oli and submitted a memorandum.

IPPAN had already announced on June 19 the programs for the first phase of their protest, which include meeting with the Prime Minister, Finance Minister, and Energy Minister to submit memorandums; sending SMS messages demanding the withdrawal of the “Take and Pay” PPA; sending SMS messages to the Speaker of the House of Representatives and the chief whips of all political parties; and issuing a joint statement in coordination with all private sector associations and organizations.

In the memorandum, IPPAN stated that if the government does not withdraw this provision, the construction of over 350 projects with a combined capacity of 17,117 megawatts will come to a halt, and the Rs. 66.22 billion already spent on the study and planning of these projects will go to waste, forcing entrepreneurs to take to the streets.

IPPAN stated that this provision goes against the government’s own plan titled “Energy Development Roadmap and Action Plan, 2024,” which aims to achieve 28,500 megawatts of electricity generation capacity within the next 10 years and export 15,000 megawatts of electricity to India and Bangladesh.

At present, the Nepal Electricity Authority (NEA) signs PPAs under the “Take or Pay” model. This means that once a hydropower project is completed, NEA is obligated to purchase all the electricity produced. In contrast, a “Take and Pay” PPA means that NEA will only purchase electricity if it deems it necessary. There is no guarantee that the electricity produced will be bought. As a result, banks and financial institutions do not provide loans for projects under the “Take and Pay” model, and even project developers are reluctant to invest in a business where there is no certainty of market demand.

In such a situation, the private sector will be unable to make further investments in Nepal’s hydropower. As a result, there is an increasing risk of a renewed energy crisis in the country due to the possible withdrawal of the private sector, which had previously produced 3,000 megawatts of electricity in a short period and helped make the country load-shedding free.

Source: Singhadarbar