Photo/TRN IPPAN President Ganesh Karki and members of the association during a program in Kathmandu.

Independent Power Producers' Association, Nepal (IPPAN) has welcomed the government's decision to withdraw the 'take and pay' provision for power purchase agreement (PPA) policy inserted in the new budget.

Organising a press conference on Thursday, the IPPAN expressed its happiness over the removal of the 'take and pay' provision, calling it is a significant achievement for the hydropower sector.

President of IPPAN Ganesh Karki said that the removal of 'take and pay' provisions in PPA would restore confidence among private investors and encourage further investment in the hydropower sector.

He thanked all political parties, government representatives, journalists, civil society and stakeholders who supported them in their attempts to withdraw the provision.

Earlier, under the coordination of Senior Vice President of IPPAN Mohan Kumar Dangi, the IPPAN Struggle Committee announced a movement and organised a phase-wise movement to remove the provision.

They met Prime Minister KP Sharma Oli, former Prime Minister and President of Nepali Congress Sher Bahadur Deuba, Deputy Prime Minister and Finance Minister Bishnu Prasad Paudel, Minister for Energy, Water Resources and Irrigation Dipak Khadka, chief whips of the major political parties and urged them to remove the 'take and pay' provision. The government made the decision following widespread criticism from energy producers and industry experts, who argued that the 'take and pay' model would discourage investment in power sector.

The government has amended a clause in the budget following controversy over the ‘take and pay’ provision in the hydropower sector.

Deputy Prime Minister and Finance Minister Bishnu Prasad Paudel on Tuesday proposed a revision to Clause No 227 of the budget during a session of the House of Representatives, clarifying the government's position on the issue. Responding to the lawmakers’ questions, Finance Minister Paudel said the government would remove the take and pay provision on certain conditions.

“The government's clarification and amendment show that it is willing to listen to the voice of the people and correct its course for the betterment of the energy sector,” said Karki. The reversal is seen as a major win for private hydropower developers and a positive signal for future investment in Nepal’s renewable energy ambitions, he said.

Unlike the 'take or pay' model — under which the Nepal Electricity Authority (NEA) guarantees payment for the electricity produced, even if it’s not used - the 'take and pay' system ties payment to actual energy consumption, creating financial risk for power producers. Dangi said that after the removal of the 'take and pay' provision, the regular PPAs up to 10 MW, which were closed after the budget announcement, will continue, more PPAs will be made as per the information made public by the NEA.

"As the private sector also has the responsibility to make the government's plan to consume 13,500 MW domestically and export 15,000 MW of electricity a success, we are ready for this, and we expect all kinds of facilitation from various ministries and agencies of the government, as well as the Electricity Authority, to create a proper investment environment to achieve this goal," he said.

He asked the government to open the PPA for the hydropower project immediately to achieve the target of generating 28,500 MW electricity by 2035.