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The Independent Power Producers’ Association Nepal (IPPAN) has urged the government to introduce comprehensive policy reforms, tax exemptions, expanded transmission infrastructure, and private sector-friendly provisions in the energy sector through the budget for the upcoming fiscal year 2026/27.

In a detailed suggestion letter submitted to the Ministry of Finance, the Ministry of Energy, Water Resources and Irrigation, and other concerned bodies, IPPAN stated that the private sector should be further encouraged to help achieve the national target of generating 30,000 MW of electricity within the next 10 years.

According to the organization, of the country’s current electricity generation capacity of around 4,200 MW, nearly 3,500 MW has been developed through private sector investment. Likewise, projects with a combined capacity of around 5,800 MW are currently under construction, while projects exceeding 20,000 MW are progressing through various stages of development.

IPPAN claims that the private sector has invested more than Rs. 1.3 trillion in the energy sector so far.

Demand for ‘Take or Pay’ PPAs

IPPAN has demanded that all Power Purchase Agreements (PPAs) be based on the ‘Take or Pay’ model, arguing that the ‘Take and Pay’ concept adopted by the Nepal Electricity Authority has created insecurity within the private sector.

The organization also called for the immediate opening of PPAs for run-of-river (ROR) projects, the resumption of agreement processes for stalled projects, and guaranteed power purchases for completed projects.

IPPAN further demanded that the commercial operation deadline for projects be extended by at least three to five years, citing challenges such as climate change, floods, landslides, earthquakes, economic slowdown, delays in land acquisition, and shortages of explosives.

Proposal to allow private sector participation in transmission lines

Stating that inadequate transmission infrastructure remains one of the biggest challenges in the energy sector, IPPAN has called for legal provisions allowing private sector participation in the construction of transmission lines and substations.

The suggestion letter states that private investment could be introduced through models such as Build-Operate-Own-Transfer (BOOT), Build-Own-Operate (BOO), and Design-Build-Finance-Operate-Transfer (DBFOT).

It has also proposed providing subsidies of up to 75 percent of the construction cost for private sector-built transmission lines of 220 kV or above.

The organization further demanded that the East-West and North-South transmission corridors be declared national priority projects and that the criteria related to Right of Way (ROW) be clarified.

Emphasizing the need to expand the private sector’s role in electricity exports, IPPAN suggested ending the Nepal Electricity Authority’s monopoly over cross-border electricity trade with India and allowing private sector participation.

To facilitate this, the organization recommended ensuring legal clarity, accelerating the construction of cross-border transmission lines, developing a bilateral electricity trade framework, and introducing a ‘day-ahead market’ system.

Demand for tax exemptions and financial concessions

To encourage investment in the hydropower sector, IPPAN has demanded a full tax exemption for at least 10 years, followed by a 50 percent tax exemption for an additional five years.

Similarly, it proposed customs duty and Value Added Tax (VAT) exemptions on machinery, spare parts, and steel materials imported for project operation and maintenance.

IPPAN also urged the government to introduce policies encouraging banks and financial institutions to increase lending to the energy sector.

According to the suggestion letter, the government should aim to increase energy sector lending to 20 percent of total bank credit investment within the next 10 years.

The organization stated that forest and environmental approval processes remain among the biggest obstacles to hydropower development. It demanded that Environmental Impact Assessments (EIA) and Initial Environmental Examinations (IEE) be made time-bound, that approved environmental reports remain valid for longer periods, and that projects within national parks and conservation areas receive easier approvals.

IPPAN also called for a review of the current provision requiring the planting of 10 trees for every tree cut down, arguing that the rule is impractical.

Proposal for a ‘one-door fast-track system

IPPAN has proposed implementing a ‘one-door fast-track system’ in the energy sector to streamline processes such as permits, land acquisition, PPAs, environmental approvals, and transmission access through a single agency.

The organization also suggested establishing a ‘Hydropower Center of Excellence’ focused on project management, financial modeling, risk management, and technical research.

Focus on electric transportation and electricity consumption

IPPAN stated that priority should be given to electric vehicles, public e-buses, electric railways, and industrial electrification to expand domestic electricity consumption.

The organization also urged the government to launch an “Electricity for Production” campaign to increase electricity use in the industrial and manufacturing sectors.

According to IPPAN, Nepal can achieve its target of generating 30,000 MW within the next decade if political stability and long-term policy consistency are maintained in the energy sector.

The organization expressed confidence that resolving private sector concerns would significantly contribute to the country’s energy security, electricity exports, industrial development, and overall economic growth.

Jalasarokar