‘Take and pay’ clause will stall run-of-the-river hydel projects, warn lawmakers and experts

KATHMANDU: Lawmakers and experts have condemned a provision in budget for fiscal year 2025/26 that mandates ‘take and pay’ power purchase agreements (PPAs) for run-of-the-river hydropower projects, describing it as “unfortunate” and urging its immediate amendment to safeguard the energy sector.

At a programme organised by the Society of Infrastructure Journalists-Nepal (SIJ-Nepal) in Kathmandu on Monday, members of the House of Representatives’ Infrastructure Development Committee and industry representatives warned that the clause could stall investment and plunge the sector into crisis.

HoR's Infrastructure Development Committee Chairperson Dipak Bahadur Singh said the budget was 'biased' and pledged to pursue fair decisions on behalf of domestic investors and “more than six million common Nepalis” with stakes in hydropower. “Voice will be raised for the benefit of everyone in a sector where domestic investors and more than six million common Nepalis have invested their shares,” he vowed.

MP Urmila Majhi criticised the budget drafting team for its apparent misunderstanding of ‘take and pay’, calling the oversight “embarrassing”. Fellow MPs Bina Lama, Nisha Dangi and Dinesh Kumar Yadav respectively announced plans to summon stakeholders for discussion, predicted the policy would fail, and pledged to press for its withdrawal. Mahesh Basnet, Sushila Shrestha and Shiva Nepali also promised to campaign for correction.

Former vice-chair of National Planning Commission (NPC) Dr Govinda Raj Pokharel warned that the government had 'attacked a sector that creates employment' and was showing insensitivity to its infrastructural needs. 

Independent Power Producers’ Association, Nepal (IPPAN) President Ganesh Karki cautioned, “If the provision is not corrected, not a single hydropower project can be built.”

IPPAN Deputy General Secretary Prakash Chandra Dulal presented an internal study showing the clause would prevent PPAs for projects totalling 17,117 MW, risk losing existing investments of Rs 109 billion and deter future investments of Rs 3,314 billion. He added that the state stands to forfeit Rs 327.62 billion collected during construction and Rs 3,100 billion post-completion. “As ‘take and pay’ will halt project construction, this large employment sector will be lost, and unemployment is likely to rise,” he said.

Industry representatives echoed the warning. Cement Manufacturers Association of Nepal (CMAN) President Dhruba Thapa said, “Weakening energy producers will undermine the cement industry, essential for infrastructure development. This must be corrected immediately.” 

Likewise, Federation of Contractors’ Association of Nepal (FCAN) President Rabi Singh warned that limited electricity supply, already hampering construction, would worsen under the new policy.