Nepal | March 28, 2020

PPA to be signed on ‘take and pay’ basis

Himalayan News Service

• Rs 5 million value added tax exemption announced for power producers
• Govt not to be involved in hydropower projects with capacity to generate less than 100 MW


Prime Minister Pushpa Kamal Dahal at the Power Summit 2016, organised by Independent Power Producers Association, Nepal, in Kathmandu, on Thursday, December 15, 2016. Photo: Balkrishna Thapa

Kathmandu, December 15

The government today announced that it would sign Power Purchase Agreement (PPA) with energy projects on ‘take and pay’ basis to encourage private investors in the country’s hydropower sector.

Doing away with the current ‘take or pay’ policy, under which the government purchases electricity from private producers on necessity basis, Minister for Energy Janardan Sharma announced that the government will soon adopt ‘take and pay’ policy as per which Nepal Electricity Authority (NEA) will purchase all the electricity generated by producers.

Speaking today at a two-day Power Summit 2016 organised by the Independent Power Producers’ Association, Nepal (IPPAN), Sharma said, “The government will now sign PPA with power generating projects on ‘take and pay’ basis, among various other policy reforms that Ministry of Energy (MoE) has initiated.”

Minister Sharma also announced that the government will now not engage itself in power projects with capacity of less than 100 megawatts (MW). By doing so, government aims to draw private investment in power projects of below 100 MW.

Similarly, the government also announced Rs five million VAT exemption for each megawatt of electricity generated by power producers. On announcing VAT exemption, Minister Sharma opined that this would increase investor confidence in hydropower sector of the country. He further said that MoE is lobbying to bring down the interest rate on loans disbursed to the hydropower sector to five per cent.

Inaugurating the summit, Prime Minister Pushpa Kamal Dahal said the government has taken an initiative aimed at removing the constraints arising from power purchase guidelines recently issued by India.

Stating that the government has accorded high priority to timely completion of the designated projects of national pride that include some key hydropower projects like Upper Tamakoshi and Chameliya, the PM added that the government has accelerated monitoring of such projects, removing impediments in the implementation process, and pronounced scheme of reward and incentives for those involved in the implementation if the projects are completed before the set deadline.

The Power Summit this year has attracted international community, potential investors from dozens of nations and other stakeholders of Nepal’s energy sector. The event is being held under the theme of generating 10,000 MW of electricity in Nepal in the next one decade.

Addressing the event, IPPAN President Khadga Bahadur Bisht said that there should be continuity in plans and programmes no matter who forms the government for development of hydropower sector in Nepal.

“With change in government, plans and programmes developed by one government should not be ignored by the next government,” Bisht said. He also stressed on the need for an extraordinary effort from the government and other stakeholders to achieve the goal of generating 10,000 MW of electricity in the next 10 years.

Meanwhile, the international community has expressed its willingness to invest in Nepal’s hydropower sector if they are well facilitated by the Nepal government. “We have already invested in different hydro projects in Nepal and there
are more Chinese investors willing to invest in this sector in Nepal,” Yu Hong, Chinese ambassador to Nepal said, adding that joint effort of the two governments can attract Chinese investment in Nepal’s hydropower sector.

Similarly, the Ambassador of Bangladesh to Nepal Mashfee Binte Shams said that Bangladesh is an
energy-hungry country and is ready to partner with Nepal, Bhutan and India to develop hydropower sector of not only Nepal but of the entire South Asian region.

Informing that 10,000 MW in 10 years is an achievable target for Nepal, Indian Ambassador to Nepal Ranjit Rae said that the government should ease land acquisition process for any hydropower project. He further added that though the recently endorsed ‘Guidelines on Cross Border Trade of Electricity’ framed by India has drawn criticism from Nepal side it is facilitating power trade between Nepal and India. Rae informed that a new regulation, which the Central Electricity Regulatory Commission is planning to bring soon, would address the confusion that has been created.

The Guidelines on Cross Border Trade of Electricity that the Ministry of Power, India launched last week says that only companies fully owned by the government of concerned countries and those having 51 per cent equity investment of Indian public and private companies can export electricity to India after obtaining one-time approval from the designated authority in India.

A version of this article appears in print on December 16, 2016 of The Himalayan Times.

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