Nepal | July 05, 2020

Reeling under virus crisis, IPPAN seeks rescue

Himalayan News Service
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Kathmandu, May 5

Private energy and hydropower producers have submitted a 14-point demand to the government that they want to be included in the budget for the coming fiscal year 2020-21. The demand is based on the impact of coronavirus on the economy.

The Independent Power Producers Association Nepal (IP- PAN), an umbrella organisation of the private energy sector, submitted its demand to Energy, Water Resources and Irrigation Secretary Dinesh Kumar Ghimire on Monday.

One of the demands is to amend the Power Purchase Agreement (PPA) in next fiscal year’s budget.

According to IPPAN, hydropower projects with total installed capacity of about 3,000 megawatts are currently under construction. Among them, projects with total capacity of about 500 megawatts were ready to be completed and connected to the national grid within the current fiscal year. However, due to disruptions caused by the COV- ID-19, work on none of the projects has been completed.

After the government imposed a nationwide lockdown from March 24 to prevent the virus from spreading, there have been several problems including shortage of workers and construction materials. As a result, the time to complete the projects has been extended, hence, the association has requested the government to extend the power generation period without any condition in the policies and programmes being prepared for the upcoming budget.

IPPAN has also urged Nepal Electricity Authority (NEA) to provide advance for the maintenance of projects and transportation of machinery. It has also sought regular payment for the electricity generated by private projects. IPPAN has said it will provide NEA with all the details regarding expenses of advance money within two months.

Moreover, IPPAN has stated that the entire banking sector and economy will be in serious crisis as the risk of non-payment has increased due to the high interest rate on the loans taken by projects under construction. “To help resolve this problem, the government needs to get rid of the interest burden,” the IPPAN statement reads. It has also urged the government to establish a relief fund with the help of donor agencies.

Similarly, it has requested the government not to charge any fees for issuing licences and preparing environmental study, among others, for projects that are in the study phase.

Additionally, IPPAN has asked the government to provide two more years to projects that are looking for financial resources.

The government has also been urged to create a ‘basket fund’ with the help of donors and make arrangements for its use in hydropower projects keeping in mind the possible liquidity shortage in the financial market.

Similarly, the association has requested the authorities for VAT exemption of Rs five million per megawatt and also for income tax exemption in the upcoming budget. It has also asked for an increase in the existing PPA rate as most of the hydropower projects will now be sick.

IPPAN also pointed out that NEA has continued to increase the rate of sale of electricity but has not changed the rate of purchase from the private sector for 30 years. NEA has been requested to make adjustments to its rate of purchase from the private sector according to the power utility’s rate of sale in the budget.

The government, in 2018, had set a target of generating 15,000 MW of electricity in the next 10 years. IPPAN has thus urged the government not to seek the source of investment until the target is achieved. It has also asked the government to bear the cost of construction of infrastructure (access road, transmission line) of the projects to reduce the cost of hydropower projects and make arrangements for refinancing in the budget by reducing the interest rate.

A version of this article appears in e-paper on May 6, 2020, of The Himalayan Times.

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