PPA must be done on 'first come, first served' basis to provide a level playing field to all
The Independent Power Producers' Association, Nepal (IPPAN) has requested the government to make amendments to some recommendations made by a five-member panel regarding the Power Purchase Agreement (PPA). IPPAN officials have asked the government to reach the PPA with the private sector for run-of-river (RoR) projects and peak run-ofriver (PRoR) projects on the "first come, first served" basis. However, in its 16-point report on policy arrangement-2023 prepared by the panel, led by Joint Secretary at the Ministry of Energy, Water Resources and Irrigation Sandip Kumar Dev, priority will be given to those hydropower projects to be promoted by the government, government-owned companies and subsidiary companies of the Nepal Electricity Authority (NEA). The government's policy to give priority only to government or NEA-promoted hydel projects is unfair to the private sector when it comes to concluding the PPA. IPPAN has said hydel projects should be given priority on the basis of their application dates for the PPA, citing that the private sector makes huge investments in a given project for the feasibility study and other preparations before applying for the PPA with the NEA, which is the sole buyer of the energy produced by the private sector.
IPPAN has also drawn the attention of the government towards a provision that recommends the cancellation of the PPA and confiscation of bank guarantee if the financial disclosure cannot be managed within two years from the date of reaching the PPA for a hydel project with a capacity of up to 100 MW and three years in the case of a project above 100 MW. Independent power producers have said it is difficult for them to make financial arrangements within the deadline due to the investment crisis in the wake of COVID-19. Financial arrangement will be possible only if the government and Nepal Rastra Bank direct the banks and financial institutions to allocate 20 per cent of the total disbursed loan to the hydropower sector. Therefore, the time to complete the financial disclosure should be extended to three years for projects of up to 100 MW and four years for those above 100 MW.
However, the private sector has welcomed the policy arrangement-2023, which aims to utilise water resources of hydel projects during the summer season, by reducing the existing provision from Q40 to Q30. A hydropower project that can produce electricity in full capacity for 4.8 months is known as Q40 project. The run-of-river projects can generate more energy during the summer when this provision is lowered to Q30 or less than that. The removal of the 'cap', which required only 17 per cent return on investment in the case of RoR and PRoR projects with a capacity of above 100 MW, is also a welcome move. Earlier, the NEA had said it would reach PPA with the private sector for up to 1,500 MW for the RoR. Now the policy recommendation has revised the cap for RoR projects to 9,112 MW from the existing 6,750 MW. The government should also allow the private sector to operate their hydel projects for up to 50 years from the existing 30-year provision. Many private hydropower developers have complained that they cannot recoup their investment within the 30 years due to various unforeseen challenges.
Recharge Chure
The Chure region, which spreads east to west across 37 districts of the country, is a rich storehouse of watersheds and other resources such as forests, sand, stones and boulders. More than half of the Chure is still under forest cover, making it rich in flora and fauna. However, as the youngest mountain range in the world, the Chure is extremely fragile, prone to severe erosion and landslides during heavy outpour in the monsoon season. The situation has been made all the worse by clearing of forests for human settlement and both legal and illegal extraction of huge quantities of sand, stones and boulders in recent years to meet the construction demands. The haphazard exploitation of the Chure is having detrimental impact on the Tarai due to the depletion of water resources.
Against this backdrop, the Minister for Agriculture and Livestock Development called for recharging the groundwater of the Chure area to stop it from turning into a desert. The problem is real and serious, and it behoves the government to implement in earnest the President Chure Conservation Programme launched in 2009. Since 60 per cent of the population lives in the Chure and Tarai, it is time the government took the matter seriously.
A version of this article appears in the print on August 16, 2023, of The Himalayan Times.
