‘Take-and-pay’ PPA model will be amended: Khadka

KATHMANDU: Minister for Energy, Water Resources and Irrigation, Deepak Khadka, has said that the ‘take-and-pay’ Power Purchase Agreement (PPA) introduced in the budget for fiscal year 2025/26 will be amended.

Responding to questions regarding his ministry’s budget in the meeting of the House of Representatives on Monday, Minister Khadka said a formal request for revision has already been sent to the Ministry of Finance. “We have recommended reverting to the ‘take-or-pay’ model for small hydropower plants with a capacity of up to 10 MW and for run-of-river (ROR) projects that have guaranteed domestic consumption or export agreements after consulting with the Nepal Electricity Authority (NEA),” Khadka said. “We have also discussed the matter with the finance minister and are confident that the amendment will be made.”

Under the ‘take-or-pay’ model, NEA must pay for contracted energy regardless of usage. This model assures developers of predictable revenue and has historically been key to attracting private investment in Nepal’s hydropower sector. However, under the ‘take-and-pay’ model, NEA pays developers for the electricity it actually purchases and consumes.

Minister Khadka added that the government was committed to encouraging private sector investment in hydropower and transmission infrastructure. He also informed that a new policy and structural framework have been developed to support tariff bidding, power trading and private participation in transmission lines.

The move comes amid growing backlash from independent power producers (IPPs) who have warned that the ‘take-and-pay’ model could affect over 350 hydropower projects with a combined capacity of 17,117 megawatts and jeopardize Rs 66.22 billion already spent on feasibility studies and early-stage development.