Government Tightens Power Purchase Agreement Policy

Kathmandu. The current government has adopted a policy of further tightening the PPA (Power Purchase Agreement) policy in the name of reforms in the energy sector. The government has indicated that it will tighten the PPA policy from the upcoming fiscal year's budget. Although the budget announced that PPAs for projects up to 10 megawatts will be done immediately on a take-and-pay basis, the government has remained silent on large projects and the previous 5,000 megawatts projects of the authority. The Ministry of Energy, Water Resources and Irrigation had formed a high-level committee to study the PPA. That committee has also submitted a report to Energy Minister Biraj Bhakta Shrestha in line with the policy taken by the government in the budget. The policy has also indicated tightening of the license for a long time in Nepal's hydropower sector. The government has started tightening the policy to discourage the tendency of obtaining licenses for electricity generation for a long time without moving forward. The high-level committee formed to review the current status, progress, and effectiveness of hydropower project licenses has pointed out the need for reform. Based on that, the government seems to be taking a new step on the issue of PPA. The government's budget policy and the committee's report recommendations match, which indicates that the ministry will get more strength to end the irregularities in the hydropower sector. However, energy producers have expressed disagreement with this tightening, although they have welcomed the government's prioritization of the hydropower sector. They believe that the government aims to produce 30,000 megawatts of electricity in 10 years, but tightening the PPA will cause some problems. Ganesh Karki, former president of the Independent Power Producers' Association Nepal (IPPAN), said that it is necessary to open new PPAs by immediately resolving the problems seen in PPAs. He emphasized that while the government's prioritization of the hydropower sector is positive, it should be made systematic rather than tightened. 'Since it is clear in the budget, we need to move forward by clarifying it. The authority had opened PPAs for 5,000 megawatts, but that has not moved forward either. The government needs to move that forward as well,' he said. He said that although the Ministry of Energy formed an internal study committee and recommended canceling some projects, not all projects are solely due to the private sector. He said that while it is right to cancel those who do not work, there are many projects that have been delayed for a long time due to the government, and the government should think about them. Meanwhile, Energy, Water Resources and Irrigation Minister Biraj Bhakta Shrestha said that he would rather be scolded for the delay in the PPA issue than be blamed for mistakes. Energy Minister Shrestha said that he is taking some time to study and break the irregularities seen in the hydropower license and PPA process. He said that the ministry itself does not have enough information about the basis on which past PPA agreements were made. 'What I feel is that it is better to be scolded for working slowly. But it is not good to be scolded for making a mistake. I am being scolded for working slowly now, I can tolerate that. But I don't have to be scolded for giving licenses and PPAs only to your own people,' said Minister Shrestha. He said that the suggestions included in the report will be implemented immediately after legal and technical evaluation. Minister Shrestha said that the government has adopted a policy to involve the private sector not only in production but also in electricity trade and transmission line construction. He said that legal provisions will be made to allow the private sector to export electricity to the international market and to charge 'wheeling charges' by building transmission lines with private investment.

38 projects with 1388 megawatts to be canceled