The government is facing intense backlash over its newly introduced ‘take-and-pay’ provision in the annual budget for Fiscal Year 2025/26, with stakeholders, lawmakers, and even members of the ruling coalition criticizing the move for threatening investor confidence and undermining Nepal’s hydropower ambitions.
The Ministry of Energy and Ministry of Finance are reportedly at odds over the issue. Energy Minister Deepak Khadka has formally called for the removal of the policy, while Finance Minister Bishnu Prasad Paudel has so far resisted the request, stalling any revisions despite a formal letter submitted by the Energy Ministry.
Speaking at a program held in Kathmandu on Monday, Ganesh Karki, President of the Independent Power Producers Association of Nepal (IPPAN), warned that the take-and-pay provision jeopardizes Rs 109 billion already invested in ongoing hydropower projects and could deter an additional Rs 3.31 trillion earmarked for pipeline projects. Karki emphasized that the policy undermines the confidence of both local and foreign investors.
Prakash Dulal, General Secretary of IPPAN, echoed these concerns, stating that the 17,117 MW worth of projects awaiting Power Purchase Agreements (PPA) would be halted under this policy. “This will make banks hesitant to fund new projects due to heightened investment risks,” he said.
Under the take-and-pay model outlined in the budget on May 29, the Nepal Electricity Authority (NEA) is required to purchase electricity from private producers only when there is demand, unlike the previous take-or-pay model that guaranteed payments regardless of usage.
Critics argue this shift will severely damage the investment environment and create uncertainty for private producers, many of whom rely on assured PPAs to secure bank loans.
In parliament, lawmakers have voiced concern. Deepak Bahadur Singh, Chair of the Infrastructure Development Committee, called for an immediate amendment to the clause, while lawmaker Bina Lama urged the government to hold wider consultations with stakeholders before implementing such a disruptive policy.
Govinda Raj Pokharel, former Vice-Chairperson of the National Planning Commission, warned that the lack of clarity in government policy could push one of Nepal’s largest employment-generating sectors into crisis.
Adding to the pressure, Nepali Congress President Sher Bahadur Deuba has reportedly expressed dissatisfaction with the mandatory take-and-pay provision. Sources indicate that Deuba personally phoned Finance Minister Paudel on Monday, urging him to remove the clause before the Appropriation Bill for FY 2025/26 is passed by Parliament.
The mounting criticism comes at a time when Nepal is striving to expand its hydropower capacity, attract foreign investment, and position itself as a clean energy exporter in South Asia. Observers warn that without a swift policy correction, Nepal’s energy ambitions may suffer a serious setback.
