Due to the 'take and pay' provision included in the budget of the current financial year, the 4967 megawatt power purchase agreement (PPA) process initiated by the Nepal Electricity Authority has become confused. On 15th June, a new arrangement of 'take and pay' was made for PPA in the public budget.

According to the authority, the PPA of 54 hydropower projects, which had already started the process before the budget, is in confusion. In addition, the PPA of hydropower projects with a capacity of less than 10 megawatts has also been stopped, according to the authority. "Continuous PPA of less than 10 megawatt capacity hydropower projects has also been stopped," the authority source said. 

Last May, the authority issued a notice to apply for PPA for hydropower projects with a capacity of more than 10 megawatts. Run-of-river and semi-reservoir hydropower projects that have completed grid connection agreements by 12 March 2081 were invited for PPA. But the authority said that the PPA itself has been stopped after the new arrangement of 'take and pay' for river projects was introduced in the budget.

After the provision of 'take and pay' was introduced in the budget, the energy producers put pressure on all sides. The power partner Congress also expressed dissatisfaction on this matter. Soon after, in the meeting of the House of Representatives on June 10, Finance Minister Paudel explained the arrangements made in the budget and said, 'based on financial risk assessment, power purchase contracts can be entered into for projects that are sure to consume or export energy and Nepal Electricity Authority can pay the obligations.' He said that the PPA will be done in such a way as to give priority to investing in hydropower projects, to meet the existing energy deficit during the dry season, to manage the potential liabilities of the government, and to create liabilities in such a way that they can afford them financially. However, he did not mention anything about the revision of the 'take and pay' arrangement from the budget. Finance Minister Paudel's speech was interpreted by some to mean that the budget has been revised and the new arrangement of PPA has been removed.

Finance Ministry spokesperson Shyam Prasad Bhandari said that the item in the budget has not been amended. According to him, the Minister of Finance has only clarified the new provision made in the budget without amending it and the necessary coordination is being done with the Ministry of Energy. "Now, according to this, the problem of take and pay will be solved," he said.

Kamal Acharya, director of the electricity trade department of the authority, informed that there is confusion on how to do the PPA. "It is said that the budget has been revised, we are looking for what has changed in the budget," he said. Acharya said that the promoters of all 54 hydropower projects have applied for the PPA. "Everyone's application for PPA has been received, but the process has not been able to proceed due to the arrangement of the budget to make PPA according to the take and pay of river flow hydropower projects," he said.

In case of PPA in 'take and pay', the electricity authority buys the quantity it needs and pays only for it. In the case of PPA in 'Take or Pay', the authority has to take electricity according to the agreement made with the promoter, otherwise it has to pay the price to the promoter. If the power is not provided as per the agreement, the promoter has to pay a fine to the authority. The Authority has been doing PPA on 'Take or Pay'. In the case that the hydropower project can be built but the new transmission line is not completed or the capacity of the transmission line is reduced, the authority has set a time limit for the PPAs made on the basis of 'Take or Pay' and takes and pays electricity on the basis of 'Take and Pay'.

The authority had sought applications for PPAs for 1858.919 MW run-of-river (ROR) and 3107.434 MW semi-reservoir (PROR) hydropower projects. Immediately after the appointment of the Executive Director of the Authority, Hitendradev Shakya, it was decided to open the PPA in the 994th meeting of the Board of Directors of the Authority held on 12 Chait 2081. 

Deputy Secretary General of the Association of Promoters and Independent Power Producers (IPPAN) Prakashchandra Dulal said that even after two months of submitting the application for PPA with the details requested by the authority, there has been no response. "We submitted all the details and application as requested by the authority, but so far there has been no response," Dulal said. 

The authority had issued a notice to the promoters to enter into the PPA process with 4 conditions. Firstly, it is mentioned that the PPA process of hydropower projects where uninterrupted power supply is possible through transmission lines and substations that are in operation or soon to be completed will be carried out, and the PPA process will be carried out by giving first priority to projects that can supply power through alternative routes even on the basis of N-1 contingency. Second Condition N-1 Contingency Under Construction Transmission Lines and Substations (taking into account the estimated date of completion of the construction) hydroelectric power projects that are possible to flow through this condition would be included in the contract and the PPA process would be given second priority.