Lawmakers, experts slam 'take and pay' provision in budget

By A Staff Reporter,Kathmandu, June 24: Lawmakers and experts have said that the arrangement of making a power purchase agreement (PPA) under the 'take and pay' provision for the run-of-the-river hydropower projects proposed in the budget for the upcoming fiscal year is unfortunate.

Speaking at a programme organised by the Nepal Infrastructure Journalists Society on Monday, they urged the government to immediately amend 'take and pay' provision included in the budget if it is to save the energy sector.

Chairperson of the Infrastructure Development Committee of the Parliament Deepak Bahadur Singh said that the budget is biased and necessary initiatives will be taken to make a fair decision to save the energy sector. 

"This sector, where domestic investors and more than 6 million ordinary Nepalis have invested, will be promoted in a way that benefits everyone," he said. Member of Parliament Urmila Majhi said that it is shameful that no one in the government that is involved in bringing the budget is aware of the 'take and pay' provision. 

Another MP, Bina Lama, said that they will call the stakeholders to the Infrastructure Development Committee of the Parliament to discuss this issue and demanded for correction of this provision.

MP Nisha Dangi said that the government's 'take and pay' policy will fail.Lawmaker Dinesh Kumar Yadav said that he is raising his voice in Parliament to withdraw it immediately. 

MPs Mahesh Basnet, Sushila Shrestha and Shiva Nepali also said that they will raise the voice over this provision effectively and get it corrected.

At the programme, former Vice Chairman of the National Planning Commission Dr. Govinda Raj Pokharel said that the government had attacked the sector that creates employment.

He said that the government is insensitive to the energy sector, which is suffering from a lack of policy infrastructure.

President of Independent Power Producers' Association, Nepal (IPPAN) Ganesh Karki said that a crisis has been created where not a single hydropower project can be built if the new provisions of the upcoming budget are not corrected. 

"We expect everyone's support as the energy sector is surrounded from all sides and is really in trouble," he said.

If 'take and pay' is not corrected, energy sector will be in crisis

Presenting a working paper, Deputy Secretary General of IPPAN Prakash Dulal said that if 'take and pay' provision in PPA is not corrected, the energy sector will be in serious crisis.

“With this arrangement, there will be no PPA for 17,117 MW projects,” he said. 

According to IPPAN’s internal study, the investment of Rs. 109 billion that has been invested so far will be lost, and the investment of Rs. 3,314 billion that will be made in the future will not be possible.

The study states that the government will lose Rs. 327.62 billion received during the project's construction and Rs. 3,100 billion received after construction is complete due to the new provision of 'take and pay'.

"Banks will not invest in projects with PPAs based on 'take and pay'. This will narrow their investment horizon and disrupt the environment of safe investment in hydropower. When a one-megawatt project is built, 100 people get employment for two to three years. Even after construction is completed, 10 people get long-term employment. As the construction of the project is stopped due to this provision, there is a possibility of losing a large share of these jobs and increasing unemployment in the country,'" said Dulal.

Industries such as cement, iron and steel and transportation sector have a direct role in the construction of hydropower projects. Once the projects are stopped, these industries will not be able to work at full capacity.

The government's ambitious target of generating 28,500 megawatts of electricity in 10 years and the target of exporting 10,000 megawatts of electricity to India will be left behind, he blamed.

Commenting on the presentation, Chartered Accountant Narayan Paudel said that there is no alternative to converting 'take and pay' to 'take or pay'.

"We cannot answer the question of who brought up such a sensitive issue, why, and for what purpose," he said. 

On the occasion, Ravi Singh, president of the Federation of Contractors' Association of Nepal (FCAN), said that construction entrepreneurs are still receiving very little electricity, and this budget arrangement has also put the construction sector in a difficult situation.

Dhruba Thapa, former president of the Cement Manufacturers' Association, said that weakening energy producers will also weaken the cement industry, which is necessary for overall project construction. 

"The provision of 'take and pay' in PPA of hydropower project needs to be corrected immediately," he said.