KATHMANDU, Dec 16: Minister for Energy Janardan Sharma has assured the independent power producers that the government will purchase energy produced by them.
Speaking at the Power Summit 2016 in Kathmandu on Thursday, Minister Sharma pledged to revive the 'take or pay' provision while signing power purchase agreement (PPA) with hydropower developers.“
"We will replace the existing 'take and pay' provision with 'take or pay' provisi”n," Sharma said, adding that he was hopeful that it will boost the confidence of the independent power developers.
Nepal Electricity Authority (NEA) had introduced 'take and pay' system two years ago under which it could reject power generated by hydropower projects when there is less demand. The power utility introduced the provision despite the fact that energy supply has never surpassed demand in the past one and half decades. The provision had made several hydropower projects unbankable
Though the government had changed the controversial provision in the PPA in February while launching the National Energy Crisis Prevention and Electricity Development Decade-2016-2026, it was not accepted by NEA.
NEA officials had argued then that it inserted the 'take and pay' provision stating that energy supply will surpass once the Upper Tamakoshi Hydropower Project starts operation.
The project is yet come into operation.
Minister Sharma has also made commitment to pay Rs 5 million per MW as incentive to hydropower developers promised in the budget two years ago.
The government had announced the incentive in the 10-year energy development plan. But it has not been implemented yet.
"The government expects the private sector to develop power plants having capacity below 100 MW so that it can focus on large-scale projects," added Sharma.
The theme of the summit is generating 10,000 MW of energy in ten years as announced in the plan.
Total installed capacity in the country at present is only around 800 MW.
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We can sell energy to India through bilateral agreement: PM
Prime Minister Pushpa Kamal Dahal has assured foreign investors that Nepal can trade energy with Indian by signing bilateral agreements, including Power Trade Agreement (PTA).
Addressing the Power Summit 2016, Dahal said, "Nepal and India have signed PTA and have expressed commitment to take needful measures for operationalizing the agreement." Dahal also said that the government has taken diplomatic initiatives with the Government of India with a view to removing constraints arising from the power purchase guidelines issued recently by India.
The Prime Minister's assurance has come at a time when foreign investors, other than Indians, and Nepali independent power developers have lamented lack of energy market after India endorsed Guidelines on Cross Border Trade of Electricity.
In the guideline, India has given priority to energy produced by Indian government or private sector investments or power trading company having more than 51 percent Indian stake for cross border electricity trading.
The policy has discouraged foreign investors who were eyeing Indian market for energy generated in Nepal.
Speaking at the meeting, Indian Ambassador Ranjit Rae explained that the guideline slightly eases energy trading for government-owned companies of both the countries and should not be taken otherwise.
