Kathmandu: The Independent Power Producers’ Association of Nepal (IPPAN) has raised serious concerns over the prolonged inaction of the government in addressing the demands of hydropower projects that have been severely affected by floods. During a discussion held on Thursday, IPPAN President Ganesh Karki urged the Ministry of Energy, Water Resources, and Irrigation to either promptly fulfill the needs of the flood-hit projects or formally declare its incapability to do so.
Karki highlighted that despite repeated assurances from the government, none of the affected projects have received any form of relief. ”
The flood-affected projects have submitted all the required evidence, including photos and videos, but the ministry’s recommendations have yielded no tangible results. No relief has been provided, and no actions have been taken,” Karki expressed in frustration.
He also pointed out that up until two years ago, hydropower projects benefited from customs exemptions on maintenance-related machinery. However, this provision has been revoked by the Ministry of Finance, leading to an additional 28% cost on spare parts, which has severely impacted the financial stability of the projects. Most flood-affected projects have been unable to restart their operations due to the financial burden imposed by these costs.
Further aggravating the situation, the hydropower projects are at risk of losing their investments as banks are reconsidering their funding commitments due to delays in meeting the Commercial Operation Date (COD) deadlines. If the projects fail to produce electricity within the fiscal year 2084/85, the Nepal Electricity Authority (NEA) has stated that it will only purchase electricity on a “Take and Pay” basis, further jeopardizing the financial viability of these projects.
Karki’s demands extend beyond the immediate relief for flood-affected projects. He urged the government to open Power Purchase Agreements (PPAs) for 13,000 MW of stalled projects, abolish hydrology penalties caused by climate change, and address issues related to forest and land reforms that are delaying project completions. He also pushed for the implementation of the 28,500 MW roadmap and called for the government’s attention to private sector concerns in the new Electricity Bill.
Ministry’s Response: Customs and Hydropower Project Delays
Responding to the concerns raised, Energy Minister Deepak Khadka assured that the government is seriously considering the issues faced by hydropower projects, particularly the removal of customs exemptions. Minister Khadka emphasized that the high costs of hydropower development make free electricity provisions for small projects challenging, especially given the high initial investment required.
Energy Secretary Gopal Prasad Sigdel also acknowledged the delay in extending COD deadlines and assured that discussions are ongoing. However, he pointed out that the customs exemption issue is under the jurisdiction of the Ministry of Finance, which has not yet approved the necessary measures to provide relief to flood-affected projects.
The ongoing inaction and lack of coordination between ministries have left many hydropower projects in a precarious financial position, unable to resume operations or secure further investments. This situation not only threatens the financial health of the projects but also risks stalling Nepal’s ambitious energy production goals.
