The government has revised the controversial ‘take-and-pay’ clause in the forthcoming fiscal year’s budget after experiencing increasing demands from lawmakers and stakeholders.
During the presentation of the amendment in Parliament on Tuesday, Finance Minister Bishnu Prasad Paudel suggested a change to Clause No. 227 of the FY 2025/26 budget. According to the updated text, power purchase agreements (PPAs) will now be permissible solely for hydropower projects that demonstrate evident potential for local utilization or export, and where the Nepal Electricity Authority (NEA) can assure payments grounded in financial risk assessments.
In the past, the budget had outlined that run-of-river projects would be engaged under the ‘take-and-pay’ framework, which ignited discussions across party lines and among energy sector representatives. The original clause also referred to synchronizing transmission and substation development with the completion of hydropower initiatives while balancing generation and consumption.
This matter had caused tension between the Finance Ministry and the Ministry of Energy. While Energy Minister Deepak Khadka advocated for policy correction, Finance Minister Paudel showed initial reluctance. However, escalating opposition—particularly from the Nepali Congress, whose President Sher Bahadur Deuba personally urged for the clause’s removal—eventually resulted in an agreement among ruling parties to amend the policy.
