Hydro projects still await incentives announced in past budgets

IPPAN for effective implementation of subsidy, incentive programs

The budgets of past three fiscal years had announced cash incentives for hydropower projects in a bid to encourage developers to complete projects at the earliest. But the developers, who met all the criteria, have not received any such incentive so far.

As many as two dozen projects met the criteria for crash subsidies. But none of them has received the amount promised by the government.

The announcement meant these projects were qualified to get PPA rates of Rs 4.8 and Rs 8.4 per unit for wet and dry seasons, respectively. Other projects are getting power purchase rates of Rs 4 for wet season and Rs 8 for dry season.

Such additional payments were meant for seven years only. Sources say the additional payment is worth around Rs 2 billion.

Nepal Electricity Authority (NEA) signed agreement with 23 hydropower plants with combined capacity of 141 MW that started generation by mid-April of 2014. These plants received incentives for only few months in 2014.

NEA has told these projects that it could not provide subsidy as it was not getting any reimbursement from the finance ministry.

Similarly, the government had also announced bulk VAT subsidy of Rs 5 million per MW to projects that comes into generation before 2024/25. This too was limited to papers as at least three projects, including Sanima Mai (22 MW) and Api (8.5 MW), which were qualified for the scheme, did not get anything from government.

“The government has not kept its words,” Khadga Bahadur Bisht, president of Independent Power Producers’ Association, Nepal, told Republica.

IPPAN has proposed to the government to implement the subsidy and cash incentive programs effectively.

Government officials agree that the incentives were not a burden to the government compared to the economic value that hydropower generation has brought to the country. “We repeatedly wrote to the finance ministry for reimbursement of incentives. But it neither made reimbursement, nor gave any clear reason on why it was not making reimbursement,” Deputy Spokesperson of Ministry of Energy Gokarna Raj Pantha said.

Pantha, however, is hopeful of continuing the schemes in the new fiscal year as the energy ministry has proposed budget for the purpose as prescribed by the finance ministry. Amount needed for the purpose was not fixed in the previous budgets even though they had clear policy announcements.

“We’ve proposed Rs 2.4 billion for the purpose in the upcoming budget to be unveiled on May 28,” added Pantha.

Of the amount, Rs 400 million is for paying additional amount as per the revised PPA for 23 projects. Similarly, Rs 2 billion is for paying bulk VAT subsidy and the remaining is for other projects that meet the criteria for subsidy and incentives programs.

Pantha also told Republica that Rs 9 billion, including the amount allocated for subsidy and incentive programs, has been proposed to implement the 99-point Energy Development Plan 2016/2026.

Other reform plans like restructuring of NEA and revising laws dating back to as early as 1990s are yet to take off. The new budget is also likely to earmark budget for restructuring of NEA which will make its work performance more efficient.

Of the proposed budget, Rs 2 billion will be utilized to make share investments in four companies namely Grid Company, Electricity Generation Company, Power Trade Company and Engineering Company as part of NEA unbundling plan. Likewise, funds will be allocated to building a substation in Dhalkebar as part of Dhalkebar Mujaffarpur Transmission Line Project, among others.

Source : Republica