Government Revises Controversial 'Take-and-Pay' Clause in Budget Following Political Pushback

The government has made changes to the contentious ‘take-and-pay’ provision in the upcoming fiscal year’s budget after it faced mounting pressure from lawmakers and stakeholders.

Presenting the revision in Parliament on Tuesday, Finance Minister Bishnu Prasad Paudel proposed an amendment to Clause No. 227 of the FY 2025/26 budget. As per the new wording, power purchase agreements (PPAs) will now be allowed only for hydropower projects that show clear potential for domestic use or export and where the Nepal Electricity Authority (NEA) can guarantee payments based on financial risk evaluations.

Previously, the budget had stated that run-of-river projects would be signed under the 'take-and-pay' model, which sparked debate across party lines and among energy sector representatives. The original clause also mentioned aligning transmission and substation construction with the completion of hydropower projects and balancing production and consumption.

The issue had created friction between the Finance Ministry and the Ministry of Energy. While Energy Minister Deepak Khadka favored correcting the policy, Finance Minister Paudel was initially hesitant. However, growing opposition—especially from the Nepali Congress, whose President Sher Bahadur Deuba personally called for the clause to be removed—eventually led to a consensus among ruling parties to revise the policy.