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The financial management plan for the Upper Karnali Hydropower Project, submitted seven months ago, has yet to be approved. The project, which took 10 years to prepare its financial plan for the Investment Board Nepal (IBN), is being developed by India’s Grandhi Mallikarjuna Rao (GMR). GMR submitted the financial plan on Jan 17, but it has remained pending due to issues involving one of its proposed shareholders, the Indian Renewable Energy Development Agency (IREDA).

IREDA had committed to invest five percent in the 900 MW project, but the Reserve Bank of India (RBI) did not approve the investment, citing incomplete processes. IREDA has since reapplied for approval after addressing RBI’s requirements. Meanwhile, GMR has also prepared an alternative shareholding structure without IREDA, proposing 36.5 percent each for GMR and Sutlej Jal Vidyut Nigam (SJVN), and 27 percent for the Nepal Electricity Authority (NEA). If RBI clears IREDA’s participation, however, the shareholding will remain as earlier proposed—34 percent each for GMR and Sutlej, five percent for IREDA, and 27 percent for NEA.

Investment Board spokesperson Pradyumna Prasad Upadhyay confirmed that no official request has yet been received regarding the change in shareholding. The board had earlier approved Sutlej and IREDA as equity partners in its 60th meeting, and GMR had signed agreements with both in August 2025 to sell shares. According to IBN, GMR also retains the option of financing the project through the net worth of its parent company if IREDA’s investment is ultimately rejected.

GMR was awarded the project in 2008 after applying in 2006. However, the company has repeatedly extended deadlines for financial closure, including in 2016, 2017, 2018, 2019, and 2022. The financial plan was finally submitted in 2024 along with an action plan, under which some initial works—such as access road construction and bridge preparations—have already begun.

According to GMR’s plan, pre-construction work is scheduled from early 2025 to Feb 2026, with major construction starting afterward. Diversion works are set for Jan 2026 to Aug 2027, road tunnel construction from Jan 2026 to May 2027, and the Karnali River bridge from Jan to Nov 2026. The company also plans to complete the transmission line by Jan 2026. Key components such as the headrace tunnel, dam, powerhouse, and electromechanical works are targeted for completion between 2029 and 2031, with the entire project expected to be finished by June 2031.

The project, located in Achham district, aims to supply electricity to Nepal, India, and Bangladesh. Nepal will receive Rs 4.5bn in benefits over 25 years through equity, free energy, and royalties. Initially, GMR had signed a power purchase agreement to export 500 MW to Bangladesh, but the Bangladesh government suspended such deals under the Special Power Act, and its Power Development Board has reportedly cancelled the preliminary supply agreement. However, IBN says it has not received any official communication regarding this decision.

The Upper Karnali project is considered one of the lowest-cost hydropower projects in the world, requiring only a 2.4-kilometer tunnel and displacing relatively few households. But with delays in construction, the estimated cost has already escalated to nearly Rs 2.5trn.

Preparations are underway to lease large government-invested structures for full operation, with government officials stating that projects worth more than Rs 1bn are being prepared for leasing to generate returns. The government has made arrangements to lease six structures: the current Parliament Building (Birendra International Conference Center), the Sunrise Assembly Hall in Godavari, Dharahara in Sundhara, the Damak Business Center, and the Assembly and Exhibition Halls in Butwal.

Since the government cannot use these structures intensively, they are not generating adequate returns. The government has proposed to improve their operation through partnerships with the private sector via leasing. However, there is currently no law or established practice for leasing government buildings and structures.

Although there is no law, the government is preparing to move forward by setting its own standards. According to Narayan Prasad Mainali, spokesperson for the Ministry of Urban Development, the ministry has already prepared standards for operating special structures for leasing government buildings. The former Birendra International Conference Center (now the Parliament Building) has been renamed, and a ‘Special Structure Management and Implementation Committee’ has been established. The government formed this committee under the ‘Special Structure Operation and Management Development Committee (Formation) Order, 2024’.

This government committee is responsible for the operation, management, conservation, and potential partnership (lease/rent) processes for government structures. The committee was formed in Nov 2024 after it became apparent that billions of rupees invested in these buildings would result in them remaining vacant, incurring losses, or being economically unsustainable if used only by government agencies. The committee was given the responsibility of deciding the operational model for these assets (government, private partnership, or lease). 

The chairperson of this committee is the secretary of the Ministry of Urban Development, and the executive director is a government-designated individual. However, the executive director position has been vacant for about three months. “An advertisement has been issued for the post. The committee will get an executive director at some point. Until then, I have been assigned the responsibility,” said spokesperson Mainali.

According to Mainali, a board meeting of the committee is being held on Sunday, where the criteria for the operation of special structures, prepared by the Ministry of Urban Development, will be presented. He says that once the meeting passes the criteria, they will be submitted to the Ministries of Law and Finance for their opinions. “After receiving opinions from these ministries, it will be submitted to the Council of Ministers for approval, and the standards will be implemented with the approval of the Council of Ministers,” Mainali stated.

“A leasing document has been prepared that details the total government investment in the specified structures, operating expenses, and the projected return period. The standards have been set to lease for about five to six years,” Mainali said. Based on this, the price of each structure will be determined, and a tender will be called for an amount not less than that.

Of the six structures the government is preparing to lease, the Sunrise Assembly Hall, Damak Business Center, and Butwal Assembly Hall have been completed. Some construction work is still pending on the Dharahara in Sundhara and the Butwal Exhibition Hall. The Parliament Building in New Baneshwor was constructed by the Chinese government around 1993. The BICC Building, which was previously used for meetings and conferences, has been used as the Parliament Building by the government since the establishment of the Republic.

Data released last week by the International Air Transport Association (IATA) shows an 11.8 percent increase in the number of business class and premium passengers in global air travel.

The latest edition of the World Air Transport Statistics (WATS), based on data from more than 240 international airlines, reports that economy class passengers grew by 11.5 percent. Business and premium class travelers totaled about 116m—around six percent of all international passengers.

The report also provides insights into operating costs and revenues, aircraft utilization, airline employment figures, and the overall financial health of the industry. According to IATA, total international passenger numbers reached about 2bn.

The Asia-Pacific region led the growth in international travel, with total passenger numbers up 28.3 percent. Business class passengers in the region increased by 22.8 percent, while economy class grew by 28.6 percent. In contrast, North America recorded the lowest international passenger growth rate—5.9 percent overall, with 9.4 percent growth in business class and 5.6 percent in economy.

In 2024, the world’s busiest air route was Jeju–Seoul in the Asia-Pacific region, with 13.2m passengers. The region dominated the list of the world’s 10 busiest routes, which also included Sapporo–Tokyo Haneda with 9.2m passengers, Fukuoka–Tokyo Haneda with 9m, and Hanoi–Ho Chi Minh City with 8m. Other high-traffic routes were Melbourne Tullamarine–Sydney (7.2m), Jeddah–Riyadh (6.3m), Mumbai–Delhi (5.9m), Tokyo Haneda–Okinawa (5.6m), Shanghai Hongqiao–Shenzhen (5.3m), and Beijing Capital–Shanghai Hongqiao (5.3m).

Bogotá–Medellín was the busiest route in Latin America with 3.8m passengers, while Cape Town–Johannesburg topped Africa with 3.3m. In North America, New York JFK–Los Angeles was the busiest route with 2.2m passengers, and within Europe, Barcelona–Palma de Mallorca led with 2m.

Boeing and Airbus narrowbody aircraft were the most widely used in 2024. The Boeing 737 (all variants) operated 10m flights with 2.4trn available seat kilometers (ASKs). It was followed by the Airbus A320 with 7.9m flights and 1.7trn ASKs, and the Airbus A321 with 3.4m flights and 1.1trn ASKs.

The United States remained the world’s largest aviation market in 2024, with 876m passengers. Domestic flights grew by 5.2 percent compared to the previous year. China ranked second with 741m passengers, an 18.7 percent increase from 2023.

The much-delayed Narayanghat–Butwal road expansion project has requested a fourth and final deadline extension, after failing to complete construction within the previously extended deadline of July 23. Despite nearly six years since the contract signing, physical progress remains around 70 percent, prompting concerns over project management and inter-agency coordination.

The project has submitted a request to the Department of Roads to extend the deadline by another year, with the aim of inaugurating the upgraded road by March 2026. The Ministry of Physical Infrastructure and Transport has stated it sees no alternative but to continue with the current Chinese contractor, though officials insist that this will be the final extension and that the contractor must complete the work within the new deadline.

Initially awarded in Dec 2018, the road’s first scheduled completion date was Aug 2022. The project faced numerous setbacks, including the Covid-19 pandemic, delays in tree clearance, utility pole relocation, and institutional instability. Former Secretary Arjun Jung Thapa noted that nearly two years were lost just navigating delays in tree-cutting permissions. An initial Environmental Impact Assessment (EIA) underestimated the number of trees by over 40,000—prompting a re-evaluation that stalled work further.

Additionally, electrical pole relocation and changes in political leadership and bureaucracy contributed to the prolonged delays.

Of the 113 kilometers of the road under construction, 60 km of four-lane paving and 33.5 km of two-lane blacktopping have been completed. The project saw a notable acceleration in 2023/24, completing 30 km of four-lane and 17.5 km of two-lane paving in that year alone.

The project is divided into two sections: Western Section: Butwal to Daunne (48 km) and Eastern Section: Daunne to Narayanghat (65 km).

According to Asian Development Bank (ADB) Project Director Chudamani Dhakal, the primary paving will be completed by March 2026, with ancillary works to finish by July 2026). Traffic flow has improved in most areas, except for Daunne, where travelers continue to face extreme hardship due to difficult terrain and construction bottlenecks.

The 13-kilometer stretch through Daunne remains the most challenging part of the project. Located in a fragile Chure region with steep gradients and narrow paths, this segment has posed engineering, geological, and traffic management hurdles. Officials say the need for deep cuts, the presence of massive boulders, and the lack of space for machinery and material storage have severely hampered progress.

With no alternative routes, both construction and traffic must coexist—leading to slower work and persistent public suffering. Although options such as a tunnel or bypass were considered, cost, environmental, and time constraints have so far ruled them out.

To minimize ecological impact, the project includes 43 culverts, two monkey crossings, and 27 ponds. Rope bridges and elevated structures have been installed to facilitate animal movement. The project also donated two vehicles to the District Forest Office in Nawalparasi and plans training programs for speed regulation in protected areas.

In the Eastern Section, which spans 65 kilometers, progress has been steady. About 56.6 kilometers of one-sided paving have been completed, along with two kilometers of bridge segments. Out of the 35 planned bridges, including the prominent Narayani Bridge, 31 have been completed, while two are still under construction. However, 6.4 kilometers remain unpaved, mostly in the Daunne area and near marketplace sections.

Meanwhile, the Western Section, covering 48 kilometers, has achieved 69 percent physical progress and 64 percent financial progress. So far, 62 percent of the paving work has been completed. Of the nine bridges planned in this section, eight have been finished, with construction still ongoing at the Rohini River bridge.

The project regained momentum after Prime Minister KP Sharma Oli intervened in April 2024. During an inspection of the Gaindakot section, he instructed authorities to expedite the project and issued a clear warning that contracts would be revoked if work did not commence by Nov 2024. Following his involvement and subsequent diplomatic efforts with the Chinese government, the project began moving forward again.

Authorities argue that cancelling the contract would only delay the project further. Hence, the decision to continue with the same contractor was made, while maintaining pressure for timely completion.

The project is being implemented with Asian Development Bank funding, with 83 percent of the cost covered by loans and 17 percent by the Nepal government. Initially estimated at Rs 21.75bn, the project was awarded at approximately Rs 17bn.

The reconstruction and management of the Jhyaple River section, damaged by a landslide under the Nagdhunga–Naubise road stretch, is in its final stages. Keshav Prasad Ojha, project chief of the eastern section of the Nagdhunga–Muglin road, said that the repair work is being carried out at a cost of around Rs 20m and is expected to be completed by July.

Following heavy rainfall last year, a massive landslide occurred in Jhyaple River along the Tribhuvan Highway. The landslide killed 35 people and swept 2.7 kilometers downhill from a point 600 meters ahead of Nagdhunga. It destroyed key infrastructure including retaining walls, breastwalls, and culverts.

Ojha said that reconstruction is underway in three phases, two of which have already been completed. “The first step involved protecting a previously built wall in the river, which was in a risky state due to the landslide. We conducted micropiling work to stabilize it. The second step was installing gabion walls in the lower area, which is now nearly complete. The third step, installing soil anchors on the damaged wall, is scheduled for completion by August,” he added.

Despite progress, long-term landslide mitigation in the Jhyaple area is expected to begin only after eight months. The Nagdhunga–Muglin road sees daily traffic of about 15,000 vehicles. Its upgrade is being funded through a concessional World Bank loan and investment from the Government of Nepal.

The 12.26-kilometer Nagdhunga–Naubise stretch is the first package under this project. A contract agreement was signed with the Jiangsu-Sagun JV on 12 April 2022, and construction began on 9 June 2022. The project, originally set to complete by 30 May 2024, has seen two deadline extensions—first to 9 Feb 2025, and again to July 25. The section is currently 84 percent complete, and discussions are ongoing with consultants regarding another extension.

Ojha explained that reconstruction was delayed due to the need for a fresh study and redesign following the unexpected landslide. “We hadn’t anticipated a landslide of this scale. A separate study was launched in October, with resource allocation and modality finalized. The consultant submitted the report in May,” he said. The study, jointly conducted by ITECO and TMS, assessed soil quality and geological conditions. Based on its recommendations, the original contractor, Jiangsu-Sagun JV, was retained for landslide management under a contract variation.

However, Ojha emphasized that this current work addresses only the immediate damage. “A new contract and budget will be needed for a comprehensive landslide management plan in the Jhyaple River area,” he said.

Gyanendra Ghimire, manager of Jiangsu-Sagun JV, said that land plotting above the Jhyaple River contributed to the disaster. “Soil, stones, and debris were left uncleared, forming a landslide-prone area. The landslide occurred when silt blocked drainage and flowed directly into the river,” he explained.

Suman Ghimire, Chief District Officer of Dhading, said the landslide was likely triggered by the area’s weak geological structure. “Risk-reduction work is ongoing,” he said. The Department of Roads has taken a specialized approach for this landslide. Gabion and bamboo-crested walls have been installed to prevent further slides, while micro-piling and RCT wall construction are underway to stabilize the road above the affected area.

The 140-megawatt Tanahun Hydropower Project is awaiting approval from the Ministry of Finance for source assurance of Rs 5.85bn needed for forest compensation. The reservoir area—spanning 421 hectares—includes a community forest, while 92 hectares of national forest lie along the project’s transmission line route. Forest-related issues have emerged as a major obstacle to the project’s progress.

The government has pledged to ensure funding, but Project Chief Shyamji Bhandari says construction will proceed only after compensation for forest areas is secured. Although Rs 6bn has been allocated for the project in the current fiscal year, it does not include the forest compensation amount.

As per earlier forest regulations, the project agreed to plant 25 trees for every tree felled in government forests. For dams, the ratio remains 1:25, but under new guidelines, the ratio is 1:10 for transmission lines. The Rs 5.85bn required includes the cost of afforestation, land valuation of affected forest areas, and a five-year forest conservation plan.

The project has applied to the Finance Ministry to allocate this amount to the Forest Development Fund under the Ministry of Forests. Although the Nepal Electricity Authority (NEA) is handling construction, the project is classified as a government initiative, and the Cabinet has committed to ensuring financial resources.

Approval for tree felling in government forests was processed by the District Forest Office and forwarded via the Forest Department to the Ministry of Forests and Environment. Bhandari said the project submitted the required documents around three months ago. The Ministry of Forests then communicated the compensation amount to the Ministry of Energy, Water Resources, and Irrigation. Ministry sources confirm that the matter has now reached the Finance Ministry. “We have received the application to ensure the funding source for the Forest Development Fund. Discussions are ongoing,” said a source at the Finance Ministry.

Meanwhile, the NEA warns that failure to ensure this funding could delay the project. NEA Executive Director Hitendradev Shakya said that despite the NEA’s 100​ percent investment, the government must either provide the funding or offer a loan to the authority. “Neither has been done so far,” said Shakya. “If the government fails to act, the project will face a crisis. The NEA does not have the funds to cover this cost.”

Without the funding guarantee, the Forest Department has withheld the order for tree felling—jeopardizing construction of the transmission line. Of the total 94 towers, 14 on the Chitwan side are located in forest areas. The contractor has said work in these areas cannot proceed without deforestation clearance. According to Bhandari, tower foundations have been completed at 80 sites, and towers erected at 69. Fourteen towers remain to be built.

The overall progress of the reservoir project is around 67 percent. Although the financial structure was finalized in 2015, completion is now expected by May 2026—two years later than originally planned—due to forest-related and other delays. The NEA conducted the initial feasibility study in 2001, with another conducted by Japan’s JICA in 2003. The Detailed Project Report (DPR), supported by the Asian Development Bank (ADB) and prepared by J-Power, was completed in 2015.

Construction is divided into three packages. Package-1, covering the main dam, was initially awarded to Italian company CMC on ​26 July 2018. However, the contract was terminated after the company failed to respond by ​19 Feb​ 2019. Tanahun Hydropower notified CMC of the cancellation.

The total project cost—including the transmission line, rural electrification, and interest during construction—is estimated at $505m. ADB has provided $150m, JICA $184m, the European Investment Bank $85m, and the Government of Nepal/NEA $86m. Around Rs 1.3bn has already been distributed as compensation for 1,400 ropanis of land.

A 140-meter-high dam is being constructed on the Seti River, at the border of Rishing Rural Municipality-1 and Byas Municipality-5 in Tanahun. Package-2 covers the tunnel, powerhouse, and hydromechanical/electromechanical installations. Package-3 involves building a 220 kV double-circuit transmission line from Damauli to Bharatpur in Chitwan, currently being constructed by India’s KEC International Limited.

In addition, the company is advancing development of the 126 MW Lower Seti Hydropower Project, utilizing flow from the current project along with water from the Madi River.

The government’s decision to sign Power Purchase Agreements (PPAs) for run-of-river (ROR) hydropower projects on the ‘take-and-pay’ model has triggered strong opposition from the private sector. Independent power producers (IPP) say this policy shift could affect the development of over 350 projects with a combined capacity of 17,117 MW, putting Rs 109bn already invested in studies and preparations at risk.

Under the ‘take-and-pay’ model, the Nepal Electricity Authority (NEA), the only entity in the country involved in energy trading, will only pay developers for electricity it actually purchases and uses. This means if NEA does not consume the electricity, producers receive no payment. This means there is no guaranteed revenue stream for developers which makes it difficult to attract investment or secure financing.

The private sector has long advocated for the ‘take-or-pay’ mode in which NEA is obligated to pay for a pre-agreed amount of electricity, whether or not it is actually used. This model assures developers of predictable revenue and has historically been key to attracting private investment in Nepal’s hydropower sector.

The Independent Power Producers’ Association Nepal (IPPAN) says the new policy sends a message that the government no longer welcomes private investment in run-of-river hydropower. IPPAN Senior Vice-president Mohan Kumar Dangi said this policy effectively tells private developers to stop investing in hydropower. “After issuing survey licenses and signing connection agreements, it now wants to deny payment guarantees,” Dangi added. 

IPPAN has warned that this policy could lead to the suspension of over 350 hydropower projects and write off Rs 109bn already invested and a potential Rs 3.3trn in future investments may never come. The government would forgo Rs 327bn during construction and up to Rs 3.1trn post-completion revenue. The government has set an ambitious target of generating 28,500 MW of electricity over the next 10 years. Nepal also has agreements to export electricity to India and Bangladesh (40 MW). If new projects are not developed, these targets may be unachievable, said IPPAN Deputy Secretary-General Prakash Dulal. 

Banks are unlikely to invest in projects under the Take and Pay model, making financing more difficult and undermining the perceived security of hydropower investments. On average, a 1 MW project provides employment to 100 people for 2–3 years and 10 people permanently after completion. “This change will spike unemployment by halting project development,” Dulal added.

The hydropower sector also drives demand in cement, steel, and transportation industries. If the 17,117 MW worth of projects are scrapped, the estimated direct losses across sectors include: Rs 355bn in cement, Rs 235bn in steel, Rs 250bn in construction materials and transport, Rs 175bn in fuel, Rs 894bn in labor income, Rs 659bn in imports, and Rs 257bn in interest—totaling over Rs 2.8trn.

NEA Executive Director Hitendra Dev Shakya admits that while production capacity has grown, investment in transmission infrastructure has lagged. “We focused on generation, but not enough on transmission,” he said. “Of the Rs 900bn invested so far in generating around 3,600 MW, only a fraction has been spent on transmission, which should have accounted for at least 20 percent.”

With many ROR projects peaking during the rainy season and falling to just 25 percent capacity in winter, Nepal still relies on imports from India during dry months. NEA currently buys about 300 MW on a contingency basis—only when needed. 

“If transmission lines aren’t built, even projects with ‘take-or-pay’ PPAs may end up being paid under ‘take-and-pay’ terms because NEA can’t evacuate the power,” Shakya said. “We did not suggest that the government adopt ‘take-and-pay’ for ROR projects. We only asked for investment in transmission.”

Shakya, however, said the private developers should not be alarmed by the new policy. “NEA has published a notice for 11,080 MW being developed by the private sector, 700 MW being developed by the NEA and 5,000 MW being developed by Indian companies to sign PPA,” he said. “Rather, the private sector should focus on financial closure for the 4,100 MW of projects that already have PPAs but have made no progress in financing for years.” 

He added that the government was preparing to bring new regulations to allow private investment in transmission lines and offer ‘take-or-pay’ PA for projects with secured markets and grid connectivity.

Energy Secretary Suresh Acharya, however, said there is no alternative to the ‘take-or-pay’ model. “The Hydropower Development Roadmap also envisions ‘take-or-pay’, so we must stick with it,” he said. “While the model is necessary, some regulatory restrictions may be required to avoid blanket guarantees.”

Meanwhile, lawmakers and energy experts have also strongly criticized the decision calling it “unfortunate” and “harmful” to Nepal’s energy sector. Speaking at a program organized by the Society of Infrastructure Journalists Nepal on Monday, they urged the government to immediately revise the provision to protect the country’s hydropower development.

Deepak Bahadur Singh, Chair of the Parliamentary Infrastructure Development Committee, said the budget was biased and pledged to initiate fair decisions to safeguard the sector. “Over 6m Nepali citizens have invested in the energy sector. We must act in their collective interest,” he said. Lawmaker Urmila Majhi called it “shameful” that the government officials who drafted the budget were unaware of the implications of the Take and Pay model. Fellow lawmaker Bina Lama said the parliamentary committee would summon concerned stakeholders for discussion and push for a revision. MP Nisha Dangi warned the policy would fail, and Dinesh Kumar Yadav said they are raising the issue in Parliament to have it repealed. MPs Mahesh Basnet, Sushila Shrestha, and Shiva Nepali also pledged to take corrective action.

Former National Planning Commission Vice-chair Govind Raj Pokharel said the budget targets sectors that create employment, showing the government’s insensitivity to energy infrastructure challenges.

Ganesh Karki, President of the IPPAN, said if the provision is not amended, not a single hydropower project would be built under the new fiscal budget. “The energy sector is under siege and needs urgent support,” he stated.

The new fiscal budget presented on Thursday has effectively halted the progress of around 17,117 MW of run-of-river (RoR) hydropower projects in Nepal by introducing a major policy shift in the Power Purchase Agreement (PPA) model.

Until now, RoR projects operated under a ‘Take or Pay’ PPA model, where the Nepal Electricity Authority (NEA) had to pay private developers regardless of whether it used the electricity or not. The latest budget, however, proposes a shift to a ‘Take and Pay’ model, meaning the NEA will only pay for the electricity it actually purchases.

Ganesh Karki, President of the Independent Power Producers’ Association of Nepal (IPPAN), warned that this policy change could render investments already made by private developers in RoR projects unviable. He said banks are unlikely to finance projects under the new PPA model, pushing many developments to the brink of cancellation.

According to IPPAN, 17,117 MW worth of RoR projects currently hold licenses from the Department of Electricity Development, with approximately Rs 66bn already invested. These projects are in various stages of development, awaiting PPAs and financial closure. Once fully implemented, total investment could reach Rs 3.4trn. The breakdown includes 2,078 MW of projects already under construction, 6,436 MW awaiting construction permits, 5,079 MW with survey licenses, and 3,521 MW awaiting survey permits.

This shift has frustrated private developers who had expected the budget to align with the government’s recently unveiled Energy Development Roadmap, which aims to generate 28,500 MW of electricity—15,000 MW for export to India and 13,500 MW for domestic consumption.

IPPAN claims the new provision makes it nearly impossible for the private sector to move forward, despite other budget promises like streamlining forest clearance, transmission line construction, and support for reservoir-based projects. Karki argued that unless developers can build the projects, these other incentives become meaningless.

“The government’s move has placed private developers in a position where their investment could drop to zero,” Karki said. “The state should not have issued licenses in the first place if it planned to later change the agreement terms. The Department of Electricity Development continues to issue licenses, but developers are now left in limbo.”

NEA sources said the switch to ‘Take and Pay’ is necessary for the financial sustainability of the authority. The previous model, where payments had to be made even without actual power usage, posed significant financial risks—especially during the monsoon when RoR production exceeds domestic demand and guaranteed exports to India remain uncertain.

IPPAN has strongly opposed the shift and announced plans to launch protests if the decision is not reversed. In a statement released Friday, IPPAN described the new policy as hostile to private investment and a setback for Nepal’s power sector. The group also criticized the government for failing to support the ongoing development of RoR projects, which they claim still constitute a majority of the private sector’s hydropower activity.

IPPAN called for an immediate revision of the policy and demanded a return to the ‘Take or Pay’ model. Failure to do so, they said, would prompt a “strong and decisive” protest campaign.

Currently, Nepal’s total electricity generation capacity is about 3,600 MW, with over 80 percent contributed by the private sector. Of the 17,117 MW of RoR projects awaiting PPAs, the NEA or the government is developing only 190 MW.

IPPAN argues that the new provision contradicts the Energy Development Roadmap and the goals set out in the 16th Five-Year Plan of the National Planning Commission. The association also claims the decision violates existing policies and legislation, including the Electricity Act 1992, the Hydropower Policy 2001, and the National Water Resources Policy.

The organization fears that this policy change will derail over Rs 1.5trn already invested by the private sector, and jeopardize an additional Rs 3trn planned for future investment, pushing the entire sector into uncertainty.