Kathmandu, June 3: The recently announced budget for the fiscal year 2082/83 (2025/26) has drawn criticism from various sectors, including independent power producers and gold and silver traders.
The government’s announcement to implement the ‘Take and Pay’ model for Power Purchase Agreements (PPAs) in the Run-of-River (ROR) hydropower projects has been met with strong dissatisfaction from the Independent Power Producers’ Association Nepal (IPPAN).
Until now, the ‘Take or Pay’ model was in place, under which the Nepal Electricity Authority (NEA) was obligated to pay for electricity even if it wasn’t used. However, under the new ‘Take and Pay’ model, NEA can refuse to purchase electricity when not needed, and is not liable to pay for unused electricity, placing significant financial risk on private investors.
According to IPPAN President Ganesh Karki, over 80% of Nepal’s current 3,600 MW electricity generation capacity comes from the private sector. ROR projects alone have a potential capacity of 17,117 MW, of which only 190 MW is being developed by the NEA or government. Karki argues that the budget announcement effectively shuts the door on the development of these projects, threatening to derail the sector’s growth.
He added that this provision has put an estimated Rs 66.22 billion already invested by private developers at risk. Since banks and financial institutions are unlikely to finance projects under a Take and Pay PPA, it could halt nearly 300 projects in development.
Karki emphasized that this policy contradicts with the government’s Energy Development Roadmap 2081, which aims to generate 28,500 MW, 16th Five-Year Plan of the National Planning Commission and existing legal frameworks including the Electricity Act 2049, Hydropower Policy 2058, and Water Resources Policy.
Despite public pledges to encourage private and foreign investment in the energy sector and export 10,000 MW to India, this budget provision is seen as contradictory and discouraging to those goals.
IPPAN warns that if the government does not revert to the ‘Take or Pay’ model, the private sector will be forced to engage in strong protest. Karki said private investors feel disrespected and betrayed by the government’s move.
Gold and silver traders also discontent
Gold and silver traders have also expressed dissatisfaction with the 2082/83 budget, particularly regarding increased taxation on jewelry.
While the provision allowing returning migrant workers to bring in a specific quantity of gold jewelry duty-free was welcomed, the Federation of Nepal Gold and Silver Dealers’ Association (FENEGOSIDA) raised concerns over a 2% luxury tax now applied to all types of jewelry, compared to previously only on items worth above Rs 1 million and a 13% Value Added Tax (VAT) on jewelry embedded with diamonds and precious stones.
Acting President Diyesh Ratna Shakya stated that this new tax structure will increase the cost burden on consumers by 2% to 13%, likely leading to increased inflation and a rise in illegal gold smuggling and black-market trading, due to higher prices than neighboring markets.
Shakya also noted that since jewelry comes with buy-back guarantees, the difference between selling and buying prices must remain minimal to maintain market stability—something now endangered by these taxes.
He stressed that the government should immediately reconsider and repeal these tax hikes and focus on creating long-term policies for sustainable development of the gold and silver sector, conducting impact assessments before changing tax structures, and ensuring that existing businesses and employment are not harmed by abrupt tax reforms.
According to the traders, the already declining market due to high gold prices will suffer further stagnation, endangering the livelihoods of thousands of artisans and workers.
Both sectors—the energy producers and gold/silver traders—have urged the government to review and revise the budget provisions to avoid derailing investments, protect jobs, and ensure long-term economic stability. #nepal #budget #energy #gold
