After Nepal and India signed an initial deal on a long-term power trade deal as well as agreed to pave the way for power export to Bangladesh from Nepal during Prime Minister Pushpa Kamal Dahal's recent India visit, private power producers are demanding that a power purchase agreement (PPA) should be opened. They have also demanded that the private sector be allowed in power trading in the domestic and foreign markets. Currently, the Nepal Electricity Authority (NEA) has the authority to sign PPAs with power producers in Nepal. However, the state-owned power utility is yet to conclude PPAs of projects with an estimated total capacity of 10,500 MW. NEA had introduced the quota system in PPA citing the lack of market guarantee.

With Nepal and India signing an initial agreement on a long-term power deal recently, the Independent Power Producers' Association Nepal (IPPAN) has again raised its demand of resuming the PPAs.

IPPAN officials argue that since the understanding reached during the Prime Minister's recent India visit has ensured the market for electricity, there is no point for NEA to continue refusing to sign PPAs with private power companies. "India has already said that it will buy 10,000 MW of electricity in 10 years. In addition, Nepal will also be exporting 40 MW of electricity to Bangladesh starting this year," said Krishna Prasad Acharya, President of IPPAN, "Given these developments, there is no point in keeping the PPAs of the projects on hold. The private sector should be encouraged to generate electricity by opening the PPAs immediately." Acharya also demanded that the private sector should also be given licenses for power trading. NEA had stopped signing PPAs with the hydropower developers of the run-of-river (ROR) projects three years ago citing the 'financial risks' involved in such power produced by such projects. According to NEA, buying more power will add more financial burden to the organization as it is experiencing power spillage during the rainy season due to low domestic consumption and inadequate access to the Indian market. In April 2018, the Ministry of Energy, Water Resources and Irrigation (MoEWRI) issued a white paper and decided to generate 15,000 MW of electricity in the next 10 years. Of the targeted 15,000 MW, PPAs were planned on the basis of the take-or-pay principle by keeping the ratio of reservoir and pump storage at 30 to 35 percent, peaking RoR at 25 to 30 percent, RoR at 30 to 35 percent, and other alternative sources. A meeting of the cabinet of ministers on July 8, 2022, reviewed the production mix ratio and reduced it by 10 percent for reservoirs and increased it by 10 percent for RoR projects. As per the latest revision, the ratio of reservoir projects will be maintained at 20 to 25 percent, peaking RoR at 25 to 30 percent, RoR at 40 to 45 percent, and other alternative sources at 5 to 10 percent. With this, the limit for PPA for the RoR project increased from 5,250 MW to 6,750 MW. NEA in the second week of February decided to sign PPAs for up to 1,500 MW with RoR projects after the then-energy minister Rajendra Lingden ordered NEA to resume PPAs. NEA decided to move ahead with PPAs of RoR projects on the basis of the date-wise chronological order of the Grid Connection Agreement. Besides the decision to buy 1500 MW of power, the PPAs of other ROR projects have been stopped. Now IPPAN wants the government to open the PPAs immediately for the rest of the projects. According to Acharya, signing PPA is vital for power developers as banks and other investors decide to invest in the projects based on the purchase agreement. The delay in PPAs has stalled the construction of many projects that have already completed the initial study and survey. IPPAN has also demanded that the private sector should be allowed to enter the power trading as there is no other entity in the country currently to sign PPAs. "This would allow the private sector to enter into PPAs with a private power trading company, which will ensure the construction of the projects," said Acharya.