IPPs demand VAT refund of Rs 1.48bn

• Developers seeking incentives worth Rs 5 million per megawatt as promised in 2014-15

Kathmandu, July 6

Independent power producers (IPPs) have sought value added tax (VAT) rebate from hydropower projects as committed by the government through fiscal budget of 2014-15.

During the budget announcement, the government had said incentives worth Rs five million per megawatt would be provided to developers of hydropower projects that start commercial operation by 2022-23.

On July 2, Independent Power Producers Association-Nepal (IPPAN) wrote a formal letter to Barsha Man Pun, minister for energy, water resources and irrigation, seeking release of Rs 1.48 billion as 51 hydropower projects developed by the IPPs are generating 297 megawatts of electricity, which are already connected with the national grid.

According to the Ministry of Energy, Water Resources and Irrigation (MoEWRI), it had already forwarded the documents related to release of the said amount to the Cabinet. The Cabinet, in turn, had also forward the documents to the Ministry of Finance (MoF). However, the finance ministry has not released the funds.

“We are ready to provide the committed amount to the private hydropower developers, but the available resources also need to be considered,” said Dinesh Kumar Ghimire, spokesperson for MoEWRI.

However, the IPPs have criticised the government for its unpredictable policies that have been discouraging domestic investors to invest in hydropower projects. “The government has always been dilly-dallying in releasing the VAT rebate even though we have already talked about it with at least six energy ministers till date,” said Shailendra Guragain, president of IPPAN.

Following the budget announcement of 2014-15, the Ministry of Energy and Investment Board Nepal (IBN) had separately recommended the MoF to provide the rebate as committed through the budget.

At that time, the MoF had seemed positive in providing the rebate as the country was reeling under energy crisis. However, the MoF is yet to take the necessary action to materialise the government’s pledge.

Seeking anonymity, a joint secretary at MoF divulged that the ministry always had strong reservations against VAT refund to IPPs. “There is no such provision in the VAT Act,” he said. “The VAT rebate provision needs to be thoroughly discussed between all the concerned parties before it can be implemented.”