In the early 1990s Lotus Energy was one of three companies promoting solar electricity for rural electrification. Everyone said solar was too expensive and that only micro-hydro was the way forward. MPs thought solar was used only for hot water.

Today there are over 70 companies in Nepal's solar industry employing tens of thousands of people to provide solar photovoltaic (PV) electric systems. There are very few villagers who do not know about solar.

The original solar subsidy program was a project between Lotus Energy and Agriculture Development Bank Nepal (ADB/N) and its 1,400 branches. The donor-supported Alternative Energy Promotion Center (AEPC) was set up and took over the subsidy program for solar in Nepal, albeit at a lower subsidy amount, a lot more paperwork and without the in-built microfinancing that ADB/N had offered.

Only recently has the AEPC realised how solar has become so practical and reliable that it could considerably ease Nepal's power shortage. But restrictions still make solar incentives difficult to obtain and components difficult to import. Restrictions on the import of cheap inverters, which divert peak electricity and store it without generating anything, have backfired as these units are still smuggled from India while more efficient invertersfrom abroad are banned. While the import of inverters needed for larger solar grid tied arrays are restricted.

On the village level, some of the least expensive and most reliable technologies are banned. The donor-created Renewable Energy Test Station (RETS) claims to provide villagers the service of filtering "bad" components out of the Nepal market. They make technical recommendations based on outdated or unfair specifications and mandates from donors with vested interests. Excellent products like inexpensive easy-to-service solar tube lamps were almost banned, as were cheap solar batteries which were some of the highest quality and longest lasting batteries used in Nepal, just because a German consultant didn't like them.

In 2003, a senior EU official came to see the solar program we were designing for remote areas. The consultant made it plain that no Nepali solar company could supply the equipment for a EU-funded project. "All the hardware must come from EU companies and nowhere else," he said. After a big outcry, the policy was later changed.

Another EU team leader resigned and told me he couldn't do the work with a clear conscience. Even though most donors "give" in some form, they "take" in another. Tied aid is alive and kicking in Nepal.

Nepal's solar subsidy program for villagers has inadvertently become a scam. When donors agree to give money, it operates for some months, and when funds run out or donors change their minds, it stops. This means that instead of buying the cheapest, longest-lasting solar year round with free market competition, the villagers buy expensive donor specified equipment like specialised tubular batteries only half the year. Solar companies must sit idle for six months and try to pay their staff and rent with no incomes.

A duty and VAT break is possible only if you are lucky to fulfill some donor-specified criteria. Subsidies restrict which solar products one can buy and how they are sold. Nepal is responsible for its own development, it must not be influenced by donors who don't really add any value.

The very best and fastest way to increase solar proliferation in Nepal is simply to drop all taxes on all solar components and installation materials for stand-alone remote and grid-tied solar systems and permanently end the unfair bureaucratic costly subsidies and dissolve the restrictions.

The cost of solar has dropped steadily for two decades while diesel and petrol constantly increases. RETS can be dissolved or converted to a research institute. The AEPC can remain as a true promotional body to provide microcredit and other incentives for urban and remote solar users.