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Through the budget for Fiscal Year 2025/26, the government had introduced ambitious programs in the energy, water resources, and irrigation sectors. The government had announced a large-scale budget prioritizing hydropower generation growth, expansion of transmission lines, promotion of green energy, attracting private investment in alternative energy, expansion of underground electricity systems, and widening irrigation access.

However, as the fiscal year nears its end, a wide gap has emerged between expectations and reality in terms of implementation. While some projects have shown progress, most are still stuck in preliminary preparation, land acquisition, tender procedures, environmental studies, and financial management.

Meanwhile, tomorrow, on May 29, the government is set to unveil the budget for Fiscal Year 2026/27. With unfinished commitments in the energy and irrigation sectors, rising electricity generation, lack of transmission infrastructure, challenges in electricity exports, and the irrigation crisis in agriculture, indications suggest these sectors will again remain priorities in the upcoming budget.

What had the government announced in 2025/26?

In the budget for FY 2025/26, the government had presented the energy and irrigation sectors as key pillars of development. Priority was particularly given to increasing hydropower generation, expanding the energy mix, constructing transmission lines, developing alternative energy, and implementing multipurpose irrigation projects.

The budget had announced the commencement of construction of the 106 MW Jagdulla Hydropower Project, acceleration of the Tamakoshi-5 project, and advancement of detailed studies for the Chainpur Seti and Karnali Chisapani multipurpose projects. Likewise, the government had aimed to prepare investment frameworks and move forward with the construction process of projects including Upper Arun, Kimathanka Arun, Phukot Karnali, Mugu Karnali, Uttarganga, and Tamor.

The government had also introduced policies aimed at attracting investment in solar, wind, and green hydrogen projects to strengthen energy security. Priority was also given to allowing industries to build their own distribution lines for electricity consumption, expanding underground distribution networks, improving electricity supply through smart systems, and promoting rural electrification.

On the transmission side, priority had been given to the Khimti-Barhabise-Lapsiphedi, Inaruwa-Purnia, Dodhara-Bareilly, and Nepal-India cross-border transmission line projects. The government had allocated billions of rupees for the expansion of transmission lines and distribution systems.

In the irrigation sector, priority had been placed on the repair and expansion of the Babai, Rani Jamara Kulariya, Mahakali, Sunkoshi-Marin, Sikta, Greater Dang Valley, and Narayani-Kamala-Gandak irrigation systems. The budget had also included a plan to expand lift irrigation in hilly and Himalayan regions within five years, aiming to provide irrigation facilities to hundreds of thousands of hectares of land.

Implementation status: Progress slower than promises

Although the government had set ambitious targets in the energy sector, implementation has not progressed as expected. By the end of the fiscal year, most projects have failed to show the anticipated level of progress.

Delays in hydropower projects

Although the government had announced the commencement of the Jagdulla Hydropower Project, construction has not gained the expected momentum. Problems related to financial management, access roads, transmission lines, and administrative coordination have slowed the project.

Projects such as Chainpur Seti and Karnali Chisapani are still stuck in the stages of study, investment management, and preliminary preparation. Similarly, major projects including Upper Arun, Phukot Karnali, Mugu Karnali, and Tamor do not appear to have advanced into construction as announced by the government.

Officials from the Ministry of Energy say that environmental approvals, land acquisition, lack of transmission infrastructure, and the process of securing investment require considerable time, which has delayed expected outcomes.

Generation increased, but transmission remains a challenge

The government had estimated that an additional 442 MW of electricity would be connected to the national grid this year. With several private-sector projects being completed, generation capacity has increased. Electricity exports to India have also expanded as power generation rises during the monsoon season.

However, despite increased production, the lack of transmission lines remains a major challenge. Many projects have been unable to operate at full capacity due to the absence of grid connections. Projects such as Khimti-Barhabise-Lapsiphedi, Dodhara-Bareilly, and Inaruwa-Purnia are still in the construction and coordination phases.

In particular, although electricity generation has increased, domestic consumption has not expanded as expected, making it difficult for the Nepal Electricity Authority to manage surplus electricity during the monsoon season. Industrialists and businesses, meanwhile, continue to complain about the lack of reliable and quality electricity supply.

Limited achievements in alternative energy

Although the government had announced plans to attract private investment in solar, wind, and bioenergy projects, notable progress has not been seen. While a few solar projects have moved forward, wind energy and green hydrogen programs remain limited to preliminary discussions.

According to energy experts, the lack of clear policies, long-term power purchase agreements, and investment security has prevented the private sector from becoming fully encouraged to invest in alternative energy.

Persistent problems in the irrigation sector

The government had also made ambitious announcements in the irrigation sector. However, although projects such as Babai, Sikta, Rani Jamara Kulariya, and Sunkoshi-Marin have shown some progress, the work has not been completed according to targets.

In particular, while progress has been made in tunnel construction under the Sunkoshi-Marin Diversion Project, the construction of the full structure is still incomplete. The Sikta Irrigation Project has been affected by weak canal structures, flood damage, and questions over construction quality.

Although repair and rehabilitation works have been carried out in the Mahakali, Narayani, Gandak, and Kamala irrigation systems, farmers are still unable to receive sufficient water. In many areas, infrastructure has been built, but ineffective distribution systems have prevented water from reaching farmlands.

Why has implementation been weak?

There are several reasons behind the weak implementation of budgets in the energy and irrigation sectors.

First, project selection is often influenced by political pressure, while preliminary preparation remains weak. Projects whose studies have not even been completed are frequently included in the budget.

Second, projects are delayed due to land acquisition issues, forest clearance approvals, environmental impact assessments, and local-level obstructions.

Third, contract management remains weak. Limited capacity of construction companies, delayed payments, lack of coordination, and the repeated extension of deadlines have increased project costs.

Fourth, coordination between the government and local authorities in transmission line construction remains poor. Even when power projects are completed, the absence of transmission infrastructure has created problems in utilizing the generated electricity.

What could the FY 2026/27 budget look like?

It is almost certain that the upcoming budget to be introduced by the new government will once again prioritize the energy and irrigation sectors. However, this time the government appears to be under greater pressure to introduce an implementation-focused budget rather than one centered only on announcements.

Possible priorities in the energy sector

In the upcoming budget, the government may introduce programs focused on electricity exports, expansion of transmission lines, energy storage systems, and increasing domestic electricity consumption.

There is a strong possibility that cross-border transmission lines will be given high priority in order to expand electricity exports to India and Bangladesh. The government has been signaling its intention to promote energy trade as a major source of foreign currency earnings.

Likewise, programs aimed at increasing the use of electric vehicles, electric stoves, industrial electrification, and green energy may also be introduced. Improvements in “take-or-pay” and more flexible power purchase agreement (PPA) policies are also expected in order to attract private-sector investment.

The Ministry of Energy has also indicated that reservoir-based hydropower and pumped storage projects will be prioritized. The need for such projects is increasing to utilize surplus electricity generated during the monsoon season in the dry season.

Possible focus in the irrigation sector

In the upcoming budget, the government may focus on completing unfinished multipurpose projects. In particular, additional budget allocations are likely for projects such as Sunkoshi-Marin, Rani Jamara Kulariya, Babai, and Sikta.

As irrigation is directly linked to the government’s goal of increasing agricultural production, underground irrigation, lift irrigation, and river control programs may also be prioritized.

However, due to economic pressure, weak revenue collection, and rising public debt, the government is more likely to adopt a strategy focused on completing unfinished projects rather than announcing new large-scale projects.

The budget for Fiscal Year 2025/26 had included ambitious announcements in the energy and irrigation sectors. The targets for expanding hydropower generation, transmission lines, alternative energy promotion, and irrigation access were highly ambitious.

But as the fiscal year nears its end, most projects have not progressed as expected. While some projects have shown progress, many continue to face delays related to studies, contracts, financial management, and construction.

Nepal has now reached a stage where it must move beyond simply increasing electricity generation and instead adopt strategies focused on transmission infrastructure, energy storage, and expanding domestic consumption. In the irrigation sector as well, there is a growing need for result-oriented work that delivers water to farmlands rather than just making announcements.

Therefore, in the upcoming FY 2026/27 budget, the energy and irrigation sectors can become genuine foundations for economic development only if the government prioritizes completing unfinished projects, strengthening implementation capacity, and introducing programs that deliver direct results instead of merely announcing new projects.

Jalasarokar