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Finance Minister Dr. Swarnima Wagle presented Nepal’s Budget for Fiscal Year 2083/84 before a joint session of the Federal Parliament on Jestha 15, allocating Rs. 85.54 billion specifically for energy generation, transmission, and distribution line construction - signaling one of the most ambitious energy sector budgets in recent memory.

Capacity Addition: 1,040 MW in a Single Year

The headline target is adding 1,040 MW to the national transmission system within the fiscal year - 670 MW from hydropower projects and 370 MW from solar. This will bring Nepal’s total installed capacity to 5,535 MW, a significant milestone for a country that was importing electricity just a few years ago.

The 40 MW Rahughat Hydropower Project is slated for completion this fiscal year, while construction of Tanahu Reservoir, Upper Modi A, Upper Modi, Upper Trishuli-3B, and Budhiganga projects will be accelerated.

Mega Projects Moving to Financial Closure

The budget initiates financial closure and tendering processes for a cluster of large projects that have long been in pipeline:

- Upper Arun: 1,061 MW

- Uttarganga: 828 MW

- Chainpur Seti: 210 MW

- Tamakoshi-5: 99 MW

- Ghunsakhola: 77 MW

Studies will also be advanced for Nalgad (417 MW), Arun-4 (490 MW), and Naumure (281 MW). The Investment Board will facilitate development of approximately 3,000 MW of projects including Arun-3 (900 MW) and Lower Arun (669 MW).

The 1,200 MW Budhigandaki Reservoir Project will move forward under an empowered authority model, while the 670 MW Dudhkoshi Reservoir Project will enter the contract phase following financial closure.

In a notable move involving citizens’ savings, the 439 MW Betan Karnali project will begin the tendering process with investment from Employee Provident Fund contributors.

Transmission: Rs. 70 Billion for Lines and Substations

Rs. 70 billion has been earmarked for transmission line and substation construction. The Hetauda-Dhalkebar-Inaruwa 400 KV line is targeted for completion this fiscal year, while the Khimti-Bahrabise-Kathmandu and Hetauda-Ratamate-Lapsiphedi-New Damauli-New Butwal 400 KV lines will be expedited.

The Karnali corridor national transmission line - long overdue - will also be prioritized, along with rural electrification in Karnali, ensuring that even the most remote province benefits from the country’s expanding grid.

Cross-Border Trade Accelerated

Construction of the Butwal-Gorakhpur and Inaruwa-Purnia cross-border transmission lines will be accelerated. Studies will be completed and construction begun on five additional cross-border lines: Dhalkebar-Muzaffarpur-Sitamarhi, Lamki-Dodhara-Bareilly, Lamahi-Lucknow, Nijgadh-Motihari, and Chilime-Kerung.

NEA Restructuring: A Long-Awaited Reform

In a structurally significant move, the Nepal Electricity Authority (NEA) will be split into three separate companies handling generation, transmission, and distribution/trade respectively. This reform, long discussed in policy circles, is expected to bring greater accountability and operational efficiency to each segment of the power sector.

Private Sector: New Rights, New Incentives

The budget introduces landmark provisions for private sector participation:

- Private sector firms will be legally permitted to trade electricity in international markets, build transmission lines, and earn wheeling charges - a policy shift that opens entirely new revenue streams.

- For large and reservoir-type projects, promoters who guarantee 100% private investment can sell up to 40% of shares to the general public in the first year itself.

- PPA reform: Power Purchase Agreements for projects that have not started construction will be cancelled, with new PPAs signed under a “Take or Pay” method. Projects under 10 MW will receive immediate PPAs. Dry-season electricity purchase rates will be determined through competitive bidding.

- Forest land use fees and tree-cutting charges will be adjusted upon transfer of hydropower projects to the government at the end of the license period.

Green Hydrogen, Battery Storage, and AI Integration

The budget charts new technological territory for Nepal’s energy sector:

- A 2.5 MW Green Hydrogen plant will be established in Hetauda as a pilot project - Nepal’s first step toward commercial green hydrogen production.

- A 100 MW Battery Energy Storage System will be initiated in the Kathmandu Valley to address dry-season peak-hour electricity shortages.

- Clean hydropower will be channeled into high-value AI computing services through the newly proposed “Sovereign AI Compute Center” - converting cheap energy into a digital export.

- The government will issue “Clean Energy Bonds” to mobilize alternative financing for the sector.

Consumer and Industrial Benefits

The budget also targets end consumers and industries:

- Electricity demand charges will be reviewed and tariff discounts provided to boost the competitiveness of manufacturing industries.

- Hire purchase facilities will be made available for household electrical appliances - washing machines, refrigerators, vacuum cleaners - to drive domestic electricity consumption and reduce pollution.

- A concessional VAT rate will apply on electricity consumption exceeding 50 units per month for end consumers.

Sectoral Outlook

For practitioners and investors in Nepal’s hydropower sector, Budget 2083/84 represents a convergence of long-pending structural reforms - NEA unbundling, private sector cross-border trading rights, competitive dry-season PPA pricing - alongside a substantial capital allocation pipeline. The acceleration of projects like Upper Arun, Uttarganga, and Dudhkoshi, combined with the Betan Karnali EPF investment model, signals the government’s intent to mobilize domestic capital at scale.

The Rs. 85.54 billion energy allocation, the highest in Nepal’s budget history for the sector, reflects a political consensus that energy is no longer merely an infrastructure priority - it is the foundation of Nepal’s economic transformation.

For details, the full Budget Speech 2083/84 is available at www.mof.gov.np