Kathmandu: Through the upcoming fiscal year budget, the government has positioned the energy, water resources, and irrigation sector as a key engine of economic growth. By integrating hydropower production expansion, transmission infrastructure development, policies to increase domestic electricity consumption, cross-border electricity trade, green hydrogen, alternative energy, and large irrigation projects within a single strategic framework, the government has presented a roadmap for economic transformation through the multifaceted use of water resources.
The budget treats water resources not merely as a source of electricity generation but links them to agriculture, industry, exports, energy security, and climate-resilient development. A policy has been adopted to utilize, conserve, and regulate water resources based on river basin master plans, while groundwater management has also been prioritized through measurement, documentation, and digitization.
Clear shift toward reservoir-based projects for energy security
Nepal’s electricity system faces a major weakness: a drop in production during winter and surplus generation during the monsoon. Since most projects over the past three decades have been built on a Run-of-River model, there has been a significant seasonal imbalance between monsoon and winter production. To address this challenge, the government has placed reservoir-based projects at the center of its energy policy this time.
As part of this, the government has announced the commencement of construction of the 670 MW Dudh Koshi Reservoir Project after completing land acquisition. The Lower Seti Project in Tanahun, whose study has been completed, will be built under government investment. The Budhi Gandaki Project, which has long remained controversial and uncertain, will be developed under a public-private partnership (PPP) model, and previous government investments will be converted into equity.
According to energy experts, if these projects are implemented, Nepal’s power system will be able to reduce seasonal imbalance, while also creating a foundation for sufficient electricity availability even during the winter season.
Long list of major hydropower projects
The budget has not limited itself to announcing only a few projects. The government has declared that it will move forward with construction by finalizing the investment modalities of strategic projects including Upper Arun, Kimathanka Arun, Nalgad, Fukot Karnali, Uttar Ganga, Tamor, Mugu Karnali, and Sunkoshi-3.
Similarly, the construction of the Tamakoshi-5 project will be accelerated, while construction of the 210 MW Chainpur Seti and the 106 MW Jagdulla hydropower projects is scheduled to begin within the upcoming fiscal year.
The government’s commitment to complete the detailed engineering design of the Karnali Chisapani multipurpose project, finalize its investment model, and complete the DPR of the Pancheshwar multipurpose project and move forward with construction has brought multipurpose water resource development back to the center of national debate.
Efforts toward an export-oriented energy economy
Until a few years ago, Nepal was importing electricity, but it is now gradually moving toward becoming an electricity exporter. To institutionalize this shift, the government has introduced clear policies in the budget. Along with increased electricity production, diplomatic efforts will be made to ensure exports to neighboring and other potential markets, and Nepal’s presence in the regional electricity market will be strengthened.
The government’s vision clearly reflects an ambition to develop the energy sector not only for domestic consumption but also as a source of foreign currency earnings.
Special focus on transmission line expansion
Even if electricity generation increases, its benefits cannot be realized without adequate transmission infrastructure. For this reason, the government has allocated NPR 1.318 billion for the expansion of transmission and distribution systems.
The government plans to advance key national and cross-border transmission lines, including the New Butwal–Gorakhpur 400 kV line, Dododhara–Bareilly 400 kV line, Chilime–Kerung 220 kV line, and Khimti–Bahrabise–Lapsiphedi corridor. The Inaruwa–Purnia and Chameliya–Jouljibi transmission lines will be taken forward for construction after the completion of feasibility studies.
In particular, the Kohalpur–Surkhet–Jumla 132 kV transmission line, targeted for completion within two years, is expected to bring a significant improvement in energy access in Karnali Province.
New strategy to increase electricity consumption
As electricity production rises in Nepal, increasing domestic consumption has become another major challenge. To address this, the government has adopted policies to promote the use of electric stoves and other electrical appliances.
A pilot project called “Complete Wiring” will be implemented in one city in each of the seven provinces. The government has also announced that remaining rural electrification will be completed within the next two years.
Additionally, industries will be encouraged to consume more electricity during off-peak hours through additional tariff discounts, as included in the budget.
New gateway for green hydrogen and alternative energy
The most forward-looking announcement in this budget is considered to be related to green hydrogen. A feasibility study for hydrogen production will be conducted in collaboration with universities and the private sector, along with efforts to attract both domestic and foreign investment.
In line with the concept of an energy mix, priority will also be given to solar, wind, and small hydropower projects. The budget also includes a notable provision to allow electricity purchase agreements (PPAs) for battery-stored solar and wind energy similar to reservoir-based hydropower projects.
The government has allocated NPR 233 million for alternative energy development.
Irrigation expansion aimed at boosting agricultural production
Along with the energy sector, irrigation has also been placed at the center of the budget. The government aims to complete major irrigation projects such as Babai, Rani Jamara Kulariya, Mahakali, and Pragnna-Badkapath within the next three years. Construction of the Sikta and Mega Dang Valley irrigation projects will also be accelerated.
A total of NPR 850 million has been allocated for these projects, while NPR 207 million has been set aside to complete the headworks and powerhouse of the Bheri-Babai diversion project within the next two years.
An additional NPR 182 million has been allocated for the restoration and management improvement of irrigation systems such as Sunsari-Morang, Chandra Canal, Kamala, Narayani, Gandak, and Rajapur.
Special priority for Sunkoshi–Marin project
Among irrigation projects, the Sunkoshi–Marin Diversion Project has received the highest priority in the budget. The government aims to accelerate its construction and expand irrigation facilities over 122,000 hectares of agricultural land in Bara, Rautahat, Sarlahi, Mahottari, and Dhanusha districts using diverted water.
The project has been allocated NPR 273 million. The government expects it to play a decisive role in increasing agricultural production, improving food security, and strengthening water management in Madhesh Province.
Total budget for the Ministry
The government has allocated a total of NPR 86.98 billion through the Ministry of Energy, Water Resources and Irrigation for implementing various programs, clearly reflecting the high priority given to the energy and water resources sector.
This time’s budget presents the energy and water resources sector as a shared foundation for economic development, industrialization, agricultural modernization, and export growth. However, Nepal’s experience has repeatedly shown a significant gap between announced projects and actual implementation on the ground. Therefore, the speed at which projects such as Dudh Koshi, Budhi Gandaki, Pancheshwar, Upper Arun, Sunkoshi–Marin, and cross-border transmission lines move into execution will be the real measure of this budget’s success. If the announced projects are implemented on time, the coming decade could become the most transformative period in Nepal’s energy history.
Jalasarokar
