AGP Executive Report

Aviation & Trade Connectivity: Himalaya Airlines launched the first direct scheduled Kathmandu–Shenzhen–Kathmandu service, with Airbus A320 flights starting June 4, opening a new air corridor to China’s tech-and-manufacturing hub. Mobility & Digital Services: Uber officially entered Nepal after trials, launching in Kathmandu and positioning itself against Pathao, InDrive and Yango. Energy Policy & Power Sector: Government clarified Budhigandaki hydropower will be developed as a multi-purpose project (power, irrigation, drinking water, fisheries, ecotourism) under an authority model; Energy Minister urged Nepal Electricity Authority to execute the budget fast, while 32 applications were received for the Electricity Regulatory Commission leadership. Hydropower Procurement Watch: A complaint alleges contract irregularities at Modi Hydropower Company, including claims of fake experience certificates used in tenders. EV Sector Scrutiny: APF seized 776 electric vehicles over suspected leaked tax-change plans and alleged fraudulent import documents. Business & Markets: NEPSE fell 11.37 points to 2,756.41; Nepal’s Chamber of Commerce pushed for an electricity-and-technology-led industrial transformation. Diplomacy: Foreign Minister Shishir Khanal began a visit to India (June 5–7) for talks with Jaishankar on trade, connectivity, energy and people-to-people ties. Environment & Wellness Tourism: World Environment Day events highlighted climate- and nature-friendly development, while spa industry standards were discussed to support Nepal’s 2027 wellness tourism push.

Hydropower Policy Shake-up: Nepal’s budget moves to restructure the Electricity Authority, tighten rules around PPAs, and open more room for private participation in transmission and power trading—while hydropower players warn the PPA “take or pay” details still lack clarity. NEA Restructuring, Local Role: NACEUN says any NEA overhaul must empower local governments and communities to cut leakage and improve accountability, and it wants the 5% VAT on higher electricity use withdrawn. Khimti Hydropower Next Steps: NEA reconstituted committees to negotiate Khimti’s share transfer and settle tariff/admin disputes, including a new PPA and royalty/tax arrangements. EV Tax Debate: Finance Minister Swarnim Wagle says EV prices under NPR 5 million have fallen after tax changes, but operators fear higher costs—especially for minibuses. Labour Rights in Focus: A study finds wage theft is widespread in Nepal’s informal sector, with most workers lacking written contracts and many receiving only partial or late pay. Agriculture Tech & Seeds: KOPIA Nepal marks its first year supporting agro innovation, while Koshi Province still meets only about 22% of paddy seed demand locally, pushing farmers toward hybrid seeds. Trade Disruption for Tea: Nepali tea exports to India face renewed hurdles as India resumes mandatory sampling and lab testing, disrupting purchases. Diplomacy Watch: Foreign Minister Shisir Khanal heads to New Delhi (June 5–7) for talks with Jaishankar on trade, investment, connectivity, energy and people-to-people ties amid recent border-row noise. Environment Day: World Environment Day events in Nepal stress nature-friendly development and climate action as impacts intensify.

Energy & Hydropower Governance: NEA reconstituted committees to negotiate the share transfer and disputes around the 60 MW Khimti Hydropower Project, including a new Power Purchase Agreement, royalty and tax arrangements. EV Policy: Finance Minister Swarnim Wagle says EV prices under Rs 5 million have decreased after the government shifted EV taxes to be based on price rather than engine capacity. Diplomacy for Trade & Connectivity: Foreign Minister Shisir Khanal will visit India June 5–7 for talks with Jaishankar on trade, investment, connectivity, energy and people-to-people ties, amid recent border-row sensitivities. Tourism & Aviation Demand: May brought record Indian arrivals to Nepal by air (40,782), while foreign tourist arrivals hit 102,626, boosting hotels especially in Pokhara. Infrastructure Delivery: Gautam Buddha Cricket Stadium construction resumed after payment delays were cleared; separately, Japan signed an additional JPY 5.7 billion loan to keep the Nagdhunga Tunnel on track for public opening around July 2026. Industry & Private Sector: CNI welcomed the budget’s industrial push, including customs duty reductions and excise removals, while also backing electricity demand charge reviews and industrial estate provisions. Tech in Logistics (Everest): Drones are increasingly used to fly supplies across the Khumbu Icefall, cutting risky carry trips for Sherpa teams. Sports & Consumer Markets: TVS launched Ronin Monotone and Agonda variants in Nepal, targeting the premium motorcycle segment.

Infrastructure Push: Japan approved an extra JPY 5.7 billion (about Rs. 5.5 billion) for Nepal’s Nagdhunga Tunnel, taking total support to over Rs. 22 billion; the 2.68 km tunnel is near completion (about 99%) and could open to the public in July 2026. Road Resilience: With monsoon arriving, roads across Nepal face landslide and blockage risks, threatening lifeline highways and travel safety. Policy for Faster Builds: Government plans a “Sunset Law” to automatically expire after 10 years, aiming to cut legal and administrative delays that stall infrastructure projects. IT & Digital Governance: MoIC is restructuring the communication sector under federal lines, including coordination on radio licensing and updates to outdated laws; NAS-IT also welcomed budget measures to boost IT exports and digital services. Energy & Industry Costs: Budget debate continues over electricity VAT and demand charges, while CNI says customs and excise reforms could lower production costs and support industrial zones and import substitution. Agriculture Prices: Kalimati set wholesale rates for fruits and vegetables for Jestha 21, shaping near-term market costs. Healthcare Supply: Nepal faces a shortage of platinum-based chemotherapy drugs like carboplatin, disrupting cancer treatment. Cooperatives: Deposit return for problematic cooperatives remains unclear, with critics saying the FY 2026/27 budget lacks dedicated allocations. Tourism & Logistics: Pokhara–Muglin road travel has eased as expansion works progress; Everest saw a record 1,000+ summit attempts this season, with verification pending.

IT Governance: Nepal’s IT minister Dr. Bikram Timilsina says old laws will be amended to improve coordination across federal, provincial and local bodies, with regular monitoring of performance. Medical Regulation: The Medical Education Commission will re-issue past directives after legal changes made earlier ones ineffective, aiming to streamline regulation of medical education. Public Health Alert: The health ministry has put high alert at Tribhuvan International Airport and border points for possible Ebola entry, with plans for testing and health-worker orientation. Budget & Industry Signals: FNCSI and CNI both say the FY 2026/27 budget boosts private-sector confidence, with tax and industrial reforms, digital economy support, and energy/infrastructure measures. Chemotherapy Disruption: A shortage of platinum-based drugs like carboplatin is disrupting cancer treatment, as suppliers stop bringing medicines amid price caps and manufacturers cut production. Tax Policy Scrutiny: The Finance Bill was revised multiple times within days, raising concerns over transparency and due process. Transport Infrastructure: Japan signed an additional JPY 5.7bn loan for the Nagdhunga Tunnel, targeting public operation in July 2026. Energy Debate: PM Balen Shah’s remarks on electricity capacity and induction stoves sparked debate over grid strength and VAT-linked policy direction. Healthcare Waste & Energy: Dhulikhel Hospital inaugurated an autoclave-based healthcare waste treatment site and launched a rooftop solar project with German support. Tourism & Connectivity: Nepal welcomed 102,626 foreign visitors in May (+19% YoY), and Himalaya Airlines plans direct Kathmandu–Shenzhen flights from June 4. Everest Boom: Everest saw a record season with over 1,000 summit attempts, driven by a wider summit weather window.

Budget & Industry Policy: Finance Minister Dr. Swarnim Wagle tabled Nepal’s FY 2083/84 budget of Rs 2.124 trillion, targeting 7% growth with inflation capped at 6%, while debates continue over the budget’s size, capital spending share, and implementation capacity. LDC Graduation: Nepal has asked the UN to defer its Least Developed Country graduation from Nov 2026 to Nov 2029, citing regional conflicts, supply-chain disruptions, remittance pressure, and weak growth forecasts. Hydropower & Power Sector: The 216 MW Upper Trishuli-1 (UT-1) hydropower project moved into its final pre-generation stage after installing the first weir gate, aiming to boost power supply for Kathmandu and beyond. Agriculture & Value Chains: Nepal’s budget signals stronger agriculture incentives, including grants for investors in agriculture and livestock, higher fertilizer allocation, and steps to systematize farmer support. Energy Costs Hit Manufacturing: Major development projects and manufacturing are under strain as West Asia conflict and global oil price volatility raise fuel and polymer costs, pushing up expenses and supply risks. Tourism & Connectivity: Nepal welcomed 102,626 international visitors in May (+19% YoY), while Himalaya Airlines prepares direct Kathmandu–Shenzhen flights from June 4 to strengthen business and tourism links. Trade & Logistics: A border dispute over the Lipulekh pilgrimage route resurfaced, with Nepal protesting and India leaving room for dialogue. Market Watch: NEPSE rose 22.21 points to close at 2,777.58, with finance and hydropower stocks leading. Agribusiness Spotlight: Organic vegetable farming in Dang is boosting incomes, supported by agriculture value-chain programs. Startup & Expo Links: India hosted a second batch of Nepali startups, and Nepal participated in the UN International Bazaar 2026 showcasing crafts and heritage.

Gender-Responsive Food & Biodiversity: Nepal’s NA vice-chair Lila Kumari Bhandari urged gender-responsive planning for food security and biodiversity, calling for stronger rights for small farmers and women and support for indigenous technologies. Coffee Supply Chain Upgrade: India has provided advanced Arabica coffee seeds to Nepal to help break the sector’s long dependence on a single variety, with technical cooperation under a joint agriculture framework. Tourism Boost from India: Nepal recorded a record 40,782 Indian air arrivals in May (+32.66% y/y), driven by better connectivity, policy changes on Indian currency access, and wider digital payments. Infrastructure Speed-Up: Government is drafting a “sunset law” to cut delays in roads, irrigation and hydropower by tackling land, compensation, tree-felling permits and construction material access. Road Safety: A safety audit has started on the Muglin–Pokhara Prithvi Highway as accident risks rise during the final phase of expansion. Budget Watch: Nepal’s health allocation for FY 2026/27 is Rs 101.95bn (4.85% of total), with critics saying it remains below WHO-recommended levels. Capital Markets: NEPSE climbed 22.21 points to close at 2,777.58 after the budget announcement, with finance and non-life insurance leading gains. Agriculture Incentives: The budget outlines incentives for farmers investing in agriculture and livestock, plus land-bank plans and agro-pooling to improve productivity and commercialization.

Governance & Budget Push: Nepal’s FY 2026/27 reform agenda is tied to digitisation and faster delivery, with the government also restructuring ministries into 18 and assigning new high-level roles for cybersecurity, data governance and AI. Power & Infrastructure: The budget targets an extra 1,040 MW next FY and plans multiple transmission line completions; a 400 kV West Seti transmission project is moving ahead via a PPP-backed special purpose company. Electricity Tax Debate: VAT on electricity consumption (5%/13%) is sparking backlash as officials argue it funds grid upgrades while consumers worry about fairness. Industry & Trade: Janakpur Cigarette Factory is struggling to survive amid weak management and competition, while Nepal’s NEPSE reacted negatively to the budget news. Aviation & Tourism: Himalaya Airlines will start direct Kathmandu–Shenzhen flights from June 4, aiming to boost inbound tourism during a typically lean season. Climate-Resilient Agriculture: ICIMOD and partners announced winners of a Hindu Kush Himalaya innovation challenge, and the National Nature Conservation Fund signed deals to promote climate-resilient food crops. Digital Payments: India’s UPI hit record May volumes and value, reflecting stronger consumer spending—relevant for Nepal’s fintech ecosystem too. Health & Business Growth: NephroPlus expects 15–20% revenue CAGR over the next three years, citing rising dialysis demand and digital scale-up. Culture & Film: KIMFF wrapped up with major documentary and fiction awards, highlighting Nepal’s growing mountain film industry.

Aviation & Trade Links: Himalaya Airlines will start direct Kathmandu–Shenzhen flights from June 4, positioning Shenzhen as a tech and manufacturing corridor for Nepal’s tourism and business travel. Energy Policy & Industry Costs: The government has imposed VAT on electricity consumption (5% for households, 13% for others) from the coming fiscal year, with Finance Minister Swarnim Wagle saying it won’t be reversed while options are discussed to protect consumers. Power Expansion: Budget plans target an extra 1,040 MW next FY (670 hydropower, 370 solar) and completion of major transmission lines, including 400kv and 132kv routes, to strengthen grid capacity. Budget & Markets: NEPSE fell 26.72 points on the first trading day after the FY 2026/27 budget, while business groups and chambers largely welcomed tax and reform signals. Infrastructure Reform: A draft “Sunset Law” aims to speed up stalled projects by cutting procedural delays in areas like environment and land acquisition. Agribusiness & Dairy: Nepal marks World Milk Day with focus on sustainable dairy growth, while World Milk Day coverage highlights milk’s role in rural cash flow. Regional Industry Watch: Bangladesh lags in buffalo milk production versus neighbors, pointing to productivity and investment gaps. Health & Community: A free cardiac camp in Gorkha benefited over 1,000 people with ECG/ECHO screenings and referrals. Digital Payments: India’s UPI hit record May volumes and value, reflecting stronger travel and consumer spending momentum.

Budget & Energy Infrastructure: PM Balendra Shah says VAT revenue from electricity use above 50 units will fund upgrades to transformers, transmission lines and substations, after the new tax drew criticism from lawmakers and energy advocates. EV Policy Shock: Revised taxes replace excise duty with a Clean Infrastructure Investment Fee, with customs duty, road fee and VAT still applying—dealers warn EV prices could jump from Rs200,000 to over Rs10 million. Hydropower as Growth Engine: A budget push puts hydropower at the center of Nepal’s economic transformation, targeting +1,040 MW next year and shifting focus from generation to transmission, storage, trade and institutional reform. Mobile Industry Alliance: CAN Federation and the Nepal Mobile Distributors Association form a strategic alliance to tackle grey-market imports and policy ambiguity, aiming to protect legitimate businesses and improve regulation. Gold & Consumer Taxes: Gold prices jump Rs. 20,500 per tola after customs duty on gold imports rises to 20%, while VAT bills are also set to feed a lottery-style scheme to boost invoice demand. Trade & Connectivity: The Jogbani–Kimathanka road link is opening a potential eastern corridor, bringing tractors and supplies to remote Sankhuwasabha. Tourism Pressure Regionally: Iran-war fuel spikes are already hitting Asia’s tourism recovery, with airlines cutting routes and ticket prices rising. Governance & Media: Press Council Nepal records 176 complaints of false news by May 6 as budget debates intensify.

Nepal Budget Push: Nepal unveiled a NPR 2.1 trillion reform budget (FY 2026/27) under PM Balendra Shah, aiming to revive growth with infrastructure, tech, health and education, plus income-tax relief and higher public salaries—while promising faster spending and a “mission mode” approach to cut project delays. Capital Markets & Taxes: Capital market reforms drew mixed reactions as the budget makes capital gains tax final for individuals but raises rates for short-term traders and adjusts long-term taxation; investors also flagged tax inequities. Electricity VAT Debate: PM Shah defended a 5% VAT on electricity use above 50 units as necessary for upgrading transformers and substations, while critics say it contradicts plans to boost domestic power consumption. Industry & Infrastructure Execution: Lawmakers and industry voices raised concerns that the budget didn’t sufficiently cover operational needs for industries, alongside broader worries about sluggish infrastructure delivery. Tarai Water Crisis: National Assembly lawmakers pressed for urgent action as drinking water shortages deepen across Madhesh and the southern plains. Public Health: Health Minister Nisha Mehta marked World No Tobacco Day by urging quitting and warning against vapes/e-cigarettes; a study also found tobacco addiction among children under 12. US-Nepal Tourism & Innovation: A US Under Secretary highlighted innovation and adventure tourism ties at Ascent Summit 2026 in Kathmandu. Border Row: PM Shah said the India-Nepal border dispute is not one-sided and that Nepal has also raised concerns with China and the UK.

EV Policy & Tax Clarity: Nepal’s EV tax rules are in flux again. The budget shifts EV levies away from motor “peak power” to customs value, with a flat 20% customs duty and a new “clean infrastructure investment duty” based on vehicle value—raising concerns that EV market prices could jump by up to Rs 4 million. Budget Push for IT & Digital Tax Admin: The government also rolled out incentives for IT exports (50% income tax exemption) and lets “sweat equity” for IT professionals be fully deductible; it plans AI-enabled e-assessment and a paperless, faceless, contactless tax system, alongside risk-based audits. Import Substitution via Tariffs: An “internal production promotion and protection fee” will hit imports with domestic substitutes, with duties (often 5–15%) covering dairy, tea/coffee, spices, forest-based goods, and parts of footwear inputs. Foreign Investment & Capital Market Reforms: Foreign investors can now notify NRB instead of seeking prior approval for repatriation, and NRNs can access the secondary securities market; capital gains tax is set as a final tax, with CGT rates raised for short-term traders. Energy Tax Backlash: Opposition leaders are pushing back on a 5% VAT on electricity consumption above 50 units, arguing it discourages clean power use. Petroleum Step Forward: DoMG is preparing a second-phase petroleum agreement with China after first-phase exploration in Dailekh, aiming to move toward commercial extraction. Private Sector Mood: Business groups welcomed higher capital expenditure and infrastructure spending, while critics say the budget still leans too much on debt and doesn’t sufficiently protect farmers and workers.

Nepal Budget 2026/27: Finance Minister Swarnim Wagle unveiled a Rs 2.124 trillion budget aiming for 7% growth, with tax relief for the middle class, a “Green Tax” overhaul, and higher excise duties on cigarettes and alcohol. The plan targets adding 1,040 MW to the national grid (670 MW hydropower, 370 MW solar), pushes road and tunnel acceleration, and boosts health and education spending, while critics warn about debt and gaps for low-income groups. Energy & Power Sector: The budget also flags restructuring the Nepal Electricity Authority into three agencies and opens the door for private transmission and electricity trade. Irrigation & Agriculture: Irrigated land coverage rose to 1.59 million hectares, with year-round and groundwater systems driving gains; yet agriculture budget critics say allocations were cut despite higher fertilizer support. Jobs & Private Sector: Opposition and youth leaders question the job-creation promise (1.2 million), while industrialists in Koshi welcome customs and tax changes. Excise & Consumer Goods: Excise rates were adjusted across 360 items, with higher duties on tobacco, liquor, junk foods, and some imports; VAT and EV duty rules were also revised. Green Industry & Forests: Forest and climate funding is set to back green industrialisation, digital single-window permits, and forest-based processing. Transport Projects: The Postal Highway is planned for completion in three years, railway works from Bardibas to Nijgadh will be expedited, and a shorter Hetauda–Kathmandu route was temporarily closed for bridge works. Regional Trade: China’s China–South Asia Expo (June 11–16) will push South Asian exports, including textiles and handicrafts, into the Chinese market. Local Farming Innovation: Farmers in Bajura are increasingly interested in soft-shell walnut farming after trial saplings showed promising yields.

Budget Reform Push: Nepal unveiled a reform-oriented FY 2026/27 budget of NRs 2.124 trillion, led by Finance Minister Swarnim Wagle, aiming for 7% growth and faster recovery after political turmoil, with tax changes (income tax exemption up to Rs 10 lakh), salary automation, and governance reforms to end policy delay and improve the business climate. FATF & Financial Stability: The plan targets early exit from the FATF grey list, including hedging services for foreign loans/investments and steps to improve sovereign credit ratings. Industrial Boost: A manufacturing-friendly package includes electricity tariff concessions, women-focused credit subsidies, business revival loans, and allowing industrialists to use infrastructure in SEZs/industrial estates as collateral; Motipur and Mayurdhap industrial zones will be run by the private sector with single-window administration. Sovereign Wealth & Tech Ambition: Government proposes a sovereign wealth fund using part of foreign exchange reserves, plus “Clean Energy Bonds,” “Diaspora Bonds,” and an AI-focused “Motherland Fund”/asset management setup. Infrastructure & Energy: Rs 17.64 billion is allocated for the Kathmandu–Terai Fast Track project (bridges and tunnels), while hydropower progress continues with UT-1’s weir gate operation milestone. Health & Social Services: Nurses’ night-shift allowance doubles, health insurance services in private institutions are suspended except emergencies, and three major hospitals are set to become medical universities. Food Safety: The Department of Food Technology ordered an immediate recall of “Tej” mustard oil over substandard quality. Bilateral Development: India laid a hospital foundation stone in Manang with about Rs 56 million support under its HICDP initiative.

Budget Watch: Nepal’s Parliament Secretariat has finished preparations for Friday’s joint session where Finance Minister Dr. Swarnim Wagle will present the FY 2026/27 budget in the multipurpose hall of the under-construction Singha Durbar parliament building, with seating limits keeping constitutional-body officials and diplomats out. Fiscal Pressure: Wagle is set to unveil a large deficit budget above the National Resource Estimation Committee ceiling, with the ceiling revised upward to about Rs 2.15 trillion and the final size likely around Rs 2.1–2.2 trillion. Public Enterprise Reform: Nepal’s state-owned enterprises show mixed health—27 of 43 profitable in FY 2024/25, but several loss-making or closed firms still bleed, while investment in PEs rose to Rs 798.56 billion, heavily linked to the Nepal Electricity Authority. Hydropower Progress: Upper Trishuli-1’s upgraded weir gate installation/testing was completed in Rasuwa, with overall project progress at 82% and completion targeted for mid-2027. Industry & Jobs: Economic Survey data says 10 industrial zones provide direct employment to about 20,000 people, with 638 industries operating and more under construction. Irrigation Expansion: Irrigation facilities reached 1.59 million hectares, with underground irrigation driving much of the growth. Tea Export Push: Nepal’s Industry Minister says talks with India are underway to resume tea exports, noting 80–90% of exports go to India. Construction Sector Stress: Contractors warn Nepal’s construction industry is in a severe crisis amid unpaid bills, material and fuel price shocks, procurement rule changes, and labor shortages. Digital Telecom: Huawei Nepal hosted Mini MWC 2026 in Kathmandu, focusing on AI commercialization and next-gen network capabilities for operators. Health & Welfare: A free gynecology camp in Myagdi benefited 614 people and referred suspected cervical cancer cases for treatment.

Tobacco Tax Push: Nepal’s fiscal squeeze is being blamed on underused tobacco excise taxation, with estimates saying tobacco costs far more than it brings in revenue. MSME Finance Boost: BII and Laxmi Sunrise Bank launched a $25m credit facility to expand formal lending for Nepal’s MSMEs, with a focus on women-led businesses. Industrial Employment: Nepal’s 10 industrial zones are now directly employing about 20,000 people, as policy changes aim to make investment easier. Irrigation Expansion: Irrigation coverage has reached about 1.59 million hectares, with major gains from underground and embankment projects. Hydropower Progress: Upper Trishuli-1’s weir gate installation and testing is completed, pushing the project toward mid-2027 completion. Construction Sector Stress: Contractors warn the construction industry is in a severe crisis as unpaid bills, material price spikes, and procurement and labor issues bite. E-Passport Probe: Suspicion of tax evasion and foreign exchange misappropriation is growing around e-passport procurement via offshore-linked entities. Co-op Sector Crackdown: A government commission says cooperatives face a crisis driven by financial irregularities and weak regulation. Pharma Supply Chain: A Chitwan biotech firm says it has produced and exported anticancer medicine raw materials like paclitaxel and docetaxel. Tourism & Energy Climate: Nepal’s President flags climate change and Everest-region garbage as key threats, while Pokhara’s Sarangkot sunrise draws more visitors.