Nepal’s FY 2083/84 fiscal policy embeds sustainability within the architecture of a green public economy, advancing green taxation and clean hydro‑bio energy development, and elevating environmental stewardship into a defining pillar of structural sustained economic transformation.
INTRODUCTION
Nepal’s fiscal year 2083/84 budget marks a decisive turning point in the country’s political economy. With the RSP government’s first mandate, sustainability has been placed at the centre of national development agenda. In the budget, the green economy is not treated as a liability or a secondary agenda; rather, it is framed as a structural economic opportunity. This vision seeks to bypass the traditional high‑carbon growth trajectory and instead pursue resilience, competitiveness, and equity.
The green economy, as defined by UNEP, is one that improves human well‑being and social equity while reducing environmental risks and ecological scarcities. Nepal’s fiscal policy builds on this foundation, integrating lessons from historical thinkers and modern frameworks. From Kautilya’s Arthashastra to Ostrom’s polycentric governance, the intellectual lineage of sustainability underscores that ecological resilience is inseparable from sustained economic modernisation.
The intellectual roots of the green economy are diverse and deeply relevant to Nepal’s current challenges. Kautilya’s Arthashastra emphasised that prosperity depends on prudent natural resource (forest and water) management and ecological balance. Malthus warned that unchecked population growth could outpace food supply, a concern that resonates in Nepal’s context of mass outmigration and demographic shifts. Garrett Hardin’s Tragedy of the Commons highlighted the dangers of unregulated resource use, while Elinor Ostrom demonstrated that communities can sustain shared resources through participatory governance.
John Rawls added a moral dimension, insisting that justice must guide sustainability so that vulnerable populations do not bear disproportionate burdens. The Brundtland Report institutionalised the principle of meeting present needs without compromising future generations. Together, these frameworks provide the intellectual scaffolding for Nepal’s pathway to green economy transition, situating ecological resilience as both a technical and moral imperative.
The Fiscal Policy 2083/84 and Green Commitments
The FY 2083/84 budget, amounting to Rs. 21.24 trillion, allocates resources across climate change adaptation, modern energy, and sustainable cities. Climate change and adaptation received 0.51%, modern energy 3.3%, and sustainable cities and settlements 6.69%. These allocations demonstrate that sustainability is embedded directly into public economic planning.
The budget also introduces green taxation as a fiscal innovation. Environmental levies are imposed on polluting industries and imports, while tax incentives are offered for renewable energy enterprises, electric mobility, and eco‑friendly technologies. Carbon‑related fiscal instruments ensure that revenues from emission reduction programmes are directed toward community development and climate adaptation. Clean infrastructure investment fees are projected at Rs. 378.67 billion and Rs. 59.50 billion. This framework discourages harmful practices while mobilising resources for sustainable investment.
Clean Hydro Energy Development
Hydropower remains the backbone of Nepal’s clean energy strategy, complemented by solar, bio‑energy (Biochar and Pellet), and emerging technologies such as green hydrogen. In the coming fiscal year, 670 MW from hydropower and 370 MW from solar projects will be added to the national grid, raising total installed capacity to 5,535 MW. The Rahughat Hydropower Project will be completed, while priority will be given to the Tanahun Reservoir, Upper Modi A, Trishuli‑3B, and Budhiganga projects.
Procurement processes will begin for large projects such as Upper Arun, Uttarganga, Chainpur Seti, Tamakoshi‑5, and Ghunsa Khola of Taplejung. Feasibility studies will advance for Nalgad, Arun‑4, and Naumure West Rapti River of Dang. The Budhigandaki Reservoir Project will be advanced under a special implementation model, while financial closure will be completed for the Dudhkoshi Reservoir Project. Through the Investment Board, facilitation will be provided for nearly 3,000 MW of projects, including Arun‑III and Lower Arun.
Cross‑border transmission lines with India and China will be expedited, strengthening regional energy trade. The Karnali Corridor transmission line will be accelerated, with electrification expanded to local governments not yet connected to the national grid. Emerging technologies will also be prioritised, with a 2.5 MW green hydrogen pilot plant in Hetauda and a 100 MW battery energy storage system in Kathmandu Valley. In total, Rs. 85.54 billion has been allocated for power generation, transmission, and distribution.
Linking Clean Energy with Digital Transformation
A groundbreaking initiative in the FY 2083/84 budget is the establishment of Nepal’s first Sovereign AI Computer Centre in Syuchatar, Kathmandu. Thousands of AI processing units will be procured to provide affordable and high‑capacity computing services to AI entrepreneurs and startups. This fiscal policy proposal envisions transforming clean hydropower into high‑value AI computer services, thereby leveraging Nepal’s abundant energy resources for technological advancement.
This initiative is expected to lay the foundation for skilled employment, digital economy growth, and AI‑driven economic transformation. At least 15 Nepali scholars engaged in international AI research will be awarded prestigious fellowships and invited to return to Nepal to contribute to national development. Academic programmes and institutions will be prioritised to ensure that Nepal plays a meaningful role in the global AI era.
Sectoral Strategies for Green Economy Growth
Nepal’s transition to the path of a green economy is supported by sectoral strategies that integrate ecological stewardship with economic modernisation. Hydropower‑led development provides clean energy to drive industrial growth and regional trade. Regenerative agriculture and forestry strengthen food security by restoring soil health, enhancing biodiversity, and promoting climate‑resilient farming practices. Forestry and trade, particularly community forestry, exemplify participatory governance that generates both ecological and economic value. Bioenergy systems provide renewable alternatives that utilise local resources from agri and forestry biomass to meet energy needs sustainably.
Together, these strategies illustrate how Nepal can align resource management with long‑term goals of resilience, equity, and sustainable development. The fiscal policy also demonstrate that sustainability is not only an environmental imperative but also an economic opportunity.
Policy Landscapes and Governance
Nepal’s green economy transition is anchored in a robust policy architecture. The Constitution of Nepal, the Local Government Operation Act, and the Natural Resources and Fiscal Commission Act provide a legal foundation. Strategic frameworks such as the Agricultural Development Strategy, the Sixteenth Plan, the Forestry Act, and the National Forestry Policy further guide sustainable development. International commitments under UN conventions and frameworks reinforce these mandates.
Yet, policies alone are insufficient unless actively implemented. Effective governance requires coordinated action across federal, provincial and local levels. Institutions must move beyond siloed approaches toward integrated systems that harmonise policy, markets, and community participation. Only through such coordinated governance can Nepal transform its policy architecture into tangible outcomes.
Equity and Social Justice
A critical dimension of Nepal’s path to a green economy is ensuring that vulnerable groups benefit from green growth rather than bear disproportionate burdens. Inspired by Rawls’s theory of justice, the budget emphasises fairness and equal opportunity. Community forestry, biogas, bioenergy, and irrigation systems exemplify how grassroots green governance can simultaneously protect biodiversity, advance clean energy, and support livelihoods and entrepreneurships.
Equity is not treated as an afterthought but as a central pillar of sustainability. By embedding social justice into fiscal policy, Nepal seeks to ensure that rural farmers, migrant families, and marginalised communities are empowered rather than excluded. This approach strengthens the legitimacy of the green economy and ensures that ecological resilience is linked with social equity.
Beyond Budgetary Allocations
The FY 2083/84 budget provides a strong foundation, but the budget alone is not sufficient. Effective implementation is required to translate fiscal commitments into tangible outcomes. This means strengthening institutions, knowledge brokering, fostering public‑private partnerships, and ensuring that policies are not only designed but also enforced. The desirable outcomes of resilience, competitiveness, and equity must be deepened across sectors and widened across regions to ensure that the benefits of the green economy are inclusive and sustainable.
Conclusion
Nepal’s FY 2083/84 budget positions the green economy as a central pillar of national development. By combining clean energy expansion, bio energy system, fiscal innovation, and digital transformation, the government has articulated a vision of resilience and competitiveness rooted in environmental stewardship. The pathways outlined are deliberate and strategic, but their success will depend on governance, coordination, and execution. If effectively implemented, Nepal can emerge as a global exemplar of how a resource‑rich developing country can harness its ecological wealth to build a resilient, equitable, and sustainable future.
The political economy of federalism, green budget tagging, carbon sequestration, biotrade, and structural fiscal, etc. alignment is critical to realising this vision. Coordination among international development partners, knowledge management institutions, public and private sector entities will ensure that sustainability is embedded across all tiers of governance.
Ultimately, ambition must translate into practice. Without strong institutional capacity and accountability, the promise of a green economy risks remaining rhetorical. But with effective execution, Nepal’s fiscal policy can transform ecological vulnerability into long‑term economic opportunity, securing resilience, competitiveness, and equity for generations to come.
(Neupane is former Chairperson of Nepal Stock Exchange (NEPSE). He is currently serving as Research Fellow at Baya Himalaya, a policy research institution in Nepal.)
