Nepal has the world’s second-highest rate of electric vehicle adoption, but a newly proposed government tax hike on EV imports and electricity consumption could undermine this transition.The government argues the previous decade of EV tax breaks was fiscally unsustainable and primarily benefited wealthy buyers in a country where most people can’t afford a car of any kind.The new tax could also slow households’ switch from gas cooking stoves to electric ones, with critics pointing out that electricity costs are the single strongest predictor for this transition; they also argue the government would save far more by accelerating that switch — and cutting gas subsidies — than it would collect from the new tax.The policy has also exposed divisions within the government itself: the energy minister backed a pro-consumption strategy just days before the tax landed; engineers have publicly disputed the prime minister’s warnings about grid overload; and officials are already signaling they may raise the rates from 5% to up to 13%.
KATHMANDU — When Balendra Shah took office as Nepal’s new prime minister in March following a landslide victory for his party, he inherited a fuel crisis triggered by the U.S.-Israeli war on Iran. His government faced a choice between speeding up the clean energy transition or shoring up the public finances needed to sustain it. In its May 29 fiscal policy, it chose the latter.
