Govt allocates Rs 114 billion to energy and irrigation, Targets addition of 1,040 MW next fiscal year

KATHMANDU: The government has allocated Rs 114.03 billion to the energy, water resources and irrigation sectors for fiscal year 2026/27 (FY 2083/84), with plans to add 1,040 megawatts (MW) of electricity generation capacity to the national grid, Energy, Water Resources and Irrigation Minister Biraj Bhakta Shrestha said on Thursday.

Responding to lawmakers during discussions on the Appropriation Bill 2083 in the House of Representatives, the minister said the government has positioned the energy sector as a key pillar of Nepal’s economic transformation and long-term growth strategy.

Of the total budget allocation, Rs 70.12 billion has been earmarked for the energy sector, while Rs 43.90 billion has been allocated for water resources and irrigation projects.

1,040 MW Capacity Addition Planned

According to the minister, Nepal expects to add 670 MW of hydropower and 370 MW of solar power during the next fiscal year, increasing the country’s total installed electricity generation capacity to 5,535 MW.

The government has set an ambitious target of reaching 30,000 MW of installed capacity within the next decade, positioning Nepal as a major clean energy producer in South Asia.

Priority projects include the Rahu Ghat Hydropower Project, Tanahun Hydropower Project, Upper Modi A Hydropower Project, Upper Modi Hydropower Project, Upper Trishuli-3B Hydropower Project and Budhiganga Hydropower Project. The government is also advancing the development of the Budhigandaki Reservoir Project and Dudh Koshi Reservoir Project, while financial and feasibility preparations for the Nalagad Hydropower Project are underway.

Transmission Infrastructure Gets Priority

Minister Shrestha said transmission infrastructure has been prioritized for the first time at a strategic level, with plans to complete 12 major transmission projects within the next fiscal year.

These include:

• Nine 132 kV transmission line projects
• Two 220 kV transmission line projects
• One Nepal–India cross-border transmission project

The minister said Nepal’s network of transmission lines of 66 kV and above is expected to reach around 7,048 circuit kilometers by the end of the current fiscal year, with an additional 800 circuit kilometers planned next year.

Private Sector to Play Larger Role

The government is also introducing reforms aimed at liberalizing Nepal’s electricity market.

Under the proposed framework, private companies will be allowed to trade electricity in domestic and international markets, construct transmission infrastructure and earn wheeling charges.

The government is also preparing legal provisions allowing private developers of reservoir-based hydropower projects to issue up to 40 percent of shares through IPOs and obtain licenses valid for 50 years.

In addition, new power purchase agreements (PPAs) under the “Take or Pay” model will be introduced, while PPAs for projects below 10 MW have been reopened.

The minister said the government would take a strict stance against the practice of holding project licenses without development progress, emphasizing governance reforms and efficient project execution.

Irrigation Expansion and River Control

On the irrigation front, the government has allocated Rs 35.95 billion through the federal budget and Rs 7.96 billion through provincial channels.

The ministry aims to expand irrigation services to an additional 15,776 hectares of farmland next year, raising Nepal’s irrigated agricultural land coverage to 64 percent.

River control and flood management programs will also continue. The government reported that 1,524 kilometers of embankments have already been constructed and plans to build an additional 70 kilometers next year, helping reclaim approximately 210 hectares of land.

Priority will be given to National Pride Projects, including the Bheri Babai Diversion Project, Sikta Irrigation Project, Sunkoshi Marin Diversion Project and Rani Jamara Kulariya Irrigation Project.

The government has also allocated Rs 922.3 million for an integrated irrigation program in Karnali Province.

Minister Shrestha said the ministry remains committed to implementing lawmakers’ suggestions and pursuing policies that balance energy development, irrigation expansion and river conservation, while recognizing rivers as vital assets for Nepal’s civilization, culture and environment.