Nepal slashes fuel allowances for officials amid deepening petroleum crisis

KATHMANDU: In a sweeping austerity move triggered by a mounting petroleum crisis, the Ministry of Finance has sharply reduced fuel allowances for senior government officials and public offices, signaling escalating fiscal stress and supply constraints in Nepal’s energy sector.

Finance Minister Dr. Swarnim Wagle approved the decision on Tuesday (Chaitra 23), citing the urgent need to shield the fragile economy from the dual shocks of surging global oil prices and weakening domestic revenue mobilization.

The ministry stated that the decision aims to enforce strict expenditure discipline as international petroleum prices continue to climb and supply chains remain volatile, while government revenue collection has fallen short of projections in the ongoing fiscal year.

Sharp Cuts Across Bureaucracy

Under the revised provisions of the “Operational Guidelines, 2081,” amended using powers granted by the Financial Procedures and Fiscal Responsibility Act, 2019 (2076 BS), fuel entitlements have been significantly curtailed:

Secretaries and special-class officials will now receive 70 liters per month, down from 125 liters
Joint secretaries will see their allocation halved from 100 liters to 50 liters
Fuel facilities for ministers and constitutional office holders remain unchanged under existing laws

The cuts extend beyond individuals to institutional operations, with pooled vehicle allocations at central offices also slashed:

Offices with up to 30 personnels: reduced from 75L petrol / 100L diesel → 35L petrol / 50L diesel
Offices with up to 50 personnels: same reduced ceiling applied
For every additional 100 personnels: now capped at 35L petrol / 50L diesel, down from previous higher thresholds

Additionally, two-wheeler fuel allowances have been reduced from 12 liters to 8 liters per month.

Economic Stress Signals Intensify

The move reflects intensifying macroeconomic pressure, as Nepal grapples with a widening fiscal gap, slowing revenue inflows, and rising import bills—particularly for petroleum products, one of the country’s largest import expenditures.

Policy analysts interpret this decision as a clear signal that the government is entering a stricter fiscal consolidation phase. The reduction in administrative perks is expected to have limited direct savings impact but carries symbolic weight in demonstrating austerity at the top levels of government.

However, critics argue that such measures, while necessary, remain insufficient without broader structural reforms in public spending, energy diversification, and revenue administration.

Supply Risks and Governance Questions

The petroleum crisis has also exposed Nepal’s structural vulnerability due to heavy dependence on imports, primarily from India. Any disruption or price volatility in the international market quickly transmits into domestic economic stress.

Experts warn that without parallel efforts to improve fuel efficiency, promote electric mobility, and diversify energy sources, such reactive austerity measures could become recurring responses rather than long-term solutions.

The Ministry of Finance has indicated that further expenditure control measures could be introduced if the current economic pressures persist, raising concerns among civil servants and public sector unions about operational efficiency and service delivery.

The latest directive comes at a time when Nepal’s economic managers are under growing pressure to stabilize public finances while maintaining essential government functions amid global economic uncertainty.