KATHMANDU: The government has prioritized green hydrogen production in Nepal by announcing tax exemptions in the budget for fiscal year 2025/26.
“No taxes or duties will be levied on imported machinery for industries producing green hydrogen,” Finance Minister Bishnu Prasad Paudel said, while presenting fiscal budget on Jestha 15.
The budget also provides an income tax exemption for green hydrogen producers for five years.
Experts have welcomed the decision, calling it a significant step toward building Nepal’s hydrogen economy. Dr. Biraj Singh Thapa, Associate Professor at Kathmandu University, termed the announcement a positive and encouraging sign for the future. “The government has taken a flexible and welcoming approach. Now the private sector must take the lead and turn these opportunities into action,” Dr. Thapa told MeroAuto.
He added that Kathmandu University has already conducted successful tests on hydrogen production and its applications, which helped shape the policy.
Dr Thapa said the time is ripe for private investment in hydrogen production, commercialization and marketing. He added that attracting foreign investment would also be easier, especially with international financial institutions offering low-interest loans for green energy projects.
“Countries like Japan and Switzerland are providing affordable financing for green energy. Nepali banks can tap into these funds and invest in hydrogen projects,” Dr. Thapa said. “Some banks, such as Global IME and Nepal Investment Mega Bank, are already taking steps to mobilize green funds.”
Various researches have showed that Nepal could export up to 350,000 tons of hydrogen annually. With current global prices in the range of $5-7 per kg, this could translate to revenue of over Rs 200 billion annually.
Investment and Industry Potential
The cost of establishing a hydrogen refueling station varies by size and capacity. According to Dr Thapa, a small-scale plant can be set up with an investment of Rs 150–250 million—an amount he believes is manageable for the private sector.
Larger facilities, however, may require investments running into billions of rupees. If the private sector takes the initiative, Dr Thapa believes Nepal could develop a complete hydrogen ecosystem within five years.
He suggested collaboration with transport committees operating large buses and trucks. “If transport operators start by purchasing a few hydrogen-powered buses, and a separate investor builds the hydrogen plant, it could jumpstart the ecosystem,” he said.
Once the ecosystem is in place, Nepal can gradually scale up production and even explore export potentials.
Growing Market and Export Opportunity
Dr Thapa said it would not be difficult to find market for green hydrogen. Currently, Nepal spends over Rs 350 billion annually on petroleum imports. This burden can be reduced significantly by replacing diesel-guzzling vehicles with hydrogen alternatives.
He added that the demand for hydrogen is rising in countries like Japan, Korea, India and China. “The global trend is shifting toward clean energy and away from fossil fuels. Demand for hydrogen will only increase,” he said.
A small-scale hydrogen plant can be set up with an investment of Rs 150–250 million
Nepal holds a competitive advantage due to lower production costs, especially compared to countries like Saudi Arabia and the UAE. “Nepal can produce hydrogen using its own water and electricity, which is relatively cheap here,” Dr Thapa said
A Game Changer for the Economy
Various researches have showed that Nepal could export up to 350,000 tons of hydrogen annually. With current global prices in the range of $5-7 per kg, this could translate to revenue of over Rs 200 billion annually.
While prices may decline with increased production, Dr Thapa believes green hydrogen has the potential to become a transformative export product and a major contributor to Nepal’s economic growth.
With the right investments and policy support, he said, Nepal could position itself as a regional leader in green energy. “Green hydrogen could play a central role in that transformation,” he added.
