Government Plans and Policies

Subsidy Policy & IREF

The exploitation of various sources of alternative and renewable energy like: biogas, small and micro hydropower, solar energy (Photovoltaic and Thermal), improved cook stove, wind energy, etc has great potentiality in Nepal. His Majesty Government has created the Alternative Energy Promotion Center (AEPC) with the objective of developing and promoting different sources of re'newable energy, considering the fact that'the maximum utilization of these renewable energy resources could contribute to environmental protection and sustainable rural development. Even though HMG had already provided subsidy to encourage the use of RETs for exploiting renewable energy resources, it is desirable to make necessary adjustment in the existing system of subsidy for extensive use of RETs. Government of Nepal has approved and implemented the new subsidy policy for Renewable Energy to achieve the following objectives.

  1. To Protect environment by encouraging the use of renewable energy resources and RETs in the rural areas and to provide opportunity to low income rural households to use RET's.
  2. To support rural electrification as well as gradually reduce the growing gap of electricity supply, consumption, etc. between rural and urban areas. 
  3. To make the use of grant assistance provided by donors, existing and forthcoming more effective and objective oriented and thereby attract the donors and other investor in RETs sectors.
  4. To support development and extension of RET market by attracting private sector entrepreneurs.

To support to the envisaged targets of RETS program of the long term plan.

Subsidy Policies:

Micro Hydro: The subsidy for the MHP projects/schemes is as follow

  1. A subsidy amount of Rs.55, 000 per kw will be provided for new MHP project (i.e. Peltric set) up to 3 kw capacity. Likewise Rs.70, 000 per KW subsidy will be provided to having the installed, capacity ranging from 3 to 100 KW.
  2. A subsidy at the rate of Rs. 27,000 per KW will be provided to the add on MHP project (Improved Ghattas), if it is for electrifying villages.
  3. An additional subsidy will also be provided for the transportation of equipment and materials of the MHP project. The transportation subsidy will be given from the nearest road head to project site. The basis of calculation will be the porters walking day. The MHP projects will be categorized for transport subsidy as shown below:
    a) Projects located at the distance of more than 5 days walking from the nearest road head 21,000
    b) Projects. located at a distance of 2 days upto 5 days walking from nearest road head 8,750
    c) Project located at a distance of less than 2 days walking from nearest road head No subsidy
  4. In respect of rehabilitation of MHP projects, subsidy of 50% on the estimated cost, but will not exceed Rs. 35,000 will be provided for rehabilitation proiects.

Applying for Solar Subsidy
An Interim Rural Energy Fund (IREF) has been set up to administer the subsidy. Both SHS and institutional PV system qualifying for subsidy must adopt the following process for subsidy acquisition.

Solar Home System.

  • SSP will actively interface with different market actors and support for awareness raising.
  • End-users will negotiate conditions for credit financing with a suitable financial intermediaries (FI) for necessary complementary funds (loans).
  • End-users will sign contract with manufacturer of his/her choice and pay full price minus subsidy amount. If it is not a cash plant, s/he should sign a loan agreement with a FI for required financing.
  • Only CTEVT certified technician/s should install SHS.
  • After SHS installation, a Subsidy Application Form (SAF) should be sent to SSP and Installation Report jointly signed by end-user, technician and manufacture/supplier.
  • SAF also includes copy of Nepali citizenship certificate of the end-user,
  • The Data Processing Unit (DPU) enters the data into the Solar Energy MIS Database (SEMD) system, provided that the necessary informations are duly filled up.
  • SSP will screen and assess applications, and recommend for payment to the IREF.
  • In every payment of IREF, 10% amount will be retained (as retainer) kept as security for performance of after-sales service and repairs for the first year of installation.
  • Supplier will be obliged to carry out a 1st Year Service Check after one year of operation.
  • Suppliers and end-users will jointly sign 1st year After-Sales-Service (ASS) report stating that plant works satisfactorily and that user has received promised after-sale-services.
  • After receiving the ASS report, DPU will enter the data in the SEMD.
  • SSP then recommends to the IREF for release of the remaining 10% subsidy. IREF will release retained amount to the supplier.
  • SSP carries out field verification of randomly sampled SHSs installed in an annual basis.

Institutional PV Systems

  • In order to be eligible for subsidy, Institutional Solar Photovoltaic Systems must have gone through the feasibility study to make sure its institutional and operational sustainability through income and or benefits.
  • Solar energy Support Programme (SSP) will appraise the feasibility study.
  • SSP will recommend the project to the IREF for the approval of subsidy if deemed appropriate.
  • IREF will also appraise the feasibility study report based of HMG/N's subsidy arrangement and if deemed appropriate will give conditional or final approvable as may be necessary.
  • Subsidy will be paid after successful installation of the system, which will be verified by IREF through IREF, specified person/institution.

Solar PV Water Pumping Systems

  • For water pumping systems, AEPC is currently providing financial and technical services to limited number of systems.
  • End user group/community approaches SSP for such a support.
  • SSP carries out a detail feasibility of the project and if found feasible, a company is selected after due competition or quotation process.
  • AEPC pays 50% to 75% of the total subsidy (75% of the cost) against bank guarantee for implementation of the project.
  • After receiving the project completion report duly certified by end user group/community, the remaining amount of the subsidy is paid.
  • A field monitoring and verification takes place before payment of the balance amount.

Biogas Subsidy Policy
Among the renewable energy technologies available so far in Nepal, the biogas has played an important role in the rural areas especially for meeting majority households cooking as the clean gas and lighting in some households. With the objectives of reducing the growing environmental degradation and fulfilling the households energy need, Government of Nepal, German Development Bank (KfW) and Government of the Netherlands through SNV/N have been supporting the biogas programme in Nepal since 1992. Government of Nepal has revised the subsidy policy in 2004 with the objective of reducing the subsidy for biogas construction and increase the access of this technology to the low-income people. The present subsidy is being provided to the family sized plants with capacity from 4 to 10 cubic meter. The following are the policies of biogas in Nepal.

  • Additional of Rs. 500 will be provided to the areas of low construction of biogas for its further promotion and expansion.
  • The more subsidies will be provided to low-income people living in the rural areas than the accessible areas (urban areas).
  • Considering the present subsidy criteria, which are simple and easy and recognized by the International Standard (IS) 9001-2000), the present criteria will also be continued in future.


Subsidy in NRs.
20 Districts of Terai 40 Hill districts connected by road 15 Remote hill districts not connected by road


Banke, Bara, Bardiya, Chitwan, Dang, Dhanusa, Jhapa, Kailali, Kanchanpur, Kapilbastu, Mahotari, Morang, Nawalparasi, Parsa, Rautahat, Rupandehi, Saptari, Sarlahi, Siraha, Sunsari Achham, Dailekha, Myagdi, Okhaldhunga, Ramechhap, Rukum, Terhathum, Arghakhanchi, Baglung, Baitadi, Bhaktapur, Dadeldhura, Dhading, Dhankuta, Dolkha, Doti, Gorkha, Gulmi, Ilam, Kaski, Kathmandu, Kavre, Lalitpur, Lamjung, Makwanpur, Nuwakot, Palpa, Panchathar, Parbat, Pyuthan, Rasuwa, Rolpa, Salyan, Sindhuli, Sindhupalchowk, Surkhet, Syangja, Tanahun, Taplejung, Udaypur Bhojpur, Darchula, Jajarkot, Khotang, Sankhuwasabha, Bajhang, Bajura, Dolpa, Humla, Jumla, Kalikot, Manang, Mugu, Mustang, Solukhumbu ;


5, 500

8, 500

11, 500


5, 500

8, 500

11, 500


5, 000

8, 000

11, 000


5, 000

8, 000

11, 000

Note: Districts of low biogas construction: Achham, Dailekha, Okhaldunga, Rukum, Bajhang, Baitadi, Dadeldhura, Doti, Panchathar, Rolpa, Salyan, Taplejung, Dhanusa, Mohatari, Parsa, Rauthat, Saptari, Siraha will get additional Rs. 500 in above mentioned subsidy rate.


Considering the popularity of the biogas plants, its huge potentiality and benefits, the present subsidy policy will be continued with the support of other donors and potential investors, even after the completion of the present biogas programme. The present subsidy is limited to 4 to 10m3 family sized biogas plant of GGC 2047 model. Besides the biogas plants which is being used the cattle dung as main feedstock, the feasibility study of community biogas plants based on biomass products and solid waste will be carried out for supplying the gas and electricity to neighboring areas.

Improved Cooking Stove Subsidy Policy
Improved Cook Stoves (ICS) is a one of the RET which is simple, cost effective and can be built with the local material and local trained people. His Majesty's Government of Nepal (HMG/N) has given the equal importance and priority to ICS like other RETs: Biogas, Micro hydro, Solar, Improved Water Mills etc. HMG/N has first formulated the Subsidy Policy for Renewable Energy in 2000. In this policy document, ICS has the following subsidy policy:

  • No direct subsidy will be provided to ICS
  • There will be indirect subsidy like supporting local organizations in terms of capacity building and technical assistance, which include providing the Information Education and Communication (IEC) materials, training manuals for promoters, users and organizers
  • The training will be given to promoters, staff of local organizations working willing to work in ICS
  • Integrating ICS programme with existing local organizations’ activity to attain synergetic effect
  • Enabling of local institutions: GOs, NGOs and other development projects to adopt ICS dissemination as one of their activity
  • Installing stove by private entrepreneurs with focus on women to address gender issues and poverty reduction
  • Rapid installation of quality stoves
  • Dissemination of subsidy less ICS mainly for low-cost stove in the Mid Hills

Wind Energy Subsidy Policy
The energy demand can be met to some extent by exploiting wind energy. if we consider the topography and climate of Nepal. Mechanical and electrical energy can be generated by wind energy. However, potential areas for wind energy exploitation need to be identified, for which wind data are to be collected and wind map is to be prepared. Subsidy to small scale wind energy schemes will be promoted by attracting the investors in this area. Decision in respect of wind energy subsidy will be undertaken after the receipt of project proposal.