New Taxes, New Struggles for Nepali Households

The government has presented new taxes as a necessary step to stabilise the national budget, provide sufficient funding for public services and support social equity. At first sight, the justification seems reasonable. However, good policy implementation should not place additional burdens on citizens. Imposing VAT on electricity consumption beyond 50 units and introducing a 3 percent levy on fees charged by private schools and hospitals may well create extra financial pressure on ordinary citizens already struggling with rising prices. The new electricity tax is particularly difficult to justify. The government has consistently promoted hydropower as the backbone of the economy. Successive governments have encouraged people to reduce their dependence on imported fossil fuels and increase their use of locally produced electricity. Citizens have been urged to adopt electric cooking appliances, electric vehicles and other energy-efficient technologies. The decision to impose a tax on electricity consumption has therefore come as a shock. While the government argues that households consuming more than 50 units are relatively better off, the reality is that many middle-class families easily exceed that threshold through ordinary daily use. This level of consumption is no longer a luxury but a necessity. Instead of encouraging greater electricity use to absorb growing hydropower production, the government appears to be discouraging it through higher costs. If Nepal is serious about becoming an energy-driven economy, policies should reward households for adopting electricity rather than penalise them for doing so. At a time when cooking gas supplies appear uncertain and international prices remain volatile, water-resource-rich Nepal should focus on expanding electricity consumption and reducing dependence on imported fuel.