Government Subsidies in Nepal's Budget: Fertiliser, Agriculture, Interest & Electricity

A subsidy (Nepali: anudan / अनुदान) is money the government spends to lower the price of a good or service below its market cost, or to compensate a provider for selling below cost. In Nepal's annual federal budget, subsidies appear mainly under recurrent expenditure and are announced each year in the Finance Minister's budget speech, usually presented on Jestha 15 (late May) for the fiscal year (FY) that begins on Shrawan 1 (mid-July). The fiscal year is written in both Bikram Sambat (e.g. 2082/83 BS) and Gregorian form (2025/26 AD).

Nepal does not have one consolidated 'subsidy bill'; instead, subsidies are scattered across ministries and state entities. The four that recur every year and matter most to households and farmers are the chemical fertiliser subsidy (run through the Ministry of Agriculture and Livestock Development and state importers), the agriculture insurance premium subsidy, the interest-subsidy on concessional loans administered by Nepal Rastra Bank (NRB, the central bank), and electricity tariff concessions delivered through the Nepal Electricity Authority (NEA).

These schemes are politically popular but fiscally heavy. Search interest in terms like 'mal anudan', 'krishi anudan', 'subsidy budget nepal' and 'interest subsidy loan nepal' spikes around budget day and at the start of the paddy and wheat planting seasons, because that is when farmers most need cheap fertiliser and credit. This page catalogues each major subsidy, the eligibility rules, and the best-verified fiscal cost figures by year.

The chemical fertiliser subsidy is by far the largest recurring agricultural subsidy. The government imports urea, di-ammonium phosphate (DAP) and potash through state entities (the Agriculture Inputs Company Limited and Salt Trading Corporation) and sells them to farmers at fixed, heavily discounted prices, absorbing the difference between the import cost and the retail price. For years urea was sold at roughly Rs 14 per kg and DAP at about Rs 43 per kg; after a 2023 price revision urea rose to about Rs 25 per kg and DAP to about Rs 50 per kg, still well below cost.

The budget allocation for the fertiliser subsidy has climbed sharply. It was around Rs 10-15 billion in 2019-2021, then surged during the global price spike triggered by the COVID-19 pandemic and the Russia-Ukraine war: roughly Rs 22 billion in FY 2021/22 and a projected record near Rs 39 billion in FY 2022/23 as import prices swelled. It eased to about Rs 29.34 billion in FY 2023/24, then rose again to around Rs 27.95-32.13 billion in FY 2024/25. For FY 2082/83 (2025/26) the government allocated Rs 28.82 billion as fertiliser subsidy, with roughly Rs 32.46 billion set aside overall for fertiliser procurement.

Despite this spending, supply routinely falls short of demand. Nepal's estimated annual requirement is about 520,000 tonnes (roughly 310,000 tonnes urea, 190,000 tonnes DAP and 20,000 tonnes potash), but imports in recent years have often been well below this, causing shortages and long queues at planting time. Nepal has no operating large-scale fertiliser factory of its own, so the entire subsidised supply depends on imports, mainly from India and other suppliers, leaving the budget exposed to global price swings.

To protect farmers against crop failure, disease, and livestock death, the government subsidises the premium on agriculture and livestock insurance. Since 2015 the federal subsidy has covered 75% of the insurance premium (up from 50% previously), so a farmer typically pays only a quarter of the cost of insuring crops or animals. Insurers such as the Nepal Reinsurance and various non-life companies underwrite the policies, and the Nepal Insurance Authority regulates the scheme.

A wide range of items can be insured, including crops such as paddy, potato, sugarcane, ginger, cardamom, apple, banana, tea and coffee, and livestock such as goats, poultry (broiler, layer and parent chicken), ducks, and fish. In practice, insurers have taken up livestock insurance far more than crop insurance, because animal-death claims are simpler to verify and settle than weather-driven crop losses.

In the FY 2082/83 (2025/26) budget the government allocated about Rs 2.3 billion for insurance premium subsidies. A recurring problem is awareness: many smallholders remain unaware that three-quarters of their premium is covered, which limits uptake. The government and development partners have also piloted index-based (weather- and area-based) insurance to reach climate-vulnerable farmers more efficiently.

Separate from grants, the government runs an interest-subsidy scheme on concessional loans (sahuliyatpurna karja / सहुलियतपूर्ण कर्जा) administered through Nepal Rastra Bank and delivered by banks and financial institutions (BFIs). Under this scheme the borrower pays only a low net interest rate while the government reimburses the lender the subsidised portion of the interest. The programme was formalised through a unified 'Interest Subsidy on Concessional Loans Procedure' first issued in 2075 BS (2018).

For most of its life the scheme offered a 5% interest subsidy to borrowers and 6% for women entrepreneurs, across roughly ten loan categories. These included commercial agriculture and livestock loans (capped at Rs 50 million), women entrepreneurship loans (up to Rs 1.5 million), educated-youth self-employment loans, migrant-returnee project loans, Dalit community business loans, and others. By mid-December of FY 2024/25, NRB data showed about 113,000 borrowers had taken roughly Rs 172 billion in such loans, with the government having paid over Rs 25.5 billion in interest subsidy.

The scheme has been trimmed because of cost and misuse. A revised 'Interest Subsidy on Concessional Loans Procedure, 2082' flattened the subsidy to a uniform 3% for all categories (with an even lower rate for very large agriculture loans above Rs 50 million) and cut the number of categories from ten to about eight, dropping education, earthquake-housing, textile and vocational-training loans while adding startup and boiler-replacement loans. NRB also began requiring BFIs to publish beneficiary names quarterly after a central-bank study found a significant share of concessional agricultural loans were being diverted to other uses.

On the energy side, the government subsidises electricity for low-consumption households through the Nepal Electricity Authority. Under the tariff-concession structure, households consuming very little power receive a full or partial waiver: for example, a 100% waiver for consumption up to about 20 units per month, a 50% waiver up to around 120 units, and a 25% discount up to about 240 units, with exact thresholds set by the Electricity Regulatory Commission and revised periodically. These waivers are designed to protect poor and low-usage households and to encourage electricity use over imported fuels.

Nepal's energy-subsidy strategy is deliberately shifting away from cooking gas and toward electricity. The government imports large volumes of liquefied petroleum gas (LPG), and the Nepal Oil Corporation has long sold cylinders below cost, an implicit subsidy that drains public finances. Recent budgets and the Energy Consumption Growth and Export Strategy signal a plan to phase out LPG subsidies over the coming years while offering subsidies and promotion for electric induction stoves, aiming to substitute domestically produced hydroelectricity for imported gas.

Beyond household tariffs, the state also extends concessional or discounted power to industry at times (for instance rebates during periods of low demand) and supports renewable-energy and clean-cooking programmes through the Alternative Energy Promotion Centre. Because these energy subsidies are delivered partly through state enterprises (NEA and Nepal Oil Corporation) rather than a single budget line, their true fiscal cost is spread across tariff waivers, enterprise losses, and dedicated allocations.

Added together, these subsidies are a large and rising claim on public money. The fertiliser subsidy alone has ranged from roughly Rs 22 billion to nearly Rs 39 billion a year in recent fiscal years; the concessional-loan interest subsidy has run into the tens of billions cumulatively; the insurance premium subsidy is in the low single-digit billions; and electricity and LPG concessions add further hidden costs through enterprise losses. Estimates by Nepali media have put the cumulative farm-related subsidy spend over the past decade near Rs 200 billion.

Critics, including economists and the central bank itself, argue that much of this money does not reach its intended beneficiaries. Fertiliser shortages and black-market leakage mean subsidised sacks do not always reach small farmers; a central-bank review found a meaningful share of concessional agricultural loans were diverted to non-farm uses; and larger commercial operators often capture a disproportionate share of both cheap credit and cheap inputs. This has driven the recent tightening: higher fertiliser retail prices, a lower flat 3% loan-interest subsidy, fewer loan categories, and mandatory disclosure of beneficiaries.

The practical takeaway is that Nepal's subsidy regime is real and substantial but administratively leaky and fiscally strained. Exact amounts change every year with the budget, so always check the current budget speech and NRB directives for the latest allocation, eligibility and rate before relying on a specific figure.