Nepal’s Electricity Dilemma: Selling Cheap, Buying Costly

Biratnagar, February 25, 2025 – Nepal’s hydropower resources have begun to illuminate more than just homes and businesses; they now represent an increasingly valuable source of national revenue. Yet, beneath the glow of export earnings lies a growing concern: the enduring price disparity between electricity Nepal sells to India and the significantly higher rates it pays when buying power back during the dry season. This tension not only weakens short-term financial gains but also hinders the nation’s capacity to nurture a sustainable industrial landscape.

In the first five months of the current fiscal year, coinciding with the monsoon months of Shrawan through Mangsir in 2081 B.S., the Nepal Electricity Authority reported the export of 1.76 billion units of surplus electricity to India. These sales generated NPR 13.04 billion in revenue, translating to an average of NPR 7.39 per unit . Yet, as the rivers wane and dry season descends, the NEA is compelled to import electricity at considerably higher tariffs. While earlier figures suggest imports have been priced around NPR 9.17 per unit on average , more recent data indicates that prices during peak dry months can hover near NPR 11.50 per unit . This glaring difference between export and import prices exposes not only financial strain but a missed opportunity to harness Nepali power for broader economic transformation.

Reflecting on the preceding full fiscal year, Nepal achieved a milestone: the country became a net exporter of electricity. Exports stood at roughly NPR 17.45 billion—almost entirely to India—with a minor portion reaching Bangladesh . Imports during the same period totaled NPR 12.92 billion, yielding a modest net gain of about NPR 4.5 billion . Still, this achievement belies critical structural deficiencies: the lack of robust, power-intensive industries that could capitalize on cheap, domestically generated electricity to drive industrial expansion and economic diversification.

The real cost of this imbalance reveals itself when reflecting on economic strategy. Exporting electricity in its raw form may bring in immediate revenue, yet without industries such as steel mills, green hydrogen plants, data centers, or electronics manufacturing, Nepal remains trapped in a low-value export cycle. The nation continues to supply unprocessed or minimally processed goods—electricity, raw agricultural products, and minerals—while it relies on high-value imports. Coffee, ginger, herbs, limestone, and sand flow out of the country; but finished products such as processed foods, cement, and construction materials make their way back in. This persistent cycle reinforces economic stagnation and limits job creation and technological advancement.

What might change if policymakers redirected focus toward domestic utilization of electricity? Local businesses would benefit from substantially lower energy costs, bolstering competitiveness and productivity. This shift could pave the way for emergent industries to take root, generating employment opportunities that stem youth migration, reducing the trade deficit, and enabling Nepal to climb the value chain in global markets.

Such a transformation would require a unified strategy and bold reforms. Industrial policy must be recalibrated to attract investment into electricity-reliant sectors. Infrastructure needs to be strengthened—not only in generation but in transmission and distribution—to ensure reliable, affordable power supply across the country. Perhaps most critically, electricity pricing must be restructured to favor strategic domestic consumption rather than short-term export revenue.

Without these changes, Nepal risks locking itself into a narrow economic corridor. Selling electricity cheaply to external markets while purchasing it at premium rates during periods of domestic scarcity constitutes a losing proposition in the long run. What lies ahead is clear: the end of raw-resource dependency and the beginning of value-led industrial growth. Now is the moment for policymakers to ignite Nepal’s full economic potential by investing in local industries, fueled by the country’s own energy resources, for truly sustainable development.