Every year on World Environment Day, 5 June, Nepali Times changes its masthead colour to green. This is not just a token gesture, it is to drive home the point that the economy and ecology are two sides of the same coin. Undermining one destroys the other.
Mahatma Gandhi said it best: “The world has enough for everyone's need, but not for everyone's greed.” Unsustainable natural resource extraction and irreversible damage to ecosystems in the name of infrastructure and ‘progress’ ultimately undermine the economy.
In the past three decades, kleptocratic plunder by Nepal’s unaccountable leaders resulted in over-exploitation of fragile ecosystems like the Chure, illegal sand mining and quarries, pollution that killed rivers, and plastic waste clogging drainage channels and landfill sites. Development led to destruction.
We had hoped that the new government with a two-thirds majority and ministers with global exposure would have come up with a budget that would steer the country on a green growth pathway. Alas.
For someone who famously started writing the budget even before his party won the election, drafted the 100-point economic plan, and with the experience of working for the World Bank, UNDP and our own National Planning Commission, we expected much more from Finance Minister Swarnim Wagle. Unless rumours are true, his hands were tied by the PMO boys.
Whatever the case, we now have a record Rs2.12 trillion budget that tries to appease the civil service and the RSP’s urban salaried middle class vote bank. The environment and sustainable growth are just afterthoughts. Climate breakdown and adaptation get scant mention.
FOSSIL ECONOMY
What Nepal needed to revive its economy was to wean itself from fossil fuels. Petroleum now makes up nearly a quarter of the total import bill — more than all exports combined. We cannot stop using petrol, diesel and cooking gas overnight, but this budget was the perfect opportunity to take a clean break from the past to start replacing petroleum products with hydroelectricity for transportation and household use.
Instead, we have higher taxes on battery-powered vehicles and VAT slapped on electricity consumption by households and businesses. Those thinking of replacing LPG in kitchens will now think twice. Gas stations installing charging stations for EVs may now put it on hold.
Nepal hopes to generate 1,040MW of additional hydropower in the coming year — 670MW from hydropower and 370MW from utility-scale solar arrays — bringing the total installed capacity to 5,535MW. But unlike hydropower, investors eager to build solar plants face bureaucratic hurdles and a lack of policy clarity.
Solar power is crucial to Nepal’s energy mix given the limitations of run-of-river schemes, the need to protect riverine ecosystems, and the increased risk to hydropower plants from glacial lake outbursts. The cheapest, fastest and most sustainable solution would be to combine solar and hydro for pump storage systems.
As we report on page 1 and 9, the new tax structure for EVs will actually increase the price of battery-powered vehicles with the tiered Clean Infrastructure Tax (CIT) based on the price of the car and not peak power as previously. Many intercity public transport operators had switched to battery-powered microbuses. Now, the import tax on 11-25 seater vans has been raised from 1% to 10%. There is no subsidy for larger electric buses, and hybrid cars that save petrol will be even more costly.
The budget has also introduced 5% VAT on monthly household electricity consumption exceeding 50 units. Business will pay 13%. Households that had ditched LPG because of price hikes and shortages caused by the West Asia war may now want to buy back the cylinders.
Allocation for forestry, environment and climate change has fallen to Rs12.31 billion from Rs18.75 billion last year. The budget pushes implementation of results-based REDD+ forestry, but at the same time wants to promote timber harvesting which could lead to illegal logging because of local level corruption.
Large infrastructure projects in Nepal are in ecologically fragile areas not only due to geography but also because they usually result in haphazard construction that ignores science and logic. There is a provision for environmental impact assessments but that is just a laughable formality.
We understand that the Finance Minister had to pass a budget that addressed expectations of citizens impatient for change, but there were ways to have a transformative green budget that ensured sustainable, equitable and inclusive growth. Instead what we have is a traditional budget that rolls back progress Nepal made in the past.
Sonia Awale