Nepal needs a new green energy policy

Fresh off the Sagarmatha Sambaad international climate conference last week where Nepal committed to lofty goals for electric mobility, one would think the Finance Ministry would have taken a big leap forward to promote electric public transport.

But the bright side is that Finance Minister Bishnu Paudel did not take a step back and kept the status quo in excise and import taxes for electric vehicles. He did not build on the gains to push more aggressively on public transport.

Past tax cuts on electric cars boosted battery-powered vehicles, and this year Nepal was only behind Norway for the highest percentage of new electric car sales. More than 75% of vehicles sold in Nepal last year were electric — with 1,400 imported in just the past month because of worries that the budget would raise taxes.

Tax rebates, monsoon power surplus, time of day metering, and improved range of EVs have contributed to the phenomenal increase in electric mobility. Even though car owners make up less than 3% of the population, there has also been a massive increase in electric vans on intercity public transport routes. And regardless of who owns EVs, conversion helps reduce Nepal’s petroleum import bill — which makes up 25% of all imports.

Taxing outsized luxury electric SUVs would have been reasonable, but much more urgent are tax subsidies on big battery-powered buses.

Replacing diesel buses with an efficient electric public transport network would also lessen air pollution and reduce road congestion. Furthermore, the life cycle cost of electric variants is much lower than that of those with internal combustion engines (ICE), and will be even more affordable as battery technology evolves.

When Nepal Rastra Bank increased the ‘Loan-to-Value (LTV) Ratio’ for electric vehicle financing to 40%, up from 20% in March, it dampened sales of public electric vehicles — showing extreme price sensitivity of buyers.

The constant flip-flopping on EV taxes over the years because of the need to compensate for revenue shortfalls has confused consumers. The Finance Ministry often takes an easy short-term fix to boost government income by increasing the tax on EVs, but does not look at the huge medium-term gain from reduced petroleum imports.

During the monsoon, battery-powered cars are using electricity that would have been wasted. The benefits to public health and national productivity from reduced street-level emissions with more EVs is incalculable.

More importantly, the discourse on sustainable transport in Nepal is limited to fiscal taxes, when it should be on regulating transportation management.

Nepal imports most of its vehicles from China and India, and both countries will soon be switching completely to electric 4- and 2-wheelers. We have no choice but to transition accordingly, and have the charging infrastructure and transport regulation in place. Furthermore, Nepal might soon be in a position where it could ban all private petrol cars and switch to only battery cars and tax them at the current rate on ICE vehicles.

For now, the government must urgently come up with a long-term financing and subsidy mechanism for electric buses, and it could start by using the Rs3 billion in ‘pollution tax’ that it collects every year from diesel and petrol sales.

Our National Transport Policy dates back to 2001, and it prioritises road infrastructure rather than transport management.

The former mayor of Bogata Enrique Peñalosa who implemented a successful bus rapid transit system for his city once said: “An advanced city is not a place where the poor move about in cars, rather it’s where even the rich use public transportation.” We could paraphrase that to ‘electric public transportation’.

Public transport is a public service, and the onus lies on the government to ensure reliable and efficient electric buses. At present public transport is almost entirely provided by private companies with the government only setting fares.

True to its name, the Department of Roads is all about building roads, and even that it does so poorly that 2,500 Nepalis are killed on dangerous highways every year. The Department of Transport Management keeps itself busy only issuing driving licenses, and is a hotbed of corruption with people waiting years for their licenses.

This year’s budget could have turned things around. The coalition government’s main preoccupation seems to be staying on in power and countering pro-monarchy rallies fuelled by discontent when it should have focused on improving public services.

Sonia Awale