Biomass entrepreneurs decry new taxes, warn of industry collapse

KATHMANDU, JUNE 4: The entrepreneurs belonging to Nepal’s bioenergy sector have expressed growing frustration over what they describe as counterproductive government policies that are discouraging investment in clean energy. Despite the environmental and economic benefits of biomass, the government has continued to impose additional taxes, making it increasingly difficult for existing businesses to survive, let alone grow, they bemoan. 

The latest disappointment came with the announcement of the upcoming fiscal year’s budget, which introduced a 5% excise duty on biomass products. This move has been particularly disheartening for industry players who have long been advocating for relief from income tax and VAT in order to sustain and scale their operations.

These concerns were raised during an event titled “Use of Biomass Energy and Its Potential in Nepal,” jointly organized by the Nepal Forum of Environmental Journalists (NEFEJ) and the Biomass Energy Entrepreneurs’ Association (BIN) on the occasion of World Environment Day.

The participants criticised the government for failing to recognise the value of biomass energy in addressing major national challenges, such as reducing air pollution, increasing energy efficiency, and lowering the country’s petroleum import bill. Rather than supporting the sector, they argued, the current policies are pushing biomass companies to the edge of closure.

“We’ve been pleading with the government for tax relief on income and VAT, but instead of support, the new budget imposed an additional excise duty,” said Aditya Parajuli, President of BIN. “Last year, our request for income tax exemption led to a hike in VAT. This year, as we again sought relief, a new tax has been added. Now we fear there might be yet another penalty just for speaking out.”

Environmental expert Navaraj Pokharel, presenting a paper at the event, emphasized the practical advantages of biomass. He noted that unused forest residues—such as leaves, twigs, and shrubs—could be sustainably harvested to produce biomass energy, which would also help prevent forest fires and generate clean energy.

“If the government integrates biomass into its forest management strategies, it could simultaneously support environmental conservation and economic development,” he said. Pokharel also stressed the importance of a long-term, sustainable policy framework to promote biomass energy, as seen in global efforts to reduce carbon emissions.

BIN Vice President Kuber Mani Nepal echoed this sentiment, noting that biomass has the potential to replace imported petroleum products and significantly reduce Nepal’s trade deficit. However, the government’s neglect of the sector is costing the nation dearly.

“Biomass can be produced at a cost 20 times lower than hydropower,” he said. “It also delivers higher thermal efficiency than LPG, petrol, or diesel, making it more effective for industrial use.” According to Nepal, the country is losing over NPR 172 billion annually in potential income from underutilised forest resources.

Currently, 15 biomass energy companies are in operation in Nepal. However, due to policy uncertainty and lack of institutional support, they are operating at only around 28% of their total capacity. If run at full potential, these companies could collectively produce up to 100 million kilograms of solid biofuel annually.

Former Environment Minister Ganesh Shah underscored the importance of reducing dependence on petroleum imports and urged the government to promote biomass more aggressively. “Those in power have not yet grasped its full potential,” he said. “There should be a mandatory policy requiring industries to use biofuels.” Shah also encouraged biomass entrepreneurs to analyze market trends and strengthen outreach to both industrial and household consumers.

Dr. Ran Bahadur Thapa, Deputy Director of the Alternative Energy Promotion Centre (AEPC), noted that the right to clean energy is enshrined in Nepal’s constitution, and biomass is an important part of that mandate. He explained that AEPC is promoting biomass under its clean cookstove program and suggested that soft loans be explored to address funding shortages for biomass development.

Resha Pia, Energy Policy Advisor at the British Embassy in Nepal, said that although biomass is both environmentally and commercially viable, public awareness remains low. “There’s a critical need to raise awareness—from policymakers to banks and financial institutions—about sustainable and eco-friendly solutions,” she said. Pia also emphasized the importance of prioritizing green financing and strengthening the supply chain for biomass technologies.

NEFEJ President Chandrashekhar Karki concluded the program by reiterating his organization’s commitment to environmental protection and sustainable development. “The government must prioritize policies and programs that turn waste into wealth,” he said.