Submit your Article

The government has taken a significant step toward restructuring the aviation sector as the cabinet last week approved two crucial bills aimed at splitting the Civil Aviation Authority of Nepal (CAAN) into regulatory and service provider entities.

The cabinet meeting held on Friday green-lit the Bill to Amend and Consolidate Laws Related to Civil Aviation Authority of Nepal, 2024, and the Nepal Air Service Authority Bill, 2024. Minister for Culture, Tourism and Civil Aviation Badri Prasad Pandey had presented these bills to the cabinet on Sept 6 after the law ministry approved their drafts. This has paved the way for Minister Pandey to table the bills in parliament. 

The primary objective of these bills is to improve aviation safety by ending CAAN’s dual role as both regulator and service provider.  The restructuring of CAAN is crucial for the aviation sector as Nepali airlines have been unable to fly into European airspace since Dec 2013 when the European Union put Nepal in its air safety list following a Sita Air Twin Otter crash in the Manohara river in September 2012, which claimed the lives of all 19 onboard.

Earlier in October this year, the EU’s ambassador to Nepal Veronqiue Lorenzo said the ban can be removed if the law is passed to split the CAAN into a service provider and regulatory body.

Since the European Union Aviation Safety Agency (EASA) earlier this month lifted the flight ban on Pakistan International Airlines three months after Pakistan divided its civil aviation authority into three separate entities—Pakistan Civil Aviation Authority, Bureau of Aircraft Safety Investigation and the Pakistan Airports Authority—tourism ministry officials are hopeful that unbundling of CAAN into regulator and service providing entities would lead to the removal of Nepal from the air safety list.

The government first mooted the plan to split CAAN in 2007. The Third Interim Plan (2007/08-2009/10) said that recommendations from a study panel to split roles of CAAN as the service provider in civil aviation, airport operator and regulator were being considered.

In Oct 2018, a sub-committee of the International Relations Committee of the House of Representatives under former PM Madhav Kumar Nepal directed the government to immediately split the aviation body. The sub-committee said in its report that Nepal’s aviation industry is facing problems at the national and international levels due to the delay in the separation. The panel had directed the government to pass the civil aviation bills immediately.

Following the parliamentary committee’s direction, the then tourism minister Yogesh Bhattarai had tabled the bills in parliament in Feb 2020. 

In Aug 2021, the National Assembly unanimously approved the two bills. The International Relations and Tourism Committee had directed the then Prime Minister Pushpa Kamal Dahal to table the bills in the lower house of the federal parliament at the earliest in December last year, to no avail.

In fiscal year 2021/22, the government mobilized Rs 58.34bn in revenue from real estate transactions. However, the impacts of the second wave of Covid-19 brought the economy to a virtual standstill, hitting real estate transactions hard.

Although most of the sectors of the economy have recovered since then, the struggling real estate sector has yet to regain momentum. The government lifted a ban on land plotting to boost real estate transactions. However, it failed to make much impact as revenue from real estate transactions stood at Rs 46.54bn in 2022/23.

Real estate entrepreneurs say although there have been some improvements in the current fiscal year which began in mid-July, the sector has been unable to gain momentum due to various policy and practical difficulties. A recent study report submitted to the government has also suggested policy reforms to boost real estate transactions. The report has pointed out several factors impeding the real estate sector like lack of clear legal provisions for building integration, an overly complicated planning approval process, dominance of middlemen, unnaturally high prices, ineffective regulation, and difficulties due to land ownership limits.

Slow recovery

The real estate sector has been unable to recover since Covid-19. Annual revenue collection from this sector, which used to reach around Rs 70bn, has now fallen to Rs 46bn. While real estate transactions are increasing, they have not returned to pre-covid levels, according to Bed Prasad Aryal, the spokesperson for the Department of Land Management and Archive.

According to department statistics, the government raised Rs 46.54bn from real estate transactions in 2023/24. During Covid-19, annual revenue from real estate transactions had dropped to as low as Rs 25bn. Aryal said the sector is now gradually recovering from its vulnerable state. He added that land and housing transactions have increased more in the eastern Terai region compared to the Kathmandu Valley.

Low transaction value to avoid taxes

The actual annual real estate transactions amount to approximately Rs 2trn. However, government statistics only show transactions worth Rs 1trn. Bhesh Raj Lohani, chairperson of the Nepal Land and Housing Development Federation, said the sector has been deteriorating due to a lack of transparency in buying and selling. He explained that the difference between market value and government valuation creates this discrepancy.

“Purchases and sales happen at one price, while government valuations are much lower. If the state made the system transparent, the value would be at least Rs 2trn annually. Due to non-transparent transactions, the government is losing revenue from different headings like registration fees, capital gains tax and income tax,” said Lohani.

To support real estate transactions, both the government and Nepal Rastra Bank (NRB) have relaxed various policies. According to the central bank statistics, approximately Rs 224bn has been invested in real estate loans by the end of mid-November of the current fiscal year, up from Rs 211bn in the same period of the previous fiscal year. Despite a 6.65 percent increase in loan investment, real estate transactions have not grown as expected.

Meanwhile, a task force formed by the government to study the problems and challenges of the real estate sector has submitted its report to the government. The committee submitted its report to Deputy Prime Minister and Minister for Urban Development Minister Prakash Man Singh on Friday.

The committee has highlighted the need to revise most laws, procedures, and standards, as well as create new laws to address problems and challenges in real estate transactions.

Similarly, it has recommended issuing the 2007 Construction Standards for municipalities and urbanizing VDCs within Kathmandu Valley and the 2015 Basic Standards for Settlement Development, Urban Planning, and Building Construction as umbrella standards, and revising and implementing the 2005 Standards for Joint, Collective and Planned Housing.

Likewise, the task force has suggested that the government implement the 2020 Environmental Protection Regulations as per federal principles, and facilitate finance and tax-related matters.

Asia has been one of the world’s fastest-growing regions, and energy requirement is expected to increase by more than 50 percent until 2040, mainly driven by factors such as industrialization, urbanization and population growth. The general electricity generation dependency upon coal and thermal power in the region is 70 percent for India, over 80 percent for Bangladesh and 58 percent for Pakistan. Despite being a technologically advanced nation, 70 percent of Japan’s energy demand is fulfilled by fossil fuels whereas the numbers for South Korea and China are 80 percent and 60 percent, respectively. The Asian countries use about 0.5bn metric tons of coal annually, of which more than 1.5bn metric tons of CO2 are emitted from the power sector. This heavy reliance on fossil energy resources bears the social cost of extreme air pollution and greenhouse gas pollution. As industries like steel, cement, ammonia and others that release high levels of CO2 are expected to expand during the current decades, it is imperative to develop nontraditional energy sources in the region.

Green hydrogen is a clean, versatile energy carrier generated through water electrolysis using renewable electricity. In contrast to grey or blue hydrogen, which are derivatives of fossil fuels and their production emits greenhouse gases, green hydrogen is carbon-free. Its applications are manifold: from powering industry and transport to energy storage and a clean fuel source for power generation. For Asia whose energy mix is dominated by coal and natural gas, green hydrogen offers a pathway to decarbonize hard-to-abate sectors like steel, cement and heavy transport. It also aligns with the region’s commitments under the Paris Agreement to limit global warming.

The present energy scenario of Nepal shows a comfortable position with an installed hydropower potential of about 3,157 MW, while the total domestic demand is about 1,870 MW. Nepal’s estimated peak electricity demand looks much less at 10,500 MW by 2040 with an installed capacity of 40,000 MW. This excess renewable energy is a perfect opportunity for Nepal to focus on green hydrogen production since water electrolysis can be powered with surplus electricity. Green hydrogen can act as a carbon-neutral and exportable energy vector for meeting the energy transition needs of neighboring Asian countries. Since coal and thermal energy predominate in the countries within the region, exporting green hydrogen from Nepal could be helpful to countries like China, South Korea, Japan, India, Bangladesh and Pakistan to progress toward less carbon-intensive energy sources and, at the same time, spur regional cooperation and growth of the energy sector. 

India's rising demand for green hydrogen is a perfect opportunity for Nepal to become a major exporter of green hydrogen. Nepal, being a country abundant in hydroelectric power, could use the excess clean energy to generate green hydrogen to aid India in its decarbonization drive. Moreover, Nepal has the potential to export green hydrogen and its derivatives, such as ammonia, to India via pipelines, enabling further export to East Asian and South Asian markets. While green hydrogen may not currently be the most economically viable energy source, it stands out as one of the most environmentally-sustainable options, aligning with global decarbonization goals. Besides, the geographical location of Nepal, which is adjacent to India, and the ongoing prospects of energy exchange make the country an ideal supplier of green hydrogen. At the same time, this business may lead to the generation of thousands of employment opportunities in Nepal’s energy transportation and logistics sectors and contribute to diversification. Green hydrogen holds the promise of becoming the foundation of Nepal's new export economy in energy and, therefore, could become a long-term substitute for the two most volatile industries in Nepal—remittances and tourism.

A 2023 report by the World Bank estimated that if Nepal utilized 10 percent of its technically feasible hydropower for hydrogen production, it could produce 1.2m metric tons of green hydrogen annually, worth approximately $6bn at current market rates. Exporting hydrogen to India, Bangladesh and potentially China would create thousands of jobs throughout the supply chain of hydrogen production, storage, transport and logistics. For Nepal’s economy, which relies heavily on remittances and tourism, hydrogen could diversify revenue streams and reduce trade deficits.

The proximity of Nepal to the two significant energy consumers, India and China, places it at a logistical advantage in terms of green hydrogen exports. India’s National Hydrogen Energy Mission has targeted bringing down the price of green hydrogen to $1 per kilogram by 2030, creating massive demand for cheaper imports. And Nepal could be a key supplier. Also, hydrogen trade could be added to existing bilateral agreements such as the India-Nepal Power Trade Agreement (2014). Developing regional hydrogen corridors with shared infrastructure, such as pipelines and storage facilities, would reduce costs.

The government’s support is critical to making Nepal a green hydrogen hub. The Nepal Hydrogen Hub plan foresees the utilization of excess hydropower in the production of green hydrogen that can be utilized in Nepal’s economy in green cement and green steel industries, and the excess hydrogen can be exported as green ammonia or transported through pipelines to the Asian market. Setting up a green hydrogen plant for every hydropower project being developed in Nepal would be very costly. In response, the Nepal government should propose a plan to establish four strategic hydrogen hubs to centralize resources for cost efficiency based on the approximate area of hydropower stations. These hydrogen hubs, depending on their distances from either India or Bangladesh, could be used to export green hydrogen, hence providing Nepal with perfect regional markets. 

For that, the policymakers need to formulate a National Hydrogen Roadmap outlining the production target, export strategy and incentive for investment. Offering subsidies or tax breaks for producing green hydrogen and related infrastructures can attract domestic and foreign investments. Incentivizing public-private partnerships is critical for mobilizing large-scale capital and technical expertise. Green hydrogen aligns with Nepal’s commitments under the Paris Agreement to achieve net-zero emissions by 2045. Hydrogen can reduce air pollution, improve public health, and contribute to global climate goals by replacing fossil fuels. 

Developing robust export infrastructure, such as pipelines, storage systems and transportation networks, will ensure seamless movement to regional and international markets via shipments. This will not only strengthen the Nepali economy but also make it more self-reliant, rather than being dependent on remittances and taxes, which are unsustainable long-term economic solutions. Becoming a green hydrogen export hub will not only position Nepal as a leader in sustainable energy but also create massive employment opportunities and drive the development of green infrastructure to pave the way for long-term economic growth and environmental resilience. Besides, the export of green hydrogen will lower Nepal’s trade deficit by decreasing reliance on imports while creating new revenue streams. This transformation aligns with global efforts to decarbonize energy systems and presents Nepal with an opportunity to lead the region in renewable energy innovation and sustainability.

The Ministry of Foreign Affairs has issued a travel advisory cautioning Nepali citizens about fraudulent job offers promising attractive salaries in the IT sector in Thailand, Myanmar, Cambodia and Laos. Criminal networks have been luring individuals through social media advertisements and agents, transporting them to Bangkok or Yangon International Airport, and then coercing them into illegal activities in Myanmar's Kayin Province (Myawaddy) and other regions. 

Victims face exploitation such as passport confiscation, long working hours, non-payment of wages and even physical abuse. Recent incidents have seen a significant rise in rescue requests to Nepal's embassies in Yangon and Bangkok. 

The ministry warns that engaging in or facilitating such illegal activities is punishable under Nepali law and urges citizens to avoid falling for these scams. It has advised against traveling on visit visas for employment and recommended verifying foreign employers through Nepal's embassies.

Nepali citizens can contact the embassies in Yangon or Bangkok for assistance or further information.