Agriculture is one of the most important sectors in Nepal, contributing 23.95 percent to the nation’s GDP and providing jobs to more than 60 percent of the population. However, the sector faces several problems, mainly food security, attributed to the high usage of imported fertilizers, most of which are urea. In fiscal year 2024-25, Nepal plans to import around 550,000 tons of chemical fertilizers, with urea constituting a bulk. Moreover, the Nepal government has allocated a budget Rs 27.95bn as subsidy to ensure a steady supply of fertilizers to the farmers. Hence, the government bears nearly two-thirds of the fertilizer price to help alleviate the pressure on farmers. However, constant supply breaks and bad distribution channels threaten food production in Nepal, necessitating the construction of a urea manufacturing plant to boost food security.

JICA study report 1984

Nepal’s attempt at local production of fertilizer began in 1984, when Japan International Cooperation Agency (JICA) conducted a feasibility study on the production of 275 TPD green urea plants in Nepal. The primary focus was to produce green hydrogen via water electrolysis, one of the percussors for urea. However, Nepal’s hydropower capacity was only 156 MW at that time, making electricity per unit price very high. The study concluded that the water electrolysis method was only feasible if the electricity price was reduced by 40 percent, and hence the idea was abandoned.

IBN report 2015

The Infrastructure Development Corporation, Karnataka (IDeCK) and the Institution of Agricultural Technologists (IAT), along with Shah Consultant International Limited, Nepal, under the Office of Investment Board Nepal (OIBN) conducted the 2015 feasibility study on 700 kT/year urea plant, which became the second major attempt to develop a urea fertilizer plant in Nepal since the 1984 JICA study. The study evaluated Nepal’s escalating fertilizer import situation as price instabilities and supply chain breakdowns endangered national food security. The analysis assessed three production methods: electrolysis, coal gasification and natural gas steam reforming for hydrogen production. The study concluded that using natural gas as feedstock made the urea plant feasible. The research team recommended that Nepal should import natural gas from Jagdishpur (India) through pipelines followed by plant construction on a 400-acre site in Dhalkebar Dhanusha as the country lacks natural gas extraction capabilities. The evaluation showed that a natural gas-based plant costs $665m, coal gasification totalled $953m and electrolysis reached $1,305m. The research base considered that the government of Nepal would import natural gas at a fixed price from India for smooth operations of the urea plant. 

IBN comparative report 2021

The Investment Board Nepal (IBN) has prepared a report that examines two urea production methods, including natural gas-based and water electrolysis-based (green hydrogen) systems. The analysis for 701,250 T/year urea demonstrates that natural gas-based manufacturing meets financial criteria through cost-effective capital investments totaling $665m and production expenses amounting to $278 per ton. However, this process requires a 108-km gas pipeline from India. The risks associated with Indian natural gas imports become substantial due to two factors: India will deplete its gas reserves by 2040, and gas produced in the country will increase in price to double its current levels until then. This creates long-term supply uncertainty coupled with high costs. The water electrolysis process is environmentally friendly yet remains uncommercial because it comes with billion-dollar capital expenses ($1.3bn) and produces hydrogen at $656 per ton, requiring 450 MW of daily electrical power and CO₂ capture from cement facilities. According to the report, Dhalkebar stands out as the optimal location because of its existing infrastructure, and the authors endorse establishing a public-private funding partnership. The future development of green ammonia through water electrolysis requires subsidized electricity costs to become viable. The research demonstrates that local fertilizer production would decrease Nepal’s dependence on imported materials and subsidy programs, yet essential infrastructure development and supportive policies need implementation.

KU feasibility report 2022

The Green Hydrogen Lab at Kathmandu University evaluated the possibility of generating 200 kT/year of green urea in 2022 and submitted its findings to the Ministry of Agriculture and Livestock Development. The feasibility study primarily focused on the surplus hydroelectricity in Nepal, which serves as the key benefit for local green hydrogen production through water electrolysis, thus ensuring the proposed urea plant operates independently from Indian natural gas imports. The study promoted domestic renewable-based solutions for urea production as it recognized the risks and price instability of importing natural gas along with the difficulties of managing border pipelines. The use of green hydrogen instead of fossil fuels in plant operations would make Nepal a pioneer in sustainable industrial development through substantial carbon emission reduction. The research demonstrated how green urea production qualifies as carbon credit material suitable for international offset programs. The new income source generated from green hydrogen operations would increase project profitability, thus attracting foreign investment. The report advocates for government incentives, policy backing, and public-private partnership (PPP) to realize the successful deployment of the green urea plant that will strengthen Nepal’s food security, energy independence and climate commitments.

GGGI report 2024

In 2024, the Global Green Growth Institute (GGGI) Nepal performed extensive research on green fertilizer production in Nepal by creating Di-Ammonium Phosphate (DAP) and Urea from green hydrogen. Researchers analyzed renewable energy integration into hydrogen production by obtaining 100 MW from the Nepal Electricity Authority (NEA). The study focused on the production of 103,950 T/year green urea and 264,000 T/year DAP. WindPower Nepal and Hydrovert Services led the project forward by performing a Pre-FEED study to evaluate the technical aspects, economic viability and infrastructural requirements for building a green hydrogen-based fertilizer plant. The study assessed the Bhalu Chira site’s characteristics by examining its ability to accommodate the proposed facility through assessments of land resources and logistical and accessibility factors. The total capital cost of the green urea plant was calculated to be $284.88m, and the capital cost of DAP was around $268.26m. Green hydrogen utilization within the project will improve Nepal's food production independence alongside carbon footprint reduction initiatives. The research findings will create a base for upcoming green fertilizer industry policy decisions and investment decisions in Nepal.

Hariharpurgadhi pre-feasibility study 2024

In 2024, Hariharpurgadhi rural municipality (Sindhuli district) signed a Memorandum of Understanding (MoU) with Kathmandu University to conduct a pre-feasibility assessment of a 200 kT/year green urea production facility. The project's central point involved extracting carbon dioxide from cement factories in Hetauda before transporting it through a constructed pipeline to the urea production facility. The research demonstrated pipeline transport of CO₂ was not economical because of substantial construction expenses and complex transportation requirements. The pre-feasibility study recommended the construction of a cement industry along with the green urea plant at Hariharpurgadhi as the solution to maintain a continuous carbon dioxide supply for urea synthesis. The project could develop a sustainable industrial cycle through this combined strategy to convert cement-based CO₂ emissions into synthesized ammonia using green hydrogen. The research demonstrated that the proposed solution could help Nepal decrease its dependence on imported fertilizers and advance carbon capture and utilization (CCU) practices that support a sustainable agricultural sector.

Conclusion

A green urea plant establishment in Nepal will produce lasting advantages since the government has to allocate billions of rupees for agricultural sector fertilizer subsidies every year. The domestic production of urea from green hydrogen combined with local carbon dioxide supplies enables Nepal to decrease expensive import costs while establishing independent fertilizer availability. The stable fertilizer prices, along with prompt distribution, will help farmers decrease expenses while improving their productivity levels. National food security will be enhanced through this project because it delivers dependable fertilizer supplies that produce elevated crop harvests and safeguard against worldwide supply chain interruptions. The initiative allows Nepal to develop carbon credits from green hydrogen and industrial emission capture activities, supporting domestic climate goals and accessing international carbon financing. Further, Nepal could generate carbon credits that can be traded internationally, creating an additional revenue stream. Establishing a green urea plant will lead to employment opportunities at various stages, including construction, plant operation and maintenance, stimulating economic growth in the region. Moreover, a circular economy practice in Nepal can develop when setting up a cement sector alongside the urea plant to convert its CO₂ emissions into valuable products instead of atmospheric release. These strategic developments will empower Nepal’s agricultural activities while decreasing government financial burdens and realizing sustainable growth through new industrial development alongside environmental management.