Nepal's 2077/78 Budget: Key Highlights for the ICT Sector

The Nepal government has unveiled its budget for the fiscal year 2077/78 (2020-21), outlining several key initiatives that will impact the Information and Communications Technology (ICT) sector. With an overall budget of NPR 1.474 trillion, the ICT sector receives an increased allocation of NPR 7.13 billion, up from NPR 6.35 billion in the previous year.

One of the major announcements is the development of a national payment gateway, a long-awaited project that has been in discussion since January 2018. This system, managed by Nepal Rastra Bank, aims to regulate digital payments and provide an alternative to private companies like eSewa, which have faced criticism over their dominance in government tenders. The gateway will facilitate digital payments for VAT, income tax, excise duty, and other government services.

The government is also committed to promoting a digital and cashless economy. This includes initiatives such as home delivery services for certain goods, a mobile application for farmers, online vehicle licensing and passport services, and the digitization of the NEPSE stock exchange. These steps are intended to modernize services, especially in remote areas.

In terms of identity verification, the government plans to roll out biometric identification for around 10 million citizens over the next year. This system, based on facial recognition, voice, or fingerprints, will eventually allow citizens to access services using their biometric data. Additionally, an online complaint system is scheduled to be implemented within three years.

To improve internet accessibility, the government aims to expand Fiber-To-The-Home (FTTH) broadband services across the entire country within two years. This is particularly important for rural areas, where reliable internet access remains limited. To make broadband more affordable, the maintenance charge levied on Internet Service Providers (ISPs) will be reduced by up to 50%, lowering the overall tax burden on broadband services.

However, the budget also introduces new taxes that may affect affordability. A 2% ownership tax on prepaid SIM cards and recharge cards has been implemented, expanding a tax previously applied only to postpaid SIMs and landline phones. Additionally, excise duties on smartphone accessories have been introduced: 15% on smartwatches, 10% on earphones, headphones, and power banks, and 5% on digital, TV, and other types of cameras.

The budget delivers a significant setback to the electric vehicle (EV) industry. Despite previous commitments to increase EV adoption, the government has raised custom duties dramatically: 30% on three-wheelers and up to 80% on other EVs, with a provision for a 50% discount on the higher rates. Excise duties on EVs are now tiered based on peak power, ranging from 40% for 50–100kW vehicles to 80% for those exceeding 300kW. These changes have drawn considerable criticism, as they contradict earlier goals for EV growth in Nepal.

Nepal Television (NTV) will expand its reach to an international audience, building on its recent transition to HD broadcasting. The government plans to invest in infrastructure to support this expansion. Additionally, Nepal aims to develop its own satellite system, following the successful launch of NepaliSat-1 by the Nepal Academy of Science and Technology.

Recognizing the challenges posed by COVID-19 to education, the government is promoting virtual learning through both internet-based and television-based platforms. This approach is intended to ensure continuity of education, particularly in areas with limited internet access.

The budget also supports online media, acknowledging the shift of public engagement to digital platforms. While traditional media such as television and radio will continue to operate, the government plans to encourage online media outlets. Insurance for journalists will also be promoted, with efforts to make coverage more affordable for the general public as well.

Other notable announcements include the establishment of a Cybersecurity Forensic Lab, the creation of a National Knowledge Park in Lalitpur, tax rebates for micro and cottage industries based on annual turnover, and electricity rebates for both industrial and household consumers.