- Nepal is negotiating $155 million in loans and grants from the World Bank for the Nepal Clean Air and Prosperity Project to reduce industrial emissions, strengthen pollution control and build government capacity.
- The government collected roughly 22.4 billion rupees ($160 million) in pollution control taxes since 2008-09, including 2.8 billion rupees ($20 million) in the most recent fiscal year.
- Auditors, lawmakers and courts have questioned transparency and directed that pollution tax funds be used specifically for pollution control.
- Air pollution remains a major public health risk, especially in Kathmandu Valley and the Terai, with little improvement over the last decade. Officials emphasize the urgency of action and say World Bank funding provides an opportunity to strengthen Nepal’s pollution control efforts despite existing tax revenues.
KATHMANDU — Nepal’s government is negotiating terms for millions of dollars in loans and grants from the World Bank to fund a project to fight air pollution, even though it has already raised billions of rupees (millions of dollars) by taxing fossil fuel over the past 16 years.
The proposed 20.8 billion rupee ($147.9 million) Nepal Clean Air and Prosperity Projectaims to help industries reduce emissions, strengthen air pollution control mechanisms, build government capacity and improve emergency response, according to project documents published on the World Bank’s website.
“With regard to the loan size, the amount is being finalized with the government based on the cost of the detailed project activities,” said Akash Babu Shrestha, a spokesperson for the World Bank in Nepal. He added that the project will be financed partially through a loan from the International Development Association, the bank’s arm that assists low-income countries, and partially through grant assistance.
These fresh loan negotiations come despite repeated reminders from Nepal’s Office of the Auditor General and several court directives that funds collected under the pollution tax should be used specifically for pollution control rather than being absorbed into the central treasury.
According to the Ministry of Forests and Environment, the government has collected a total of 22.4 billion rupees (around $160 million) in pollution control fees between fiscal year 2008 and 2009 and 2023 and 2024. The government began levying a 0.5 rupee per liter charge (later hiked to 1.5 rupees) on the sale of petrol and diesel in 2008-09. In the most recent fiscal year, 2023-24 (2080-81 B.S.), the government collected roughly 2.8 billion rupees (about $20 million) in such taxes alone.
While the ministry says the money is deposited into the national treasury and used through the government’s annual budget, auditors and lawmakers have questioned the lack of transparency and direct accountability in how the funds are spent.
Prem Suwal, a member of the erstwhile lower house, recently raised the issue in Parliament (before it was dissolved), asking the Ministry of Forests and Environment to clarify how the pollution tax has been used and why the Kathmandu Valley continues to rank among the world’s most polluted urban areas.
In a written response, the ministry acknowledged that the funds are pooled into the treasury but insisted that “resources are utilized for pollution control and environmental protection through the ministry and its agencies.
It cited several causes behind worsening air quality, including forest fires, burning of agricultural residues and dust from road construction. The ministry also noted that Kathmandu’s bowl-shaped topography traps polluted air unless strong winds or rainfall help disperse it.
Air pollution is a cause of concern not just in the capital, but also in other parts of the country. According to a new report by the World Bank, the Kathmandu Valley and the Terai are the country’s air pollution hotspots, with the areas not showing significant improvement over the last decade. The report states that air pollution is the number-one risk factor for death and disability in Nepal, surpassing malnutrition (second) and tobacco (third).
The Auditor General’s annual report has been flagging the misuse of the pollution tax for a long time. In its 56th annual report published in 2019, the government auditor reported that 5.2 billion rupees ($37 million) had been collected as pollution tax over 10 years, but the amount wasn’t used to fund pollution control measures. In the 58th report, the amount jumped to 9.4 billion rupees ($66.8 million), but the government didn’t invest it in fighting pollution. In its latest 62nd report, the office reported the amount to have accrued to 22.4 billion rupees with authorities just absorbing the amount into the central treasury.
Lawyers working on environmental issues also filed several public interest litigation cases against the government over the issue. The latest one was filed by law students Shreena Nepal and Abhyuday Bhetwal in 2023 demanding the government make proper use of the amount collected as pollution tax. Responding to the petition, the court, in its interim order, stated that the amount collected as pollution tax couldn’t be used for purposes other than fighting pollution.
That the government is now talking about taking a loan for pollution control activities even after failing to make use of the taxes that citizens pay is questionable, Nepal, the law student, told Mongabay.
However, officials say the project is much needed in Nepal. Shiva Kumar Wagle, spokesperson for the Ministry of Forests and Environment, said the government needs to act quickly on fighting air pollution and the World Bank funding provides a platform to do so. When asked about the court orders, Wagle said he wasn’t aware of such orders.
Banner image: The iconic Phewa lake in Nepal’s Pokhara shrouded in smog during the peak wildfire season. Image by Abhaya Raj Joshi/Mongabay.
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