The move comes after the Ministry of Finance introduced a 5 percent VAT on domestic consumers exceeding 50 units of monthly electricity consumption, a policy that took effect from Shrawan to bolster state revenue. However, energy officials argue that the current 50-unit threshold disproportionately burdens middle-class households and discourages the adoption of electric appliances like induction stoves.

According to Energy Minister Biraj Bhakta Shrestha, the proposed shift to a 150-unit threshold would exempt approximately 4.69 million domestic consumers—around 88 percent of Nepal's 5.3 million household connection base—from paying VAT on electricity.

"The 50-unit limit has discouraged middle-class families and consumers who want to switch to induction stoves," Minister Shrestha noted. Under the Energy Ministry's revised plan, only about 616,000 high-consumption households and commercial users would remain within the VAT net.

Estimates prepared by the Nepal Electricity Authority (NEA) show that raising the exemption slab to 150 units would cost the state treasury approximately Rs 2.20 billion annually. At present, the target is to collect Rs 12.5 billion annually if the limit of 50 units is maintained, but if the exemption is up to 150 units, only about Rs 10.22 billion will be collected. 

While Finance Minister Dr. Swarnim Wagle has defended the original tax structure as a necessary measure to fund infrastructure development, the Ministry of Energy maintains a philosophy of "first drive consumption, then tax." Energy officials emphasize that the long-term objective is to replace imported Liquefied Petroleum Gas (LPG) with domestic hydropower and avoid wasting surplus electricity during the wet season.

To mitigate the impact of the Finance Ministry's tax structure, Minister Shrestha has also formed a dedicated tariff review committee through the NEA.

The revised proposal and technical estimates from the NEA have officially been submitted to the Ministry of Finance for consideration. If approved, the policy change is expected to provide direct financial relief to millions of urban households using electricity for cooking while driving a substantial increase in domestic power demand.