- Nepal has become the most expensive country for fuel in South Asia due to international supply chain disruptions caused by the ongoing conflict involving the U.S., Israel, and Iran.
- Petrol prices in Kathmandu hit NPR 219 (USD 1.48) per litre, reflecting a 60 percent surge in less than three weeks.
- The government faces severe economic strain, with the World Bank projecting growth to drop to 2.3 percent for the 2025–26 fiscal year.
Economic Impact and Supply Vulnerability
- Nepal relies entirely on imported petroleum, primarily sourced from India, leaving it without a buffer against international price spikes.
- Freight and transport costs have risen sharply: inter-provincial passenger fares increased by 16.71 percent, and cargo rates rose by up to 21.68 percent.
- Household essentials, including food, have seen significant inflation; rice prices increased by NPR 100 to 200 per 25-kg sack.
- The Nepal Oil Corporation (NOC) reported a fortnightly loss of roughly NPR 14 billion (USD 105 million) as of April 2026.
Government Response and Public Unrest
- The Rastriya Swatantra Party government has implemented emergency measures, including a 50 percent reduction in fuel customs and infrastructure taxes.
- Administrative efforts include a two-day weekend for schools and government offices, reduced fuel quotas for officials, and rationing of LPG (cooking gas) cylinders.
- Public dissatisfaction has led to protests in Kathmandu, organized by student unions demanding tax repeals.
- Trucking entrepreneurs are pressuring the government to adhere to automatic fare adjustment agreements.
Long-term Outlook
- Economists warn of broader instability if the conflict persists, specifically noting risks to remittances from Nepali workers in the Gulf, which totaled NPR 1.261 trillion in early 2025/26.
- While Nepal is a leader in EV adoption—with electric vehicles accounting for about 75 percent of new car sales—the nation remains heavily dependent on diesel for long-haul freight and public transport, underscoring the urgency of the green energy transition.