Government Plans to Produce ‘Green Urea’ Fertilizer Using Electricity
The government has announced a plan in the upcoming fiscal year’s budget to operate a green urea fertilizer industry through a partnership between Nepal Electricity Authority and the private sector. The Electricity Authority will provide electricity at subsidized rates for green urea production, and the government will purchase the produced fertilizer under a guaranteed policy. However, energy experts argue that the primary responsibility of the Electricity Authority is to supply electricity and that it should not engage directly in fertilizer production. Kathmandu, May 2, 2026. To address the shortage of chemical fertilizers in Nepal, the government has introduced an ambitious initiative in the upcoming fiscal year’s budget. The Energy, Water Resources, and Irrigation Ministry has proposed to run a ‘green urea’ fertilizer industry under a company model operated through collaboration between Nepal Electricity Authority and the private sector.
The government has planned to attract private investment by offering a purchase guarantee for the produced fertilizer and supplying electricity at concessional rates. According to Amtsukiran Shahi, a member of the Authority’s Board of Directors, the process involves extracting hydrogen to manufacture green urea. The global interest in green hydrogen has sparked similar enthusiasm in Nepal, especially after its inclusion in the latest budget. The government has already conducted three studies which concluded that producing green urea fertilizer in Nepal is feasible. Based on these investigations, this process was incorporated into the budget for the first time.
Initially, there were discussions among the secretaries of the Ministry of Industry, Ministry of Agriculture, and Ministry of Energy. Following these talks, it was agreed to proceed with a pilot project, focusing on Udayapur Cement Industry. The plan is to fuse gases emitted from the cement factory to produce urea fertilizer. However, the Udayapur Cement Industry is currently non-operational, and the government is preparing to restart it. The project intends to utilize waste gases from this industry to manufacture green urea fertilizer, Shahi explained.
Typically, chemical fertilizer production uses fossil fuels like natural gas or coal, which increase carbon emissions. In contrast, green urea in Nepal will be produced by using abundant hydropower to separate hydrogen from water. This method is both fully environmentally friendly and based on domestic raw materials—electricity and water, Shahi added. The production of green urea requires three primary raw materials: electricity, water, and carbon dioxide (CO₂). Initially, electricity is used to split water (H₂O) to extract hydrogen gas. Then, nitrogen is combined with this hydrogen to produce ammonia, which is subsequently mixed with carbon dioxide to form solid urea fertilizer.
Nepal plans to capture carbon dioxide emissions from industries such as Udayapur Cement for this purpose. “Cement factories emit large amounts of CO₂; using this captured gas reduces pollution and enables low-cost fertilizer production,” Shahi noted. The budget outlines special incentives for attracting private sector investment in this industry. The Electricity Authority will supply power at concessional rates and begin green urea production on a trial basis accordingly. “We have the capacity to produce large quantities of urea domestically by supplying electricity at just five rupees per unit,” Shahi affirmed.
Regarding feasibility in Nepal, Kathmandu University is conducting the technical studies. Preparations are underway to launch a pilot project with a capacity of about 2.5 megawatts. Using surplus electricity during the rainy season for fertilizer production will help optimize resource utilization, Shahi explained. The Water and Energy Commission Secretariat and Alternative Energy Promotion Centre are prioritizing these studies. Neighboring India has also established a green hydrogen department within its electricity authority. Despite the promising prospects, some legal and technical challenges remain. According to Director Shahi, Nepal currently lacks a regulatory body to test hydrogen quality and oversee its regulation. Given hydrogen gas’s high flammability, stringent safety and quality control measures are necessary.
Nepal annually spends a significant amount on importing chemical fertilizers. If the government’s green urea concept succeeds, it could not only transform the fertilizer sector but also introduce new dimensions in hydropower utilization. The Electricity Authority aims to advance this as a pilot project.
Experts Raise Concerns: Should the Electricity Authority Produce Electricity or Fertilizer? Experts have expressed skepticism about the government’s proposal. They argue that the Electricity Authority’s core mandate is electricity generation, transmission, and distribution, and involvement in fertilizer production is inconsistent with this. Former deputy executive director of the Electricity Authority, Prabal Adhikari, questioned whether fertilizer manufacturing falls within its scope. “The Authority has announced collaboration with the private sector to produce green urea fertilizer, but its main responsibility is electricity services and production. Focus should be on maximizing the use of electricity in innovative ways,” he said. Adhikari highlighted that the proposed fertilizer production plan contradicts current restructuring efforts aiming to divide the Authority into three entities. “During restructuring, how can the Authority manage fertilizer production? Why should fertilizer production be the Authority’s responsibility when the private sector can undertake it?” he queried. He also emphasized the gravity of diverting the Electricity Authority—an entity primarily responsible for electricity supply—into fertilizer manufacturing.