The Hotel Association Nepal (HAN), the umbrella organization of the country’s hospitality industry, has welcomed the national budget for fiscal year 2025/26, calling it “favourable for the tourism and hospitality sector.”

HAN praised the government’s decision to extend income tax and electricity tariff exemptions to hotels and resorts—benefits previously limited to the manufacturing sector—as a long-overdue response to its decades-long advocacy.

The new budget also introduces financial incentives for workers in tourism-related sectors such as hotels, motels, restaurants, and jungle safari. These incentives will be distributed through a revised service fee mechanism.

Unveiled by Finance Minister Bishnu Paudel on May 29, the annual financial plan allocated Rs 13.28 billion for the Ministry of Culture, Tourism, and Civil Aviation.

Among the key initiatives is the transformation of Tribhuvan International Airport (TIA)—Nepal’s main international gateway—into a “boutique airport,” with Rs 4.15 billion allocated for the upgrade. Meanwhile, Pokhara International Airport, Nepal’s newest aviation asset which has so far failed to attract international carriers for regular operation, is planned to be developed as a full-fledged tourism hub.

A major structural reform proposed in the budget is the long-awaited split of the Civil Aviation Authority of Nepal (CAAN) into two separate entities: a regulatory authority and a service provider. This move is seen as a crucial step toward Nepal’s removal from the European Union’s air safety list—an issue that has long undermined international confidence in the country’s aviation sector.

Another ambitious plan involves advancing the long-stalled Nijgadh International Airport, a project marred by controversy and delays, through an alternative development fund. 

The budget also proposes the repurposing of Nepal’s underutilized domestic airports. In collaboration with the private sector, these airports will be utilised as hubs for aviation training and adventure tourism activities such as paragliding, parasailing, ultralight flights, and skydiving.

On the ground, the government plans to attract private investment for the development of eco-tourism infrastructure—including jungle safaris, trekking trails, and lodges—across national parks, wildlife reserves, and conservation areas. To support this, public land will be leased to investors for the construction of hill stations, hotels, and resorts in key tourism zones.

Despite welcoming the budget’s vision, HAN expressed concern over existing taxes that continue to burden domestic tourism. The association called on the government to reconsider the 2 percent luxury tax and 13 percent value-added tax (VAT) on airfares, arguing that these levies have made domestic travel services less competitive and more expensive.

(With inputs from RSS)

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