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The government has removed the upper ceiling on foreign direct investment (FDI) introduced through the automatic route.

The Ministry of Industry, Commerce and Supplies published a notice in the Nepal Gazette implementing the provision in line with the Foreign Investment and Technology Transfer Act 2019. Previously, foreign investors could inject only up to Rs 500 million through the automatic online system.

With the new rule in effect, the government has scrapped the capital ceiling for both the automatic and manual approval systems. However, except for information technology (IT)-related projects, a minimum investment threshold of Rs 200 million remains in place for sectors approved through the online system.

The government has identified 102 FDI-eligible businesses under the automatic route that will no longer face any upper limit for investment. These include four energy industries, 13 agriculture and forest-based businesses, 41 manufacturing industries, 23 service-related businesses, eight infrastructure projects, nine IT-related ventures and four tourism-related sectors.

Last month, the Cabinet decided to remove the cap on FDI inflows through the online platform. Under the automatic route, foreign companies must declare their country of origin at the time of application.

After completing required procedures and meeting the criteria set by the Department of Industry (DoI), applicants will receive instant approval certificates. Once registered, companies must submit their project proposals to the DoI before commencing operations.

The new provision allows IT-related projects - including IT parks, biotech parks, software development, data processing, digital mapping, business process outsourcing (BPO), knowledge process outsourcing (KPO), data centres, data mining, cloud computing, web portals, web design services and web hosting - to invest without any capital ceiling through the online system.

The energy sector includes solar, wind and biogas projects, along with feasibility studies related to oil, gas and other energy resources. Agriculture and forest-based industries range from fruit processing to wood products. Infrastructure projects include film cities, cargo complexes, private warehouses, business complexes, water processing and treatment plants, export processing facilities and transport parking yards.

Despite policy reforms aimed at attracting higher FDI inflows, investment has remained below expectations. The government has amended several laws, including the Foreign Investment and Technology Transfer Act, and reduced the minimum FDI threshold to Rs 20 million from Rs 50 million effective from October 14, 2022 in a bid to attract higher investment.