Himal Press 
KATHMANDU: The government has announced that the Civil Aviation Authority of Nepal (CAAN) will be unbundled by the end of this year in a major reform aimed at removing Nepal from the EU air safety list.
Presenting the budget for fiscal year 2026/27 in the federal parliament on Friday, Finance Minister Swarnim Wagle said CAAN will be split into separate entities.
Under the proposed restructuring, an independent Civil Aviation Authority of Nepal will oversee regulation and aviation safety, while a proposed Air Service Authority of Nepal will handle airport operations, infrastructure development, and air navigation services.
A bill to separate the regulatory and service operation functions of CAAN has already been tabled in parliament.
The separation of regulatory and operational responsibilities has long been recommended by international aviation bodies, including the International Civil Aviation Organization, to strengthen oversight and improve aviation safety standards.
Finance Minister Wagle also announced that a hedging fund will be introduced from the next fiscal year.
In another reform measure, legal provisions related to foreign investment approval, investment accounting, profit repatriation, and capital gains tax will be amended to allow non-resident Nepalis to participate in the secondary market.
The government has also announced a tax settlement scheme for disputes pending in courts or judicial bodies. Under the provision, cases can be withdrawn if taxpayers pay the due amount along with an additional one percent within the specified timeframe.
The budget also introduced several tax reforms. The personal income tax exemption threshold has been doubled to Rs1 million, with tax for the upper ceiling fixed at 29%.
The government has said that excise duties on 360 goods will be scrapped.
Customs duties on 273 types of industrial raw materials have also been reduced to ensure tariff rates on raw materials remain at least one level lower than those imposed on finished products.
The government further announced plans to reduce its shareholding in Nepal Telecom to 66% and divest the remaining shares to the general public by 2026. Revenue generated from the share divestment will be used to establish a technical hub.
An AI Compute Center will also be established in Syuchatar, Kathmandu, according to the budget statement.
In the energy sector, the government said the private sector will be allowed to participate in power trade.
