The government has removed the upper limit on foreign direct investment (FDI) approved through the automatic route. Following the publication of a notice in the Nepal Gazette on Falgun 4, the cap on FDI approved via the automatic route in designated sectors has officially been scrapped.
Previously, only projects with total capital investment of up to Rs 500 million were eligible for approval through the automatic route. Investments exceeding that threshold required direct approval from the Department of Industry.
The decision to remove the ceiling was made during a Cabinet meeting held on Magh 8. Although the Cabinet had approved lifting the upper limit for foreign investments through the automatic route in specified industries, the provision could not be implemented until it was published in the Gazette.
Director General Jitendra Basnet of the Department of Industry confirmed that the new arrangement has come into effect following its Gazette publication. He explained that investors can now submit proposals online and receive approval letters through the same system without visiting the department. Physical presence will only be required for industry registration.
According to Basnet, the move is aimed at facilitating and attracting large-scale investors. “We wanted to make it easier for big investors, but the ceiling itself was restricting them. Now that limit has been removed,” he said.
Sectors Eligible Under the Automatic Route
The automatic route applies only to specified sectors, including energy-based industries, agriculture and forest-based industries, infrastructure, tourism, information technology, service-oriented industries, and manufacturing.
Energy-based industries include power generation from wind, solar, petroleum, gas, biomass, and other sources; manufacturing of machinery and equipment used in energy production; biogas-based energy; co-generation from sugar industries; and feasibility studies related to energy. Industries producing ethanol are now also eligible for foreign investment through the automatic route. The government had recently approved ethanol blending in petrol.
Agriculture and forest-based industries cover fruit and vegetable processing, food production and storage, animal feed production using agricultural raw materials, silk processing, tea and coffee processing, herbal processing, rubber processing, cold storage, furniture, plywood, composite boards, paper, resin, cotton processing, and other forest-based products.
Infrastructure sectors eligible for FDI include convention centers, vehicle parking facilities, export processing zones, cargo complexes, wastewater treatment plants, film cities, film studios, commercial complexes, and private warehouses.
Tourism-related sectors include motels, hotels, resorts, restaurants, healing centers, conference and sports tourism facilities, amusement parks, and water parks.
Information technology (IT) industries eligible under the automatic route include technology parks, IT parks, biotech parks, software development, data processing, digital mapping, business process outsourcing (BPO), knowledge process outsourcing (KPO), data centers, data mining, cloud computing, web portals, web design services, and web hosting.
Service-oriented industries include mechanical workshops, printing services, construction businesses, photography, hospitals, nursing homes, polyclinics, physiotherapy centers, Ayurveda and alternative medicine hospitals, fitness and yoga centers, swimming pools, waste management and sanitation services, and heavy equipment rental and maintenance, among others.
Manufacturing industries include animal and fish feed production, meat processing and packaging, bakery and confectionery products, sugar and beverage production, textiles and garments, electronic household appliances, rice, oil, flour and pulse mills, as well as the production of bicycles, scooters, motorcycles, automobiles, and galvanized sheets.
However, except for IT-based industries, a minimum investment of Rs 20 million is still required to qualify under the automatic route. For IT industries, the minimum investment threshold has also been removed. Previously, IT projects required a minimum investment of Rs 20 million.
Basnet said the department is studying whether a minimum threshold should be reinstated for IT-based industries. “Now even Rs 100,000 or Rs 20 million—or any amount—can be approved in the IT sector,” he said, adding that the number of foreign investment approvals has surged. The department is also examining the share of foreign-invested companies in IT service exports and evaluating their overall contribution.
The automatic route provision is based on Section 42(2) of the Foreign Investment and Technology Transfer Act, 2019, which authorizes the government to simplify foreign investment procedures through Gazette notification. The system was implemented through amendments to the Foreign Investment and Technology Transfer Regulations, 2020, enabling services such as company registration, industry registration, and FDI approval to be processed electronically.
The electronic system for automatic FDI approval was launched by the Ministry of Industry, Commerce and Supplies during the third Investment Summit.
Earlier, the Department of Industry could approve only FDI projects below Rs 6 billion, while larger investments required approval from the Investment Board. However, after amendments to Section 17 of the Act during the third Investment Summit held in Baisakh 2081, the authority to approve FDI of any amount has been vested solely in the Department of Industry. The department reports that investment commitments have been steadily increasing following this change.
