Nepal’s Low Voltage Panel Industry: Analysis and Recommendations

The electrical industry in Nepal is characterized by intense competition, particularly in the low voltage panel manufacturing sector. This segment comprises two principal components: switchgear elements and enclosure and busbar components. The market is constrained by a limited pool of suppliers for switchgear, while differentiation among panel builders is minimal regarding enclosures and busbars. As a result, the sector has become increasingly competitive.

Currently, there are approximately 50 to 55 registered panel builders operating within Nepal—an amount that surpasses actual market demand. This oversaturation, combined with fierce competition, has led to a gradual decline in the industry's overall health. Panel fabricators are experiencing sustained and intense rivalry.

Despite these challenges and competition with each other, panel fabricators across Nepal have united under a single association. Upon investigation of their unity despite of the competition, it was determined that the primary catalyst for this unity lies not in internal market dynamics, but rather in external pressures—specifically, the influx of imported low voltage panels from India.

This significant disparity, despite the presence of numerous local manufacturers and latent market potential, necessitates a thorough examination of the underlying causes.

Analysis reveals that approximately NPR 8 billion worth of panels are imported annually from India, constituting nearly 65% of Nepal’s total market demand. Consequently, local panel fabricators are fulfilling only 35% of domestic requirements. This significant disparity, despite the presence of numerous local manufacturers and latent market potential, necessitates a thorough examination of the underlying causes.

Further analysis identifies Nepal's customs tariff structure as a key contributing factor. Low voltage panel imports fall under HSN code 8537.10 and benefit from the SAFTA agreement, resulting in a reduced import duty of just 7% for panels sourced from India. Conversely, local manufacturers are subject to a 15% customs duty on loose switchgear components—components which account for roughly 60% of a panel’s total value. This discrepancy places domestic fabricators at a considerable disadvantage.
In response, the association of Nepalese Panel Builders has mobilized to advocate for rectification of these imbalances. Our analysis against their demands and suggestions for the

Nepalese government and relevant stakeholders are summarized below:
Raise the tariff on products under HSN code 8537.10 from 15% to a minimum of 30% to create a level playing field for domestic manufacturers. A higher tariff will serve as a protective barrier, discouraging the influx of foreign panels that undermine local industry while generating additional revenue for the government. It is recommended that periodic reviews of the tariff structure be conducted in consultation with industry representatives to ensure that the rates remain responsive to market dynamics.

Revoke SAFTA Preferences for Panel Imports: Eliminate the SAFTA facility for products classified under HSN code 8537.10. Removing these preferential tariffs would curb the unfair price advantage enjoyed by some regional exporters and would encourage domestic investment. Furthermore, the government should explore bilateral trade negotiations to safeguard local interests while maintaining robust trade relations.

Implement Quality Grading for Local Fabricators: While restricting panel imports may risk compromising quality, it is recommended that the government introduce a grading system (Categories A, B, and C) based on facility standards, engineering capabilities, process quality, and customer feedback. Subsidies and inclusion on official procurement lists can then be aligned with these gradings, with oversight by relevant organizations such as NS or NEA. To further promote transparency and continuous improvement, periodic audits and public disclosure of grading results should be mandated.

The government can encourage this by establishing professional development programs, certifying local consultants to international standards, and integrating requirements for local expertise in public project tenders.

Provide Domestic Preference Policies: Issue a Domestic Preference Certificate for local panel fabricators and introduce a 20–30% subsidy for both governmental and private sector invested Projects in Nepal. Special attention should be given to small and medium-sized enterprises (SMEs) to foster innovation and job creation. The government could also develop a streamlined application process for subsidies and offer technical assistance to ensure that even emerging businesses can benefit from these incentives. Above Suggested Grading System of the Panel will make the Government to implement the Subsidy Policy on them accordingly.

Promote Nepali Consultants in the Construction Sector: Given that Indian consultants are involved in designing roughly 60% of electrical infrastructure—often favoring Indian panel manufacturers in their specifications—it is imperative to prioritize Nepali consultants to ensure greater inclusion of local fabricators on project procurement lists. The government can encourage this by establishing professional development programs, certifying local consultants to international standards, and integrating requirements for local expertise in public project tenders. Building capacity within Nepal’s consulting sector will not only support local panel fabricators but also foster knowledge transfer and the growth of specialized skills within the country.

Adopt International Standards: The global industry is moving toward IEC 61439-1 & 2 standards for low voltage panels. Nepali fabricators are encouraged to collaborate with switchgear manufacturers and consider HUB or licensee strategies to facilitate compliance, thereby enhancing their market competitiveness and independence. To support this transition, the government and industry associations should organize training sessions and workshops on international certification processes, offer financial incentives for compliance, and partner with recognized testing laboratories to simplify certification for local manufacturers.

In summary, the Nepal Panel Fabricators Association is advised to focus on these strategic initiatives, both existing and newly proposed, and urges government bodies as well as industry stakeholders to promote and support the growth and sustainability of Nepal’s domestic panel fabrication sector. By implementing these measures, Nepal can build a competitive, innovative, and resilient electrical panel industry that contributes significantly to the country’s economic development.

• Sunil Thapa , Electrical Engineer (NEC 1836), MBA Student (SAIM)
• Saroj Pudasainee, MBA Student (SAIM)