Gandaki Province has formally opened the door to the cultivation of cannabis for medicinal and industrial use after its province chief authenticated a landmark law that establishes one of the country’s most comprehensive regulatory regimes for the crop.

The Bill to Regulate and Utilise Cannabis Cultivation for Medicinal and Industrial Purposes, 2026 was authenticated on Monday by Gandaki Chief Dilliraj Bhatta after surviving a constitutional dispute over whether the province had exceeded its legislative authority.

Once published in the provincial gazette, the law will come into force, although detailed regulations and implementation guidelines still need to be drafted before cultivation licences can be issued.

The legislation aims to create employment and generate income by allowing commercial cannabis cultivation on suitable land while keeping production under strict government control. Rather than legalising cannabis for general use, the law establishes a tightly regulated licensing system limited to medicinal and industrial purposes, with criminal penalties for violations.

A narrow legal opening

The Act carefully distinguishes between cannabis as a narcotic and cannabis-derived materials intended for industrial or pharmaceutical use.

Under the law, “cannabis” includes the leaves, flowers, seeds and fruit of the cannabis plant, along with naturally occurring resin and extracts. However, materials such as stalks, fibre, bark, roots, seeds, leaves and flowers intended as industrial raw materials or pharmaceutical ingredients are classified separately as “cannabis-derived products.”

That distinction is central to the legislation because it separates parts of the plant that could be used as narcotics from those intended for manufacturing medicines, fibre, textiles, oils and other industrial products.

The law defines medicinal use as cannabis supplied to pharmaceutical manufacturers registered with Nepal’s Department of Drug Administration or produced under the recommendation of licensed medical practitioners. Industrial use includes the manufacture of fibre, seed products, oils, textiles and other industrial raw materials.

Cultivation restricted to designated zones

Cannabis cultivation will not be permitted across the province.

Instead, Gandaki’s Ministry of Industry and Tourism will designate specific cultivation zones after receiving recommendations from a newly created Cannabis Cultivation Regulation and Management Unit.

Only selected districts or local units notified in the provincial gazette will be eligible for cultivation.

Authorities must consider land suitability, production potential, crop quality, public security, ease of monitoring and the impact on food production before approving cultivation areas. The law also instructs the government to prioritise barren, fallow or low-productivity land wherever possible.

The ministry must consult local units before declaring cultivation zones and will also determine the maximum area each licence holder may cultivate. The provincial government may later increase or reduce those limits based on recommendations from regulators.

THC capped at 0.3%

One of the law's most significant safeguards is a limit on the concentration of tetrahydrocannabinol (THC), the principal psychoactive compound in cannabis.

Before harvesting, storage, transportation, processing or sale, cannabis must contain no more than 0.3% THC, the internationally recognised threshold commonly used to distinguish industrial hemp from psychoactive cannabis.

The province may establish its own testing laboratories or partner with universities and research institutions to analyse THC levels before products enter the market.

Three-stage licensing process

The law creates a three-tier approval system intended to prevent speculative licensing and ensure only qualified applicants enter the sector.

The first stage requires prospective growers to obtain preliminary approval.

Applicants must submit detailed information including proof of land ownership or lease agreements, recommendations from the relevant local government, intended medicinal or industrial use, estimated production volumes and a purchase commitment from a pharmaceutical or manufacturing company willing to buy the harvest.

Authorities will refuse applications for plots smaller than two ropanis (about 1,018 square metres) or larger than the maximum size prescribed for a designated cultivation zone.

Preliminary approval remains valid for one year. Applicants who fail to complete the required infrastructure and obtain a cultivation licence within that period must begin the process again.

The second stage requires growers to construct mandatory infrastructure before receiving a licence.

This includes perimeter fencing or walls to prevent unauthorised access, security systems, processing facilities if on-site processing is planned, and secure storage facilities for harvested crops.

Only after those requirements have been completed may applicants proceed to the final licensing stage.

Applicants must then provide detailed land records, photographs of cultivation sites, lease agreements of at least five years where applicable, purchase agreements with authorised buyers, declarations confirming they have not been convicted of drug-related offences during the previous ten years, and confirmation that all required infrastructure has been completed.

Government inspectors will conduct on-site inspections before licences are issued.

Licences may authorise cultivation for medicinal use, industrial use or both.

Strict obligations after licensing

Obtaining a licence does not free growers from continuous government oversight.

Licence holders must maintain all approved security infrastructure and may use or sell cannabis only for the purposes specified in their permits.

Any theft, damage or loss of crops must immediately be reported to both police and the regulatory unit with supporting evidence.

Growers must notify regulators, police and local monitoring committees before harvesting, storing or selling any crop.

They must also maintain updated records detailing cultivated area, plant numbers, production volumes, sales and purchasers.

Cultivation licences will remain valid for five years and require renewal before expiry.

Authorities may revoke licences if growers violate the law, breach licence conditions, fail to renew permits, sell products without prior approval, neglect required security infrastructure or fail to maintain production records.

Licence holders are entitled to present their defence before cancellation, except where they voluntarily surrender their licences. Appeals may be lodged within 35 days, although the appellate authority's decision will be final.

Harvesting and transport under official supervision

The Act imposes unusually stringent controls over harvesting and transportation.

Growers must electronically notify regulators once crops mature.

A government inspector will schedule the harvest and must be physically present before cutting begins.

Harvest quantities must be formally documented in the presence of the ward chair or representative, members of the local monitoring committee and police officials. The record must then be submitted to the regulatory unit.

If inspectors fail to arrive and crops risk deterioration, growers may request permission from the local monitoring committee to proceed.

Transport is subject to even tighter controls.

Cannabis products may only be transported after inspectors seal every shipment and record its contents.

The sealed consignments cannot be opened during transit.

They may only be unsealed at the final destination in the presence of district administration officials and police.

If a vehicle breaks down or is involved in an accident, authorities must reseal the cargo and document the incident before transport can resume.

Where a contracted purchaser refuses to accept a shipment, growers may sell it to another authorised processor only with government approval.

Any parts of the cannabis plant deemed capable of being used as narcotics but unsuitable for industrial or medicinal purposes must be destroyed after harvest, with police and regulators receiving formal destruction reports.

Four-tier oversight structure

The legislation creates a multilayered regulatory system.

At the top sits a provincial steering committee chaired by the chief minister. Members include ministers responsible for agriculture, health, industry and forests, the principal secretary, the provincial police chief and senior bureaucrats.

The committee will identify cultivation zones, resolve policy issues, recommend taxation, oversee regulation and coordinate public awareness programmes against drug abuse.

Day-to-day regulation will be handled by the Cannabis Cultivation Regulation and Management Unit under the Ministry of Industry and Tourism.

The unit will be headed by a senior director and supported by inspectors responsible for licensing, monitoring and enforcement. If necessary, police officers may be seconded to assist inspections.

At the local level, ward chairs will head monitoring committees comprising police representatives, agricultural officials, civil society members, farmers' representatives and ward secretaries.

These committees will supervise cultivation sites and report violations.

Criminal penalties remain

The law does not decriminalise unauthorised cannabis cultivation.

Anyone cultivating cannabis without a licence, growing beyond the authorised area or selling products outside the approved system will remain liable under Nepal’s national narcotics laws.

Less serious administrative violations, such as failing to maintain records or transporting products without required approvals or official seals, carry fines ranging from Rs50,000 to Rs500,000.

Inspectors must immediately refer serious offences to relevant investigative authorities for criminal proceedings.

Cannabis purchased for medicinal or industrial purposes must be used exclusively for those approved purposes, with detailed records maintained throughout the supply chain.

The provincial government also retains the authority to prohibit cultivation of particular cannabis varieties if future research shows they pose unacceptable public health risks.

Income earned from licensed cultivation will be treated as agricultural income for taxation purposes. Foreign investment and exports, however, will continue to be governed by existing federal laws.

Rehabilitation provisions

Recognising concerns over potential misuse, the law also provides for rehabilitation centres to treat cannabis addiction and substance abuse.

The centres may be established and operated by provincial or local governments, either independently or in partnership with communities and non-governmental organisations.

Constitutional dispute

The legislation reached the statute book only after an unprecedented constitutional confrontation between the provincial assembly and the province chief.

The bill was first passed by the Gandaki Provincial Assembly on July 14 and forwarded to Bhatta for authentication.

Instead of signing it, Bhatta returned the bill to the assembly, arguing that several provisions potentially conflicted with federal legislation, particularly Nepal’s Narcotic Drugs (Control) Act, 1976, and questioning whether the province had legislated beyond its constitutional powers.

It was the first time in Gandaki Province’s history that a governor had returned a bill for reconsideration.

The provincial assembly, however, rejected the governor'’s concerns and, after a brief debate, passed the bill again without making a single amendment.

Provincial ministers and lawmakers argued that agriculture falls within the exclusive legislative authority of provincial governments under Nepal’s Constitution and that older unitary-era legal provisions inconsistent with the federal constitution had already become inoperative.

Under Article 201(4) of the Constitution, once a provincial assembly passes a bill for a second time, with or without amendments, the governor is constitutionally required to authenticate it within 15 days.

Bhatta subsequently signed the legislation three days after receiving it for the second time.

Province says law does not conflict with federal legislation

Gandaki’s Chief Attorney, Chiranjeevi Sharma Paudel, has defended the Act as fully consistent with both the Constitution and Nepal’s existing legal framework.

Paudel argues that Nepal never entirely closed the legal door to cannabis cultivation.

Although Nepal banned cannabis cultivation under the Narcotic Drugs (Control) Act after joining the 1961 Single Convention on Narcotic Drugs, he says the country entered reservations allowing cultivation and trade for medicinal and industrial purposes.

He also contends that Nepal’s narcotics law itself permits the government to authorise controlled cultivation under special licences and allows cannabis to be supplied for pharmaceutical production.

According to Paudel, agriculture is an exclusive provincial subject under Schedule 6 of Nepal’s Constitution, giving Gandaki clear constitutional authority to legislate in this area.

He further argues that constitutional provisions rendered outdated sections of pre-federal legislation inoperative where they conflict with the federal constitutional order.

Paudel also notes that the World Health Organisation and the United Nations Commission on Narcotic Drugs have recognised the medicinal value of cannabis and revised its international classification, strengthening the case for regulated cultivation.

Even so, he acknowledges that the province’s success will depend on effective implementation, including strong licensing procedures, rigorous inspections and close coordination with local administrations.

“The law has been introduced primarily to benefit farmers,” he said, adding that practical difficulties could be addressed through future amendments.

Whether Gandaki’s model becomes a blueprint for other provinces, however, will largely depend on how effectively the government translates the law into functioning regulations and whether it can demonstrate that commercial cannabis cultivation can be managed without fuelling illicit production.