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The paper is concerned with the development of a simplified linear model which attempts to optimize the cost function of an energy supply system consisting of a mix of energy resources and conversion devices, each of which may have a constraint with respect to availability, efficiency and cost. The model has been applied in three villages, from three different physiographic zones of Nepal, for which detailed data were collected and analysed. The results of the study show that the optimized use of different energy sources in different regions is strongly dependent on demographic and climatic parameters. For hill villages, hydropower could become the cheapest source of energy if technical options were provided, but until then more efficient use of wood is the only viable solution. Commercial sources like kerosene and LPG are not likely to play any significant role in hill and mountain villages. On the other hand, the use of biogas is economically most feasible in Terai village. The availability of kerosene rules out wood or agriculture waste as feasible solutions for cooking energy needs, as this village is closer to the Indian border and has good road access.

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The paper examines the total energy input requirements and outputs of subsistence agriculture in the rural areas of Nepal with specific emphasis on animate energy inputs for different crops. It analyses the availability of animate energy and the usage pattern and also looks into various issues of energy demands in subsistence agriculture at micro levels and its impact at macro level. The paper attempts to highlight major policy options that are imperative for raising the living standard of the rurals through increased productivity.