The son of the leader of Nepal's ruling Unified Communist Party of Nepal (Maoists) was forced to refuse $250,000 from his father's government for a Qomolangma expedition after the offer sparked accusations of corruption.

Opposition activists had burned effigies of Prime Minister Baburam Bhattarai and warned they would stage "massive" protests across the impoverished Himalayan nation after details of the grant emerged.

Maoist party chairman Pushpa Kamal Dahal's son, Prakash, told a press conference, "We want to return the money to the government, showing respect for the sentiments of the Nepali people."

He told reporters he wanted the money instead to be given to the families of the 16,000 killed in the country's 10-year civil war, which ended in 2006.

The announcement marked an about-face by the mountaineer, who had planned to take the cash before the public outcry.

He had been quoted as saying his team was taking up the Qomolangma challenge "for the sake of the country, the people and peace and constitution," sparking widespread derision.

"This is the worst kind of immoral decision taken by this government. There cannot be any financial irregularities greater than this," said Ramesh Lhekhak, leader of the opposition Nepali Congress, accusing the Maoists of "nepotism."

Dahal senior, who goes by the nom-de-guerre Prachanda or the Fierce One, has been accused of pressuring Prime Minister Bhattarai to release the funds to the 11-man Maoist expedition team.

"How can the government's decision to empty the state coffers for these new princelings help achieve peace and the constitution-making process?" National Students' Union coordinator Ranjit Karna was quoted as saying by the Kathmandu Post. "This is an example of institutional corruption."