Shyam Sundar Gupta was detained in western Nepal on Monday and is expected to appear before a court in Kathmandu on Tuesday charged with kidnap.
Police say Mr Gupta ordered the abduction of Pawan Sanghai at a temple in December. He was released, reportedly after a ransom was paid.
Mr Gupta is yet to make a comment.
He is the leader of the Sadbhawana party in Nepal and is a former minister for supplies, according to the AP news agency.
He was arrested at his hometown of Bhairawa and police say they are seeking to extend his custody so they can continue their investigations.
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