Upcoming budget to be development oriented: FinMin

KATHMANDU, June 7: 

The upcoming budget scheduled to be unveiled in mid-July will focus on core development agendas and not promote populist programs to appeal to certain interest groups, finance minister Shankar Koirala said on Thursday.

During a meeting with Republica and Nagarik dailies, Minister Koirala said the incumbent government does not need to embrace populist manifestos as it is made of technocrats and not politicians.

“This has paved the way for the government to focus on development and it will prioritize sectors ranging from energy and infrastructure to agriculture, tourism and exports,” the minister said.

Referring to the frequent power cuts that have crippled industrial units and the lives of the general populace, Koirala said the government would give the topmost priority to the energy sector. “This includes creation of favorable policies to bring in foreign investment for development of hydro projects,” Koirala said. “We will also focus on the laying of transmission lines and signing of power purchase agreements.”

Next in the government’s priority list is infrastructure development. “Under this, focus will be laid on expansion of the road network,” the finance minister said. “We will also lay emphasis on development of railway lines and irrigation projects.”

Another priority sector, according to the minister, is agriculture. “We intend to promote commercial agriculture and livestock farming, while easing the supply of fertilizers,” he said, adding, “The government has also laid focus on tourism development and export promotion. We will also devise ways to substitute imports.”

To finance development projects, the government intends to boost revenue collection by over 30 percent in the next fiscal year.

“I think the revenue collection target we have set is achievable as only 900,000 people, or only 3 percent of the population, are included in the tax network,” Koirala said. “We are also mulling over upward revision of tax rates in certain areas, without infringing on the commitment expressed during the signing of the South Asia Free Trade Agreement.”

Source: Republica

Govt still receives over 100 applications a day for politically motivated programs

KATHMANDU, July 6, 2012

Though the Ministry of Finance has already closed budget negotiations with different ministries, the Ministry of Physical Planning, Works and Transport Management (MoPPWTM) and the Department of Roads (DoR) are still receiving at least a hundred applications every day from political leaders and locals demanding budget for roads and bridges to be implemented at the local level.

“We have received at least 15,000 applications since December last year demanding budget mainly for roads and bridges in the coming fiscal. More than 14,000 of those applications are for local roads,” Tulasi Prasad Sitaula, secretary at MoPPWTM, told Republica on Thursday.

According to Sitaula, for the past couple of weeks MoPPWTM has been dealing with at least 100 applications a day demanding that their programs be forwarded to the National Planning Commission (NPC) -- the apex policy-making body of the government -- for implementation through district development committees (DDCs). Normally, DDCs formulate budget and prioritize the programs, including roads and bridges, at the local level.

Though the applications for budget for local programs started arriving in December last year, the number has been increasing as the budget announcement draws closer.

“As most of the people coming to us want to avoid the DDC´s process of implementing programs, they are frequenting MoPPWTM directly to put their programs under NPC,” said Sitaula. He said more than 80 percent of the applications are registered by people with political affiliations who are putting pressure on the government to implement the programs that serve their political interests rather than the people´s needs.

Last year also, 15,000 applications were registered at the ministry. Of them, 4,000 applications for construction of roads and bridges were approved and allocated Rs 500 million. However, only 2,500 programs had achieved their targeted implementation. “As implementation of the programs is not satisfactory, we are not recommending any such programs for the coming fiscal year,” said Sitaula.

Source: Republica

Budgetary provision for loans, grants to PEs in offing

KATHMANDU, MAY 17, 2012

Finance Ministry will introduce a special provision regarding loans and subsidies to public enterprises (PE) as it has faced a lot of problem due to PEs seeking loans and grants, though there has not been any amount earmarked for them in the fiscal policy.

The ministry has been facing problems to manage fund for public enterprises since the government does not allocate a budget for those entities, said spokesperson at the finance ministry Rajan Khanal. “Also the release of huge amounts as loans or grants has been hitting development projects as it means a reduction of the budget for development work.”

The government has to spend at least Rs 360 million every year on a few public entities just to distribute salaries to their employees and in other administrative costs, according to the Finance Ministry. Besides, loans to Nepal Oil Corporation (NOC) and other public enterprises which have been incurring losses has emerged as a key issue.

The government provided a loan of Rs 10 billion to NOC alone, he said, adding that

one third, out of the total amount, was directly released by the government and the

rest was provided after the Finance Ministry provided a guarantee to the lenders.

Similarly, the government has to bear Rs 20 million in administrative costs of Janakpur Cigarette Factory and Rs 4 million for Nepal Drugs every month, according to Finance Ministry.

Nepal Orind Magnesite and Nepal Metal Company are also completely dependent on the government for their administrative expenses.

Most of the loss-bearing public entities have been regularly approaching the Finance Ministry for grants or loans. “So, the government should allocate some fund in the budget.”

The ministry is planning to introduce some clear conditions which will be applied to

all public entities when they

approach the ministry for a loan. “Not all PEs will be eligible to ask for loans from the Finance Ministry,” said Khanal, adding that there has to be a convincing reason to avail a loan or grant.

Source: THT

Capital expenditure figures disappointing

Although Finance Ministry officials expect this fiscal year’s capital expenditure to be around 90 percent of the allocated budget, spending in the first nine months suggests that achieving even that figure is going to be a herculean task.

The government has been able to spend just 32 percent (Rs 18.79 billion) of the capital budget of Rs 58.22 billion on cash-flow basis over the review period.

Of the total capital budget of Rs 72.61 billion, Rs 58.22 billion is spent on cash flow basis, while rest of the amount has been planned to be spent under commodity assistance and direct funding from donors.

Finance Ministry officials are not contented with the present state capital spending, but say figures are encouraging compared to last year. “The actual expenditure could be much higher, as the stated figure does not include progress in ongoing work as payments are made only after completion of the work,” said Rajan Khanal, spokesperson for the Finance Ministry.

Significant progress has been made in major projects such as the Kathmandu-Tarai Fast Track, Mid-hill Highway, Sikta and Ranijamara irrigation project, according to Khanal. The ministry has been regularly holding talks with secretaries of various ministries to encourage them to ensure better capital expenditure. At a recent meeting with secretaries, Finance Minister Barsaman Pun warned that he would take the proposal for diverting the budget of ministries failing spend to the Cabinet.

The ministry’s record shows that major ministries having huge capital budget have failed to spend. For an instance, the Ministry of Physical Planning has been allocated Rs 34.5 billion capital budget, but has spent just Rs 8.5 billion as of the ninth month. The Ministry of irrigation has spent Rs 4 billion out of the

allocated Rs 9 billion, while the Ministry of Local Development has managed to spend just Rs 1.5 billion where as its allocation is Rs 7.5 billion.

The government has adopted a policy that projects failing to spend less than 60 percent budget in first nine months will not be sanctioned budget further. Also, they should have spent 80 percent of the budget as of 11th month to get the budget for the 12th.

“The Finance Ministry will stick to this policy and those not spending 60 percent budget as of the first nine months will not get additional budget as long as the minister or the secretary decides otherwise,” said Khanal.

On revenue collection front, the government missed the target by Rs 4 billion as of the ninth month. The collection over the period stood at Rs 172 billion against the target of Rs 176.2 billion.

The ministry’s statistics show revenue collection under customs duty, VAT and income tax exceeded the target, but collection under the excise duty, vehicle tax, registration charge and non-tax segments fell short of target.

The government has been struggling to raise non-tax revenue such as royalty and dividend from public enterprises as it has to give its own resources to cash-strapped public enterprises such as Nepal Oil Corporation.

Khanal said with the peace process heading towards conclusion which is expected to create more demand in the market, revenue collection is expected to improve.

Source: Kathmandu Post

India Budget 2012 : Delhi pledges IRs 2.7b in grants to Nepal

KATHMANDU/NEW DELHI, MAR 18, 2012

India will give IRs 2.7 billion in grants to Nepal in 2012-13. This is what Indian Finance Minister Pranab Mukherjee announced on Friday while unveiling the budget for 2012-13.

New Delhi had given grants worth IRs 1.5 billion in 2011-12 and IRs 1.67 billion in 2010-11 to Nepal.

India’s proposed loans and grants to foreign governments amount to IRs 51.48 billion this year. In South Asia, Bhutan continues to top the list of countries receiving Indian grant. While Afghanistan and Sri Lanka are ahead of Nepal in terms of the Indian grants amount, Bangladesh and Maldives will receive relatively less amount than Nepal.

On concerns about the Indian budget’s incentives for agriculture that may impact Nepal’s exports and imports, experts here said the budget had no major policy shifts to make a big difference.

Given Nepal’s dependence on India, with over 60 percent of trade being done with the southern neighbour, the Indian budget is closely watched by Nepali policymakers and business community.

Nepal is basically concerned about Indian policies on agriculture, as Nepal’s agriculture is less competitive than India, and more facilities to Indian farmers mean Nepali farmers’ misery. Nepali farmers have always been suffering from the import of cheap Indian agriculture products through porous border between the two countries. “India has not increased direct subsidies to farmers, which is our concern,” said Rameshwor Khanal, economic advisor to Prime Minister Baburam Bhattarai.  “However, a number of missions announced in the areas of horticulture to food processing may affect our agriculture sector.”

The Indian budget has announced a number plans to increase agriculture productivity, including National Food Security Mission, National Mission on Oilseeds and Oil Plm, National Mission on Agricultural Extension and Technology and National Horticulture Mission.

Besides these programmes, the budget also reduced customs duty on the import of agriculture machineries and other inputs to enhance productivity. Basic customs duty on sugarcane planters, root or tuber crop harvesting machines, weeders, and tillers has been slashed to 2.5 percent from 7.5 percent earlier. Customs duty on specified coffee plantation and processing machineries has been reduced to 5 percent from 7.5 percent.

Although the budget has announced slashing subsidies on petroleum products and fertilisers, it has made it clear that it would continue providing subsidies on food to enhance India’s food security situation. “More subsidies and benefits to Indian farmers may affect Nepali farmers’ interests at a time when Nepal is all set to remove agriculture development fee on imports,” said trade expert Ratnakar Adhikari.

Nepal has pledged to the World Trade Organisation that it would remove such a fee from the next year.

The Indian budget has raised standard excise duty from 10 percent to 12 percent. “As most of the goods imported from India, including vehicles and tobacco products among others, are subject to the increased excise duty, the price of imported goods may go up due to increased production cost,” said Khanal.

As no excise duty is imposed on goods imported to Nepal from India, it will not affect vehicle prices here. “Automobile price will not go up here due to a hike in excise duty in India,” said Saurabh Jyoti, president of Nepal Automobile Dealers’ Association. India has raised excise duty on small cars to 27 percent from the current 22 percent.

An increase in the income tax exemption threshold to IRs 200,000 from the current IRs 180,000 is expected to increase Indians’ disposable income. “This will create more demand and fuel price rise in India,” said Khanal. “The rise in Indian inflation may also catalyse Nepal’s inflation.”

Source: Kantipur

Inflow of remittance from Nepali workers in foreign countries shot up by 80.7 percent during the first three months of the current fiscal year, according to a central bank report released Sunday. Remittance growth in the first quarter of the previous fiscal year was 17.2 percent, Nepal Rastra Bank (NRB) said.The big jump in remittance also helped boost the country's overall balance of payments (BOP) during the period pushing it into positive territory after a long time, the report said.

According to the quarterly report on the current macroeconomic situation of the country, Nepal's BoP recovered from a deficit of Rs. 5.6 billion recorded in the first quarter of Fiscal Year 2007/08 to a surplus of Rs. 7.7 billion in the first three months of Fiscal Year 2008/09.

Similarly exports witnessed an upsurge of 27.1 percent during the first quarter of the current fiscal year against a mere 4.3 percent rise in the corresponding period last year.NRB said that exports to both India and third countries swelled this year. It said exports to India during the period increased by 10.1 percent against a 0.6 percent rise recorded during the corresponding months last year. Likewise, exports to countries other than India swelled by 58.3 percent compared to an increase of 11.9 percent last year.

Exports to India increased due to a rise in export of readymade garments, shoes and sandals, polyester yarn, copper wire rods and G.I. pipes. An upsurge in export of pulses, woolen carpets, pashmina, herbs and tanned skin mainly contributed to an increase in overall exports to third countries.

Meanwhile the country imported 30.6 percent more in the first quarter this year. In the corresponding period last year, imports had gone up 13.1 percent.Imports from India went up 19.3 percent in the review period, compared to a 13.7 percent rise in the corresponding period last year.

NRB attributed the growth to rise in petroleum imports and higher import of vehicles and spare parts, cold rolled steel in coil, hot rolled sheet in coil and cement among other from India.On the other hand imports from other countries jumped 48.5 percent in the three months while it had grown just 12.1 percent during the corresponding period last year. NRB said higher inflow gold, MS billet, telecom equipment and parts, computers and related products, and polythene granules among others from these countries contributed to the big surge.

During the first three months of the current fiscal year, total government spending decreased by 2.4 percent to Rs. 29.3 billion compared to an increase of 53.7 percent in the corresponding period last year.
The government's failure to make both recurrent and capital expenditures at significant levels resulted in the decline of overall expenditures. Given the relatively huge size of the budget, spending money has remained a big challenge for the government.

Recurrent expenditures increased by 13.2 percent to Rs. 18.5 billion compared to an increase of 35.6 percent in the corresponding period last year. The government's budget deficit stood at Rs. 2.9 billion compared to a deficit of Rs. 9.4 billion in the corresponding period last year.

At the same time revenue collection saw an increase of 16 percent during the review period to Rs. 22.3 billion. The Ministry of Finance has said on Nov. 21 that revenue collection increased by 35.5 percent between mid-October and mid-November this year. It said Rs 32.97 billion had been collected in revenue in the first four months of this fiscal year. The government aims to increase revenue by 31.7 percent to meet its target of Rs. 142 billion, set for this year.

Domestic credit claims by non-financial government enterprises increased by 6.2 percent over the period compared to a decline of 17.3 percent in the corresponding period last year.Higher credit claims by government enterprises like Janakpur Cigarette Factory, Nepal Oil Corporation, Nepal Airlines Corporation, Janak Education Material Center and Nepal Electricity Authority contributed to the increase, NRB said.However, claims on government financial institutions declined by 6.7 percent in the review period. Meanwhile, overall domestic credit increased by 6.8 percent during the period against 6.9 percent recorded in the corresponding period last year.Gross foreign exchange reserves stood at Rs. 230.8 billion in mid-October, an increase of 8.5 percent compared to a decline of 4.1 percent in the corresponding period last year. The current level of reserves is adequate for financing merchandise imports for 10.1 months, and merchandise and service imports for eight months, according to NRB.

Budget based on 'controlled economy' concept: FNCCI

The umbrella body of private sector, the Federation of Nepali Chamber of Commerce and Industries (FNCCI), has accused that the budget is based on the concept of 'controlled economy.'"Even though the budget raises the subject of liberal economy, it is based on the concept of controlled economy. It has not created private sector-friendly environment. Although it embraces the concept of public-private partnership, it does not encourage the private sector through competition," reads a statement issued by the FNCCI in response to the budget.

"Instead of introducing additional commitments to liberal economy to mobilize domestic and foreign capital, the government is creating a holding company to revive the sick industries rather than hand them over for privatization. This cannot be called as a policy conducive for industrialization," adds the statement.

In a statement issued Monday, FNCCI said though many suggestions put forward by the organisation have been incorporated in the budget, the government still intends to increase its presence in the business sector by resuming its hold on public companies which were in the process of privatisation.

FNCCI expressed dissatisfaction for not addressing its demand to stabilize taxes at least for next one decade, and the failure of the government to implement multi-rate tax regime apropos the Value Added Tax. The FNCCI has demanded its representation in the proposed Central Revenue Board and called for building of infrastructure for Special Economic Zones (SEZs), which have remained on papers despite repeated commitments from the government.

Further accused the government of not acting appropriately on downsizing the imports by encouraging active involvement of the private sector. It said the budget has not addressed the grievances of the industrialists hit by the Koshi havoc.

FNCCI sought support from the government to uplift the industries who were affected by the decade long insurgency due to which they failed to pay back government loans on time. However, talking to reporters on the evening of the budget speech FNCCI chairman Kush Kumar Joshi had said the budget had address most of the demands put forward by the private sector.

Dear Readers and responsible citizens of Nepal, please put your views, what you liked or disliked and what should have been better way for the new act of Budget. The increment of Capital gain tax to 15%... increase in duty for imported vehicles and cut of VAT in hydro sector are these all fair, good or just new government's selfish policies? Please comment.