March 7, 2014, 3:00 pm 
The government has never been this rich in the history as its treasury swells by Rs 68 billion due to government’s inefficiency in spending capital expenditure.
The government has been able to spend only Rs 17.7 billion capital budget – that is 20.86 per cent of the total development expenditure of Rs 85.10 billion – due to lack of spending capacity by the end of eighth month of the current fiscal year 2013-14.
Though the capital budget spending has soared by 45.19 per cent compared to the same period of last fiscal year 2012-13, the low spending will result in lower economic growth.
The low government expenditure also contracts the private sector spending as they will not be spending due to government’s apathy towards development projects.
Finance Minister Dr Ram Sharan Mahat said that 80 per cent of the development budget spending is not good enough.
Addressing the review meeting of the five of the largest budget holding ministries – Physical Infrastructure, Irrigation, Tourism, Energy and Urban Development ministries – that are looking after 26 major projects, here today, he said that the spending at the end of the fiscal year will not produce quality output.
Asking the ministries to expedite capital expenditures, he also said that the Finance Ministry could not allocate more budget but will help transfer budget from the low performing projects to high performing ones.
“Our emphasis should be on both physical and financial delivery so that projects are completed on time,” Mahat added.
“Despite a timely budget, the development expenditure has been disappointing,” according to finance secretary Shanta Raj Subedi. “The performance of donor-funded projects has also been not good,” he added.
“Out of the Rs 78 billion allocated for energy, drinking water and airport infrastructure this year, only eight per cent has been spent so far,” informed joint secretary at the Finance Ministry Ram Sharan Pudasaini, who looks after the monitoring department. “It will be a huge challenge for the ministries to spend the rest of 80 percent of the budget with just four months remaining till the end of the fiscal year.”
The Ministry of Physical Infrastructure, which has been allocated Rs 30 billion for development expenditure has spent only Rs 6.05 billion – just 20.16 percent – of the budget, though secretary at the ministry Tulsi Prasad Sitaula claimed that the ministry has spent 30 per cent of its capital budget.
Likewise, Ministry of Irrigation has been able to spend just Rs 2.9 billion – some 25.43 per cent – of the Rs 25.43 billion budget for the current fiscal year.
Similarly, Ministry of Urban Development has recorded 20 per cent – of the allocation of Rs 7.94 billion – spending.
Projects like Kathmandu Valley Road Expansion Project, Pashupati Area Development Fund and Lumbini Development Fund spent more than 50 per cent of the allocated budget till the first week of March. However, projects like Postal Highway, Ringroad Expansion Project, Melamchi Drinking Water Project, and Bheri-Babai Diversion, among others, have seen less than 15 per cent of their budget.
Likewise, among the 18 projects that are being funded under fiscal management heading, six projects have not spent a dime, which is an indication that the projects have not even begun preliminary tasks.
The secretaries of some of the ministries also complained the Finance Ministry for allocating budget in some projects that donot need it, whereas allocating penny where it is needed the most.
Hydropower has no dearth of financing
KATHMANDU: Hydropower sector could receive billions of rupees in assistance from the World Bank Group alone, if the government shows seriousness on energy sector reforms. “The World Bank Group alone is willing to inject $5 billion within the next few years in hydropower development,” he said, adding that the key bottleneck is reform. “There will be no dearth of resources for hydropower development, if the country reforms the sector.”
Some of the reforms the donors have sought are allowance for them to issue local currency bonds, restructure Nepal Electricity Authority, power trade agreement with India and signing of power development agreement (PDA) with three foreign power developers.
According to World Bank/IFC, the World Bank Group is ready to support Nepal for the generation of 3,000MW electricity, provided the government reforms the sector and capitalise on their enthusiasm.
Regional airport ‘cost higher’
KATHMANDU: Finance Minister Mahat also said that the cost estimate of the proposed regional international airport in Pokhara was ‘unrealistic’. Calling the concerned ministry to recalculate the cost, he said the scheme’s estimated cost was ‘outrageous’ compared to the regional international airport being constructed in Bhairahawa. Pokhara’s much-talked-about airport project has been on hold since July 2012 after the lowest bidder China CAMC Engineering Co quoted $305 million, which was 85 per cent higher than the government-estimated cost. The government had expected the project to cost around $166 million. Though in January 2013, China CAMC wrote Civil Aviation Ministry expressing its willingness to build the project at the government-estimated cost, the things became more complicated after China Airport Construction Company, a consultant appointed by China CAMC, submitted another study report to the Civil Aviation Authority of Nepal quoting an estimated price of $264 million (excluding 16 per cent price escalation cost and 13 per cent VAT). However, after including the price escalation cost as per the study, the estimated outlay would come to around $300 million, nearly equal to the original cost quoted by China CAMC. The government had planned to borrow around $145 million in soft loans from the Export-Import Bank of China to fund the project. A detailed study for the airport project – conducted by the government in association with the Japan International Cooperation Agency in 1989 – had proposed a runway 2,500 m long and 50 metre wide, a terminal and a cargo building to be completed in four years at an estimated cost of $39.6 million at that time.
Contractor disappeared
KATHMANDU: Contractors of the three section – out of the six sections – of the Postal Highway have disappeared without notice. Construction work on a 320-km section of the Postal Highway Project has been at a standstill for the last eight months after the Indian contractors abandoned it without notice, informed the secretary at the Ministry of Physical Planning. A joint venture of two Indian companies Vishwa and BVSR had been contracted to build the east-west Postal highway by December 2013. The joint venture had been given a contract divided into three packages to strengthen 11 sections of the proposed highway spanning from Bara to Parsa, Sarlahi, Mahottari and Dhanusha in the Tarai. As the contractor left the project without notification, the progress of the the national pride project has remained poor in the first seven months of the current fiscal year 2013-14. So far, the project has spent Rs 224.8 million out of the budget allocation of Rs 2.21 billion for the current fiscal year. Similarly, only two bridges have been completed out of the target to build 20 bridges this year. Being undertaken with the assistance of the Indian government as part of a bilateral cooperation programme, Postal Highway Project had signed the agreement with Vishwa-BVSR JV in 2011 for three packages (3, 4 and 5) out of the six packages. As per the contract, it is the responsibility of Nepal government to provide the land required for road construction, remove public service utilities, cut trees falling in the alignment and construct bridges. Under the first phase of the construction that started in 2010, Postal Highway Project is constructing 19 roads having a total length of 606.75 km in six packages. The project has stated that the other three packages in the districts of Kailali, Banke, Bardia, Dang, Jhapa, Morang and Sunsari were making progress despite some problems in Kailali and Parsa.
