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Leading To Budget For Fiscal Year 2010

Issue 49, December 05, 2010

Siddhi B. Ranjitkar

On June 30, 2010, Prime Minister Madhav Nepal has resigned under the pressure of the members of partners of his coalition government rather than the opposition UCPN-Maoist making his government a lame duck and himself an officiating Prime Minister. However, the three major political parties such as UCPN-Maoist, NC and CPN-UML have stuck to their position on not forming a new government making a mockery of the parliamentary election to a new Prime Minister and have not been able to form a new government well beyond the time of the presentation of a budget for Fiscal Year (FY) 2010 to the parliament in the first half of July 2010. Consequently, the officiating Minister of Finance has to present a special budget to the parliament in July 2010 for making money available to the lame duck government for running the state administration. However, the three major political parties have continued to play the game of the election to a new Prime minister without any one party winning the game. Some political parties such as CPN-UML and Madheshi political parties have sat on the fence while UCPN-Maoist and NC have continued to play the game. After some rounds, UCPN-Maoist also has joined the CPN-UML and Madheshi parties to watch the single NC candidate playing a fruitless game of the parliamentary election to a new Prime Minister. In fact, the NC candidate has said that he has been running the race for the office of a Prime Minister for not winning the office but for taming the UCPN-Maoist leaders consequently leading to the President discontinue the House session and introduce the budget for FY 2010 through his presidential power and let the most unscrupulous man Madhav Nepal to enjoy the continuity of the office of Prime Minister keeping the political stalemate intact.

Even after four months of the current FY 2010, the government has not been able to present a full-fledged budget to the parliament, the money provided by the special budget has been running short and soon the state administration will come to a standstill if the government fails in getting a new budget. So, the three major players such as UCPN-Maoist, NC and CPN-UML in the Nepalese current politics have agreed to form a taskforce of the three former Finance Ministers such as Dr. Baburam Bhattarai of UCPN-Maoist, Dr. Ram Sharan Mahat of NC and Bharat Mohan Adhikari of CPN-UML to make a budget acceptable to all three major players.

On Friday, November 19, 2010, the officiating Finance Minister has got an approval of the House Speaker for presenting a budget for FY 2010. Obviously, the three former Finance Ministers have failed in building a consensus on a new budget; however, the officiating government of Madhav Nepal has surely wanted to bully the opposition in the parliament presenting a new budget and getting passed by the majority votes of the NC, CPN-UML and Madheshi legislators in the parliament. The UCPN-Maoist legislators sensing the motive of the ruling-party partners have stopped the Finance Minister from going to the podium, and snatched the portfolio containing the budget and made the officiating Finance Minister unable to present the budget. Sensing the possibility of serious incident in the parliament, the House Speaker immediately adjourned the session and postponed the session to the December 02, 2010.

Morally bankrupt politicians such as NC President Sushil Koirala and Dr. Ram Sharan Mahat have openly called the President for discontinuing the House session and then introducing the budget through the Presidential order even though both of these actions go against the democratic values and norms. In fact, Dr. Ram Sharan Mahat has yelled demanding the discontinuation of the House session and then immediately using the presidential order for introducing the budget. These guys belonging to the so-called Democratic Party have opted for the most undemocratic means of passing the budget.

The smart Prime Minister has immediately gone to the President and briefed him what has happened in the parliament and also briefed him about the possible consequences of not having a full-fledged budget for the FY 2010 in other words he has convinced the President of the need for discontinuing the parliament session for paving the way for the introducing the budget by the presidential order. The naïve President simply has nodded to the both proposals of the crook Prime Minister.

Immediately after returning from the meeting with the President, Madhav Nepal has not lost even a minute to hit the iron as long as it is hot, and has held the cabinet meeting at midnight to make the decisions on making recommendations for the president to send the House in recess and then introduce the budget by the presidential order disregarding the democratic values and norms and the impact of his actions on the current political situation.

A person as crooked as Madhav Nepal has got the decision made by his cabinet on recommending the President to discontinue the House session and then announced the budget for the FY 2010. He takes the cabinet decisions to the President on the Saturday morning, November 20, 2010. The President without thinking much possibly because his former colleagues such as Sushil Koirala and Dr. Ram Sharan Mahat have already approved of his actions for immediately announcing the discontinuation of the House session, and the budget for the FY 2010, and not even thinking twice has just done what the officiating Prime Minister has recommended him. This time taking the recommendations of the officiating Prime Minster, the President has hit the already constrained Interim Constitution of Nepal of 2007 and has gone against the democratic values and norms stopping the ongoing House session and introducing the budget making the mockery of the parliamentary democracy and the people’s representatives.

The most fraudulent man Madhav Nepal has fooled the naïve President and led him to commit another mistake of discontinuing the ongoing House session. Perhaps, President Dr. Ram Baran Yadav must be repenting for his misdeed of discontinuing the House session. Now, he cannot do anything to run the House session even though he wants to. Currently, Madhav Nepal is not in a mood to recommend the President to call the House session immediately. In fact, he has waved his hand to House Speaker Subash Nemwang, NC President Sushil Koirala, and other leaders that have demanded immediate call of the House session, and has left Kathmandu for Cambodia on November 30, 2010 for attending the Sixth General Assembly of the International Conference of Asian Political Parties (ICAPP), and then go on to Brussels to attend the Fifth Trading of European Development countries program. So, more than two weeks will pass before Madhav Nepal will be in a mood to work again as an officiating Prime Minister. He has not cared for the time that has been running short for completing the peace process and writing a new constitution. Attending the two seminars of his interest abroad, he can add two more things to his CV (curriculum vitae) in case he needs to apply for a job of a Prime Minister or President, as he cannot expect for getting reelected to any elected position in the future.

Currently, the same persons that have called for the immediate discontinuation of the House session are dying for calling the House session immediately. The NC central working committee (CWC) members have said on Thursday, December 02, 2010 that the House session should be called right away in order to re-start the election to a new prime minister as the country cannot remain without a functioning government for a long time, writes. However, these very guys have made the officiating Prime Minister Madhav Nepal more than a functioning head of the caretaker government.

Madhav Nepal has skillfully exploited the mistake of making him the member of the Constituent Assembly-cum-parliament committed by Chairman of UCPN-Maoist Prachanda and Chairman of CPN-UML Jhalanath Khanal, and of course the good will of the NC leaders for making him the Prime Minister setting aside the democratic values and norms even though he is the man rejected by the people in two constituencies. Using the mistakes of one leader after another, Madhav Nepal has managed to stay on in the office of Prime Minster for thirteen months doing nothing of any sort that strengthens and consolidates the Federal Democratic Republic of Nepal but amassing the wealth as much as possible for himself and for his circle of people. The money he has accumulated has been enough for supporting his cadres and followers for at least ten years to come. So, he will remain in the political scene of Nepal at least for another ten year even though the people have despised him for all such negative activities.

After getting the President discontinue the House session and announce the budget for FY 2010, Madhav Nepal sends his officiating Minister For Finance to the hall of the National Planning Commission in the Singhdurbar in Kathmandu on November 20, 2010 to read out the 25-page budget to the selected persons of Madhav’s choice. Thus, Madhav Nepal has exploited the naivety of the President to introduce the budget for FY 2010 without the people’s representatives seeing it much less discussing it in the parliament. This is exactly what the man not elected by the people but by the legislators unworthy of trust and unfit to hold office, to the office of Prime Minister can do, as he does not need to care for the democratic values and norms. All the political leaders including the President need to share in all the misdeeds and faults of Madhav Nepal, as they have been responsible for letting Madhav Nepal committing one political and economical crime after another and ultimately making him the man with power to discontinue the House session and not to recommend the President to call the House session again most probably provoking the people to revolt again and punish the politicians committing such on political and economical culprits.

The 25-page budget for the FY 2010 titled ‘Public Statement On Income and Expenditure of Fiscal Year 2010‐11’ read out by the officiating Finance Minister is nothing but a survival kit of Madhav Nepal and his followers. Ironically, it says that some legislators have roughed up the officiating Finance Minister, and the incident goes against the democratic values and norms; so the President has to introduce the budget. It says that the growth of the Gross Domestic Product (GDP) is 3.5 percent in the FY 2009 against the 3.9 percent in the FY 2008 and 5.8 percent in the FY 2007. Obviously, the Madhav government has success in lowering the GDP.

The total budget is Rs. 337.90 billion of which 56.3 percent or Rs. 190.32 billion is for the recurrent expenditure, and 38.3 percent or Rs. 129.54 billion is for the capital expenditure, and 5.4 percent or Rs. 18.42 billion is for the repayment of principal. If you add up the three figures to a total then it comes to Rs 338.28 instead of Rs 337.90 million indicating the Finance Minister or his assistants for that matter have no time to check the figures.

The total resources required for the remaining period of the FY 2010 is Rs. 281.99 billion of which Rs. 216.64 billion will be met by the regular revenue and Rs.65. 34 billion from foreign grants, leaving a deficit of Rs. 55. 91 billion, of which Rs. 22.23 billion will be met by the foreign loans, and Rs. 33.68 billion from the domestic borrowings according to the statement of the budget for the FY 2010.

The Finance Minister has said that not more than 40 per cent of the budget of any project will be allowed to spend in the last quarter of the FY and not more than 20 per cent in the last month of the FY indicating the tendency of most of the money being spent in the last months of a FY means doing nothing but spending the money.

The main drawback of the budget is that the money is scattered over all the large projects giving a few hundred millions to each that needs billions of rupees to complete. For examples, the multi-billion projects such as the Melamchi Drinking Water Project and the Fast Track Highway have received Rs 2.17 billion and Rs 680 million respectively, and Rs. 700 million for the construction of six lane roads linking international trade routes such as Birgunj-Pathlaiya, Belahiya-Butwal, Rani-Itahari and Surya Binayak-Dhulikhel. With these amounts of money, these projects will never be completed but will be useful onlty for the Prime Minister such as Madhav Nepal to make money out of these projects.

The Finance Minster has increased the subsidy on the chemical fertilizers from Rs 2.00 billions in the last FY to Rs 2.75 billions in the current FY. This money surely goes to the pockets of Madhav Nepal and his followers. None of the former Prime Minister has dared to reinstate the subsidy on fertilizers that the international community has succeeded in forcing the then government to remove it, as it has been for making money to the dishonest Prime Ministers and their colleagues. However, Madhav Nepal has not only reinstated the subsidy on fertilizers but also has increased the subsidy amount and certainly has continued it for his own benefits.

Rs. 57.65 billion for the education sector is the highest amount allocated to any sector but it is not clear without digging the details of the budget into the ‘Red Book’ whether the main portion of the education budget goes to the higher education including for opening the newly proposed university rather than the urgently needed for upgrading and expanding the primary education to bridge the gap widening between the private and public primary education as the Finance Minister says in the 113 paragraph of the budget, “I have proposed Rs. 1 billion for teaching grant to be distributed among the schools facing scarcity of teachers. Similarly, I have doubled the amount being distributed to Higher Secondary Schools as teaching grants in proportion to the number of students.” However, the money allocated to providing girl school students with scholarship is highly commendable because it will attract and keep the girls in schools.

The Finance Minister has given the highest possible exemption and other benefits including security to the large businesses employing 300 or more employees thus grossly neglecting the small businesses and domestic and handicraft businesses that have been employing almost all the Nepalis after the agricultural season.

The Finance Minister has made the provision in the budget for the non-resident Nepalis to invest in the stock market and has continued the Foreign Employment Bond targeted at the Nepalis working abroad. These are a few positive measures of the Madhav government in any account.

The Finance Minster has said, “Micro hydropower production work will be accelerated as a campaign with the initiative of local bodies also by mobilizing local capital. Micro hydropower projects will be implemented in the entire hilly and mountainous region where the access to national grid is not possible and there is possibility of micro hydropower. I have allocated Rs. 1 billion for this purpose.”

However, in a press release on Thursday, December 02, 2010, Small Hydropower Development Union-Nepal and Free Energy Producers Union have said that the Energy Ministry has made decision on stopping the licenses to the private electricity companies and have urged the Energy Ministry not to deprived the private companies of its rights to generate electricity at the time when the country is facing the acute shortage of power, ‘Himalayan News Service’ reports on December 03, 2010.

Under the pressure of the Nepal Gold and Silver Dealers Association (Negosda), the Finance Minister has urged the Ministry of Commerce and Supplies on Tuesday, December 02, 2010 to lift the three-month-old ban on the import of the gold but the Ministry of Commerce and Supplies has decided to assign the commercial banks to import the gold disregarding the demand of the bullion traders for letting them to import at least 35 kg of gold daily to meet the domestic demand; the bullion traders have said that this provision for making the commercial banks responsible for importing gold will cause a rise in the gold prices, writes on December 02, 2010.

The money sent by Nepalis working abroad has reached US$3.5 billion in 2010 significantly easing the badly damaged economy by the political instability. Nepal has received US$2.98 billion in 2009. The World Bank’s latest report has said that the money sent by workers working in foreign countries worldwide will reach US$440 billion by the end of the current year.

Minister for Health and Population Umakanta Chaudhari has said on November 29, 2010 that the public have not benefited from the growing government investment in the health sector because of the poor performance of health sector, it is difficult to coordinate with the line ministries such as Ministry of Local Development, Ministry of Physical Planning and Ministry of Home to deal with various epidemics, ‘The Rising Nepal’ of November 30, 2010 writes.

The Finance Minister in his budget for the FY 2010 has said, “I have proposed budget for the free provisions of basic health services, promotion of infant and maternal health, and access of the poor and endangered ethnic citizens to the basic health services and treatment of the senior citizens. I have proposed Rs. 24.51 billion for the implementation of the health sector programs.”

Garment Association Nepal (GAN) has shown anger at the government not including its demands for elimination of the 25 percent penalty on bank guarantee, increasing the time limit for producing goods from 14 to 18 months from the date of importing the inputs, setting up a Special Economic Zone for apparel and pressing on achieving a duty-free access of Nepalese garments to the US markets in the budget for the current fiscal year according to the news posted on the on November 29, 2010.

The budget for FY 2010 has a negative impact on the NEPSE (Nepal Stock Exchange) index as it has dropped 7.27 points during the week’s trading. The sensitive index that measures the ‘A’ listed companies’ trade also has gone down by 1.89 points. The transaction of class ‘A’ companies comprised 52.82 per cent of total transaction amounting to Rs 77.2 million. Float index that represents tradable shares’ situation has also dipped by 0.63 points. This week, insurance subgroup and development banks have been the only gaining subgroups that earned 6.28 points and 0.84 points respectively, ‘Himalayan News Service’ online on November 27, 2010 writes.

Issuing a press statement on November 29, 2010, the Federation of Nepal Electricity Entrepreneurs has shown its concern over the government ignoring to provide domestic power producers with incentive to implement the fast developing projects that could be completed soon, and removing the provision of the exemption of custom duty provided to promote CFL bulb in the current budget at the time when the country is facing an energy crisis the state news agency RSS says.

The private companies involved in power production in Nepal have been disappointed by the government budget for the FY 2010, as the budget has ignored the private sector’s role in the development of hydropower in Nepal, representatives of Independent Power Producers’ Association Nepal (IPPAN), and Small Hydropower Development Association Nepal (SHDAN) have told the reporters in the joint press conference held by them in Kathmandu on Monday, November 22, 2010, ‘The Rising Nepal’ of November 23, 2010 writes. President of IPPAN Subarna Lal Shrestha has said that at the time when the country has been facing up to 18 hours of load-shedding per day, the reluctance of the government to encourage the private sector develop hydropower projects is a matter of shame. The private sector has shown interest in investing in around 100 power projects generating a total of 2,000 MW. "But the budget for the current fiscal year has created an utter frustration among the private entrepreneurs," Shrestha said. The government is ready to purchase power at the rate up to Rs. 12 per unit from India, but it has proposed only Rs. 4.55 per unit to buy the power from the private companies of Nepal, he said. "This shows the government’s apathy toward the development of hydropower project,” Shrestha said, ‘The Rising Nepal’ of November 23, 2010 writes.

On Monday, November 22, 2010, Independent Power Producers (IPPs) have strongly reacted to the budget for fiscal year 2010 saying it has been silent on their plight; the government has failed in bringing policies and programs following the earlier commitments made to develop the energy sector; the government has committed to generate 25,000 MW of electricity within 20 years but the budget has failed in giving a priority to the energy sector. President of Independent Power Producers´ Association, Nepal (IPPAN) Dr Subarna Das Shrestha has said that the budget has been silent on strategies to reduce the load-shedding hours (Nepal Electricity Authority has said it will be 14 hours per day at highest this year), create an investment-friendly climate and define the role of private sector to end the energy crisis, writes.

Export of Handicrafts has increased by 8.91 per cent to around Rs. 900 million in the first quarter of the current fiscal year compared to Rs. 830 million of the corresponding period in FY 2009; the export of handicraft has stood at around 2.78 billion in the last fiscal year while the amount of export has been around Rs. 3.2 billion in the previous fiscal year. Director General of Federation of Handicraft Associations of Nepal (FHAN) Dilip Khanal has said that the export of handicraft has shown an upward trend during the first quarter of the current fiscal year but the export of handicraft has decreased during the last fiscal year due to various problems including ongoing political instability and lack of promotion abroad among others. He has said that the export of handicraft might increase in the days to come because the new budget has given priority to the export trade; however, the new budget has not addressed problems of Small and Medium Entrepreneurs (SME) despite their significant contributions to the promotion of big industries and this sector being one of the major contributors to the foreign exchange earnings, ‘The Rising Nepal’ of November 24, 2010 writes.

On November 21, 2010, Federation of Nepal Cottage and Small Industries (FNCSI) has shown its dissatisfaction with the government budget for the FY 2010 even though the budget has incorporated some incentives to small and cottage industries, it has not given a priority to small and cottage industries and the government has not introduced any program on bringing small and cottage industries to the mainstream of the industrial sector despite these industries are the mainstay of the country’s economic development, ‘The Rising Nepal’ of November 22, 2010 writes.

On Monday, November 22, 2010, the private sector has shown serious concern over the provision made in the new Finance Ordinance for giving the power to the government to increase the rate of tax, duties and fee until then the rights has been enjoyed only by the parliament. The Clause 18 of the new ordinance says, “Irrespective of whatever is written in the existing laws, Nepal government can reduce, increase or exempt the fees, duties and tax rates imposed under the prevailing ordinance and laws as per necessity.” Finance Minister Surendra Pandey has maintained this provision is aimed at bringing dynamism in the tax system. However, Confederation of Nepalese Industry (CNI) and Federation of Nepalese Commerce and Industry (FNCCI) have said that if the government enjoys the rights to increase and exempt taxes, it will trigger unpredictability and arbitration, writes.

December 4, 2010.

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