Low spending: Govt sitting on Rs 95b

KATHMANDU, JAN 21 -

The government has been sitting on a pile of money amounting to more than Rs 95 billion because it has nowhere to spend it. The state treasury has probably never held so much cash in the past, government officials said.

The reason why the vaults are overflowing with money is low capital spending. As of January 18, capital expenditure came to Rs 15 billion out of the capital budget of Rs 117 billion allocated for this fiscal year.

Finance Secretary Suman Sharma admitted that low capital expenditure was the main reason why the treasury held such a large sum of money. “The unspent amount became so large because it also includes last year’s unspent budget of Rs 25 billion,” said Sharma.

“Compared with last year’s figure for the corresponding period, the amount remaining in the treasury this year is less.” According to him, the treasury contained Rs 77 billion at this stage in the last fiscal year and this year the figure is around Rs 72 billion.

However, the figures for this year and the past year show that expenditure has been poor in both the years. In fact, capital expenditure has not crossed 15 percent of the allocated amount during the first half of the fiscal since the fiscal year 2011-12.  

According to the Finance Ministry, in addition to low capital expenditure, swelling revenue collection during the second quarter and an increase in reimbursements by donors also resulted in the huge amount of money in the government’s vaults.

“People pay one instalment of their taxes before the second quarter-end,” said Sharma. “While closing the year in December, donors also release their pledged aid amounts based on the expenditure here.”

With capital expenditure consistently remaining poor, the government has initiated a mid-term review of the expenditure by the executing agencies under various ministries having a high capital budget.

Reviews of the expenditure of the Physical Infrastructure, Local Development, Energy, Agriculture and Education ministries, among others, will be carried out, said the Finance Ministry.

Sharma said that the move was aimed at finding problems in the early stages and diverting unused resources from underperforming projects to others making good progress. There is a tendency of diverting resources on a big scale in the final months of the year to increase capital spending, but the quality of work has been compromised as a result.

Officials have been pointing to issues like procedural delays in approving the project and awarding the contract, a tendency among contractors not to work after receiving the mobilization fund in advance, frequent transfers of technical and top level staffers at the project and fear of the Commission for the Investigation of Abuse of Authority as some of the key reasons why the expenditure pattern has not improved.  

Although these problems have remained consistent for the last several years, capital spending was also affected as development projects were hindered by a shortage of construction materials like pebbles and sand in the last fiscal year due to strikes held by crusher plants.

A senior official of the National Planning Commission said that pebbles and sand may not emerge as a problem in this fiscal year as the government has extended the deadline for following the set standard until the end of this fiscal year.

Infra projects’ fate hangs in balance

The fate of under-construction 32MW Rahughat Hydropower Project and Beni-Athunge road upgradation remains uncertain, thanks to the government’s failure to monitor development activities.

The hydropower project is being developed under Indian loan assistance, while the Asian Development Bank (ADB) has financed the road projects.

Only 35 percent of the work on the stalled road project has been over. If the project isn’t completed within March 2015, floods might sweep away construction materials at the project site.

The Rahughat project snagged after the contractor failed to carry out work due to its financial weakness. Now, Nepal Electricity Authority (NEA) plans to terminate the contract with the contractor—India’s IVRCL Infrastructure. India had awarded the project contract to IVRCL, but at a recent review meeting in New Delhi, the southern neighbour has agreed to go ahead with the contract termination.

Similarly, construction of a bridge over Dukhukhola along the Ratodhunga road section of the Beni-Darbang highway, a bridge over the Kali Gandagi River connecting Beni-Jomsom, and a culvert along the same highway has stalled for the past two years. Contractors selected by Department of Road fled away without completing the work.

“This is because of the failure of the authorities concerned to monitor the projects,” said Pramod Shrestha, executive member of the Federation of Nepalese Chambers of Commerce and Industry.

Construction of the private sector-initiated 4MW Ghalemdi Hydropower Project has been stalled due to obstructions created by the Annapurna Conservation Area Project (ACAP) and Department of Forest. Over 200 workers have lost jobs.

A transmission line project along the Kali Gandagi corridor and construction of Dana Substation have also hit roadblocks due to land compensation issues.

“considering the development of hydropower projects in the area, we invested in hotels, restaurants, vegetables and animal farm. But now, the situation is depressing,” Tej Bahadur Gurung, president of Narchyang Jalsarokar Samuha. “Two hydel projects are under construction in Narchyang, while six more are in the pipeline.”

NEA’s plan to construct the Dana substation for the 220KV transmission line has yet to take off. This has made the fate of 16 hydro projects, including Myagdi Khola, Raghu Ghat Khola and Kali Gandagi corridor, uncertain.

“Initiating the construction isn’t enough. We have to pay interest as high as Rs 500 million to banks for the delay caused by the NEA,” said Dolendra Sharma, one of the promoters of the 42MW Mistri Khola Hydropower Project. “More than a dozen projects cannot move ahead without the transmission line.”

“Since the Dana substation is unlikely to be constructed in time, we are seeking alternatives for evacuating the power generated,” Kishor Subedi, president of Ghalemdi Hydropower Project.

Projects with a combined 468MW capacity have already got the approval, while an additional 403MW projects are awaiting the go-ahead. The under-construction projects have 78MW combined capacity.

Source: The Kathmandu Post