Monday, January 21, 2019

Inflated revenue mobilization, uncertain Melamchi project and more

From The Himalayan Times: The government, which has been boasting of a brisk revenue collection since the start of this fiscal year, has suffered a rude jolt, as the body which operates its treasury has been found to be inadvertently producing inflated figures because of double counting. The erroneous reporting on revenue collection came to the fore after the Financial Comptroller General Office, the main agency responsible for the government’s treasury operation, stated that the government had generated revenue of Rs 520 billion in the first half of this fiscal.

The figure surprised many because it was 21 per cent more than the government’s own revenue collection target of Rs 429 billion for the six-month period from mid-July to mid-January. At a time when the Ministry of Finance was apprehensive about meeting its own target because of slackness in collection of duties at customs offices, the news that revenue collection beating the target by close to Rs 100 billion was too good to be true. Turns out it was.

Nepal Rastra Bank, which also tracks the government’s revenue collection, has said the government generated Rs 414.3 billion in revenue in the same six-month period. This means the government missed its revenue collection target by 3.4 per cent in the first six months. After crunching its own numbers, the FCGO has acknowledged its mistake and told THT today that the central bank’s figure was closer to reality.

“We failed to present accurate statistic because of double calculation of fund transferred to divisible fund,” said a senior FCGO official on condition of anonymity. Since the beginning of this fiscal, the federal government has been sharing 30 per cent of value added tax and another 30 per cent of inland excise duty with provinces and local bodies as part of the policy to financially empower sub-national governments and institutionalise fiscal federalism. The portion of VAT and inland excise duty dedicated to provinces and local bodies is parked in the divisible fund. “Although the amount deposited in the divisible fund is also a part of federal government’s revenue, we had initially decided to keep it separate,” said the FCGO official. This means FCGO’s system had to deduct the amount kept in the divisible fund from the federal government’s gross revenue. But the deduction was not made,” added the official.

Government scraps Melamchi contract of Italian builder

From The Kathmandu Post: The government has decided to scrap the contract with the Melamchi Water Supply Project’s Italian builder in a move which will push the national pride project into further uncertainty. “The government formally dispatched a letter of termination to the Italian contractor Cooperativa Muratori e Cementisti di Ravenna after it failed to come up with any concrete decision regarding resuming works,” Surya Raj Kadel, executive director of the Melamchi Water Supply Development Board, told the Post. “We have decided to terminate the contract with the existing builder after it did not turn up to resume works even a month after abandoning the project.”

In its previous letter sent last Tuesday, the government had set a Friday deadline for the CMC to make it clear whether it was interested to resume works and how it would want to resolve the dispute. According to Kadel, the Italian builder did respond but sought at least one more week. “We received a meaningless correspondence which had not even come from the proper channel… and it just sought more time. We cannot do that anymore,” Kadel added. CMC officials on their part told the Post that the Nepal government gave them “a very short deadline”.

“For a meeting set for January 18, the employer [Nepal government] had sent us a message on the night of January 15. The company had responded saying it was not possible to meet within three days’ time,” a CMC official said. “We had said a meeting was possible at a suitable time-around January 27 or so and we had also sought diplomatic assurances.”

Govt pays Rs 758m in interest subsidy for agro-livestock loans

From myRepublica:  The government has disbursed  Rs 758.2 million in interest subsidy for loans floated under a concessional credit scheme for certain agricultural and livestock businesses.  It bears five percent of the interest for loans disbursed by banks and financial institutions. According to  Nepal Rastra Bank (NRB), the outstanding subsidized loans aimed at encouraging youths to pursue agriculture and livestock businesses through BFI loans stand at Rs 14.39 billion as of mid-December. 

A total of 9,749 beneficiaries have borrowed under the scheme, according to NRB data. The scheme was introduced by the government in fiscal year 2014/15 and the subsidy rate was revised after two years. Those who want to start or expand certain agriculture or livestock businesses can get the concessional loans from BFIs. 

The government subsidizes five percent of the interest on the loans under the scheme. The data shows that the government has so far spent Rs 758.2 million on subsidizing the interest. The upper limit for concessional loans under the subsidy scheme has been fixed at Rs 700 million with a maximum payback period of five years. BFIs have to provide loans under the scheme against the collateral of land used for the agro or livestock undertaking or the crops. Loans can be disbursed against group guarantee up to a limit of Rs 1 million.

>>Here is a news story about misuse of the interest subsidy program