Revenue shortfalls in Nepal

Nepal is facing a very large revenue shortfall in FY2023. According to FCGO, revenue mobilization in the first seven months of this fiscal (mid-January 2022 to mid-March 2023) is just 40% of the target. In the previous fiscal years, the revenue mobilized by this time was always higher than 50% of target. The following is the progress by the seventh month of respective fiscal:

• FY2019: 61%
• FY2020: 50%
• FY2021: 57%
• FY2022: 58%
• FY2023: 40%

The budget projection on revenue mobilization was too ambitious in the first place. It projected about 29.5% increase over FY2022 revised estimate for total federal receipts (revenue, inclusive of revenue sharing with subnational governments, and foreign grants). Revenue was projected to increase by 25.7% and tax revenue by 31.6% over the revised estimates. 

Revenue decreased owing to a slowdown in imports and slower than expected economic recovery. A slowdown in construction and real estate and share transactions also affected revenue mobilization. Faced with the reality of a revenue shortfall, the Finance Ministry proposed a cut in expenses, especially recurrent spending, by 20% in all tiers of government. It also plans to tighten approval of projects that were included in the budget but whose procurement process has not started.

According to news report, the government suspects that informal activities have also reduced revenue mobilization. For instance, based on business operations, some have paid VAT and customs duties, but not paid income tax.

Energy deficit in India

According to Reuters, India will likely face risks of nighttime power cuts due to delays in adding new coal-fired and hydropower despite the rapid addition of solar farms, which helped India avert daytime supply gaps. The power availability during nighttime is expected to be 1.7% lower than peak demand. Coal, nuclear and gas capacity are expected to meet about 83% of peak demand at night.

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April nighttime peak demand is expected to hit 217 gigawatts (GW), up 6.4% on the highest nighttime levels recorded in April last year. While Indians looking to beat the heat this summer will want steady power for their air-conditioners, night time outage risks threaten industries that operate around the clock, including auto, electronics, steel bar and fertiliser manufacturing plants.

After the Grid-India report, the government brought forward maintenance at some coal-fired power plants and secured extra gas-fired capacity to run to try to avert outages, another senior government official said. As much as 189.2 GW of coal-fired capacity is expected to be available this April, according to Grid-India's February note. That would be up more than 11% from last year, according to Reuters calculations based on Grid-India data. Together, coal, nuclear and gas capacity are expected to meet about 83% of peak demand at night.

Hydro power will be crucial not only to meet much of the remaining supply but also as a flexible generator, as coal-fired plants cannot be ramped up and down quickly to address variability in demand. However Grid-India has forecast peak hydro availability in April this year will be 18% below what it was a year earlier, when output was boosted by favourable weather conditions.

Around midnight through April last year, jostling for power was intense, with buyers making bids for five times more power than sellers offered, a Reuters analysis of data from the Indian Energy Exchange, the country's most liquid electricity trading platform, showed.

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