The government has presented in Parliament a budget of Rs1.75 trillion for the next fiscal year 2023-2024 without many lofty promises, with the fiscal estimates 2.37 percent lower than the allocations made for the current fiscal year.

As the government faces a resource crunch to implement development projects, the finance minister was circumspect in budget-making.

While resource crunch is a problem, the inability to spend available resources also continues to be a major issue.

The government is estimated to spend Rs1.54 trillion or 83.90 percent of the allocated amount in the current fiscal year ending in mid-July. Capital budget spending is expected to remain at Rs258 billion or 67.91 percent of the allocated amount, according to the document read out by Prakash Sharan Mahat.

As of June 2, the capital spending stood at 37 percent of the allocated budget, according to the Financial Comptroller General Office.

The dismal progress also reflects in the poor implementation of the fiscal provisions for the current fiscal year. A government report shows that the progress in budget implementation remains abysmal.

The Prime Minister’s Office said it had set 1,270 activities and 2,795 milestones, besides 339 result indicators for 21 ministries to determine the implementation status of the policies and programmes for the current fiscal year.

As of mid-April, only 10.39 percent of the activities have been completed, while 20.57 percent of the milestones have been achieved, according to a report released by the PMO on May 17.

Of the 356 activities in the infrastructure sector, 28 were completed, 296 are under construction and 32 have made no progress, according to the report.

Besides overall activities and milestones, the PMO had also selected 30 projects with large budgets for evaluation—including 20 related to infrastructure and 10 related to economic activities, social activities and governance. The physical progress in those projects stood from 13.57 percent of the annual target to 155.55 percent. Progress in most projects remains below the mark, the report added.

Experts say the track record of poor budget implementation raises questions over the government’s ability to implement projects announced for the upcoming fiscal year as well.

Tulasi Sitaula, a former government secretary with an experience in handling infrastructure projects, said the hurdles in implementation have not changed in a number of years. “For example, funds are allocated for projects that are not ready to go,” Sitaula said. “Seldom does the government complete a detailed project report (DPR), land acquisition, and forest and environment clearances before undertaking a project.”

Project selection sans preparation

The country currently has 24 National Pride Projects. Of them, the construction of Pokhara International Airport, the Gautam Buddha International Airport and the Upper Tamakoshi Hydropower Project have been completed.

But no international flight has yet taken off from the new Pokhara airport, while only a handful have jetted off from the Gautam Buddha Airport. Many projects are under construction, a majority of them at a glacial pace, while there is no certainty about how some ‘National Pride Projects’ will be developed.

For example, the Nijgadh International Airport is designated a National Pride Project but there is no clarity on its development. The government in the budget for the next fiscal year talks about starting the project after determining its investment modality.

There is also no clarity on how the East-West Railway would be developed even though the Department of Railway has been working on opening its track.

“There is a trend of allocating huge sums for projects which are not yet ready to go,” said Sitaula. “In my view, we have to revisit the National Pride Projects and include those that are ready for implementation after the completion of all preparatory works including DPR, development modality, land acquisition, and forest and environmental clearances.”

Even the under-construction projects suffer delays. For example, the Sikta Irrigation Project was supposed to be completed by the fiscal year 2024-2025, but physical progress in the highly prioritised project is just 38.82 percent, according to the Economic Survey 2022-2023 released on May 28.

The Rani Jamara Kulariya Irrigation project is supposed to be completed by the end of fiscal 2023-2024 but progress stands at 58.5 percent, according to the Economic Survey.

Data show that most under construction National Pride Projects are facing time and cost overruns.

Politics in picking projects

In April 2021, former prime minister KP Sharma Oli announced the commencement of 165 strategic road projects, one in each electoral constituency.

But the environmental impact assessment (EIA) and detailed project report (DPR) studies have not been conducted for most of them. An official at the Department of Roads had at the time told the Post that the DPRs of only 10 roads had been completed.

Back then, Oli had announced elections to the House of Representatives. The erstwhile Nepal Communist Party (NCP) was dissolved in March 2021 with a Supreme Court order—reviving the CPN-UML and the CPN (Maoist Centre).

According to Sitaula, politicians also rush to include projects of their choice under the high-priority category because of resource guarantees, irrespective of whether they are ready for implementation.

Besides the National Pride Projects, the government created another category of ‘Transformative Projects.’

“I sense that the transformative projects came into being after strong pressure from politicians to get their projects enlisted under the National Pride Projects,” said Sitaula.

Land acquisition and forest clearance

Many transmission line projects are facing time and cost overruns as they face local protests asking for more compensation or re-alignment of transmission lines.

For example, the Nepal Electricity Authority (NEA) has been struggling to complete the Bharatpur-Bardaghat line due to the protests by local residents against the existing alignment at Dumkibas of Nawalparasi (East).

Delayed forest clearance has affected the Kushma-New Butwal transmission line project.

Dirghyu Kumar Shrestha, chief of the transmission directorate at the NEA, said only 50 to 60 percent of annual targets on project implementation were being met due to factors like delays in land acquisition and forest and environmental clearances.

“People seek full compensation even in the case of the transmission right-of-way and obstruct work,” said Shrestha. “The government offices responsible for forest and environment clearances take years to issue permits even after the Cabinet gives its go-ahead.”

He said the rules are such that if a shrub has grown into a tree, that should be recounted and that takes time.

Government versus contractors

The government usually blames contractors for poor implementation of development projects.

Both officials and builders agree that a single contractor occupying a large chunk of the work affects its ability to swiftly implement a development project.

Contractors on the other hand blame the government for delayed payments of mobilisation advance as well as clearance of bills of accomplished works. “The contractors have outstanding dues of more than Rs60 billion that they need to claim from the government in the current fiscal year,” said Rabi Singh, president of the Federation of Contractors’ Association of Nepal. “When the government stops cash flow to contractors, how can they work at pace?”

The government struggled to pay the contractors due to a reduced revenue collection, officials said. As of June 2, the government collected Rs796.41 billion, compared to Rs907.67 billion gathered in the same period of the fiscal 2021-2022, according to the FCGO.

What next?

The budget for the next fiscal year seeks to address the prevalent issues plaguing the implementation of development projects.

According to the budgetary provision, contract-signing can happen only in the case of the projects that have completed DPR, environmental impact assessment, land acquisition and the right of way. “There is a tendency to guarantee resources for multi-year contracts without the confirmed availability of such resources,” it said.

The budget specifies that resource guarantee would be nullified if the contract is not signed within nine months after such approval. The budget also makes it mandatory for the contract to be awarded by mid-November, warning that the budget could otherwise be withdrawn.

“Obviously, some budgetary provisions for the implementation of development projects are welcome,” said Sitaula. “But, again, our poor history of budget implementation does not inspire confidence.”