Government to shorten supply chain

Though the traders have been opposing claiming most of the people will be out of business, the government is planning to lessen the supply chain for the welfare of consumers and also to check the unnatural price hike in the market.
A draft regulation prepared by the Department of Commerce, Supply and Consumer Protection has proposed to shorten the layers of intermediaries to three from the current up to seven layers of middlemen. “The goods and services normally pass through up to seven layers of middlemen, each adding a hefty markup, forcing consumers to pay unfairly high prices,” a report prepared by the department reads, adding that multi-layered supply chains are mostly seen in the trade of agricultural goods, which the buyers are paying high price but the farmers get peanuts. “Neither the farmers nor the consumers are benefitting from the current supply chain.”
Generally a product passes from the manufacturer to the dealer, main distributor, national distributor, local distributor, wholesaler and retailer before reaching the final user. But there is no regulation to control the unnecessary layers of middlemen. The department has prepared a preliminary draft of the regulation – in line with the Consumer Protection Act 2018 – which has recommended to fix the market price of all essential goods and services with having only three layers of middlemen between producer and consumer, according to former director general of the Department of Commerce, Supply and Consumer Protection Yogendra Gauchan, who has been hired as an expert member in the task force to prepare the regulations.
The regulation has also recommended legally recognising the layers of middlemen to make the market’s supply chain transparent, he said, adding that such mechanism will ensure that consumers can get quality goods and services at reasonable prices. “The proposed regulations will also include standards of profit margin on essential goods and services.”
The list of essential goods and services is also being revised as there are 29 listed daily essential items, according to the department. “Essential consumer goods or services means goods or services that may be bought or acquired primarily for personal, family or household purposes.”
The traders have, however, opposed the proposed regulations claiming that minimising the layers will put many, who have been acting as a chain to supply goods in the market, out of employment. “It will be difficult to sell goods and services in rural areas without a dealer, distributor, retailer and national distributor,” traders claim.
But, a study of nine edible oil factories revealed that there are six layers of middlemen, a product goes from the producer to the dealer or distributor, and then passes through the wholesaler to semi-wholesaler and retailers before reaching the consumer, according to the department. “Likewise, drinking water factories have five layers of middlemen in the jar and bottled water business.”
There are five layers of middlemen in the medicine business, whereas there are six layers of middlemen in cement factories. “Likewise, there are four layers of middlemen in the steel business,” according to the department's report.

Price starts looking up

Price hike has become a serious concern as it has not seen cooling down.

According to the central bank, the year on year (y-o-y) inflation -- as measured by the consumer price index -- recorded an increase of 12 per cent in Mid-February (seventh month of the current fiscal year) compared with the 13.7 per cent increase in the same period last year. It had recorded 11.8 per cent increase in mid-January (sixth month of the current fiscal year).

Propelled by the items in the food and beverage group, price indices of sugar and sugar related products -- that saw almost double and the highest increase of 77.6 per cent compared with an increase of 46.7 per cent in the same period last year -- the price hike continued to look upward, said the Nepal Rastra Bank (NRB).

Similarly, some of the items saw four fold increase in a year. "The price indices of spices, pulses, meat, fish and eggs as well as vegetables and fruits sub-groups increased in reviewed period by 36.7 per cent, 36.4 per cent, 22.7 per cent and 18.8 per cent respectively compared to an increase of 9.4 per cent, 26.5 per cent, 22.9 per cent and 19.4 per cent in the same period last year," the report added.

However, the grains and cereal products prices came a little down. "The index of grains and cereal products subgroup also witnessed an increment of 13 per cent compared to 14.7 per cent increase in the corresponding period of last year," according to the central bank's monthly price index. "Similarly, the price index of food and beverages group increased by 17.8 per cent whereas the index of non-food and services group rose only by 5.3 per cent. The index of food and beverages and non-food and services group had risen by 18.1 per cent and 9.1 per cent respectively in the same period last year."

Region-wise, the price index of Hills rose by 13 per cent and followed by 12.3 per cent in Terai and 10.8 per cent in Kathmandu Valley compared with 13.2 per cent, 13.8 per cent and 13.9 per cent same period last year.

Though the y-o-y wholesale price inflation increased by 14.2 per cent compared to 15 per cent a year ago, the indices of agricultural commodities and domestic manufactured commodities increased by 25 per cent and 11.2 per cent against to 18.8 per cent and 11.2 per cent a year ago. "Within the agricultural commodities group, the price index of pulses, livestock production and spices increased by 36.4 per cent, 35.2 per cent and 33.8 per cent compared with an increase of 19 per cent, 24 per cent and 10.3 per cent during the same period last year," it said.

Surprisingly, the price index of imported commodities declined by 0.5 per cent in the review period whereas it had increased by 11.8 per cent during the same period of last year.

Within the group of domestic manufactured commodities, the price index of food-related products increased by 18.9 per cent compared with a rise of 11.8 per cent a year ago.

However, the overall y-o-y salary and wage rate index rose by 16.7 per cent compared with a rise of 16.5 per cent a year ago. Similarly, the wage rate index also increased by 17.6 per cent compared with an increase of 16.4 per cent in the same period last year.

The wages of industrial labour increased by almost double. "Wages of agricultural, industrial and construction laborers increased by 20.7 per cent, 13.8 per cent and 12.9 per cent respectively in the review period. These wage rates had increased by 23 per cent, seven per cent and 15.3 per cent respectively in the same period last year," said the central bank.

The rising trend

Seventh month -- 12 per cent

Sixth Month -- 11.8 per cent

Fifth Month -- 11.3 per cent

First six months average -- 10.1 per cent.

Government target -- seven per cent

Prices resume upward climb

Prices have again starting ascending, thanks to a whopping rise in the price of sugar and sugar related products, pulses, spices, vegetables and meat.
"Year on year (y-o-y) inflation, as measured by the consumer price index (CPI), moderated to 11.8 per cent in mid-January," said Nepal Rastra Bank, the central authority. It had moderated to 11.3 per cent in mid-December.
Though the central bank in its report for the sixth month price analysis said that the CPI moderated to 11.8 per cent against a 14.4 per cent increase in the same period last year. "The price index of food and beverages group increased by 18.1 per cent whereas the index of non-food and services group rose only by 4.5 per cent," said the report.
The index of food and beverages and non-food and services group had risen by 18.3 per cent and 10.3 per cent respectively in the same period last year. Of the items in food and beverage group, price indices of sugar and sugar related products had the highest increased rate of 77.5 per cent against an increase of 37.3 per cent in the same period last year.
Similarly, the price indices of pulses, spices, vegetables and fruits as well as meat, fish and eggs sub-groups increased by 36.7 per cent, 34.8 per cent, 29.2 and 22.8 per cent, respectively against an increase of 25.6 per cent, 8.1 per cent, 13.3 per cent and 22.5 per cent in the same period last year.
The index of grains and cereal products subgroup also witnessed an increment of 11.7 per cent compared to 16.5 per cent increase in the same month last year. "Within the group of non-food and services, the index of tobacco and related products has the highest increased rate of by 11.6 per cent compared to a rise of 15.1 per cent during the same period last year," said NRB. However, the price index of transport and communication declined by 7.5 per cent in the review period. It had increased by 20.7 per cent during the same period last year.
Region-wise, according to price index the Terai is the most expensive place to live in as it rose by 12.5 per cent followed by 11.8 per cent in Hills and 10.6 per cent in Kathmandu Valley. The respective rates were 13.6 per cent, 14.2 per cent and 15.8 per cent last year.
In the review period, the y-o-y core inflation rose to 12.6 per cent, a moderation from 13.2 per cent a year ago.
Wholesale prices under the agricultural commodities group, the price index of cash crops, increased by a whopping 64.7 per cent against a decline of 7.7 per cent a year ago. The price index of spices, pulses and livestock production increased by 50.3 per cent, 34 per cent and 33.8 percent, respectively as compared to an increase of 7.2 per cent, 20 per cent and 27.9 per cent respectively during the same period last year. Within the group of domestic manufactured commodities, the price index of food-related products increased by 15.1 per cent as compared to a rise of 12 per cent a year ago.
Within the imported commodities group, the price indices of chemical fertilizers and chemical goods declined by 11.9 percent in the review period as compared to an increase of 8.3 per cent in the corresponding period of previous year.

Food price hike hits sky

The price of black-gram is up by 44 per cent, wheat flour by 25 per cent, musuro (broken lentil) by 25 per cent and coarse rice by 14 per cent compared to 12 months ago, according to a report that points out national food price inflation as a serious concern.
"Thus it is likely that official year-on-year CPI inflation figures released by the Nepal Rastra Bank could rise again next month," the report predicts. Common cooking oils are the only commodities which have not significantly increased during the past 12 months. The recent harvest of potato has resulted in a significant decrease in potato prices; which are down by around 17 per cent across the country compared to December.
The most recent year-on-year food price inflation figure provided by the Nepal Rastra Bank (NRB) in January was 17.8 per cent -- up by almost two per cent compared to last month, said a report jointly produced by World Food Programme (WFP) - Food Security Monitoring and Analysis Unit, Ministry of Agriculture and Cooperatives - Department of Agriculture, Agribusiness Promotion and Marketing Development Directorate (ABPMDD), Federation of Nepalese Chambers and Commerce and Industry/Agricultural Enterprise Centre and Consumer Interest Protection Forum.
High food prices are driving overall high consumer price inflation, which is currently estimated at 11.3 per cent, the report said.
Over the past month the price of staple grains have remained relatively stable due to the summer crop harvest. However, as the harvest was weak it did not have a major impact on reducing the price of key commodities in most markets (as would normally be expected. "A recent bird flue outbreak in the Pokhara region could have a major impact on poultry trade and prices during the first half of 2010. Previous outbreaks have seriously impaired poultry markets in Nepal," it added.
The price of staple food items generally remained stable across the country. In the markets regularly monitored by WFP and MoAC the average price of coarse rice in December was Rs 32 per kilo (down by three per cent compared to last month) and the national average wheat price was Rs 35 per kilo (up by one per cent compared to last month).
Grain prices are relatively stable due to the recent summer harvest which has helped re-stock local markets. However, the summer harvest was too weak to significantly reduce prices as would normally be expected.
However, the national average price of potato is still Rs 15 per kg higher than last year. An outbreak of bird flu has occurred in Pokhara. A Rapid Response Team (RRT) has been deployed for close surveillance. It has been reported that 10,000 chickens, ducks and other birds in the area could be culled to prevent the spread of the disease. MoAC is also considering to ban transportation of poultry products to and from the affected area. Bird flu that broke out in Eastern Terai earlier caused a steep increase in chicken prices to Rs 280 per kg in Kathmandu. Though the cardamon production in the Eastern districts of Taplejung, Sankhuwasabha etc is reportely down by 30-40 per cent compared to last year, these districts have benefited from increase in its price from about Rs 175 per kg last year to about Rs 400-450 per kg this year.
The price of cooking gas has increased from Rs 1,125 to Rs 1,250 per cylinder, particularly affecting urban households. The price of salt was also increased from Rs 11 to Rs 15 per kg.Generally, supply improved across Nepal during January, the report said. The Karnali highway opened and this improved both supply and prices in feeder markets. The most noticeable improvement was in Jumla where the prices of coarse rice is down by 23 per cent compared to last month.
The recent summer harvest has also increased supply in various markets.

Commodities prices continue to rise

Food prices have seen a significant rise in the recent years.Poor summer harvests domestically and across much of India are a significant factor keeping prices in Nepal high
However, losses in India are not as bad as initially expected and it is likely that the country produced a surplus summer crop, said a report jointly produced by World Food Programme (WFP) – Food Security Monitoring and Analysis Unit, MoAC – Department of Agriculture, Agribusiness Promotion and Marketing Development Directorate (ABPMDD) FNCCI/ AEC – Federation of Nepalese Chamber of Commerce and Industries/ Agricultural Enterprise Centre CIPF – Consumer Interest Protection Forum.
The price of rice continued to be at the same or higher level even after the recent crop harvest; the prices in most Terai markets are higher by 10 per cent to 40 per cent compared with the same period last year. The most recent year-on-year food price inflation figure provided by the Nepal Rastra Bank in November was over 16 per cent. The report said national food price inflation remains of significant concern. Compared to the same period last year, the price of black-gram is up by 37 per cent, wheat flour by 19 per cent, musuro (broken lentil) by 17 per cent and coarse rice by 11 per cent.
However, cooking oils are the only commodity which has not significantly increased during the past 12 months. “Similarly, a seasonal increase in the supply of fruit and vegetables has significantly reduced prices across much of the country,” the January report said. “For instance, the Kalamati wholesale fruit and vegetable market has experienced a decrease in the price of tomatoes, onion, carrot and cauliflower of around 25 per cent during the past one month period. During December the government lifted the pulse export ban which had been in place since the end of July 2009. Traders are now allowed to export a maximum of 15,000 tonnes of pulses. The price of lentils appeared to be stable during the period of the export ban
However it is not known whether this was a direct result of the ban. “The price of diesel and kerosene has been increased by three rupees per litre. It now costs fifty-eight rupees per litre, pushing the commodity prices high. The report said that 90 per cent of markets surveyed across Nepal reported that the supply situation had remained stable or improved during December. This was a result of both improved road access following the reopening of monsoon damaged transportation routes (particularly in the mid and far-western hills and mountains) and also the ongoing summer crop harvest which re-stocked markets with paddy (and to some extent maize and millet
However, a number of hill and mountain markets reported ongoing supply constraints, including Bajura, Dailekh, Dolpa, Mugu and Humla. The Kolti region of Bajura is facing a particularly severe shortage of food supply and NFC supply is virtually the only grain stock available in local markets. “This is mostly due to the monsoon which caused a severe damage to transportation routes and blocked food transportation for much of the period, and an outbreak of diseases which has affected a large proportion of the mules and donkeys used for food transportation in the region,” the joint report said. “The Karnali highway was still not fully operational in the reporting period.” The report also attributes the price rise to bandhs that have caused disruption to almost every market surveyed by WFP during December
“Almost 70 per cent of markets were forced to close at least once during December. Markets in Kailali and Kanchanpur were closed for five days during the month, the main market in Udayapur was closed for four days, and markets in Saptari, Siraha, Dailekh, Mugu and Doti were each closed for three days. Significant supply disruptions were also noted in the Eastern hill and mountain districts of Mechi.” It noted
The report also forecast that further price hike of key commodities in the coming months. “Price of wheat is likely to rise further until the next harvest in April, May. Although the price of rice has been stable in the past month due to recent harvest, it is likely to rise in the coming months and such increases are likely to continue until the next main harvest in November-December 2010,” the report concludes.

Price hike starts to cool down

The price hike that has zoomed up last year has started to cool down.
According to Nepal Rastra Bank (NRB), the year-on-year (y-o-y) inflation -- as measured by the consumer price index -- moderated to 9.3 per cent in Mid-October 2009 against 14.1 per cent in the same period last year.
The food and beverage group -- especially Vegetables, sugar and sugar related products -- have become more expensive than last year.
Sugar and sugar related products have become more expensive as it increased by a whopping rate of 42 per cent in compared to an increase of 39.5 per cent in the same period last year. Similarly, the price indices of vegetables and fruits increased by 37.5 per cent in sharp contrast to last year's decline of 10.1 per cent.
Similarly, the price indices of pulses as well as meat, fish and eggs sub-groups also increased by 25.1 per cent and 22.7 per cent respectively compared to an increase of 24.7 per cent and 22 per cent in the same period last year, said the NRB.
Though, the prices of food and beverages have not come down, the prices of non-food and services group came down by over six times. “The price index of food and beverages group increased by 15.6 er cent but the index of non-food and services group rose only by two per cent,” said the central bank said adding that the index of food and beverages and non-food and services group had risen by 15.2 per cent and 12.9 per cent respectively in the first three months of last fiscal year.
Within the group of non-food and services, the index of tobacco and related products rose up by 17 per cent against to a rise of 12.7 per cent during the same period last year. However, the price index of transport and communication declined by 8.7 per cent in comparison to an increase of 23.1 per cent during the same period last year.
Surprisingly, the prices in Kathmandu Valley, Tarai and Hills have moderated as the price index of Kathmandu Valley rose by 9.7 per cent and followed by 9.4 per cent in Tarai and 8.5 per cent in Hills against 14.5 per cent, 14 per cent and 13.9 per cent last year.
The y-o-y core inflation also moderated to 10.9 per cent from 13.1 percent a year ago, the central bank’s data revealed.
Similarly, the salary and wage rate index also rose by more than a double to 22.1 per cent in comparison to a rise of nine per cent a year ago. “The increase in basic salary and allowances of civil servants and its simultaneous effect on salary of the private sector contributed to such an increase in salary index,” concluded the NRB report.

Price hike cools down, salary increases

Salary and wages increased by double in comparison to the price hike in the second month of the current fiscal year.
According to Nepal Rastra Bank's (NRB) data of mid-September, the overall year-on-year (y-o-y) salary and wage rate index rose by 20.8 per cent but inflation moderated to 9.7 per cent.
The price hike was 13.5 per cent in the same period last year. In the review period, the price index of food and beverages group increased by 16.3 percent.
Similarly, the index of non-food and services group rose only by 2.1 percent. The index of food and beverages and non-food and services group rose by 14.2 percent and 12.8 percent, respectively, in mid-September 2008.
Rise in prices of vegetables and fruits contributed to the price hike as their indices increased by a whopping 43.5 per cent -- in sharp contrast to a decline of 14.6 per cent in the same month last year. Similarly, the price indices of sugar and sugar related products also increased by 40.5 per cent in comparison to an increase of 38.9 per cent during last year's same month, said the NRB.
The price index of meat, fish and eggs has doubled to 29 per cent against an increase of 14.5 per cent in the same period last year.
However, the grains and cereal products subgroup witnessed an increment of 5.8 per cent against a 23.8 per cent hike in the same month last year. The price index of transport and communication declined by 8.7 per cent against the increase of 23.1 per cent during the same month last year.
Region-wise, the Tarai was the most expensive as the price index there rose by 9.9 per cent followed by 9.6 per cent in Kathmandu Valley and 9.4 per cent in the hills. The respective rates were 13.5 per cent, 14.1 per cent and 12.7 per cent last year.
The y-o-y core inflation rose to 10.9 per cent, a moderation from 12.1 per cent a year ago, said the report.
However, the overall y-o-y salary and wage rate index rose by 20.8 per cent in comparison to a rise of 9.1 per cent a year ago. "The salary index increased by 32.8 per cent due to increase in basic salary and allowances for civil servants," said NRB. The wage rate index increased by 17.1 per cent compared to an increase of 12.3 per cent in the same month last year.
Wages of agricultural, industrial and construction labourers increased by 18.1 per cent, 15.8 per cent and 16.4 per cent respectively against increase by 19.5 per cent, 2.7 per cent and nine per cent, respectively, in the same month last year.

Wholesale price up
KATHMANDU: The y-o-y wholesale price inflation rose to 12.6 per cent against 10.3 per cent a year ago. Agricultural commodities that increased by 29.7 per cent contributed to the increase of wholesale price as it was a 0.7 per cent increase a year ago. Within the agricultural commodities group, the price index of cash crops increased by 84.3 per cent against the decline of 23.2 per cent a year ago. Likewise, price of livestock, fruits and vegetables and spices also increased by more than double to 42.5 per cent, 30.9 per cent and 20.2 per cent against the increase of 13.3 per cent, -22.1 per cent and 10 per cent last year.

Special conference on informal sector

City streets are lined by barbers, cobblers, waste recyclers, vendors of vegetables and every other imaginable kind of goods. They join the legions of workers that comprise the informal sector, that shadowy part of the economy, where companies -- if they can even be called that --don't exist on official registers and workers don't have secure contracts or benefits and social protection.
"This sector is hugely important to developing countries, having ballooned over the past decades as high rates of urbanisation, population growth and declining wages have pushed people out of the formal sector," said Professor Bishnu Dev Pant, director of the Centre for Economic and Applied Statics (CEAS)-South Asian Institute of Management.
"To gauge their contribution in real terms, brainstorming is needed," he said adding that South Asian Institute of Management is holding an international conference on 'Measuring Informal Sector in Developing Countries' jointly with International Association for Research on Income and Wealth (IARIW) on September 24-25 in Kathmandu.In most developing countries, most people depend for their livelihood on the 'informal economy' as their incomes come from subsistence farming or from operating small unincorporated enterprises.
Although the largest part of GDP may be generated by the formal economy, most people in developing countries live in the informal one, according to Pant.
By its nature the informal economy is difficult to measure. Informal enterprises are not usually listed in statistical registers used for official surveys, so indirect methods have to be used to estimate their contribution to value addition, output and employment. "Measuring the informal economy is therefore one of the main themes of the Special Conference," Prof Pant said adding, "But measurement is only useful if it serves the needs of policy makers. The conference will also consider the more basic questions of what needs to be measured and how measuring the wrong things may lead to bad policy-making."
"Yet, there's scant data on the informal sector, largely because of its high turnover, the reluctance of informal workers to participate in official survey and the small size of informal enterprises. This has a dealt death blow to sound policy-making in small economies where the informal sector plays a big role," he said adding that traditional survey methods will need to be totally overhauled to capture the full complexity of the informal sector.
This Special IARIW Conference -- that will have 50-75 participants -- will look at both economic and social aspects of the informal economy. How large it is in terms of employment and output, where families in the informal economy stand in the overall income distribution, what access they have to government education and health services, how they are served by non-profit institutions, how they cope with food shortages and price hike of basic for foodstuffs, and what government policies may be helpful or harmful in promoting the welfare of those who live in the informal economy.

Price hike slows down but set to go up

The price of essential food items has been scaling a new high everyday thanks to hoarding, supply constraints and over-supply of money in the market, though the data of the last month (mid-July) of the fiscal year 2008-09 reveals that the price rise slowed down to 11.4 per cent.
In a bid to control spiriling price rise, the Department of Commerce (DoC) has been raiding various shops and godowns but not a single trader has been punished till date.
According to Nepal Rastra Bank (NRB), the price rise has come down to 11.4 per cent from 12.3 per cent a month ago. "The price hike in non-food items has come down dragging the inflation rate down," said a source at the central bank that publishes the price hike rate every month. "However, the prices of food items have not come down."
The persistant rise in money supply has contributed to price hike. "The money supply has risen by 27 per cent in the last month of 2008-09," the source said adding that the huge money supply that has seen persistant growth is something that was observed only during 1993.
The last fiscal year saw a continuous rise in the price of food items. During the fourth month (mid-November 2008) of the last fiscal year, the price hike was at its peak at 14.5 per cent. "But its a temporary phenomenon and prices have again gone up by now," the source added.
The Monetary Policy for the fiscal year 2009-10 has projected the price hike at 7.5 per cent but it has failed to crack whip the crack on price rise.
People have not got any relief from the price spiral as the government failed to manage financial, monetary and political causes. The key reason behind the price hike is short-supply and more money in the market. "When more money is chasing less goods -- due to hoarding, curtailing and supply constraints, the price will obviously rise," the source said.
Rise in salary and remittance inflow have also contributed to the price hike. Remittance -- according to the 11th month report of 2008-09 -- touched Rs 188.88 billion. "Easy money -- remittance -- is fueling consumerism and pushing prices up.
Though remittance has helped maintain balance of payment (BoP) and forex reserve it is creating demand pressure. Investment of remittance in unproductive sectors has virtually hit the manufacturing sector leading to more unemployment.
"It is also due to non-monetary reasons," said the NRB top official. The Fiscal Policy -- budget and Monetary Policy -- both failed to bring the price hike into control due to non-monetary factors' role in the price rise.
Apart from that, government spending on development activities -- that could have generated employment -- has dropped and non-budgetary and administrative expenses are rising.

Price hike in fiscal year 2008-09
First Month (mid-August) -- 13.1 per cent
Second Month (mid-September) -- 13.5 per cent
Third Month (mid-October) -- 14.1 per cent
Fourth month (mid-November 2008) -- 14.5 per cent
Fifth Month (mid-December) -- 14.1 per cent
Sixth Month (mid-January) -- 14.4 per cent
Seventh Month (mid-February) -- 13.7 per cent
Eighth Month (mid-March) -- 13.1 per cent
Nineth Month (mid-April) -- 11.9 per cent
Tenth Month (mid-May) -- 12.9 per cent
Eleven Month (mid-June) -- 12.3 per cent
Twelve Month (mid-July) -- 11.4 per cent
(Source: Nepal Rastra Bank)

Price curve offer no relief

July saw a rise in the prices of most of the staple food commodities.
"In comparison to prices in June, the price of rice increased on an average by three per cent, black gram by seven per cent, lentils by two per cent and the wheat by one per cent, respectively," said a report jointly produced by World Food Programme (WFP), Food Security Monitoring and Analysis System, Ministry of Agriculture and Cooperatives (MoAC), Department of Agriculture, Agribusiness Promotion and Marketing Development Directorate, Federation of Nepalese Chambers of Commerce and Industries( FNCCI) and Consumer Interest Protection Forum (CIPF).
Supply constraints have pushed up the prices of vegetables and fruits. The average price of potatoes in Nepal is more than double last year's price. The price of cabbage is nearly five times higher than a year ago due to landslides and damage to roads, trails and supply disruption -- particularly in hill and mountain districts.
"The supply of fresh fruits and vegetables has decreased significantly," the report revealed. In the Kalimati Fruit and Vegetable Market in Kathmandu, the average daily supply of vegetables, fruits and spices has reportedly decreased by almost half compared to last year -- down by around 300 tonnes a day due to poor harvest because of drought, according to the report of July.
The government, though it had promised to take measures to improve food supply to contain the price hike, has failed to crack the whip on the price hike due to rise in hoarding and curtailing.
However, oil prices came down in July in comparison to June. "After touching a peak -- at the end of 2008 -- the price of cooking oil has gradually decreased. As compared to June, mustard oil is down by three per cent and soybean oil is down by four per cent," said the report.
The price of chicken -- in major consumer markets -- also fell by around three per cent in June. But, in August it is expected to increase due to a recent announcement of price increases (by five rupees for live chickens and by seven rupees per processed) by poultry entrepreneurs in Kathmandu.
According to Nepal Rastra Bank's (NRB) macro-economic data of the 11th month (mid-June), the price hike has come down to 12.3 per cent from 12.9 per cent in the 10th month (by mid-May ) of the fiscal year 2008-09.

Drought hits rice in Chitwan
CHITWAN: This year, over 20 cultivable rice fields are barren in Chitwan following prolonged drought. Farmers transplanted the rice seedlings only after mid-Shrawan. They were forced to transplant 40 days old rice seedlings. Generally, 25 days old rice seedlings are good for plantation. This year, the district will see a drastic fall in rice production as over 20 per cent of the arable land, mostly in the western belt, has been left barren due to the long drought, said the District Agricultural Development Office. It is said that rice production will go down by 30 per cent in the district this year compared to last year. The district that has 46,894 hectares of cultivable land witnessed 94,896 metric tonnes of rice production last year. Rice farming will be in crisis if any alternative is not sought keeping in mind this year's drought, said crop development officer Mahesh Regmi

Price hike inthe fiscal year 2008-09
First Month (mid August) -- 13.1 per cent
Second Month (mid September) -- 13.5 per cent
Third Month (mid October) -- 14.1 per cent
Fourth Month (mid November) -- 14.5 per cent
Fifth Month (mid December) -- 14.1 per cent
Sixth Month (mid January) -- 14.4 per cent
Seventh Month (mid February) -- 13.7 per cent
Eighth Month (mid March) -- 13.1 per cent
Nineth Month (mid April) -- 11.9 per cent
Tenth Month (mid May) -- 12.9 per cent
Eleven Month (mid June) -- 12.3 per cent
(Source: Nepal Rastra Bank)

Price hike rigours has country groaning

Spiralling prices are breaking the fiscal backbone of people throughout the country. Outside Kathmandu Valley, it is the Dhangadhi people that are the worst hit -- facing an average of 21.37 per cent price hike, with rice at 10.5 per cent more, lentils at 45 per cent more, cooking oil at 20 per cent more and vegetables at 10 per cent more compared to July 2008. June-September is usually high pricing time in Nepal but this year's prices are at an all time-high.
According to Nepal Rastra Bank, regionwise the price rise was 14.5 per cent in Kathmandu valley followed by 11.5 per cent in both Tarai and the Hills in mid-June 2009.
Biratnagar, Janakpur, Birgunj, Naryangarh, Pokhara and Bhairanawa have not been spared either. Prices of rice, lentils and edible oils are skyrocketing in these towns. "We are not taking much profit," said Bishnu Prasad Sharma, a retailer at Bhairahawa, "Our profit is not more than 10 per cent." Retailers in other towns agreed that market intervention was a must to curb prices. "Stockists are the culprits," blamed Shankar Man Gurung, owner of Gurung Provisional Store at Chipledhunga, Pokhara, "Some stockists are manipulating the market." Pokhara is experiencing an all-time high price of vegetables -- cauliflower Rs 80/kg, tomato Rs/55 kg and green chilly Rs 90/kg. "I have never seen such high prices in my life," Lakshmi Bastola, 45, a housewife said.
In the towns bordering India, the lowest prices of food grains are seen in Birgunj, a major route of transit to India and abroad. Lentils are the highest priced consumer goods in the town with Rs 130 and Rs 100 for a kg of Rahar and Masuro pulses, respectively.
Interestingly, the price hike has not affected less consumed commodities. "Though the price of lentils has increased by 30-40 per cent the price of beans -- Kerau, Bodi, Bhatmas -- has not risen much," said Shyam Prasad Sah, president of Janakpur Chamber of Commerce.
Price of essentials goods like rice, lentils and cooking oils have become almost double in a year, from July 2008 to July 2009, throughout the country. However, the skyrocketing had begun since early this June. Consumers and retailers are blaming stockists for the price hike and are urging the government to intervene in the market.
Propelled by food and beverages, the year-on-year inflation as calculated by the consumer price index rose to 12.3 per cent in mid-June 2009 from 11 per cent in the same period of the previous year.
The review period's price of sugar and sugar-related products rose by 12 times to a whopping 62.3 per cent in comparison to an increase of 5.5 per cent in the same period the last fiscal year. The price indices of vegetables and fruits increased by 55.5 per cent in sharp contrast to last year's decline of 3.3 per cent.
Similarly, the price indices of meat, fish and eggs as well as pulses' sub-groups in the review period grew by 29.8 per cent and 27.7 per cent as compared to an increase of 12.6 per cent and 11.1 per cent in the same period last year. The subgroup of grains and cereal products also witnessed a price rise of 6.6 per cent compared to an increase of 21.2 per cent in the corresponding period of previous year.

Remittance jumps to a record high of Rs 188.88 billion

Dexpite global financial crisis and teh slowdown of Nepali migrant workers outflow, the remittance has posted a record high as it increased by 51 per cent to Rs 188.88 billion in the first 11 months of the fiscal year 2008-09 in comparison to the same period last fiscal year, said the Nepal Rastra Bank (NRB). The NRB has estimated Rs 200 billion remittance by the end of the fiscal year 2008-09 in the Monetary Policy for this fiscal year.
“Under transfers, workers' remittances soared by 51 per cent in comparison to the growth of 37.3 per cent in the corresponding period of the last fiscal year,” according to the current Macroeconomic Situation based on the first eleven months' data of 2008-09.
Similarly, grants rose by 22.3 per cent in the review period in comparison to a growth of just 6.6 per cent in the corresponding period last year. Due to the increase in remittance, the overall Balance of Payment (BoP) also posted a significant surplus of Rs 39.06 billion in the first eleven months of last fiscal year in comparison to a lower surplus of Rs 24.67 billion in the corresponding period a year ago, said the report.
“The current account recorded a double growth as it posted massive surplus of Rs 39.58 billion in the review period in comparison to a surplus of Rs 15.98 billion in the same period last fiscal year. The significant current account surplus in the review period was largely attributed to the rise in net transfers by 38.5 per cent in the first eleven months of 2008-09.
In mid-June 2009, the gross foreign exchange reserves stood at Rs 271.68 billion, an increment of 27.8 per cent compared to the level as at mid-July 2008. Such reserves had risen by 25.2 per cent in the corresponding period of the preceding year. On the basis of US dollar, gross foreign exchange reserves went up by 15.8 per cent to $3.59 billion in mid-June 2009. Such reserves had risen by 18.6 percent in the same period of the previous year. The current level of reserves is adequate for financing merchandise imports of 11.8 months and merchandise and service imports of 9.6 months, said the report.
During the review period, exports increased by 15.4 per cent in contrast to a decline by 2.1 per cent in the corresponding period last year. Exports to India rose by 8.5 per cent in as against a decline by 8.2 per cent likewise exports to other countries expanded by 28.8 per cent compared to an increase of 12.3 per cent in the same period last fiscal year.
The budget remained at a surplus of Rs 1.7 billion in contrast to a deficit of Rs 9.3 billion in the corresponding period last year. An impressive growth of resource mobilisation relative to the government expenditure accounted for such a budget surplus in the review period. Similarly, the government has a significant cash surplus of Rs 17.4 billion (including the 3.9 billion of previous year) with NRB.
Similarly, the government has failed to control the price hike as the price hike is still over 12 per cent to 12.3 per cent. “The year-on-year (y-o-y) inflation as calculated by the consumer price index rose to 12.3 per cent in Mid-June 2009 from 11 per cent in the same period of last year,’ said the report. The inflation, in the review period, was driven mainly by the rise of 19 per cent in food and beverages group. The price index of non-food and service group increased by only 5.1 per cent. The price rise of food and beverages and non-food and services group, was 13 per cent and nine per cent respectively in Mid-June 2008.
In the review period, the y-o-y core inflation rose to 12.6 percent from 8.3 percent a year ago.

No new licence for banks and financial institutions: NRB
KATHMANDU: Nepal Rastra Bank (NRB) has decided to stop issuing new licenses for the new banks and financial institutions. According to the NRB Board meeting on Monday, the central bank is going to review the existing licensing policy and procedures. “The NRB has halted the applications for new banks and financial institution until it apprises the current situation and prepare a report on existing licensing policy," a press note from the central bank said. However, the banks and financial institutions that are in pipeline will get the licence, the central bank has clarified. “It will also entertain the application for D-class micro-finance institutions,” the central bank said. The current governor at the time of his reappointment has hinted on halting the licences for the new banks and financial institutions as according to him “central bank wish to have few but stronger banks rather than more and number of banks and financial institutions.” There are 181 banks and financial institutions – 26 commercial banks, 63 development banks, 77 finance companies, 15 micro-finance development bank – by the end of the fiscal year 2008-09.

Price hike control plan a Barmecide's feast

The recently announced Monetary Policy for the fiscal year 2009-10 has projected the price hike at 7.5 per cent -- almost half the present rate.
However, the government has been since last year failing to control price rise. Nepal Rastra Bank (NRB) and the Finance Minister -- in the budget -- project growth and price hike ritually every year. They failed last year to contain the price hike and this year too, people are feeling the heat of the price hike.
The people have not got any relief from the price spiral as neither the budget nor Monetary Policy has tried to tackle the key factors that have led to the current surge in inflation.
"It requires better management of financial, monetary and political causes as the price hike is co-related to all of them," said National Planning Commission (NPC) vice-chairman Dr Yubaraj Khatiwada. The key reason behind the price hike is insufficient supply, he opined adding that the bandhs/road blockades/syndicates have contributed 10 per cent to the total price rise.
The other major reason for price hike is more money chasing less goods. There is a shortage of goods due to hoarding, curtailing and supply constraints. The Commerce Department last week raided some of the godowns in the valley on the charge of hoarding. However, the traders protested and the government seems to have backed down as not a single trader has been booked.
Rise in salary and remittance inflow has also contributed to the price hike. The remittance inflow has increased by 55.5 per cent and crossed the Rs 169 billion mark. But remittance has been spent on unproductive areas like land and houses, fuelling consumerism.
World Bank Economic Advisor for the South Asia Region, Ejaz Ghani said Nepal is benefitting from higher inflows of remittances and healthy availability of foreign aid. "With the decline in global commodity prices, the balance of payments (BoP) and fiscal situation are comfortable and there is no evidence of a liquidity constraint on domestic demand," he said adding that on the contrary large foreign exchange inflows are creating some demand pressure.
The private sector could not become an engine of growth as the manufacturing industries have not seen any growth while consumption is increasing. Labour disputes and frequent power outage has hit production, leading to more unemployment.
The government also could not spend on development activities that would have generated employment, It instead spent more on unproductive areas. In the first 10 months of 2008-09, recurrent expenditure increased by 26.5 per cent to Rs 81.9 billion. In the corresponding period of the year before that, this expenditure had increased by 21.9 per cent, according to NRB.
It was that upward revision of salaries of government employees as well as an increase in non-budgetary expenditure that led to such acceleration in recurrent expenditure in the review period.
All this led to a price spiral, despite the government's tall claims of containing the price rise. The year-on-year (y-o-y) consumer price index rose by 12.9 per cent in mid-May compared to that of 9.2 per cent in the same period the last fiscal year, according to NRB.
The food and beverages group pushed the price hike up as the inflation, in the review period, was driven mainly by the 16.5 per cent price rise in food and beverages group. The price index of non-food and service group increased by 8.8 per cent.
The price increase in food and beverages group was 13 per cent and that in non-food and services group was 5.3 per cent in the same period the last fiscal year. The price of items in food and beverages group like sugar and sugar-related products increased by a whopping 66.9 per cent in sharp contrast to last year's decline of 0.5 per cent, said the central bank.
Similarly, the price indices of vegetables and fruits as well as meat, fish and eggs sub-groups increased by 33.5 per cent and 27.5 per cent respectively in the review period compared to an increase of 1.8 per cent and 10.2 per cent respectively in the same period last year.
The indices of pulses also rose by more than double to 26.3 per cent compared to an increase of 12.1 per cent in the same period last year. The subgroup of grains and cereal products also witnessed a price rise of 6.3 per cent compared to an increase of 21.0 per cent in the corresponding period of the previous year.
In the review period, the y-o-y core inflation rose to 12.7 per cent from 7.5 per cent a year ago.
Recognising the high inflationary pressure, NRB has announced a cautious and tight Monetary Policy envisioning to containing inflation at 7.5 per cent. However, there has been no change in the political situation and the prevailing political instability will lead to hoarding further fueling price rise, with little or no hope for the public.

Policy measure taken by Monetary Policy
KATHMANDU: The policy has reintroduced Statutory Liquidity Ratio (SLR) to contain inflation and fuel growth as it is commonly used to contain inflation and fuel growth by increasing or decreasing it, respectively. This counteracts by decreasing or increasing the money supply in the system.

Policy measure taken by the Budget
KATHMANDU: The government is trying to get consensus on banning strikes and bandhs. Declaring the highways a strike-free zone and implementing third-party insurance, the budget has tried to protect highways from unwanted bandhs, accidents and disputes leading to bandhs for compensation. It has promised to keep the supply route -- the highways -- free of disturbances.

Factors leading to the price hike
Contributing -- Price Weightage
Indian Market -- 40 per cent
Bandhs/road blockades/syndicates -- 10 per cent
Stockists/wholesellers -- 20 per cent
Hoarders/blackmarketeers -- 30 per cent

Eighth Monetary Policy walks tightrope

Policy reintroduces SLR after 17 years, hopes to contain price hike at seven per cent

Recognising the high inflationary pressure, Nepal Rastra Bank (NRB) today announced a cautious and tight Monetary Policy for the fiscal year 2009-10.
"It is believed the policy will contribute to the prudent macroeconomic management, consolidation of the financial and external sectors and secured internal payments system to create a conducive economic environment for higher growth," said NRB governor Deependra Bahadur Kshetry, unveiling the eighth Monetary Policy.
"The existing liquidity overhang in the economy is sufficient to facilitate economic growth of 5.5 per cent," Kshetry said adding that the policy also envisions containing inflation at seven per cent. However, the Monetary Policy -- in the last fiscal year also -- failed to contain the price hike and it is still doubted whether it will fuel growth and contain the price hike.
The policy has reintroduced Statutory Liquidity Ratio (SLR) after one-and-a-half decades to contain inflation and fuel growth.SLR is commonly used to contain inflation and fuel growth by increasing or decreasing it, respectively. This counteracts by decreasing or increasing the money supply in the system. The commercial banks, development banks and finance companies are now required to invest in government securities six per cent, two per cent and one per cent of their total deposit mobilisation by second quarter, respectively and which will be increased to eight, three and two per cent respectively by the end of the fourth quarter.
"The old banks already have invested in government bonds and securities over the limit fixed by the policy," said Anil Shah, vice-president of Nepal Bankers' Association (NBA) and CEO of Nabil Bank. "However, the new banks will feel the heat and it might put pressure on lending rates," he added.
Kishore Maharjan, CEO of Sunrise Bank agreed with Shah. "Lending rates may go up," he said.
Though the limit of paid-up capital is unchanged, the policy has made capital fund the main barometer of any financial institution. Apart from that, it has also opened the borders for domestic banks. They can now open branches outside the country.
"The policy is flexible and can be adjusted according to the situation anytime," governor Kshetry said. It has not changed any major rate like Cash Reserve Ratio (CRR), refinancing rates or the bank rate.

SLR versus CRR
KATHMANDU: What Statutory Liquidity Ratio (SLR) does is it restricts the bank's leverage in pumping more money into the economy. On the other hand, Cash Reserve Ratio (CRR) is the portion of deposits that the banks have to maintain with the central bank.The higher the ratio, the lower the amount that banks can use for lending and investment. The other difference is that to meet SLR, banks can use cash, gold or approved securities whereas with CRR it has to be only cash. CRR is maintained in cash form with NRB whereas SLR is maintained in liquid form with the banks themselves. SLR refers to the amount that all banks require to maintain in cash or in the form of gold or approved securities. However, the Monetary Policy has directed the banks to buy government bonds and securities. The objectives of SLR are to restrict the expansion of bank credit, augment the investment of banks in government securities and ensure solvency of banks. CRR is in the form offiat currency stored with the central bank. The reserve ratio is used as a tool in the Monetary Policy, influencing the country's economy, borrowing, and interest rates. It would cause immediate liquidity problems for banks with low excess reserves. It was increased from 5 per cent to 5.5 per cent in last fiscal year's Monetary Policy.

Price hike unlikely to roll back

Though the government has projected to keep the price hike at seven per cent, the idea seems unfeasible. For the new fiscal year, the price hike is estimated to remain at 13 per cent as the government has completely failed to curb it.
Food price inflation remains a serious concern across Nepal. According to figures recently released by Nepal Rastra Bank (NRB), the year-on year inflation for food and beverage was 16.5 per cent for May. A poor food availability situation in remote hill and mountain markets, caused largely by the recent winter drought, has resulted in significant price increase during June, said a report Market Watch jointly prepared by World Food Programme (WFP), Food Security Monitoring and Analysis System the Ministry of Agriculture and Cooperatives (MoAC), Department of Agriculture, Agribusiness Promotion and Marketing Development Directorate of the the Federation of Nepalese Chamber of Commerce and Industries (FNCCI) and Consumer Interest Protection Forum (CIPF).
"This is particularly so in Mugu, where reduced local food stocks and insufficient external supply, has resulted in a five per cent increase in the price of cooking oil, a 30 per cent increase in the price of rice and a 50 per cent increase in the price of beans between May and June," the report said adding that due to a poor winter crop harvest, the price of potato continues to increase across much of the country, on average up by 10 per cent compared to last month, and up by over 58 per cent compared to last year.
Even Kathmandu Valley is under serious threat of price rise. There has been a strong increase in vegetable prices in the past one month, and the comparison of prices a month back and the prices today shows a very noticeable difference.
The price of carrot in the last one month has shown a major difference. Then priced at Rs 36.80 per kg it is now at a high at Rs 67.50, a difference of 155 per cent.
The widely consumed cauliflower has shown a difference of 104.74 per cent, priced at Rs 23 per kg a month back it is selling for Rs 47 per kg.
"The vegetable and grain yield this year has been very dissatisfactory due to meagre rainfall and various other factors. The price hike is due to lack of supply," said Binay Shrestha, Planning Officer of the Kalimati Fruit and Vegetable Market Development Department.
Broccoli shows a difference of 141.33 per cent, priced at Rs 38 per kg it a month ago it has now gone up to Rs 92 per kg.
The price of watermelon in the peak season has touched Rs 47.50 per kg. It was at Rs 13.67 exactly a month back, showing a difference of 247.48 per cent.With the implementation of the proposed budget, the government has estimated the Gross Domestic Product at 5.5 per cent by the end of the coming fiscal year. The growth rate in agriculture sector is expected to be at 3.3 per cent and non-agriculture sector at 6.6 per cent. The projection is based on the surmise that the price level will gradually drop and inflation will be around seven per cent. Looking at comparative data for only a month, the estimated rate of inflation does not seem to be a realistic or practical approach to curbing the price hike.

Mixed bag of borrowed template

Finance Minister Surendra Pandey today presented an accommodative budget of Rs 285.93 billion for the fiscal 2009-10. Though the budget has increased its revenue target, it still has Rs 46.34 billion deficit.
"The budget is little oversized," said former finance minister Dr Ram Sharan Mahat, who was cautious in his praise. It has the following broad contours -- Rs 160.63 billion has been set aside for recurrent expenditure, Rs 106.285 billion for capital expenditure and Rs 19.12 billion for principal repayment.
However, denizens, suffering from double digit price hike, will not get respite as the oversized budget could fuel the price hike. It seems that the government has completely surrendered to the rising price as it projects 13 per cent price hike in 2008-09 but has no contengency plan to contain the price rise.
Prof Dr Bishwambher Pyakuryal, a senior economist, too endorsed that overriding perception. The all-important fiscal document has, though, aims to contain the price hike at seven per cent and targets growth at 5.5 per cent.
"It seems that the government wants to give something to the people. But, unfortunately it lacks focus," said Dr Shanker Sharma, ex-vice-chairman, National Planning Commission (NPC). "If there is a good monsoon, the growth target could be achieved since it is primarily powered by agriculture, which is dependant on the vagaries of nature,” he added.
Pandey also has a lot of hard work in store to live up to his promise.
Dr Sharma opined that delivery mechanism needed to be improved at least 10 times to make it a resounding success.
In a bid to be as accommodative as the ground reality allowed him to, the Finance Minister has not only added new programmes but also opted for continuity of his predecessor Dr Baburam Bhattarai.
Pandey said that the budget would focus on job creation, boosting law and order, creating a better investment climate and implementing power projects to end a crippling shortage of electricity that has stunted economic growth but he has totally lost the focus.
Dr Mahat, too, agreed that the budget lacked a sustained focus. The budget is a throwback to Bharat Mohan Adhikari of his own party -- CPN-UML -- and Maoist Dr Bhattarai's budgets.
Entrepreneurs, however, felt that it neglected private sector. But, in theory Pandey worked towards an inclusive budget, where the public-private partnership (PPP) has been bandied as a guiding force.
Binod Chaudhary, CA member and a leading industrialist, agreed that the private sector was overshadowed. "Though, it's also true that the budget is infrastructure-driven,” he added.
"But the budgetary allocation for infrastructure is not enough," said Dr Sharma. He cited the example of a showpiece project National Pride -- a Kathmandu-Tarai Fast Track road. Though the estimated cost of the project is pegged at Rs 60 billion, Pandey has allocated only Rs 250 million in his budget.
The Finance Minister has also let the government employees down since he did not hike their salaries and only hiked their allowance. His projection of foreign assistance -- at Rs 56.95 billion - and foreign grant -- at Rs 21.56 billion -- too is ambitious.
The new Finance Minister clearly seems to be inspired by his predecessor. For instance, despite the pressure from the bureaucracy, he increased the revenue target to Rs 161.73 billion.In reality, even if he could meet the revenue target, his ability to spend -- like Dr Bhattarai -- is very much in doubt in absence of local bodies and political instability.
“Pandey has lost sight of the fact that our economy cannot absorb expansionary fiscal policy at this moment," added Dr Pyakuryal.

Highlight
Total budget outlay -- Rs 285.93 billion
Recurrent expenditure -- Rs 160.63 billion
Capital expenditure -- Rs 106.285 billion
Principal Repayment -- Rs 19.12 billion

Sources
Revenue target -- Rs 161.73 billion + Rs 15 billion = Rs 176.73 billion
Foreign assistance -- Rs 78.51 billion
Foreign grant -- Rs 56.95 billion
Foreign loan -- Rs 21.56 billion
Deficit -- Rs 46.34 billion

Major highlights of annual budget 2009-10
* Inflation rate -- seven per cent
* Gross Domestic Product target -- 5.5 per cent
* Agriculture sector growth target -- 3.3 per cent
* Non-agriculture sector growth taget -- 6.6 per cent
The tax exemption limit has been increased to Rs 1,60,000 for unmarried and Rs 2,00,000 for married.
* The prevailing highest rate of customs duty of 40 per cent has been reduced to 30 per cent.
* Foreign currency declaration limit by foreigners at the arrival point has been fixed at $5000 from earlier limit of $2000.
* Local Development Tax and Kawadi Tax scrapped.
* Tribhuvan International Airport duty free shops can seel goods in Indian Currency.
* Industreis exempted 10 per cent tax on special industries and information technology industry that directly emploes 300 or more Nepalis the year round.
* Industries that directly employes 1,200 or more Nepali nationals round the year round or which provides direct employment to more than 100 Nepali nationals including 33 per cent women, dalits (the downtrodden) or the handicapped will have to pay only 80 per cent tax on their income of that particular year.
* Tax Compliance Year has been declared for developing taxpaying habit.
* All income earners and advance tax payers (TDS payers) will have to get PAN members compulsorily.
* Income earners involved in different employments, occupations or investments without PAN numbers, who have not paid or only partially paid taxes like consultants, doctors, engineers, lawyers, auditors, artists, commission agents will, if they get PAN numbers within the last day of Magh 2066 (mid Feb 2010) and submit the tax returns of the fiscal years 2007-08 and 2008-09 and pay the tax, will be exempt from submitting the tax returns of the previous year and enjoy exemption on payment of tax, charge, interest and penalty on it.
* Projects of National Pride: The government has announced three project -- Kathmandu-Nijgadh fast track road, Upper Seti Hydropower project and the Hulaki Sadak in the eastern Tarai. These are high priority projects that depend on investment from the private sector and donors. However the government wants to use the unspent budget to initiate these projects.
* Rs 1,00,000 grants for intercaste marriage.
* Rs 50,000 grants for widow marriage.
* Generation of 25000 MW of electricity in 20 years.

Top 5 Ministries (in terms of budget allocation)
Ministry of Education Rs 42.24 billion
Ministry of Home Affairs Rs 15.38 billion
Ministry of Defence Rs 14. 62 billion
Ministry of Health and Population Rs 14.13 billion
Ministry of Local Development Rs 13.83 billion

Budget Allocation for Constitutional Bodies
President Rs 160.68 million
Vice President Rs 22.17 million
Constituent Assembly-Legislative Parliament Rs 770.30 million
Court Rs 1.41 billion
CIAA Rs 89.21 million
Office of the Auditor General Rs 142.16 million
Public Service Commission Rs 145.06 million
Election Commission Rs 185.68 million
Office of the Attorney General Rs 217.66 million
Council of Justice Rs 8.97 million
National Human Rights Commission Rs 70.53 million
Prime Minister and Council of Minister's Office Rs 3.49 million

Government fails to control price hike

The government has completely failed to control the price hike in food commodities and the overall price hike that still hovers close to 13 per cent.
"The year-on-year (y-o-y) consumer price index rose to 12.9 per cent in mid-May 2009 compared to 9.2 per cent in the same period last year," according to the current macroeconomic situation based on the first 10 months' data of current fiscal year published by Nepal Rastra bank (NRB).
The inflation, in the review period, was driven mainly by 16.5 per cent price rise in food and beverages group. However, the price index of non-food and service group also increased by 8.8 per cent.
"In food and beverage group, sugar and sugar-related products played a key role in pushing the price hike up so that it increased by a whopping 66.9 per cent, the report said. This is in sharp contrast to last year's decline of 0.5 per cent. Similarly, the price indices of vegetables and fruits as well as meat, fish and eggs sub-groups increased by 33.5 per cent and 27.5 per cent respectively in the review period compared to an increase of 1.8 per cent and 10.2 per cent respectively in the same period last year.
The wholesale price inflation increased to 15.5 per cent compared to 10.1 per cent a year ago. Indian price hike plays a key role in the Nepali market. Though India's wholesale price index has posted a negative growth by the end of May, the Indian month-on-month price hike in May is also at 10.3 per cent.
The central bank's report reveals that the government budget on cash basis remained at a surplus of Rs 6 billion in contrast to a deficit of Rs 6 billion in the same period last year. "The government has significant cash surplus of Rs 21.6 billion -- including Rs 3.9 billion of previous year -- with Nepal Rastra Bank," according to the report, thought the total government expenditure on cash flow basis, increased by 25.7 per cent to Rs 127.6 billion compared to an increase of 28.2 per cent in the corresponding period of the previous year. Low growth rate of capital expenditure accounted for such a deceleration of total government expenditure.
Revenue mobilisation also grew by 39.9 per cent to Rs 110.5 billion compared to an increase of 24 per cent in the corresponding period the previous year. "The government's firm commitment to revenue leakage control, revenue administration reforms, Voluntary Disclosure of Income Scheme and significant growth of non-tax revenue contributed to such an impressive growth of revenue mobilisation in the review period," said NRB.
However, exports shot up by 19.8 per cent in the first ten months of the current fiscal year in contrast to a decline by 2.4 per cent in the same period last year. The rise in exports is contributed to readymade garments, textiles, GI pipe, catechu, toothpaste, pulses followed by pashmina, woollen carpets, readymade garments and handicraft.
But at the same time, total imports also went up by 25.4 per cent compared to an increase of 16.8 per cent in the same period last year. "Imports from India rose by 11.5 per cent and imports from other countries surged by 50.4 per cent compared to last year's nominal imports," the report said.
During the review period, the overall Balance of Payment (BoP) posted a significant surplus of Rs 43.1 billion compared to a lower surplus of Rs 19.9 billion in the same period last year.

Prices putting food out of people's reach

The price of wheat, potato, musuro (broken lentil), soyabean oil and rice has increased, with staple food prices across Nepal remaining significantly higher in comparison to the same period last year.
"Commodity prices, however, have begun stabilising," said a report published by World Food Programme (WFP) - Food Security Monitoring and Analysis System, Ministry of Agriculture and Cooperatives (MoAC) - Department of Agriculture, Agribusiness Promotion and Marketing Development Directorate (ABPMDD), Federation of Nepalese Chambers of Commerce and Industries and Consumer Interest Protection Forum.
The price of wheat -- which normally decreases during this period of the year -- has risen over the last month because of the winter drought. Potato price is also very high, having increased by 28 per cent.
Compared to 18 months ago, the price of musuro (broken lentil) has increased by nearly 50 per cent, soybean oil by 32 per cent and rice by 25 per cent. However, the supply situation has improved across the country due to the lifting of bandhs in the Tarai.
The recent joint MoAC, WFP and FAO winter drought assessment confirmed that production of major winter crops like wheat and barley decreased nationally in 2009 by 14.5 per cent and 17.3 per cent, respectively, in comparison to last year.According to the year-on-year (y-o-y) consumer price inflation data released by Nepal Rastra Bank, the price hike rose to 11.9 per cent in mid-April 2009 from 8.9 per cent in the same period last year.
Because of the poor winter crop harvest, price of winter crops did not decline as usual -- it remained largely unchanged and even increased slightly in May, said the report. For instance, black gram price increased by three per cent and wheat flour and rice price increased by one per cent. Lentil price also increased by 11 per cent but this is likely due to rising regional prices as opposed to a poor harvest.
In May, heavy rainfall hindered food deliveries to Doti. It is likely that heavy rainfall will continue to cause supply constraints in mountain and hill markets across Nepal until the end of the monsoon.

Price hike trots at steady pace

Price hike in Kathmandu Valley, Hills and Tarai maintained a similar trend. "Region-wise, price rise in Kathmandu valley was 12.5 per cent followed by 11.8 per cent in Hills and 11.7 per cent in Tarai in the first nine months of the current fiscal year. Last year, the respective rates were 8.6 per cent, 8.5 per cent and 9.2 per cent," according to the Nepal Rastra Bank -- the central bank -- current macroeconomic situation based on the third quarter's report.
Incidentally, the price hike seems to be slowing down. According to the year-on-year (y-o-y) consumer price inflation data, it rose to 11.9 per cent in mid-April 2009 from 8.9 per cent in the same period last year. Earlier the price hike was hovering around 13 per cent.
"The inflation, in the review period, was driven mainly by the rise of 14.8 per cent in food and beverages group," said the central bank. The price index of non-food and service group increased by 8.8 per cent. The price rise of food and beverages and non-food and services group was 12.6 per cent and 4.9 per cent respectively in mid-April 2008.
In the food and beverage group, price indices of sugar and sugar-related products increased in mid-April 2009 by a whopping rate of 50.5 per cent. This is in sharp contrast to last year's decline of 3.8 per cent, said the report.
Similarly, the price indices of meat, fish and eggs as well as vegetables and fruits sub-groups increased in the review period by 28.2 per cent and 21.3 per cent respectively compared to an increase of 8.8 per cent and three per cent in the same period last year. During the review period, the indices of pulses rose up by 20.7 per cent compared to an increase of 14.9 per cent in the same period last year.
In the review period, the y-o-y core inflation rose to 12.1 percent from 7.0 percent a year ago. The y-o-y wholesale price inflation increased to 13.7 per cent compared to 9.4 per cent a year ago. The index of agricultural, domestically manufactured and imported commodities increased by 19 per cent, 9.1 per cent and 8.7 per cent respectively in the review period as compared to 10.4 per cent, 8.5 per cent and 8.3 per cent a year ago.
Of agricultural commodities, mainly the price index of cash crops increased by 34.3 per cent in the review period compared to a rise of six per cent a year ago. Likewise, livestock production and fruits and vegetables increased by 30.3 per cent and 26.7 per cent compared to an increase of 7.1 per cent and 4.1 per cent in the same period last year. The overall y-o-y salary and wage rate index rose by 20.3 per cent in the review period as compared to a rise of 9.2 per cent a year ago. The salary index increased by 16.8 per cent in the review period compared to a rise of 10.9 per cent in the corresponding period the previous year.
In the first nine months of 2008-09, the government budget remained at a surplus of Rs 12.7 billion in contrast to a deficit of Rs 5.3 billion in the corresponding period the previous year. "An impressive growth of resource mobilisation relative to the government expenditure accounted for such a budget surplus in the review period," the report said.
In the review period, the government has significant cash surplus of Rs 28 billion with Nepal Rastra Bank (NRB).

Monetray Policy fails to curb price hike

The Monetary Policy has done little to control the price hike.
Speaking during Nepal Rastra Bank's 54th anniversary today, central bank governor Dipendra Bahadur Kshhetri showed serious concern over the rising prices at a time when prices around the world are falling due to financial crisis. The inflation rate at present is above 13 per cent -- nearly double the target of 7.5 per cent.
"Though Nepal's economy is not completely integrated with the global market, it has already started feeling the heat of the global financial meltdown in some sectors like tourism, exchange rate of Nepali rupee vis-à-vis US dollar and foreign employment," he said adding that local problems like energy crisis, frequent bandhs, strikes and labour disputes have also posed a serious threat to the growth that was pegged at around seven per cent.
During the current fiscal year, the expected growth in the agriculture sector and industrial output also might be adversely affected, according to Nepal Rastra Bank's data.
However, some of the financial indicators are positive. "The central bank is trying to maintain overall economic stability," the governor added. "The service sector is expected to grow satisfactorily."
The regulator of the monetary and financial market also assured that it would formulate and implement effective monetary and fiscal policies to stabilise the country's financial sector.