National pride projects fail to perform, under utilise budget

Despite timely budget for the current fiscal year, the government has miserably failed to expedite the development projects that could have not only generated employment but also pushed the economic growth.

The government has been able to spend only Rs 2.82 billion, which is only 12.9 per cent of the total budget Rs 21.85 billion for the total 21 national pride projects.

The national pride projects include large-scale hydro – like 750 MW West Seti Hydropower and 456 MW Upper Tamakoshi Hydropower – irrigation projects –  like Sikta, Ranijamara-Kulariya and Babai – and international and regional airports like Pokhara and Bhairahawa, and highways like Fast Track, Mid Hill Highway and Postal Highway but the delay in implementation, lack of coordination among various state agencies, problems in land acquisition have taken toll in the development, according to the mid-term review of the budget.

The three projects – Bhairahawa Regional International Airport, Second International Airport and West Seti Hydropower Project – have become the poorest performers with no spending, the report stated, adding that the West Seti Hydroelectric Project has not yet completed feasibility study, whereas second international airport in Nijgad has been delayed due to confusion on construction modality.

Similarly, Bheri-Babai Diversion Multipurpose Project – that could also generate 48 MW electricity and provide irrigation facility to 60,000 hectares of land in Bardiya and Banke – has also been able to spend only Rs 3.31 million out of its Rs 1.01 billion budget.

Babai Irrgation Project project was started in 1989 with an objective of irrigating 36,000 hectares of land, and Banke-based Sikta Irrigation Project is expected to irrigate some 42,766 hectares of land. Sikta Irrigation Project has been able to spend around quarter of its total budget of Rs 1.14 billion budget.

Likewise, Ranijamara Kulariya Irrigation Project has spent around 33 per cent of its total budget of Rs 1.25 billion.

Likewise, Kathmandu-Terai Fast Track Project – that has been allocated Rs 500.31 million for this fiscal – has been able to utilise only Rs 3.92 million that is less than one per cent of the total budget in the six month of the current fiscal year also due to private sector's lack of interest in the project. The project was supposed to be constructed in public-private partnership model.

Yet another project that has become a prestige issue for the Asian Development Bank, Melamchi Water Supply Project, has been able to spend only Rs 638.50 million that is 12.18 per cent of its total budget of Rs 5.24 billion.

Of the five components of the Melamchi Water Supply Project, the tunnel – one of the major components – has started after a long disturbance and the project that took 15 years has set postponed the deadline for completion.

The report also stated that the national priority projects were selected without any solid basis. "The numbers of national pride projects increased but they have been just occupying huge resources without implementation,” it stated, adding that Mid Hill Highway has spent 17.12 per cent of the budget in the six months. "Only 1.5-km of track has been opened, with the graveling of one-km being completed in the western sector of the 1,108-km long highway. Likewise, in the eastern section, only four-km road has been graveled with eight-km being black-topped."

The Postal Highway has been able to spent only Rs 153.65 million out of its total budget of Rs 2.21 billion, whereas Budhigandaki Hydroelectric Project has spent the largest above 60 per cent of its Rs 260.99 million budget followed by Pashupati Area Development Fund that has reported some 59 per cent spending, the report stated.

Under utilisation of budget by the development projects is a serious concern for the government," finance minister Dr Ram Sharan Mahat said, addressing the mid-term budget review meeting here today. "If it continues, budget for under-performing projects would be transferred to other projects that are moving smoothly and demanding more funds for their speedy completion.

Surprisingly, all most all of the projects are under multi-year budgetary framework that needs no separate approval every year as they are prioritised.

Projects of national pride record mixed performance

Projects of national pride have posted mixed performances.

"Of the total 17 projects of national pride evaluated today, some have performed better and others have not," said secretary at the Prime Minister's Office Krishna Hari Baskota.

"Construction work at the Melamchi Water Project is going to start soon," he said, adding that the government is holding talks with development partner Asian Development Bank to award two contracts for the project.

Likewise, the three irrigation projects — Sikta, Ranijamara Kulariya and Babai — have entered into a performance contract with the ministry and are under construction," Baskota added. "Of the total 50km, some 35km canal of Sikta Irrigation project will be completed in this fiscal year."

The government has allocated an additional Rs 520 million for the project in the current fiscal year to expedite the project.

The Ranijamara Kulariya Irrigation Project has also received an additional Rs 640 million, whereas Babai Irrigation has received Rs 470 million that was spent on the construction of a 401m-long siphon, he informed.

Similarly, Nepal Army has opened the track of the 76.2km fast-track road that will connect Kathmandu with the Tarai. "The government is planning to invite the private sector for its construction," according to Baskota. "The track of the 1,776km Lokmarga will be opened within the current fiscal year, work on one section of the 1,798km Hulaki Highway is underway, and work on Koshi-Gandagi and Karnali corridors that will connect north and south is also satisfactory."

However, the second international airport at Nijgarh of Bara, and regional airports at Bhairahawa and Pokhara have not picked up. "Project chiefs and Ministry of Physical Planning have also not yet entered into a performance contract," he said, showing concern on the low performance of these projects.

A French company is preparing the detailed project report of the 700 MW Budi Gandagi Hydropower, and 456 MW Upper Tamakoshi Hydropower is also showing satisfactory performance, whereas Chinese company Three Gorges is studying the 750 MW West Seti Hydropower, the secretary informed, promising not to let these projects of national pride face a budget and manpower crunch.

Projects of national pride see low performance

The government has handed over projects of national pride to the Investment Board as the projects have not seen significant progress.

"The government has handed over 14 projects of national pride to Investment Board for immediate implementation," said caretaker finance minister Barshaman Pun during the mid-term development evaluation meeting here today.

Prime minister Dr Baburam Bhattarai had listed 17 infrastructure projects as 'National Pride' in his ambitious Immediate Action Plan, which he had unveiled with much fanfare last February.

However, except for Upper Tamakoshi hydropower, all the other projects have failed to move ahead smoothly due also to the government's non-priority towards development and concentration on politics.

Speaking, most probably, in his last meeting at the Finance Ministry, Pun also mentioned of Nepal Investment Year 2013, that has also not been moving ahead due to the government's apathy towards creating an investment friendly environment and security concerns from the private sector. Lately, the government has completely failed to boost the private sector's confidence that has plunged to an all-time low due to repeated attacks on them.

Boosting the confidence of the domestic private sector is key to attracting foreign direct investment as they are the bridge to bringing the foreign private sector to the country.

Pun, however, said that 60 per cent of the civil work on intake of Rani Jamara Kulariya irrigation project has been completed. "The construction of Babai and Sikta irrigation projects has been going on," he added.

The country could not get a full-fledged budget for the current fiscal year and has been operating through the interim public expenditure arrangement, which has slowed down development activities, he said, adding the government has spent Rs 7.66 billion under capital expenditure by the end of mid-January.

The government has spent a total of Rs 104.12 billion in the first six months of the current fiscal year. "The total expenses is 29.59 per cent of the total estimation of expenditure," said Pun, adding that of the total, a large chunk has been spent on recurrent expenditure that is salaries and administrative expenses at Rs 86.90 billion, whereas it spent Rs 9.55 billion under financial management.

"The government could do very little due to limited space," Pun added, claiming that he has, however, brought some regulatory changes, despite his limitations. "The government has received Rs 15.76 billion foreign aid commitment in the first half of the year, though it has been able to mobilise Rs 134.56 billion revenue."

"Despite a slowdown in economic activities, low agriculture production and industrial output, the economy is expected to grow by 4.1 per cent," Pun claimed, downward revising his earlier projection  of 5.5 per cent growth. But development partners — World Bank, Asian Development Bank and International Monetary Fund — have projected economic growth at a little over three per cent for the current fiscal year.

He, however, boasted of the road expansion drive. "A total of 102.79 km road has been widened in Kathmandu valley," he said, adding that some 84.69 km road in Kathmandu, some 15.60 km road in Lalitpur and some 2.50 km in road Bhaktapur have been widened so far.

Likewise, under the cross border customs road expansion to six lane plan to expedite external trade, the government has started the expansion of Bhairahawa and Biratnagar customs roads recently, Pun added.

Budget crunch to hit irrigation projects

A budget crunch is likely to hit irrigation projects as the caretaker government has failed to bring a full budget and has only brought an interim public expenditure arrangement twice for regular salaries, continuation of projects of national pride, and to mobilise revenue.

"There might be a shortfall of Rs 4 billion to Rs 5 billion for irrigation projects by the end of the current fiscal year," said secretary at the ministry of irrigation Pratap Kumar Pathak during the budgetary review meeting.

The ministry has signed a Performance Agreement with the heads of three irrigation projects of national pride — Sikta, Ranijamara Kulariya and Babai — and Morang Sunsari Irrigation Project is in the implementation phase, he informed, adding that the projects under the ministry are on the right track. "The ministry will be able to spend 100 per cent capital expenditure by the end of the current fiscal year, and will fall short of around Rs five billion."

Situated in Banke of the mid western development region, Sikta Irrigation Project is expected to help cultivate around 33,766 hectares of land — almost all the low lands of Banke that have a significant economic impact on the whole of the mid western development region.

Though the concept of Sikta Irrigation Project was first formulated in pre-feasibility studies conducted in 1975-1976, the project is going to cost Rs 12.80 billion and is listed as a national pride project.

Likewise, the Ranijamara Kulariya project, which is projected to cost Rs 12.78 billion, has also been listed as a project of national pride by successive governments.

These irrigation projects will help irrigate most of the southern plains and despite it being a food basket of the country it has been dependent on rainfall for harvest.

Finance secretary Shanta Raj Subedi, on the occasion, asked Pathak to inform the Finance Ministry, if the Ministry of Irrigation faces a budget crunch and urged it boost capital expenditure.

"All the ministries should report 25 per cent of capital expenditure by Poush-end (January 14)," Subedi added. According to the fiscal calendar, mid-January marks the half of the fiscal year that started in mid-August.

Similarly, secretary at the Ministry of Urban Planning Kishor Thapa also briefed the status of his ministry. "Of the 40 projects under the ministry, Melamchi Water Project has been prioritised," he informed, adding that the ministry might need Rs 900 million for Rural Drinking Water and Sanitation Programme.

During the meeting, caretaker finance minster Barshaman Pun asked the secretaries to closely monitor Priority one, Priority two and Priority three projects for their timely completion as they will have greater development and economic impact.