Kathmandu, July 12:

Finance minister Dr Ram Sharan Mahat today unveiled a ‘socialist budget’ worth over Rs 143.91 billion for the fiscal year 2006-07, at the House of Representatives in Kathmandu. The budgetary allocations are scattered and seem to be more inclined towards welfare rather than focusing on hardcore economic development.

Although the annual estimate of income and expenditure has gone up by 28.42 per cent against the current fiscal year’s revised outlay, it carries a gross deficit of Rs 22.451 billion.

Last fiscal’s gross budget deficit was at Rs 15.90 billion.

Out of the total estimated expenditure, Dr Mahat has earmarked Rs 83.767 billion, Rs 44.976 billion and Rs.15.168 billion for recurrent expenditure, capital expenditure and repayment of principal amount respectively.

The proposed expenditure is up by 21.3 per cent, 56.2 per cent and 6.8 per cent in capital, recurrent and repayment of principal amount respectively, as compared to the revised estimate of fiscal year 2005-06.

To meet the above-mentioned expenditures, the government has set a target of generating as much as of Rs 80.824 billion revenue from the existing sources, while Rs 23.728 billion and Rs 16.907 billion are expected for finance from foreign grant and loans respectively.

The budget has expected to generate an additional Rs 4.551 billion through changes in revenue rates, administrative reforms and the revenue policy reforms.

This will put the net budget deficit at Rs17.9 billion, which finance minister Dr Mahat said would be met through domestic borrowings.

The budget has pegged a GDP growth at five per cent with an increase of 3.5 per cent in agriculture and six per cent in non-agriculture sectors during the fiscal 2006-07. The inflation, narrow money supply and broad money supply are expected to remain at six per cent, 12.5 per cent and 14.1 per cent, respectively.

According to the budget speech, the allocations have been made as per the Tenth Plan’s four strategies as well as for the general administration.

Of the total expenditure, Rs 21.883 billion has been earmarked for high, sustainable and broad-based economic growth, while Rs 29.493 billion has been set aside for social sector and infrastructure.

Likewise, Rs 4.50 billion has been earmarked for targeted programmes and Rs 8.397 billion have been allotted for good governance.

Agriculture:

The government has earmarked a sum of Rs 3.96 billion for the development of agriculture sector, which is slightly up from the last year’s allocation of Rs 3.81 billion.

Road and transport:

The government has proposed to create a ‘District Transportation Master Plan-Road Construction Fund’ for development of rural roads construction in a planned manner. A total of Rs 200 million has been allocated for the fund. The government expects to build 250 kilometres of road in 20 districts consisting of 200 km of all weather roads and 50 km of seasonal road under the Rural Access Improvement and Decentralisation Project.

Education, health and drinking water:

A total of 52 billion has been allocated for social sector, which includes Rs 22.77 billion for education, Rs 9.30 billion for health and Rs 6.19 billion for water supply and sanitation. Rs 160 million additional grant has been allocated for the community-managed schools to recruit 3,000 female teachers.

Private sector :

The budget proposed to enact Competition Law within November 2006. The budget has proposed to an Industrial Rehabilitation Fund of Rs 500 million. The total capital of this fund is expected to reach to Rs 2 billion with the participation of private sector and banking sector.The Special Economic Zone under construction in Bhairawa will be operated in the next fiscal year. An employment-oriented Labour Law will be enacted.

Tourism and aviation:

Additional royalties levied on chartered flights will be waived. 10 per cent discount on fee in the international flights. A new air services agreement with India to be inked soon. Arrangement has been made for the tourists to take trekking certificate from Trekking Agents Association of Nepal. Best five tour operators will be rewarded.

Power and Energy:

Construction works of Madhya-Marsyangdi Hydropower project will be completed and some mega power projects will be initiated. A total of Rs 8.41 billion has been allotted for overall power sector. Petroleum supply system will be deregulated and private sector will be given permission apart from Nepal Oil Corporation.

Communication and IT:

Budget has been allocated to set up 1,068 PCOs. Optical fibre cable will be installed in Lamahi-Kohalpur, Tulsipur and Kathmandu through Tatopani. E-governance Master Plan will be introduced.

Prof Bishwambher Pyakuryal, president, NEA: - Considering the increased demands of people and the changed political context, the budget size does not seem very high. However, due to lack of implementation mechanism, weak governance, weak absorptive capacity, allocated resources in a number of sectors would be difficult to be used effectively. Discretionary spending should be controlled. Current reality is terrible as 80 per cent budget allocated in VDCs is not used and health sector has been able to use only 35 per cent of allocated budget. The budget is missing categorical plans. In such a context, budget will become inflationary and create varied problems.

Prof Madan K Dahal, ex-head,CEDECON, TU: - The budget is not growth-oriented but has equity considerations. Equity and distribution has been addr-essed. Bu-dget alloc-ation is okay. But implementati-on is going to be difficult. It is a normal budget and does not seem ambitious. There are no special efforts for revenue mobilisation. Tax administration improvement is not sufficient. Revenue collection estimates will meet only current expenditure and there will be no revenue surplus. But it may not be able to address the problems of recession. It does not seem gea-red towards employment cr-eation. Investment friendly guarantee for business is missing. There is an absence of incentives to taxpayers.

Chandi Raj Dhakal, president, FNCCI: - The budget has tried to focus on industrial rehabilitation plan as per the suggestions given by FNCCI, which is good. It has pro-mised to enhance competitiveness of the trade and industry sector by revi-ving the existing industrial policy, foreign inve-stment and trade policy. Ho-wever, implementation is doubtful. The move towards commercialisation of agriculture is good as it would boost farmers’ status. The announcement to establish Industrial Rehabilitation Fu-nd worth Rs 500 million is a welcome step at a time wh-en the industrial sector is in bad shape. Full income tax exemption for the newly established industries in 22 remote districts is noteworthy.

Surendra Bir Malakar, president, Nepal Chamber of Commerce: - The budget is positive though it seems a bit ambitious. It has tried to address the Karnali zone and rural areas that have been long neglected. But it seems difficult to achieve the target. It has tried to help small industries. There are some positive aspects like BOOT and Public-Private Partnership programmes. The private se-ctor should also help the government to implement the budget successfully. However, consumers can be at the receiving end as the prices of some of the goods have been increased. The major factor is the implementation because a good budget could be a failure du-e to weak implementation.

Rajendra Khetan, president, Young Entrepreneurs’ Council : - Since this is the budget after Janaandolaan, everybody has high expectations. It has not been able to fulfill the aspirations of all. The budget has not brought any radical departure in policies. It cannot change national economic scenario, like the budgets after the popular 1990 movement did. It has tried to accommodate all, which is good. But it might end as, ‘Jack of all trades and master of none.’ As it has imposed more tax on local industries, the competitiveness of domestic industries could not be boosted. This budget could bring political stability as it has also tried to address some of the Maoists concerns.

Diwakar Golchha, vice-president, Golchha Organisation : - The budget has tried to restructure the ailing economy. If it could be implemented it can achieve the GDP growth it is planning. It has tried to promote exports. The government has tried to expand the road network, which will boost economic activities. It has focused on the development of Karnali zone. Nepal is an agricultural country and the promotion of agro-based industries that the budget is planning is quite encouraging. The government has set aside a budget for the constitutional assembly, which the Maoists will also favour. Overall monitoring and implementation aspect will decide the fate of the budget.

Nothing for automobiles:

This budget has not at all addressed the problems of automobile industry. We had so many expectations but our problems were ignored completely. The budget has talked about increasing custom rates on vehicular parts but increasing custom rates on vehicles themselves would have been better. The provision brought by the budget will give rise in incidents of thefts of vehicles. The blacktopping of major roads including in Kathmandu will surely pave way for nation’s development. Also, concession on custom rate for those wanting to displace old vehicles from Kathmandu is commendable. We can find some good points in the budget for other sectors other than automobile sector, like providing help for the treatment for kidney patients is quite commendable.

Rajendra Bataju, chairman of Western Regional Automobile Dealers Association, Pokhara

Disappointing for tourism:

This budget is not quite what tourism entrepreneurs were expecting. This budget will not be able to provide relief to tourism entrepreneurs who have suffered most in a decade long conflict. There hasn’t been any mention of hotel industry. The facts about doing an air agreement and providing concession to chartered flights to India is commendable. While talking about sick industries, only small industries were mentioned. We are of the view whatever kind the budget is, there should be stability in the nation. The weak point of the budget is that it has not been able to bring in programmes to solve the conflict. The budget is the continuation of conventional thinking. Budget has ignored the plight of tourism entrepreneurs to provide them some services and concessions.

Sundar Kumar Shrestha, former chairman, Regional Hotel Association Nepal (HAN), Pokhara

Good for mid-west region:

Though budget is positive, there is still doubt about its implementation. Though the budget has given priority to mid-western region, most affected by Maoists and poverty, question still remains if it would be implemented. Declaring a special package for Karnali region is positive. Also, declaring Banke and Bardiya a pocket area for Bel (a kind of fruit) cultivation, establishing Agricultural Production Center in Chaulika of Nepalgunj and providing a special ward for treatment of kidney patient in Bheri Zonal Hospital are some points, which help mid-western region. Making provisions for free scholarship for children of Martyrs till bachelor level addresses the sentiments of Janaandolan. One house and one employment in Karnali will help battle poverty. Also reduction in expenses of royal palace and army is positive.

Manoj Sharma, businessman (Sai electronics), Nepalgunj

Doubts over implementation:

There are few points in the budget that facilitate businessmen, If these points are implemented, the businessmen will surely get some relief. The implementation of the programmes brought in by government has always been weak. The same doubts and question over the government’s ability to implement the budget remains. The budget has brought in some programmes to facilitate national industries. They should be implemented. 10 per cent concession will provide relief to businessmen and consumers. This is commendable. Cutting down on military and Royal Palace’s expenses is also commendable. However, VAT rate has been kept as usual, which could have been brought down. Also, no specific programme has been brought to construct Lumbini International Airport, which is of crucial importance not only for the zone but for the nation also.

Krishna Prasad Sharma, chairman, Siddharthanagar Chamber of Commerce and Industries

Of average stature:

Budget has failed to meet expectations of people in this changed political scenario. This budget is only of average stature. Providing relief to the family of martyrs of janaandolan and other victims is most commendable. Also trying to include dalits, janajatis, women, handicaps and backward community is positive. The vision of adding a trade school is also positive. Reduction in security expenses is another important factor of the budget. This will pave the way for other development constructions. Concession in export will increase export business. Introduction of Competitive tax is also positive. Budget hasn’t brought any programmes to facilitate sick and small industries. Also, there has been no reduction in excise duty and other taxes. The programmes brought in by budget should be implemented.

Pawan Kumar Agarwal, chairman Sunsari Chamber of Commerce and Industries