Govt unlikely to raise size of first grant instalment

Kathmandu, July 1

The government is mulling over rolling back its decision to raise the size of first housing grant instalment for earthquake survivors by three-fold to Rs 150,000 after donor agencies reminded it to honour the agreement reached in the past.

“It won’t be possible to increase the size of first grant instalment to Rs 150,000 and limit the size of second and final instalment at Rs 50,000,” Prime Minister KP Sharma Oli’s Chief Advisor Bishnu Rimal told The Himalayan Times. “What we can do is extend Rs 50,000 in first instalment and raise size of second instalment by Rs 20,000 to Rs 100,000 and give Rs 50,000 in third or final instalment.”

The government is extending a grant of Rs 200,000 to each homeowner who lost a house during devastating earthquakes of April and May, 2015. As per the existing provision, the grant should be disbursed in three instalments of Rs 50,000, Rs 80,000 and Rs 70,000.

But on Wednesday, the government decided to extend the entire grant of Rs 200,000 in two instalments of Rs 150,000 and Rs 50,000 based on demand placed by main opposition Nepali Congress (NC) party.

At the time when the agreement was reached with NC, the government had, however, said the revision to the size and number of grant instalments would be officially made upon consultation with donor agencies that are helping pool financial resources for distribution of housing grant to quake survivors.

Currently, the World Bank (WB) is taking the lead in this regard and has roped in a number of development partners, including those from the US, Japan, the European Union, Canada and Switzerland, to support the cause.

But in a letter written to Finance Minister Bishnu Prasad Paudel yesterday, the WB, on behalf of other donors supporting the Rural Housing Reconstruction Programme, said: “Subsidy payments should be made on the basis of principles agreed to at the International Conference on Nepal’s Reconstruction (held in June 2015). These principles are based on global best practice in post disaster reconstruction and are designed to ensure that eligible beneficiaries receive and utilise reconstruction grants for intended purposes.”

The letter also said modalities through which the WB and other donors have agreed to support the programme should remain the same.

This basically means the housing grant should be extended in three instalments of Rs 50,000, Rs 80,000 and Rs 70,000 as pledged in the past.

Donor agencies are urging government not to renege on promise made in the past to prevent cases of moral hazard.

The government’s Private Housing Grant Distribution Guideline has incorporated certain provisions that bind grant beneficiaries to complete certain works and maintain certain standards before applying for another tranche of grant.

For instance, grant beneficiaries, who have obtained first instalment, will be eligible for second instalment only if they prove they have built the foundation and plinth of the house. Similarly, the third instalment will be released if beneficiaries substantiate they have built all other parts of the house, except the roof.

Also, technicians check the quality of the structure being built by grant beneficiaries from time to time to ensure enhanced traditional construction techniques and local materials have been used to build a quake-resilient house.

Donors fear that grant beneficiaries may not feel the pressure to meet all these standards if the size of the first instalment is raised to Rs 150,000 or 75 per cent of the total grant of Rs 200,000 because the remaining part of instalment or 25 per cent of the total grant may not have the power to incentivise good work.

This may even encourage beneficiaries to disappear after collecting first instalment. This tendency, donors say, will not only put financial resources to waste but undermine the principle of ‘building back better’.

However, NC has said hike in first instalment was demanded due to delay in grant distribution process.

It has been over 14 months since the first big quake hit the country in April 2015. But thousands of families are still spending days and nights in temporary shelters.

“I think the donor agencies have well understood this problem,” Senior Congress Leader and former finance minister Ram Sharan Mahat told THT yesterday, suggesting ‘renegotiation in deal earlier reached with donor agencies’, which, he said, would ‘serve the country’s interest’.

Mahat has, however, said everything should be done based on mutual understanding with donors.

Attempts to make any unilateral decision in this regard may backfire because development partners may express reluctance to mobilise additional financial resources for housing grant in the future.

So far, the World Bank has pledged $200 million (approximately Rs 21.7 billion) for Rural Housing Reconstruction Programme, while the European Union has pledged 100 million euros, the Japan International Cooperation Agency has pledged $100 million and Canadian, Swiss and the US governments have pledged $25 million each.

It is said the US government may extend another $100 million and the Indian government may also contribute another $100 million for the programme in future.

As per the National Reconstruction Authority, the country needs at least Rs 286.06 billion to rebuild rural houses and another Rs 90.06 billion to rebuild urban houses.

PM’s Chief Advisor Rimal did not disclose whether the government was interested in renegotiating deal with donors as suggested by Mahat.

He also did not say whether government has met with donor community since receiving WB’s letter yesterday. But reliable sources said the government has not approached the donor community yet.