Going against the norms of federalism, the government in the FY 2024/25 budget not only brought scattered smaller projects, some as low
as Rs 100,000, but also earmarked substantial resources to the districts and constituencies of influential politicians and sitting ministers.
NewBiz Report
Rastriya Prajatantra Party (RPP) Chairperson, Rajendra Lingden, tore up the budget booklet of the Ministry of Physical Infrastructure and Transportation (MoPIT) during his address in parliament on June 18. Known for his typically restrained demeanour, Lingden expressed rare anger, stating, "I seldom show anger, but upon receiving the budget from the MoPIT, I was furious. I felt compelled to tear it up and discard it."
Lingden was upset about the uneven distribution of funds by the ministry. The ministry has earmarked a considerable portion of the budget for the constituencies of influential leaders. Lingden was not the only one to criticise the budget of the ministry. Ramesh Lekhak, the Chief Whip of the Nepali Congress, also called for a revision of the MoPIT’s budget.
While the government has allocated substantial sums to select constituencies, the allocation of mere peanuts for several projects has surprised former bureaucrats and opposition lawmakers. For instance, the Ministry of Urban Development has allocated only Rs 100,000 for the construction of a new city in Phidim. Additionally, the ministry has earmarked Rs 100,000 for land acquisition. While allocating more resources to the constituencies of top politicians is not a new phenomenon, the federal budget for fiscal year 2024/25 shows that two development ministries - the Ministry of Physical Infrastructure and Transport (MoPIT) and the Ministry of Urban Development (MoUD) - have allocated substantial amounts to the districts and constituencies of Prime Minister Pushpa Kamal Dahal, former Prime Minister KP Sharma Oli, Finance Minister Barshaman Pun, Physical Infrastructure and Transport Minister Raghubir Mahaseth, lawmaker Julie Mahato, Tourism Minister Hit Bahadur Tamang and Urban Development Minister Dhan Bahadur Budha.
A significant portion of the MoUD's budget has been earmarked for Chitwan, Gorkha, Rolpa, Dolpa and Jhapa districts. Nearly Rs 3 billion has been allocated for 221 programs in Jhapa, Rs 2.223 billion for 152 schemes in Rolpa, Rs 1.7 billion for 208 programs in Dolpa and Rs 1.25 billion in Gorkha. Physical Infrastructure Minister Mahaseth has outdone everyone. Elected to the House of Representatives from Dhanusha-4, Mahaseth has directed a substantial budget towards local roads, bridges and infrastructure in Dhanusha district through alternative subsidiary highway development, local road bridge construction, strategic road bridge construction and bridge protection programs. In the annual development program of the MoPIT, the budget has been cleverly allocated without even specifying the project addresses.
In past years, Prime Minister Dahal's home district, Chitwan, and former Prime Minister Oli's home district, Jhapa, were at the top of the list for receiving significant funding from the MoUD. The budget for urban development projects for 2024/25 has been allocated to constituencies in districts such as Gorkha, Rolpa, Dolpa and Jhapa without prioritising the projects. For the next fiscal, more than Rs 3 billion has been allocated by the MoUD in Jhapa for approximately 221 programs. Through the Urban Government Capacity Development Program, Damak Municipality has received a subsidy of Rs 323.2 million, Birtamod Municipality Rs 282.6 million and Mechinagar Municipality Rs 700 million. The Ministry of Urban Development's annual development program shows that about Rs 2.23 billion from the upcoming fiscal year's capital budget has been assigned to 152 projects in Rolpa which is the hometown of Finance Minister Pun.
Dolpa is another district where urban development funds have been poured. Dolpa is the home district of Urban Development Minister Dhan Bahadur Budha. Dolpa has received a budget of Rs 1.7 billion solely from the Ministry of Urban Development. Minister Budha has earmarked budgets for approximately 208 programs in his constituency. Likewise, around 120 urban development programs have been initiated in Gorkha - the constituency of Prime Minister Dahal. An allocation of Rs 1.02 billion has been made from the MoUD for these programs.
Smaller Projects Galore
Before the federal budget for fiscal year 2024/25 was tabled, Prime Minister Dahal repeatedly said that projects under Rs 30 million won't be managed by the federal government. However, the budget allocation continues to involve Singha Darbar in awarding contracts for projects that should be handled by the provincial or local governments. In the third week of December last year, it was decided that the federal government would not handle projects costing less than Rs 30 million and the provincial government would not handle projects costing less than Rs 10 million. However, the FY 2024/25 budget completely ignored this directive outlined in Project Classification Basis and Criteria, 2023.
Although there is a legal provision stipulating that projects of national importance should be handled by the federal government, while lower-cost projects should be managed by provinces and local levels, the government has reverted to previous practices in the budget. Finance Minister Pun has allocated a significant amount in the federal government's budget for the next fiscal year for the construction and upgrading of small buildings, roads, canals, parks, memorial gates, temples, monasteries, access road studies, irrigation plans, environmental tests and master plan studies. Many such projects are being implemented through the Ministry of Urban Development (MoUD) and Ministry of Physical Infrastructure and Transport (MoPIT). Under MoUD alone, there are 99 projects valued at only Rs 100,000 in the next year's budget. The allocations for the MoUD has increased from Rs 64.78 billion in the current fiscal year to Rs 91.35 billion in the upcoming fiscal year due to addition of petty projects.
MoPIT is also among those ministries allocating more budget to small projects. The ministry has allocated Rs 500,000 each for 626 projects, predominantly for strategic road/bridge construction and bridge protection. A budget of Rs 150 billion has been allocated to the Ministry of Physical Education for the next fiscal year, with a significant portion earmarked for smaller projects. The Ministry of Culture, Tourism and Civil Aviation (MoCTCA) too has allocated a meagre budget of Rs 100,000 for various projects. These projects include preparing study reports on temples and forts, studying potential World Heritage Sites, conducting orientations on heritage conservation, preparing study reports on the old fort in Lamjung, and preparing study reports on Kapilmuni's Ashram in Kapilvastu, among other activities.
Fiscal Discipline Discarded
According to Former Chief Secretary Dr Bimal Koirala, the trend of allocating a significant amount of the budget to the constituencies of select leaders constitutes a form of corruption. “Budget formulation is a meticulous process. The finance ministry spends months working on it to prevent any form of influence. However, neither can the ministry resist pressure from top leaders, nor do these leaders feel any guilt in directing ministers to allocate budgets to their constituencies,” Dr Koirala told New Business Age. Dr Koirala said nothing substantial can be achieved with such meagre amounts. “Even local units could accomplish these tasks with a slightly increased budget. The government appears to be squandering valuable resources on unnecessary activities," he added.
He said that the finance ministry should be able to reject unnecessary budget allocation requests. “The Ministry of Finance must enforce proper procedures if it is to halt this trend. Otherwise, every government will continue to draft budgets according to their own interests, putting previously planned infrastructure projects on the back burner,” he said. “It appears that budgets are merely being dispersed without coherence." Experts say that the tendency of scattering budgets goes against the spirit of federalism. “Retaining projects with budgets as low as Rs 100,000 under federal control is against the principle of federalism. The federal government should have strengthened federalism. However, this has not been the case in Nepal,” said Dr Koirala.
Economist Keshav Acharya feels lawmakers have failed to grasp the essence of federalism. Although political parties are never tired of advocating for federalism, Acharya believes that leaders across all political parties have failed to uphold its principles. “What we need from political leaders is the capability to prioritise issues that necessitate planning, placement in planning commissions, and transforming these addressed issues into electoral agendas. There is a lack of understanding among Nepal’s political party leaders, ministers, and parliamentarians about intervening in tasks that should be managed at the municipal level,” he added. “In contrast to ward members and chairs, who diligently carry out their responsibilities, federal ministers and parliamentarians are often seen neglecting their duties and becoming distracted by trivial matters.”
Lawmakers have failed to grasp the essence of federalism. Although political parties are never tired of advocating for federalism, leaders across all political parties have failed to uphold its principles. What we need from political leaders is the capability to prioritise issues that necessitate planning, placement in planning commissions, and transforming these addressed issues into electoral agendas. There is a lack of understanding among Nepal’s political party leaders, ministers, and parliamentarians about intervening in tasks that should be managed at the municipal level. In contrast to ward members and chairs, who diligently carry out their responsibilities, federal ministers and parliamentarians are often seen neglecting their duties and becoming distracted by trivial matters.
The trend of allocating a significant amount of the budget to the constituencies of select leaders constitutes a form of corruption. Budget formulation is a meticulous process. The finance ministry spends months working on it to prevent any form of influence. However, neither can the ministry resist pressure from top leaders, nor do these leaders feel any guilt in directing ministers to allocate budgets to their constituencies.
Nothing substantial can be achieved with such meagre amounts. Even local units could accomplish these tasks with a slightly increased budget. The government appears to be squandering valuable resources on unnecessary activities.
The finance ministry should be able to reject unnecessary budget allocation requests. It must enforce proper procedures if it is to halt this trend. Otherwise, every government will continue to draft budgets according to their own interests, putting previously planned infrastructure projects on the back burner.
Retaining projects with budgets as low as Rs 100,000 under federal control is against the principle of federalism. The federal government should have strengthened federalism. However, this has not been the case in Nepal.
