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Political And Bureaucratic Hurdles To Development

Issue August 2017

Political And Bureaucratic Hurdles To Development

Siddhi B Ranjitkar


From the time of Prithvi Narayan Shah, political and bureaucratic barriers to development have not only kept the economic development of Nepal in a status quo but also even retarded as the then Shah-Rana administration did not want Nepalese to be prosperous, as they had been jealous of common folks being rich and then challenging them politically and economically. Intentionally or unintentionally the current political system and then the State laws and bureaucrats have been the tallest hurdles to pass over for the socio-economic development in the country.


Since the Ranajit Malla: the then king of Bhaktapur trained Prithvi Narayan Shah from the tiny Gorkha: a so-called hill State created the current shape of Nepal, the Shah-Rana administration never did anything to improve the State economy not to mention the lives of the common folks for 240 years. These Shah-Rana rulers stole everything from the State treasury for their luxurious lives and for buying jewelry to their concubines, and then keeping them fat and healthy for the use at any time they needed.


Not only the economic prosperity of the common folks had been intolerable to the Shah-Rana administration but also even the social reform, as any social or economic improvement common folks had initiated had been seen as against the Shah-Rana administration. In July 1949 a group of Brahmins had initiated to plow the land going against the tradition for the social reform, the then Shah-Rana administration arrested them, the editorial in “gorkhapatra’ on July 28, 2017 stated.


Only on August 9, 2017, the parliament has passed the bill on making chaupadi as a criminal act and making it punishable by the imprisonment for three months and with the fine of NPR 3,000; and it will be effective on August 13, 2017 after the president signed it off into a law. Following the chaupadi, women have been staying in a cowshed during the menstruation and the childbirth in the far western Nepal. Some of the women have lost their lives because of the very poor condition of living or due to the snake biting. 


Even after Nepalese ended first the tyrannical Rana regime in 1951, and then the despotic Shah dynasty in 2008, Nepalese have been facing the political and bureaucratic and legal barriers to social and economic development.


Political Obstacles: the news in “gorkhapatra” on July 24, 2017 stated that at the news conference held to make public what the central committee meeting of the Maoist-Center decided after six days of debate, chairman of Maoist-Center Prachanda said that the current electoral system and the governance system have been the obstacles to development.


According to the news, Prachanda said that poor candidates or even the candidates with the middle class background would never be able to contest the elections as the money plays a crucial role in winning the election. He even gave an example of a movie that shows a mafia of smugglers finances a candidate and gets elected and then the elected person does not follow the mafia’s instructions, and the elected person either gets removed from office or even gets killed. The story might be repeated in the country, too, Prachanda said. So, the central committee meeting decided to make the proportional election system in other words only the political parties would be the candidates competing in the elections, and the political parties based on the numbers of votes they received would have their representation in the legislature as the election system for the country.


The current electoral system has some flaws, as the government sets the date for any elections. The consequence of this provision in the election law has been the local elections were put on hold for about 20 years. The recent experiences in setting the date for the local elections have been that the government set the date for holding the local elections in all seven provinces. Then the government changed its mind and decided to hold elections in two phases, and set the elections date accordingly. The government again decided to hold elections in province number 2 separately on the later date.


The government has done so to make room for the Madheshi political parties to take part in the local elections. They have been demanding to amend the Constitution for making the ethnic and Madheshi people have equal rights to all sorts of political, social and economical dealings. They have been threatening not only boycotting the elections but also disrupting the elections. However, they have neither participated in the elections nor disrupted.


In order to avoid such flaws, elections to the local units, provinces, and federal legislatures need to be automatic for five years or on the preset dates then not requiring either the government or the Election Commission setting the date for elections at all. Then, the Election Commission has to hold the elections periodically without waiting for the government to announce the election date.


The system of the legislative body electing a chief executive or prime minister needs to be changed by the system of directly electing by the universal franchise, said Prachanda at the news conference. The system of the parliament electing a prime minister has made the political instability as the prime minister becomes vulnerable to the majority in the parliament but also to the majority s/he could garner in her/his own party. So, the country needs a directly elected president to last at least for five years, said Prachanda.


The parliamentary system of electing prime minister has made the government vulnerable to the majority in the parliament at the same time the parliament has been defenseless to the prerogative of prime minister to dissolve the parliament and call for fresh elections seeking a new mandate from the people any time a prime minister thinks it necessary. This has made the political instability causing an adverse impact on the development.


Since the reinstatement of the multi-party democratic system in 1990, and the NC receiving the majority in the parliament in the election in 1991, and Girija Prasad Koirala becoming the prime minister of the majority party, his government could not stand the pressure put up by the opposition in his own party. So, he went to the polls dissolving the parliament hoping to garner absolute majority in the party but failing to have even the simple majority for forming a government, he then had to effectively hand out the administration to the CPN-UML for drastically reversing the economic policy in 1994. Since then, the country has been plagued not only with the coalition government of two or more political parties but also with the frequent changes in governance adversely affecting the development activities.


The victim of the parliamentary system of governance has been the development projects. They have to wait for three to seven months before they get initiated again that has been halted after one prime minister quits office and another takes office, and appoints the ministers, and gets the administration runs smoothly.


For example, current Prime Minister Sher Bahadur Deuba has been in office for more than one-and-a-half months but he has not made his cabinet fully functional, as he has to appoint a number of new ministers from his own party and other parties of his partners in the governance. Deuba has been holding a number of ministerial portfolios. How could a single person manage so many ministries? Surely, many important decisions have been put on hold, and large development projects must have been waiting for new ministers to come.


However, Prime Minister Deuba managed to appoint 19 ministers: 10 of his party, six of the Maoist-Center, two of the Madheshi Janadhikar Forum-Loktantrik, and one of CPN-United on July 26, 2017: the 51st day of taking office. However, Prime Minister Deuba has to fill out another five ministries to run the cabinet in the full scale. Deuba appointed only three women among the 19 ministers despite the demand of the women team his spouse also parliamentarian Dr Arju Deuba had led, made for the Cabinet having at least one-third of women.


Once ministers are in offices, they need to appoint the persons of their choices to the projects chiefs or executive directors or CEOs. Those new appointees have to familiarize the projects, and then they in turns have to appoint the persons of their choices to managers at different levels. They even repealed the contracts the predecessors had made, and then they made new contracts with new contractors making most of the time cost overrun and time overrun.


If prime ministers were changed every nine months as had been in the immediate past, the progress of development projects would be practically dragged on at the snail’s pace. So, large development projects designed for four years to complete at a certain cost complete only after four times the cost overrun and the time overrun even more. Only a few projects have cost overrun and time overrun less than twice or thrice the estimated cost and time.


So, Prachanda might be correct to say that the directly elected presidential system would be good for the country, as any president elected for five years or so could work without any troubles of need for quitting office before the term ends, and then turnover of ministers, and officials running development projects would be less frequent.


Victims of the turnover of government have been not only the large development projects so-called prides of nation but also the Bills pending in the parliament. According to the news in “gorkhapatra” of July 26, 2017, 53 Bills have been pending at the parliament, some have been waiting as long as three years because every new minister wants to review the Bills, and some others even ignore the Bills the predecessors has submitted. Not passing Bills in time means surely putting the socio-economic development on hold.


Laws as barriers: Other serious barriers to the development projects have been the laws such as Public Procurement Act, Land Reform Act, Forest Act, and Labor Law.


Most of the project chiefs and CEOs blame the Public Procurement Act for delay in project management and implementation, as it has made the provisions for calling bids for goods, services, and jobs to be acquired, and to give a number of days for the bidders to submit the bids. Then, the project management has to open bids, and evaluate them and then get the concerned minister signed them off. Most of the time, lobbyists, political leaders, and members of parliament put pressure on the project chiefs, and evaluators of the bids, and even the ministers for favor. That is not all; they make deals on millions of rupees for awarding large contracts to the favorites. Then, everybody involved in projects makes millions if not billions at the huge cost of projects, as recently revealed how the Tax Redemption Commission had waived different taxes including the VAT (value-added tax) consumers paid causing billions of NPR worth of revenue loss to the nation.


The most important part of the Public Procurement Act has been the provision for extending project time and for increasing the cost. Even if contractors could finish the job at the cost and time they have been awarded for, sometimes, projects chiefs under the pressure of ministers extend the project time, and increase the project cost obviously for making the money for the party or the persons involved in the projects.


Unless and until this provision for extending the contract time, and project cost, is made applicable only to when the country faces natural disasters such as quakes or floods, or crisis such as sanctions imposed on the country causing tremendous shortage of fuels and other goods in the country when contractors actually could not work, and they would need time extension and probably cost increase, too, otherwise development projects continue to suffer from delay in completion and high cost making the beneficiaries suffer too much.


Land Reform Act has been instrumental not to have land required for the development projects, as they needed. It has made a provision for lengthy process for acquiring the public land as well as the private land. Often development projects have to wait for a number of months if not years before having the required land for smooth running the projects.


If projects have to acquire private land then they have to do it through the district administration that has to set up a land-price-setting committee to evaluate the land and then set the prices for paying the landowners, and publish the names of landowners whose land would be acquired calling them to collect compensation for their land in a newspaper.


Often disputes arise between the landowners and the projects causing delay in acquiring land for the project implementation. Naturally, landowners complain that they are offered the prices of their land less than the market prices. During the king’s rule, project people simply grabbed land without paying anything only publishing a notice in a newspaper; nobody could rather dared to question the then repressive administration. That had been in the past. Now, nobody could acquire land without paying appropriate compensative prices to landowners.


One of the main impediments to the private investment and development has been the provision made for the land ceiling in the Land Reform Act. This provision has made a limited ownership of land in the hills, and the Kathmandu Valley, and Terai. One of the reasons why the agriculture could not develop as it should be because of this provision, as this provision does not provide sufficient land for even a small-size commercial farming. Investors have been less interested in investing in Nepal because of the hassles of acquiring sufficient land for the factories and industries.


The third law that has been nuisance to the development projects has been the Forest Act that has made the forestry department and the forest ministry owners of forest. So, any projects have to wait for the approval of the Forest Department for cutting the trees that have been in the land of the project areas. Road projects and other projects have suffered from this provision made in the Forest Act.


For example, the road projects have to secure the approval of the forestry department to cut the trees in its way. Getting an approval of the forestry department is not a simple thing, as the department has to follow its rules and regulations and even needs to secure the approval of a minister.


The country has many examples of the Nepal Electricity Authority could not build its towers for power transmission lines because the Forest Department either did not issue an order to cut the trees or delayed terribly.


The remedy to this malice is to make projects the owners of anything including the trees in their lands then they would not need to go to the Forest Department. They could pay the compensation for the trees if the Forest Department has grown them or the Forest Department could claim the proceeds from the sale of the timbers and other forest products.


Labor Law has been the devastating for the businesses. Anybody could hire a labor but nobody could fire. The law has well protected the laborers making businesses vulnerable to dictation of trade unions and even individual laborers. Many small businesses had to close because of the labor problem. However, some of the smart managers have been running the businesses employing informally paying only daily wages denying so many benefits the Labor Law has prescribed. The business community has been putting heavy pressure on the government to amend the Labor Law.


Bureaucracy as a barrier: Now, the State bureaucracy has been one of the main reasons for delay in project implementation and even for completing them. Bureaucrats are rent seeking bosses that would hardly move any dossiers from one desk to another without a proper payment rather a payoff.


Quoting the Comptroller General Office, the recent Radio Nepal news has it that the accountants have held the checks issued to the contractors. Most of the development budgets are used at the last three months of any fiscal years. The FY 2016 ended on July 16, 2017. Accountants of various department issued checks for billions of rupees to contractors that had worked relentlessly in the last three months but the account officials held those checks for the obvious reasons.


The Ministry of Finance has been mulling to make mandatory to cash the checks issued to contractors within a month. Here, the question is why the Finance Ministry has been so shy to take actions against the accountants that held the checks illegally. Why the Finance Ministry did not make a rule to issue the checks immediately to the contractors. All these questions ultimately lead to the vested interest of bureaucrats and most probably of ministers, too.


Service delivery has been horribly time-consuming. The Banke District Revenue office has recently introduced the system of delivering the service through computers obviously for expediting the service delivery but the clients have suffered from the tremendous delay in the service delivery sending the clients to protest, stated the news in “gorkhapatra” on July 27, 2017.


Officials at any State offices could say that either the papers are not right or the rules don’t permit but if anybody make a payoff then everything becomes correct, straight and right, and s/he gets what needed. Everybody would not know the State rules and regulations, and laws, and everybody does not need to know them, too but everybody needs the sincerity of the officials responsible for delivering public services but that is really lacking in this country.


Irregularities in performing official duty as barriers:


Irregularities In Waiving Taxes:


The recent hot news in the State media and private media has been about the three officials that have been responsible for waiving taxes including VAT to the businesspeople and the companies. The guys in question are Chudamani Sharma, Umesh Prasad Dhakal and Lumba Dhoj Mahat. They were the officials on Tax Redemption Commission. Lumba Dhoj Mahat was the Chairperson of Tax Redemption Commission, Umesh Prasad Dhakal member, and Chudamani Sharma a member secretary. The trio of Sharma, Dhakal, and Mahat managed to waive tax revenue more than 20 billions of NPR, according to the report of the Auditor General. Currently. Investigation Into Abuse of Authority (CIAA) has been investigating the matter following the numerous complaints and the report of the Auditor’s General on the irregularities in waiving the taxes.


Sharma has been under the custody of CIAA since June 2, 2017. Other two guys have been on the run since then. CIAA published a notice on the State-run newspaper “grokhapatra” on June 22, 2017 stating anybody helping to find those guys would be appropriately awarded.


CIAA filed a lawsuit against these three guys at the Special Court for causing the revenue loss of more than NPR 20 billions waving even the VAT the customers had paid demanding the maximum penalty, and the bail of NPR 10 billions to release Sharma.


The spouse of Sharma has filed a habeas corpus at the Supreme Court. CIAA has produced Sharma at the court but the apex court has not release Sharma on bail rather asked the Special Court not to take any actions on this case until the habeas corpus is presented at the full bench of the Supreme Court, as the case indicated the complex constitutional issues. The full bench asked the Special Court to submit the dossier of the case to the Supreme Court.


Hearing on the habeas corpus, the divisional bench of the supreme court found that it has some critical issues including the issues of whether the Tax Redemption Commission is a semi-judicial body or a simple administrative body whether CIAA could take actions against its members or not. To settle all these issues, the divisional bench ruled to submit the case to the full bench.


The members of Tax Redemption Commission have given an unlimited power even denying any lawsuits against their actions at any law courts. The law was enacted at the time of the king’s rule for making unlimited money at the cost of the State losing revenue, and is continued today. The Income Tax Act of 2002 has been in effect. The finance ministry had set up the current Tax Redemption Commission in 2015.


According to the interview former Acting Auditor General Sukadev Bhattarai Khatri has given to the reporter of Republica, and posted on, the then Auditor General has urged the then Finance Minister Dr. Ram Sharan Mahat not to set up a Tax Redemption Commission as it goes against the Tax Act of 2002 but he did set up, and then the Commission has waived the taxes going against the Tax law that says only the parliament could do so. Despite the heavy pressure the then government had put on him not to do so, Former Acting Auditor General Khatri had made public the 54th audit report of the Auditor General that contained the report on Tax Redemption Commission waiving the taxes arbitrarily, said Khatri while talking to the interviewer.


Answering to the question of “What’s the exact loss to the state coffers due to the commission decision?” Former Acting Auditor General Khatri said, “Upon applications received related to tax dispute worth Rs 40.83 billion, the commission decided on pending taxes worth Rs 30.52 billion only. The commission negotiated at Rs 9.54 billion as payable taxes and waived Rs 21 billion. After the commission’s decision, taxpayers have paid about Rs 6 billion out of Rs 9.54 billion and remaining over Rs 3 billion is not yet paid. It means the loss to the state coffers is Rs 24 billion.”


Recently, the Parliamentary Finance Committee has instructed the government Prime Minster Sher Bahadur Deuba has presided over to immediately dissolve the Tax Redemption Commission, as it has been against the current political scenario and the Tax law, and it has given an unlimited power to its members making them so powerful, that their actions would not be questionable at any courts. It remains to be seen how fast Prime Minister Deuba would act on dissolving the Tax Redemption Commission, and correct the previous mistakes of giving an unlimited power to the members of the Tax Redemption Commission.


On August 11, 2017, hearing on the habeas corpus filed by the wife of Chudamani Sharma, a full bench comprising justices such as Deepak Raj Joshi, Deepak Kumar Karki, Kedar Prasad Chalese, Sharda Prasad Ghimire, and Anil Kumar Sinha of the Supreme Court ruled to release the suspended Director General of Inland Revenue Office Chudamani Sharma for the largest possible corruption case on general date to appear in the court; and continue the hearing on the corruption case against Sharma at the Special Court making the actions of the Tax Redemption Commission under the jurisdiction of CIAA.


Irregularities in Sajha Prakashan


Following a series of news reports on the irregularities in Sajha Prakashan in Republica and Nagarik dailies, the Parliamentary Public Accounts Committee (PAC) started off investigating the alleged irregularities in Sajha Prakashan serving subpoena to Secretary to Education Ministry: Shanta Bahadur Shrestha and chairperson cum general manager of Sajha Prakashan: Dolindra Prasad Sharma to be present at the committee for inquiry on Friday, August 4, 2017, the news on stated on August 4, 2017 quoting the PAC officials.


“We have called education secretary Shanta Bahadur Shrestha and Dolindra Prasad Sharma, chairperson and general manager (GM) of Sajha Prakashan tomorrow,” said Ram Hari Khatiwada, a member of PAC. “I wonder what the ministries are doing by not taking action against the corrupt people!” he said, the news stated.


Ministry of Education (MoE) set up a three-member panel on July 27 to probe into the irregularities in the Sajha Prakashan making its Accounts Officer Bhola Nath Paudel as a member but replaced him with Sunita Khanal: accounts officer at Department of Education on Thursday, August 4, 2017 after the news reports in Republica and Nagarik revealed that GM Sharma appointed Paudel's wife Nabina Koirala Paudel to a job at Sajha Prakashan on July 30, 2017, the news stated.


GM Sharma has been accused of appointing those folks close to political leaders and media persons, maintaining no record of annual incomes, creating fake documents, printing textbooks illegally, transferring NPR 5 million from Sajha to the GM's bank account, serving both as the chairman and the GM going against the rules, and not conducting an audit of the accounts during his tenure as a GM of two-and-a-half years, the news on stated on August 4, 2017.


Then education minister Chitra Lekha Yadav appointed Sharma as general manager of Sajha publications in January 2015. He was given the responsibility of chairperson as well a month later. Sharma's tenure ended in January 2017. He was reappointed as a chairman and GM for four years in January 2017. Dhani Ram Paudel of the CPN (Maoist Center) was education minister at the time, the news on stated.



Irregularities In Purchasing Land:


Talking to the anchor of the Radio Nepal morning program “antar-sambad” on August 5, 2017, NC Lawmaker also the member of Parliamentary Public Account Committee (PAC): Dhanaraj Gurung said that Nepal Oil Corporation (NOC) had purchased the land for constructing petroleum depots at various areas not directly from the landowners but from the middlemen at the rate of a number of times higher than the landowners received; a plot of land of which the prevailing market price had been NPR 200,000 but the landowners received NPR 300,000; they were happy but the price NOC paid was recorded NPR 1 million.


PAC has urged Commission On Investigation Into Abuse of Authority (CIAA) to investigate the process NOC had adopted for purchasing land, the officials involved in the process, and other necessary document, as PAC found that NOC had overstepped the process any State-owned companies had to follow for acquiring land causing the estimated loss of one billion NPR, the news in the “artha bazaar” section of “gorkhapatra” stated on August 5, 2017.


Chairman of PAC: Dorprasad Upadhaya said that NOC did not follow the Public Land Purchase Act, and Land Acquisition Act of 1977 (2034) while purchasing land in Jhapa, Chitwan, and Bhairawa. PAC Chairman Upadhaya also said that first, NOC purchased land not following the directives of the Parliamentary Consumer Welfare Protection Committee for acquiring public and private land; second, NOC did not follow the Land Acquisition Act of 1977 (2034) for purchasing the private land; third, the prices of land had been tremendously higher than the prevailing prices; fourth, the land is of low quality, as the land is mostly of the riverbank; he also said that the irregularities in purchasing land had been because of purchasing through middlemen rather than directly from the landowners, the news in the “artha bazaar” section stated.


PAC Member Ram Hari Khatiwada said that NOC not only did not follow the Land Acquisition Act of 1977 (2034) but also even its Purchase Rules and Regulations of 2007 (2064) for purchasing land, causing irregularities in land acquisition; he also said NOC paid NPR 650 millions for the land of NPR 230 millions, the news in the “artha bazaar” section stated.


Another news item in the “artha bazaar” section of “gorkhapatra” stated on August 5, 2017 that the land NOC had purchased in Bhairawa in the last month has been flooded because of the monsoon rains; NOC had purchased 14 bigha land some of the land had been part of the area where once the river flowed; now the river has been flowing to the west leaving the land.


In the advertisement NOC published in the front page of “gorkhapatra’ on August 5, 2017, NOC has stated that it has purchased the land through bidding; it has verified the prices of land writing to the local administration; NOC is practically and legally off-limit to what prices bidders have paid to the landowners or what prices landowners have received; so, NOC has followed the proper process for purchasing land; none of the NOC officials has any link with the bidders or the land sellers.


Other Irregularities:


Talking to the anchor of the Radio Nepal morning program “antar-sambad” on August 5, 2017, NC Lawmaker also the member of Parliamentary Public Account Committee (PAC): Dhanaraj Gurung said that previous energy minister had awarded the contract on constructing the 1,200 MW Budhigandki Hydropower project to the Chinese Company that had been blacklisted for not completing the construction of 42.5 MW Sajen Hydropower Project and Chameliya Hydropower Project signing off the document at the prime minister’s Baluwatar residence on the day he quit office.


NC Lawmaker Gurung said that the opposition in the parliament did not talk about such corruption but always opted to keep muted; some political leaders even made calls to him to stop talking about corruption at the PAC; his reply to such callers had been they had placed calls on the wrong person.


Out of 477 lawmaker that signed off on the attendance register on Friday, August 4, 2017, 380 lawmakers disappeared causing the lack of quorum for passing various bills in the parliament; following the demand of NWPP Lawmaker Dilliprasad Kafle for checking the presence of lawmakers in the parliament for passing the bills, Speaker Onsari Gharti Magar found only 97 lawmakers were present causing the lack of quorum for passing the bill; so, she postponed the passing of the bills for two days; following the Article 94 of the Constitution at least one-fourth of the total lawmakers needs to be present for passing any bills; currently, the parliament has 592 members; so at least 148 lawmakers need to be present for passing bills; more than 45 bills have been waiting for passing in the parliament; every lawmaker once signed off the attendance register entitled to receive an allowance of NPR 1,000 for her/his presence in the parliament,  the news in the front page of “gorkhapatra” stated on August 5, 2017.


After the revenues collected in the fiscal year 2016 has been twice the revenue collected in fiscal year 2015, the Ministry of Land Reform and Management has set up four teams: one team for Jhapa, Morang, Sunsari, another for Bharatpur and Butwal, and one each for Banke and Kaski to investigate the causes of doubling the revenue; the capital income tax collected on sale and purchase of property was NPR 2.07 billion in the FY 2015; it increased to NPR 4.62 billion in the FY 2016, the news in “gorkhapatra” stated on August 3, 2017.


The divisional bench of Judges Bhimkumar Ojha, and Balbhadra Banstola of the high Court of Patan has issued an order to release SSP Shyam Bahadur Khatri involved in smuggling 33 kgs of gold on a general date, repealing the ruling of the Kathmandu District Court on demanding NPR 200,000 bail amount for releasing SSP Khatri, the news in “gorkhapatra” of July 30, 2017 stated. Gold smuggling has been rampant causing millions if not billions of revenue loss to the nation. Smugglers have been smart to exploit the legal loopholes for release and pardon.


The meeting of the Parliamentary Public Account Committee held on Tuesday, August 1, 2017 has instructed the government to repeal the contract on installing 25 MW solar power plant in Nuwakot the previous government had awarded to the Chinese Company called “Risen Energy Company” at NPR 3.72 billion not awarding another Chinese Company called “Pinggao and Haroen Company” that quoted NPR 3.04 billion causing the loss of NPR 0.68 billion to the State, and also instructed the government to start a fresh process for awarding the contract on this project following the Public Procurement Act, and the rules and regulations, and act transparently; the estimated cost of the project is NPR 4.50 billion, and the World Bank is providing Nepal with the funding for this project, the news in “gorkhapatra” of August 2, 2017 stated.


Prime Minister Sher Bahadur Deuba with the entourage of concerned ministers has made an inspection visit to the Mugling–Narayangad Road that connects the hills with the Terai obviously to expedite the ongoing expansion work on this vital road on August 2, 2017, and he said to the project chief and the contractor, “this road is a national lifeline; I cannot tolerate any delay in the project work; tell me directly if you have any problem of working with any state agencies; I will immediately resolve the problem; and I will talk to the donor agency: The World Bank if you have any problem, to resolve it,” the news in “gorkhapatra” stated on August 3, 2017.


With the funding from the World Bank, widening of this road has been going on since April 2015 with the target of completing it within two years. The deadline for completing the road has been missed in April 2017 but only 53 percent of the expansion work has been completed so far, and the new deadline has be set for December 2017 to complete, the news in “gorkhapatra” stated on August 3, 2017.


The Chinese government had built the Mugling–Narayangad Road in 1979 in grant. It has drastically cut the traveling time between Kathmandu and Terai. So, most of the vehicles take this route for traveling from Kathmandu to any destinations in terai. Consequently, the traffic has been heavy causing traffic jam and delay. So, widening of this road has been necessary. Then, the government reached an agreement with The World Bank for funding the expansion work and for completing it within two years starting in April 2015. However, only 53 percent of the completion of the expansion work has been completed in August 2017. The delay has been entirely due to the quakes and the embargo on trucks entering Nepal from India for about six months. According to the new agreement, the widening work will be completed in December 2017. The road will be widened from five meters to 11 meters from Narayangad for 16 km, and thereafter to seven meters up to Mugling. The total length of the road is 36. The time taken to travel on this road after the completion of the expansion work for any vehicles will be reduced to 35 minutes from 70 minutes, the news in “gorkhapatra” stated.


Speaking at the Parliamentary Committee on Good Governance and Monitoring, Chief Commissioner of CIAA has said that after the Constitution deleted the investigation into the improper activities from the functions, duty and rights of CIAA consequently, making CIAA not able to investigate the private sector and non-governmental organization thus reduced the jurisdiction of CIAA, and increased the policy-level irregularities, as even for the minor deals the government has made policy-level decisions, the news in “gorkhapara” of August 2, 2017 stated.


However, the lawmakers on the committee has charged CIAA with not being able to effective, and ignoring the corruption committed under the political protection; member of the committee also former prime minister Jhalanath Khanal has said that complaints about corruption in the education sector has been the highest but the investigation into the cases CIAA has done, has been insignificant, the news in “gorkhapara” stated.


The Parliamentary Committee on International Relations and Labor has found that the human trafficking from Nepal has been in conjunction with the State mechanism, as 60 percent of the laborers illegally going to the gulf countries for work have gone in close cooperation with the immigration officials, airport security, and airline officials, according to the report prepared by the Parliamentary team headed by Prabhu Shah: the then Chairman of the parliamentary Committee on International Relations and Labor after visiting the gulf countries such as Saudi Arabia, Kuwait, Qatar, and UAE, and interacting with the Nepalese laborers, the officials of the Nepalese embassy and other stakeholder for ten days for the onsite study on the situation and condition of laborers in Chaitra (March/April), the news in “gorkhapatra” on August 9, 2017 stated.


Some custom clearing agencies have been evading tax on imported goods in conjunction with the custom officials. The custom official has signed off two custom declaration forms for the same goods for two trucks with different license plates at the Bhairawa Custom Office means one truck going without paying tax on the goods it has been carrying; some of the custom officials suspicious of the second truck carrying the same custom declaration form stopped it and brought it back to the office; the chief of the custom office has said that serious investigation into the case would be done, and the concerned official would be questioned, the news in “gorkhapatra” on August 13, 2017 stated.


The Melamchi Drinking Water Development Board had awarded a contract to the Chinese Company called China-15 Railway Bureau for constructing the more than 27 km long tunnel at NPR 4.24 billions. The Chinese company started off digging the tunnel in April 2010 but it walked out of the job after excavating six kilometers of the tunnel in September 2012. Then, the Board signed off a contract on digging the rest of the tunnel with the Italian company CMC di Ravenna at NPR 7.72 billions in 2013, and the company started off digging the tunnel in January 2014. The estimated cost of the project is NPR 23 billions; so far, the expenditure has been NPR 22.34 billions as of August 10, 2017, the project chief has said.


The project was supposed to complete after four years in 2017 but the time was extended to September 30, 2017 in view of the Indian sanctions and the quakes in 2015. However, the project has not been on target, as it met a soft rock at 2.202 km of the remaining portion of the tunnel toward the Melamchi River, and constructing the tunnel has been drastically delayed. At the same time, the subcontractors have stopped working saying they have not received payments from the CMC di Ravenna. If the project meets its new target the water might flow to Kathmandu in March 2018; it has completed 25.382 km of the tunnel, the news in “gorkhapatra” on August 10, 2017 stated.


Coordination and cooperation among State agencies: Another serious barrier has been the lack of coordination among the State agencies that have preferred to work disregarding what another agency working in the same field is doing and has done. For example, the Department of Roads builds a road. Not even a month passes after the blacktopping of the road, the State agency responsible for water supply and sewers digs the newly built road, and the road becomes muddy and dusty again. The State money has been wasted on building a road.


On July 25, 2017, the Radio Nepal morning news has stated that the Minister for Urban Development made an inspection of the Kalanki-Nagdunga Road that has been waiting for widening for some time. According to the news, the minister found a number of electricity poles the Nepal Electricity Authority has to uproot and remove have remained in-situ; a number of illegally built sheds, and other structures some agencies have to remove remained unmoved, too. The total number of such barriers has been more than 1,300.


The ‘artha bazaar portion of “gorkhapatra” of July 25, 2017 has a news that Nepal Electricity Authority could not complete the construction of the Butwal-Gorusinghe-Lumbini 132 KVA transmission, as the Roads Department refused to give an approval of setting mono-poles along the under-construction Belahiya-Butwal Trade Road. The trade road is of multi-purpose, and so cannot be immediately give an approval of laying electricity poles along the green belt, the concerned engineer of the road project stated, according to the news. So, Nepal Electricity Authority has to find an alternative route at a higher cost.


The Parliamentary Public Finance Committee has instructed the government Prime Minister Deuba has presided over to make the State agencies work in coordination and in cooperation with each other so that the taxpayers’ money would not wasted on building a road that is to dig just only after the blacktopping.


After a schoolgirl drowned in the pothole water, another was saved in Kathmandu, Prime Minister Sher Bahadur Deuba call out the officials of the concerned ministries such as Transport, urban and local development to fill out the potholes working in cooperation and coordination within 15 days. Most of such cases elsewhere in Nepal went unnoticed.


The concerned State agencies have been smart enough to fill out the potholes even working under the heavy downpour of monsoon rains, and even blacktopped in some important areas where the Prime Minister often travels. However, potholes might reappear soon, as earth was used to fill out rather than stone aggregates the prime minister had instructed.


Speaking at the Reporters’ Club on Friday, July 28, 2017, the newly appointed Minister for Physical Planning and Transport Bir Bahadur Balayar has regretted that the prime minister has to order the State agencies for filling out the potholes on the roads in Kathmandu even though repairing roads has been the regular business of these State agencies.


Prime Minister Deuba has demonstrated he could bring the concerned State agencies together and work them, too. In fact, any prime minister is accountable to make the State agencies work in coordination and cooperation. However, not always a prime minister could do so particularly when some ministers belong to the political party of another coalition partner, as those ministers often believed they were accountable to their party boss than the prime minister.


National Planning Commission is another agency responsible for coordinating the ministries. It directly reports to the prime minister. So, it might not have any problem of making the ministries work together but such things have not been happening. Again ministers work independently of other ministers and such an agency and even of the prime minister sometimes challenging the prime minister.


Neighbors as barriers: Neighbors also have been instrumental to help Nepal develop and sometimes became the barriers to the economic development. China and India have contributed the most to building infrastructures such as roads, and highways, to developing industries, and education and so on. Sometimes, both China and India stood as strong barriers to the economic growth in Nepal.


For example, India imposed sanctions on Nepal even when Nepal was reeling from the massive quakes that devastated almost the entire central Nepal in 2015, adding pains to the common folks in Nepal. Even though India has the severe short supply of electricity it did not want to buy electricity generated in Nepal adversely affecting the hydropower development in Nepal. India has whimsically acted to stop the import of agricultural products from Nepal. These are the few examples India has done to hamper the economic development of Nepal in the past.


Indian Border Security Police have been making a trouble to the transporters of goods and even commuters checking the goods trucks and passengers at the Sunauli: the Indian side of the border checkpoint at the Belahiya-Sunauli border in the Rupandehi District since the last week of July 2017 causing tremendous delay in the export and the import between Nepal and India; the Indian Police have been checking the trucks and the commuters moving back and forth between Nepal and India, the news in the “artha bazaar” section of “gorkhapatra” stated on August 6, 2017.


Anytime India wants to restrict the movement of goods and people then it uses the soft tool of checking anything or anybody going in and going out of India at the border between Nepal and India. It has been an open secret in the past and even today. India might have a genuine security reason for doing so but India could expedite the checking deploying additional police but Indian border officials even ignored the Nepalese local administration’s request for adding some police to perform the checking the trucks at Sunauli, according to the news in “gorkhapatra”. So, the reason for strict border checking might be beyond the security.


According to the news in the “artha bazaar” section of “gorkhapatra” on August 6, 2017, import of Indian cement has gradually decreased since the State circular on checking the quality of Indian cement received on May 31, 2017, and has totally stopped on July 16, 2017, said the information officer at the Nepalgunj Custom Office. Following the circular, the Custom Office needs to send the cement sample to Kathmandu for a lab test, and get the result before the Custom Office could release the cement. Getting result after a lab test in Kathmandu takes 16 days.


Nepal has strictly followed the Indian tactic of restricting import of cement. India used to ask the Indian Custom Office at the border with Eastern Nepal to conduct a lab test of Nepalese agricultural products requiring taking samples to Kolkatta (Calcutta) whenever India wanted to stop or decrease the import of Nepalese products. Nepal has been self-sufficient in cement. So, Nepal wants to restrict the import of cement or it might be the success of the cement producers’ lobby in Nepal. Such a trick might harm the consumers as the cement producers might have the monopoly on setting the prices of cement or even causing an artificial shortage of cement.


China has not opened the Tatopani border point in the east closed after the quakes hit central Nepal in 2015 stopping billions of NPR worth merchandise import from China, and denying the local people the most needed employment. Whatever the reasons for not opening the border point for smooth transport might be it has been the barrier to the development in Nepal.


Surely, China has opened up its territory and a port for Nepal to pass through for reaching the third countries when India blocked Nepal in 2015 but without the proper roads and railways linking to the Chinese border, the passage has been only on paper. The highly hyped “One Belt One Road’ has been the hope for Nepal but when it will arrive Nepal, and becomes a reality remains to be seen.


August 12, 2017





"Tax Settlement Commission itself was against law"

 July 23, 2017 08:40 AM Republica


In its 54th audit report, Office of the Auditor General had disclosed in April that controversial tax discounts of over Rs 21 billion were provided to different firms and companies by the Tax Settlement Commission (TSC) led by Lumba Dhawaj Mahat. The commission formed in 2015 had decided on the taxes worth Rs 30.52 billion and settled at Rs 9.54 billion.


Erstwhile Acting Auditor General Sukadev Bhattarai Khatri took the decision to disclose the issue although they were under great pressure not to do so.


The audit report has questioned the opaque tax settlement, which incurred huge loss to the government. Commission on Investigation into Abuse of Authority (CIAA) has investigated the issue and has recently filed corruption cases against all three members of the TSC at the Special Court and it has sought to recover Rs 10.02 billion from each member. TSC’s member secretary Chudamani Sharma is in custody while Mahat and Umesh Dhakal are at large. Republica’s Rudra Pangeni caught up with Khatri to take insight on various aspects of controversial tax settlements. Excerpts:


Can’t the court or any other agency question the decisions of Tax Settlement Commission? 


We should first consider the existing tax laws and the practice of self-declaration of taxes. We should pay the taxes accordingly as per the Income Tax Act of 2002. Unlike today’s self-declaration practice, tax officials used to determine the tax payable by all the business firms and companies before 2002. The tax disputes could be high because tax officers used to determine the taxes. Now the context is different as taxpayers declare taxes on their own. Tax offices can reassess the taxes if needed. If dissatisfied with such reassessment, the taxpayers can seek legal remedies at three levels.


They can apply for review with director general of the Inland Revenue Department. Then they can appeal at the Revenue Tribunal if dissatisfied again. As last resort, they can go to Supreme Court to address their grievance. This means, taxpayers have already got ample opportunity to address their grievances and the commission is not needed in the changed context.  On the other hand, only the parliament can waive the taxes and no others can do so, according to the Income Tax Act. The new laws replace old ones, says the legal practice.


Can we conclude that the commission’s decision can be questioned?


Of course, its decisions can be questioned. Its decisions other than in good faith can be questioned, as per Tax Settlement Act 1976. On the other hand, the constitution says that any issue except statements made in the parliament can be questioned at the court, and this provision does not even spare the President. Therefore the commission cannot be above the law. The prevailing law -- the Income Tax Act -- has said that only the parliament can waive or reduce the tax.


What’s the exact loss to the state coffers due to the commission decision?


Upon applications received related to tax dispute worth Rs 40.83 billion, the commission decided on pending taxes worth Rs 30.52 billion only. The commission negotiated at Rs 9.54 billion as payable taxes and waived Rs 21 billion. After the commission’s decision, taxpayers have paid about Rs 6 billion out of Rs 9.54 billion and remaining over Rs 3 billion is not yet paid. It means the loss to the state coffers is Rs 24 billion.


What are the factors behind such big loss of Rs 24 billion to the state coffers? 


Preamble of the Tax Settlement Act 1976 has clearly stated that the commission can be instituted to settle disputed taxes in good faith for the cause of the country’s economic benefit. But the commission has abused the clause of ‘good faith’ stated in the law, which has caused the losses the state.


The commission was meant for settling taxes for the bankrupt and insolvent firms but this commission has waived taxes of the companies and firms that are making robust profits and are being operated by the people living lavish lifestyles. The commission has waived the Value Added Taxes (VAT) worth Rs 770 million to distilleries, hotels and construction companies. The VAT is collected from the customers and should be compulsorily paid to the state within the deadline.


This is only a tip of iceberg we disclosed following a brief study of the commission’s report in our 54th audit report unveiled in April. We are yet to study all the files. The waived amount on VAT is huge, according to our estimate.


What type of a crime the commission has committed by waiving the taxes collected from the customers?


The business houses and companies collected 13 percent VAT promising to pay the amount to the government. But the commission defined it as tax dispute and waived it. Moreover, the commission has surprisingly decided to return already paid taxes through self-declaration system. The commission has returned Rs 78.2 million to 9 taxpayers and such amount could be more.


The commission had ill intention in making such decisions then. Do you agree?


Yes, it has waived the VAT, and also decided to return the taxes from the state coffers. This proves the commission had mal-intention while making such decisions. It’s not only against the tax laws but also a serious crime.


What is your reaction to returning the money from the state coffers?


It’s quite difficult to understand why they decided this. At the same time it is also interesting to note that a business firm has got waiver of 99.05 percent. The disputed tax amount of a distillery was Rs 3.29 billion but it was settled at Rs 39.9 million. Statistics show that a firm has been asked to pay only Rs 10,000 in a tax dispute of Rs 446.6 million.


Business people were appealing repeatedly to the government for setting up commission for one time. Isn’t this settlement report unfolding the mystery behind their plea?


Take an example of three firms of the same type named A, B and C and almost equal amount of the taxes they owed to the government. Let’s say annual transaction of each firms was worth Rs 10 million and their profits were also similar. Firm ‘C’ paid taxes as per law and in time but ‘A’ and ‘B’ did not. They rather waited for the set up of the commission to get waiver. If we allow practices like this, then it can grow into an epidemic for the country’s taxation system.


Can the government recover the settled taxes in this way?


The commission has already negotiated on the disputed taxes and settled through a contract signing. It is not practical to recover.


Are those who allowed such illicit waiver, are the culprits?


You can understand it easily. I don’t have to state this.


Do you mean the business firms can be aloof from it but not the people in the commission?


This is a case under judicial review. Let us not comment on it.


Hasn’t the commission followed its own guidelines while settling the tax disputes?


No, it has not followed. It has waived only around 35 percent taxes to the government entities while the private businesses and firms have got 99 percent tax discounts. It is evident that it did not follow its own guidelines and decided without any rationale.


Why was the commission given more authority than permitted by the law?


Yes, the commission was given more authority. In 2008, in a meeting of the Public Accounts Committee, erstwhile secretary of Ministry of Finance and deputy auditor general had pledged not to form such commission but the government formed it. 


Does the Income Tax Act 2002 forbid forming of such commission?


The act restricted anyone going beyond this law. As the clause 142 has clearly stated that no one except the parliament can reduce, increase or waive tax. The commission was formed despite the provision of three agencies-- director general of Inland Revenue Department, Revenue Tribunal and the Supreme Court -- for appeal. The Income Tax Act 2002 has no provision for the commission. Had it (the act) thought about formation of such commission, it would not have provided for the three agencies for appeal.


Did you receive any pressure from the political quarters and business communities to not disclose the works of the commission in your audit report?


The government provided the commission’s report only after we complained at the parliamentary committee. Various government agencies made delays to provide details against our efforts to assess the taxation of a telecom company. We decided that taxes were due although the cabinet had decided to waive it. We were pressurized to omit both issues but we replied them that we were putting it in the report anyway. 


Is erstwhile Minister for Finance Ram Sharan Mahat responsible for these decisions? Is he clean?


Mahat himself had contributed to bring in the Income Tax Act 2002. He should have known that there was no rationality for the Tax Settlement Commission after the Act came into effect. Why did he institute such commission, which he knew was against the Act? I do not understand it. It’s better to ask him.


July 23, 2017 08:40 AM Republica


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