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Finance Minister Ram Saran Mahat is presenting the budget for the fiscal year 2080/081 BS (2023/24) in a joint session of the federal Parliament on Monday. Prior to that, a meeting of the Council of Ministers endorsed the budget details, granting permission for its presentation in the House. Soon after the commencement of the House session, Speaker Devraj Ghimire invited the finance minister to present the budget for the upcoming fiscal year. The Constitution states that the finance minister shall lay before the Federal Parliament an estimate of revenues and expenditures under clause (1) on the 15th day of Jeth (mid- May) each year. In Nepal's history, the first budget speech was held on February 4, 1952 following the restoration of democracy. It was announced by the then Finance Minister Subarna Shumser Rana and its size was equivalent to Rs 52.5 million.

All eyes are on Finance Minister Prakash Saran Mahat as he prepares to present the federal budget for the next fiscal year on Monday. The constitution of Nepal mandates the government to present the annual budget to the parliament on Jestha 15 (May 29) every year. For the government in previous years, presenting the budget used to be a somewhat easy affair; the budget speech used to be full of populist programs with the government trying to please everyone. The situation is very different this year as a severe resource crunch has forced Finance Minister Mahat to walk a tightrope where he has to manage the expectations of many while also bringing a prudent budget at the same time. Probably never before has any finance minister been forced to prepare a budget with an acute scarcity of financial resources as Mahat. In Nepal, it has been common for every finance minister to bring a budget with a size higher than the previous one, but the implementation of the budget has always been poor. The tendency of bringing a bloated budget but not being able to spend it fully has been repeating for years in Nepal. While the spending capacity of the government has not increased in the last decade, the trend is to bring abnormally large budgets. In the last 10 years, the government has been able to spend an average of only 81.31 percent of the total allocated budget annually. The highest budget spending was in FY 2012/13 when the total expenditure reached 88.7 percent. The data of the last 10 years shows the government has increased the budget size by an average of 44 percent over the actual expenditure of the previous year. While the actual spending stood at Rs 1,309bn in FY 2021/22, the government came up with an annual budget of Rs 1,793bn for FY 2022/23. The size of the current fiscal year budget was increased by 36.97 percent of the actual amount spent in FY 2021/22. In FY 2016/17, the government brought a Rs 1,048bn budget, which was 74.37 percent higher than the actual spending of FY 2015/16. Official statistics show budget utilization has remained sluggish in the last 10 years. The government has been able to utilize on average only 81.31 percent of the total allocated budget in the past decade. The highest spending was recorded in FY 2012/13 when 88.7 percent of the total budget was spent, while the expenditure was most sluggish in FY 2019/20 when only 71.18 percent of the total budget allocation was spent. Economists say the trend of bringing a bloated budget but spending the allocated amount sluggishly has diminished the public’s trust in the budget. “By not being able to spend the budget, the government has failed to fulfill its responsibilities,” said economist Chandra Mani Adhikari. “While presenting the budget, the government promises many facilities to its citizens. When the government fails to implement the budget, the citizens of the country are deprived of the facilities announced by the budget.” The state of capital expenditure spending (development budget) is much weaker. Even as the federal budget is presented six weeks before the start of the new fiscal year, the government has failed to install measures to expedite the development budget. Every year, the government has struggled to spend the allocated capital expenditure, only to promise that it will resolve the problems next year. According to the Financial Comptroller General Office (FCGO), capital expenditure amounted to Rs 135.44bn till May 14. It means only 35.61 percent of the capital expenditure has been spent in the 10 and half months of the current fiscal year. Official statistics show that the government has managed to spend only 72 percent of the capital budget on average every year. The majority of capital expenditure takes place in the last month of the fiscal year i.e., Asar (mid-June to mid-July). The report of the Office of the Auditor General (OAG) also shows that 40 percent of the total capital expenditure takes place in Asar. This creates room for fiscal indiscipline and also affects the quality of the development works. Economists say capital spending is one of the major factors that determine the country’s economic growth rate. The government's capital expenditure includes spending made in infrastructure development, construction, and other sectors that help generate capital formation in the country. Economists and former government officials cite multiple reasons for the poor state of capital expenditure. According to them, starting construction work without preparing a detailed project report (DPR), no clarity in the project implementation modality, land acquisition, and compensation disputes, and lack of inter-agency coordination in the transfer of utility services have plagued the country's development expenditure. Government officials admit the rushed spending that happens usually in the last month (Ashar) of the fiscal year has raised the quality of such spending. According to them, government agencies generally prepare procurements in the first quadrimester of the fiscal year. The spending picks up in the second half of the fiscal year after the government exerts pressure on agencies to speed up development works. “The late submission of bills, settlement of flaws in documentation, and political pressure to spend in certain areas are the reasons for a large amount of budget being spent in the last month of the fiscal year,” said the former secretary. Economist Adhikari points out the structural weaknesses in project preparation and implementation, bureaucratic delays in approving and re-approving projects, and contractor capacity. Total budget spending

Ahead of Prime Minister Pushpa Kamal Dahal’s visit to India, the Investment Board Nepal (IBN) has approved the draft of the power development agreement (PDA) of the Lower Arun Hydroelectric Project. A board meeting of IBN on Sunday endorsed the PDA draft to be signed with SJVN Lower Arun Power Development Company for the development of 669 MW Lower Arun HEP. The meeting chaired by Prime Minister Pushpa Kamal Dahal decided to approve the PDA and send it to the Cabinet for final endorsement. The IBN and the developer will sign the PDA agreement after the cabinet's endorsement. Earlier on April 13 this year, an IBN board meeting approved an investment of Rs 92.68bn proposed by the developer of the 669 MW Lower Arun Hydroelectric Project. The same meeting also decided to form a project development agreement (PDA) negotiation committee led by the IBN CEO. IBN on July 11, 2021, signed a pact with India’s state-owned Satluj Jal Vidyut Nigam to develop the Lower Arun Hydropower project in eastern Nepal. This is the second mega project undertaken by the SJVN after the $1.04bn 900-MW Arun-III hydroelectric project in the Arun River. As per the draft of the PDA, the project developer has to provide 21 percent of the total energy produced from the Lower Arun HEP to Nepal for free. The developer has been provided an income tax exemption for 15 years after the start of power generation. After the start of commercial production, the company will have to pay $11,000 per month to IBN. The IBN board meeting has also advanced the process of eviction of the Chinese company Power China from the 756 MW capacity Tamor Reservoir Hydroelectric Project. Providing a month's time, the meeting on Sunday decided to seek an explanation saying why the work is not progressing according to the agreement and action plan made by Power China to make the project together with the Nepali company HIDCL. “It has been decided to correspond with Power China regarding compliance with the Memorandum of Understanding dated 19 Jan 2020,” states a press statement issued by IBN. The HIDCL and Power China signed an agreement to develop the Tamor Project during Chinese President Xi Jinping’s visit to Nepal in 2019. Of late, HIDCL found it difficult to sell electricity in the Indian market while constructing the project in collaboration with a Chinese company, and it sent a proposal to the IBN to cancel this agreement. According to the IBN sources, the government decided to give one month's time to the Chinese company so that no legal dispute would arise later. Interestingly, the SJVN has shown interest in developing the Tamor Reservoir Project and has sought permission from the government.  

While the government has invested Rs 618bn in public enterprises (PEs), the returns have been minimal from such investments. The Annual Status Review of Public Enterprises published by the Finance Ministry shows the government received Rs 6.16bn in dividends from the PEs in FY 2021/22. According to the report which was presented to the federal parliament on Sunday, only 25 PEs are in profit while 17 are facing losses. The operating income of PEs has increased by 36.2 percent and reached Rs 575bn in the last fiscal year. However, compared to the previous fiscal, the net profit of PEs has decreased by 94.15 percent, according to the report. The net profit of PEs in FY 2021/22 stood at Rs 1.54bn only. In FY 2021/22, the net profit of 25 PEs increased by 33.65 percent while the net loss of 17 PEs rose by a staggering 610.96 percent. Among the PEs, Nepal Electricity Authority (NEA) earned Rs 13.37bn in profit in FY 2021/22 overtaking Nepal Telecom as the biggest profit earner; Nepal Telecom posted Rs 8.47bn profit in the last fiscal year. Meanwhile, Rastriya Banijya Bank, Citizen Investment Trust, and Deposit and Credit Guarantee Fund earned net profits of Rs 4.29bn, Rs 3.10bn, and Rs 3.01bn respectively. With PEs continuing to bleed taxpayers’ money, with no returns on the money invested from the state coffer, the government has put forward a plan to run PEs that are weak in terms of capital, and technology by the private sector. Finance Minister Prakash Saran Mahat made such a statement while unveiling the Economic Survey for FY 2022/23 on Sunday. “It is necessary to identify PEs that are not operating effectively and that do not need to be kept in the public sector. Such enterprises should be operated by the private sector with more capital technology and competent management,” said Mahat. The government in the third week of April this year, has also formed a task force to reform PEs under the leadership of former finance secretary Shankar Adhikari. The PEs in Nepal saw a drop in their profits post-Covid-19 pandemic, according to a recent report from the International Monetary Fund (IMF). While the total profits of PEs were largely unchanged in the initial stage of the pandemic (the last four months of FY 2019/20), the profits reduced by 0.5 percent of GDP in FY 2020/21, as almost half of PEs ran in losses that year. Except for the PEs in the financial services sector, institutions in trading, public utility, and services sectors saw a big drop in profits or an increase in losses in FY 2020/21. Compared with the pre-pandemic FY 2018/19, PEs’ contribution to fiscal revenue (income tax and dividends) declined by 0.16 percentage points of GDP in FY 2020/21 and 0.23 percentage points in FY 2021/22.  

As in the past years, Nepal again faces the risk of spillage of electricity in the monsoon season this year with India yet to approve exporting more than 452.6 MW of electricity from its northern neighbor. According to the Nepal Electricity Authority (NEA), the country’s power generation capacity has already reached 2,650 MW, while the projected peak domestic demand for power in the current fiscal year is 2,036 MW. A senior NEA official said the country is expected to see surplus energy of 700-800 MW in the late night time while there will be excess power production of 400-500 MW in the daytime in the wet season that starts in June and lasts till October. “So, there is an urgent need for us that the Indian government should provide approval to sell more power generated by more power projects in Nepal,” said the NEA official. “There may be some announcement in this regard during the Prime Minister’s visit to India.” Prime Minister Dahal is scheduled to visit India from May 31 to June 3. Cooperation in the energy sector is one of the major agendas of the Prime Minister’s visit to India, according to officials. After the then Prime Minister Sher Bahadur Deuba visited India in April last year, the southern neighbor had allowed Nepal to export 325 MW of electricity from 39 MW earlier. With the advent of monsoon, water levels in the rivers are expected to rise soon enabling Nepal’s run-of-river type projects to boost their energy production. “We may be able to export more power regularly if the country sees the continued rainfalls in the days to come,” said the NEA official. On Friday last week, NEA sold 100 MW of electricity in the evening as power production rose due to the rainfalls but exports were discontinued on Saturday and Sunday. Monsoon in Nepal typically begins in mid-June and the country will see excess production of power on a regular basis. NEA expects the country’s power generation capacity to rise to 2,853 MW by the end of the current fiscal year. By the end of the next fiscal year in mid-July 2024, Nepal’s electricity generation capacity is expected to rise further to 4,507 MW and to 5,251 MW by mid-July 2025. Nepal’s domestic demand for power is expected to grow to 2,280 MW in mid-July 2024 and 2,568 MW in mid-July 2025, NEA has forecasted. This clear disparity between domestic demand and the generation of power has forced Nepal to find the outside market as long as domestic demand grows substantially with increased economic activities and industrial growth. Nepal is seeking not only the Indian market but also the Bangladeshi market as well and seeking India's help to send Nepal’s power to Bangladesh too. A private sector developer said that even if India gives the approval to sell more electricity in the Indian market, the possibility of spillage of power continues. Currently, Nepal has been allowed to sell power only in the day-ahead market of India’s exchange market. The day-ahead market means that Nepal can sell electricity once quantity and price are determined a day ahead of the trading day. But Energy Ministry officials say that the southern neighbor is positive for Nepal's entry into its real-time trading market as well. In such a market, Nepal can sell electricity anytime when there is a possibility of excess power in the country. “In the real-time market and day-ahead market, buyers may not buy Nepal’s electricity or may seek power at a very cheap price depending on availability of power supply in the market,” said the private power developer. “That’s why, a long-term power purchase agreement with India buyers is a must to ensure that electricity is not wasted in Nepal.” NEA had sought to sell electricity in a six-month deal but it didn’t not sign any agreement citing the lower prices offered by the potential buyers. But it didn’t make any efforts to sell power under a long-term deal this year. According to the private power developer, NEA should have sought bids from the Indian companies for a longer-term power purchase agreement. NEA resumes electricity export to India Nepal has resumed electricity export to India after the surge in domestic power production. According to the Nepal Electricity Authority (NEA), it sold 600 MW hours of electricity to the day-ahead market of the Indian Energy Exchange on Saturday. With the water level in the rivers increasing with the start of pre-monsoon rainfall, the power generation from domestic hydropower plants has increased of late. NEA officials say the power generation from domestic power plants is currently around 1,300 MW. As most of the power production in the country is based on run-of-the-river hydropower plants, Nepal usually exports electricity to India during the wet season during which electricity production is at the fullest. Nepal has been selling electricity to India’s power exchange market since November 2021. NEA stopped power export to India in the second week of December last year following decrement in the water level in the rivers. The run-of-the-river type hydropower projects usually produce less than 40 percent of their installed capacity as water levels in the rivers decrease significantly during the dry season. NEA Spokesperson Suresh Bhattarai said that the power utility has resumed electricity export to the southern neighbor. “With the start of the pre-monsoon, power generation has been gradually increasing, enabling NEA to export excess electricity to India during night time,” he said. NEA has also stopped importing power from India from Friday. “The domestic demand has also been met due to the increase in domestic power generation,” said Bhattarai. NEA is targeting to export 1,200 MW this wet season to India. The authority has been selling electricity in the day-ahead market of Indian Energy Exchange Limited through daily bidding. Currently, the southern neighbor has allowed Nepal to sell 452.6 MW of electricity generated by 10 hydropower projects in the Indian power market. But the approvals given to the 10 hydropower projects need to be renewed every year. NEA has forwarded the list of additional projects including the 452 MW Upper Tamakoshi Project, the electricity of which it plans to sell to India. If the southern neighbor accepts the new list, the state-owned power utility will be able to export power according to its target. Nepal earned over Rs 11bn by supplying excess power to India from early June to mid-December, 2022. Nepal first started exporting power to India in early Nov 2021 through a competitive bidding process. But after exporting for a few weeks, Nepal stopped selling power to India in December amid a reduction in power generation in the dry season. Exports resumed in 2022 with the start of the monsoon in early June. The NEA has sold 1.35bn units of electricity to India since then and earned Rs 11.16bn. The power was sold at a rate between Rs 6.58 and Rs 12.15 a unit. NEA has reported that it earned Rs 2.83bn from exports from July to the end of the last fiscal year 2021/22 and an additional Rs 8.32bn since the start of the new fiscal year 2022/23. The authority has set a target of Rs 16bn within the current fiscal after resuming exports in May.

The gold is being traded at Rs 108, 100 per tola in the domestic market on Monday. According to the Federation of Nepal Gold and Silver Dealers’ Association, tejabi gold is being traded at Rs 107, 600 per tola. Similarly, the silver is being traded at Rs 1, 360 per tola today.

The 16th Republic Day is being marked nationwide by organizing several programs on Monday. The first-ever people-elected Constituent Assembly had proclaimed the federal democratic republican governance system in the country by officially abolishing the autocratic monarchy on 28 May 2008. The Republic Day is celebrated across the nation on Jetha 15 (May 29) every year in commemoration of the day the republican system was proclaimed on the backing of the historical people's movement of 2006 AD (2062-063 BS). The Republic Day is being marked commemorating the commencement of democratic republican system resting all state power on the people. On 24 April 2006, the then King Gyanendra Shah had reinstated the Parliament that was dissolved on 22 May 2002 The republic system was set up in the country on the backing of the 2006 April uprising.

Nagarik Unmukti Party leader Resham Chaudhary has been released from prison on Monday. He was released from the jail this morning after President Ram Chandra Paudel, on the recommendation of the government, pardoned his remaining sentence on the occasion of Republic Day. Chaudhary was serving a life term in Dillibazaar Prison after being convicted of masterminding the 2015 Tikapur massacre. Earlier on Sunday, the government had recommended the President’s Office to pardon his remaining jail term. Responding to journalists after being released from the prison, Chaudhary said that he is innocent. He was of the opinion that the government should take action against the real culprits. Saying that the Tikapur incident should be investigated, he demanded that a high-level probe commission should be formed for the same. He said that the Tikapur incident is not the incident that took place in a closed room. Chaudhary said that Tharus were not completely involved in the incident. He also thanked the government for releasing him. Chaudhary’s father and mother and his wife and minister Ranjita Chaudhary had reached the Dillibazaar Prison to receive him. Nagarik Unmukti Party leaders, cadres and his well-wishers had also reached the prison to welcome Chaudhary. The Kailai District Court on February 24, 2019 handed down a life sentence to 11 people including Chaudhary in connection with the 2015 Tikapur incident in which nine people including seven security personnel and a toddler were killed in a violent clash. The Dipayal High Court on December 18, 2020 upheld the decision of the District Court. Earlier on May 16, the Supreme Court upheld the decision of Kailali District Court and Dipayal High Court to sentence Chaudhary to life imprisonment in the Tikapur incident.