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The government’s ongoing struggle with revenue collection, which persisted throughout the previous fiscal year, appears to persist into the current fiscal year as well. The initial two months of FY 2023/24 have not shown any significant enhancement in the government’s revenue collection. According to recent data from the Financial Comptroller General Office (FCGO), the government has managed to achieve just 9.92 percent of its total revenue goal during this period.

In fact, the current fiscal year has witnessed a weaker performance in revenue collection compared to the previous fiscal year. In the first two months of FY 2023/24, government revenue collection amounted to Rs 141.07bn, slightly lower than the Rs 143.81bn achieved during the same period in FY 2022/23.

The Department of Customs (DoC) and the Inland Revenue Department (IRD) are the two major revenue collectors of the federal government. The statistics show, both agencies continuously collect revenue below the targets in this fiscal also.

The IRD has collected only 78.75 percent of the target in the first two months of this fiscal. The department has been able to collect only Rs 66.19bn against the target of Rs 84.05bn. In fact, the IRD’s revenue collection in the first two months of FY 2023/24 is 2.54 percent less than that of FY 2022/23’s first two months. 

While the Custom Department has seen some improvement, its revenue collection is also below the target. The department has managed to collect 75.5 percent of the target in the first two months of this fiscal. The DoC has collected Rs 67.95bn in revenue in the first two months against the target of Rs 90.28bn. 

Finance Ministry officials attribute the subdued economic activities to the slowdown in revenue collection. Despite the Dashain festival nearing, traders say there is not much movement in the market. The ministry had called a meeting of the heads of departments and discussed the decline in revenue.

The ministry has also formed a task force to study the problem of revenue leakage. The meeting of the Central Revenue Leakage Control Committee last Friday formed a working group under the coordination of the Revenue Secretary to analyze the trend of revenue leakage and submit an action plan with concrete measures to control it within a week.

Marginal growth in capital expenditure

There has been some improvement in the capital expenditure in the current fiscal year. The government has spent Rs 8.163bn under the capital expenditure heading in the first two months compared to Rs 5.86bn during the same period in the last fiscal. 

According to the officials of the Finance Ministry, the surge in the capital expenditure in this fiscal was due to the government releasing dues of the last fiscal year that were accrued to the contractors. The government has allocated Rs 302.07bn under the capital expenditure for FY 2023/24. 

The government spent Rs 87.66bn under recurrent expenditure in the first two months of the current fiscal year, which was less than Rs 21.06bn compared to the review period of the last fiscal year.

The price of gold has dropped by Rs 200 per tola in the domestic market on Wednesday.

According to the Federation of Nepal Gold and Silver Dealers’ Association, the yellow metal is being traded at Rs 112, 800 per tola today. It was traded at Rs 113, 000 per tola on Tuesday.

Meanwhile, tejabi gold is being traded at Rs 112, 250 per tola. It was traded at Rs 112, 450 per tola.

Similarly, the price of silver has dropped by Rs 5 and is being traded at Rs 1, 405 per tola.

The Upper Arun Hydropower Project has received a significant boost as the government has opted for a concessional loan of $6m to fund the project’s initial preparations. The Cabinet meeting on Friday, approved around Rs 800m in funding from the World Bank to support the preparatory phase of the Upper Arun Hydropower Project.

Of late, there has been some momentum about the 1,061 MW project with the Finance Ministry, in the second week of June, organizing a discussion with donor agencies to secure investments for its construction. This meeting was attended by representatives from several organizations, including the World Bank, Asian Development Bank, JICA, the German Government, OPEC Fund, European Union, European Investment Bank, Germany, and Saudi Development Fund, among others.

During the discussion, representatives from the World Bank, Asian Development Bank, JICA Fund, and Saudi Fund expressed their willingness to invest in the Upper Arun project. Meanwhile, the representative from the German government indicated their readiness to invest in the transmission line contingent upon the project’s progress.

The Nepal Electricity Authority (NEA) intends to finalize the financial closure of the project by the end of 2023. The state-owned power utility has initiated the necessary steps to secure financing for the 1,061 MW project through collaborations with the World Bank and local lenders.

NEA has commenced project development by founding Upper Arun Hydropower Limited. NEA has projected that an investment of Rs 214.86bn will be necessary for the project’s development.

Out of the entire project cost, 70 percent, which amounts to Rs 150.40bn, is being sourced through loans. The World Bank has expressed its commitment to provide Rs 97.06bn in the form of a loan for the project.

The World Bank will serve as the primary international financial institution responsible for funding the construction of the project, located in the upper reaches of the Arun River within the Bhotekhola Rural Municipality of the Sankhuwasbha district. As per Finance Ministry officials, the World Bank will also lead efforts to secure investments from other donors, including the Asian Development Bank, OPEC Fund, and European Investment Bank, among others.

NEA officials said that the World Bank has already promised to provide loans for this project. “We are working to make a financial agreement with the World Bank within this year,” said the NEA source.

The project will be structured with a 70:30 debt-to-equity ratio. According to NEA, the project will secure funding through Rs 150bn in loans, consisting of Rs 97 billion from international financiers and Rs 53bn from domestic creditors.

This is the first time the global lender is back in the hydropower project in the Arun River after the debacle of the Arun-3 project in the mid-90s. 

As per NEA, a total of Rs 53bn will be raised through collaboration with a consortium of domestic institutions, which includes Hydropower Investment and Development Company Limited (HIDCL), Nepal Bank, Rastriya Banijya Bank, and Citizen Investment Trust. An initial memorandum of understanding was executed between the project's promoter company, Upper Arun Hydropower Limited, and these institutions in August of the previous year. NEA intends to finalize agreements simultaneously with both the World Bank and these domestic institutions.

The promoter company Upper Arun Hydropower Limited will invest 30 percent i.e. Rs 64.46bn in the project as equity. 

The government had advanced the concept of this project in 1985 and a feasibility study was done in 1986. The government in 2011 had entrusted the development of the project to NEA.

Currently, works are being carried out to design the tender for the construction of the project. NEA plans to start the construction of the project in 2024. It is estimated that the project will take about six years to complete, which is the picking run-of-river project. 

NEA has said that about 100 meters high will be constructed on the Arun River and the water will be channelized through an 8.5 km long tunnel to an underground hydroelectric plant in Chongrak. The project will generate 4.51bn units of electricity annually.

That electricity from the project will be connected to the substation at Haitar Sankhuwasabha by constructing a 400 kV double circuit transmission line about 6 km long from the powerhouse.

The Nepal Stock Exchange (NEPSE) gained 16.24 points to close at 1,985.43 points on Tuesday.

Similarly, the sensitive index surged by 2.43 points to close at 381. 17 points.

A total of 4,336,583-unit shares of 272 companies were traded for Rs 1. 17 billion.

Meanwhile, Shuvam Power Limited was the top gainer today, with its price surging by 10. 00 percent. Likewise, Emerging Nepal Limited was the top loser as its price fell by 8.00 percent.

At the end of the day, total market capitalization stood at Rs 2. 99 trillion.