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Nepal has made significant progress on fiscal federalism, but more needs to be done to strengthen the regulatory framework, institutional setup, human resource capacity, and public financial management (PFM) systems at the provincial and local levels, says the World Bank in its first annual ‘Nepal Fiscal Federalism Update’. The report unveiled on Thursday said that moving into the next phase of fiscal federalism requires further legal and institutional reforms. “The existing structure of concurrent responsibilities on expenditure and service delivery among the three tiers of government provides overlapping mandates to different tiers of government and hinders responsiveness to citizens’ demands,” states the report. “Adjusting the regulatory framework to give clarity on these aspects would reduce duplication in spending and enable better service delivery.” The report also highlights that unclear division of tax responsibilities undermines the materialization of provincial and local governments (PLGs)’ own-source revenue potential. “There is a need to strengthen the institutional capacity and the coordination arrangements between the key federal institutions responsible for fiscal federalism; and of them with the provinces and local governments,” says the World Bank. “The report highlights the need to develop a fiscal federalism roadmap that encompasses a clear set of actions, sequence, timeline, and responsible actors to improve fiscal federalism outcomes in Nepal,” said Balananda Paudel, Chairperson of the National Natural Resource and Fiscal Commission. The report says the intergovernmental fiscal transfer (IGFT) mechanisms need to be revised to make them more effective and introduce more flexibility. Four types of such mechanisms have been established to distribute funds from the Federal Government to PLGs and from provincial to local governments. While provincial and local governments received nearly 36.7 percent of the federal money through intergovernmental fiscal transfers which amounted to 64.8 percent of their revenue in the fiscal year 2021. The largest and proportionally growing fund transfers to subnational governments, in the past five years, have been through conditional grants. Since conditional grants are heavily earmarked, they limit PLGs’ spending autonomy and maintain undue control from the federal government on PLG spending. The share of conditional grants needs to be gradually lowered and other grants including equalization grants be increased following the expenditure capacity of the provincial and local government increases, according to the report “There is room to improve the current IGFT system to make the transfers more flexible, clear, and timely, as well as increasingly performance-based, to enable PLGs to better align their available resources with planning processes and investment priorities and facilitate better outcomes of PLG service delivery,” reads the report According to the World Bank, while considerable progress has been made on sub-national public financial management (PFM) performance, the report says, challenges remain in terms of the effectiveness of certain processes and compliance with the applicable policies of sub-national public financial management. “The proportion of conditional grants seems to be high in the early years of federalization due to the transfer of projects to provincial and local governments being operationalized by the federal government in the past and contributing the salary and allowances of teachers and health staff deputed in the local governments and it will be gradually improved as situation changes. The recommendations are well aligned with our national development plan and further support our ongoing efforts to advance fiscal federalism,” said Ram Prasad Ghimire, Revenue Secretary at the Ministry of Finance. The Nepal Fiscal Federalism Update identifies key reforms to help Nepal improve fiscal federalism outcomes. It recommends developing a fiscal federalism roadmap to guide and monitor the reforms in this area, reinforcing the Intergovernmental Fiscal Transfer system, and establishing a consolidated PFM performance database at the subnational level. It also recommends amending the legal framework to clarify the concurrent and shared responsibilities among the three tiers of government, strengthening the capacity of provincial and local government staff to carry out PFM-related functions, and reinforcing systems to improve the budget credibility and delivery of services by subnational governments. “Fiscal Federalism is a foundation for sustained service delivery by provincial and local governments. To this, they need adequate financial resources and the ability to make spending decisions at the subnational level, in the spirit of federalism,” said Faris Hadad-Zervos, World Bank Country Director for Maldives, Nepal, and Sri Lanka.

USAID on Thursday launched an up to $5m USAID Agriculture Higher Education activity. In December 2022, USAID awarded this five-year activity to Tuskegee University, in collaboration with Nepali partner Sathguru, Inc., to enhance the capacity of the Agriculture and Forestry University (AFU) and increase the number of workforce-ready students by strengthening the university’s research and teaching methodology. Established in 2010 and with a current student population of more than 1,800, AFU is Nepal’s premier agricultural university. Tuskegee University has a long history in agriculture and higher education while using the asset of student diversity to drive innovation. Through this new partnership, AFU will be able to leverage Tuskegee University’s experiences to strengthen the academic, research, and extension capacity of AFU and develop the entrepreneurial spirit of AFU students to become a significant force in the agricultural transformation of Nepal. Speaking at the launch event, USAID Agency Counselor Clinton White said, “USAID is thrilled to launch this new Agriculture Higher Education activity to further strengthen our engagement with AFU. The partnership with Tuskegee University, a US higher education institution and a Historically Black College and University, brings a unique set of strengths, experiences, and expertise. The activity will improve the quality of agricultural higher education, increase graduates’ employability through a market-driven curriculum, and contribute to strengthening agricultural research and extension. It also helps expand and diversity our partnerships with new local Nepali organizations” USAID Agriculture Higher Education is one of the latest examples of the United States’ long partnership with Nepal to improve food security and strengthen economic development in Nepal. Counselor White is on a three-day visit to Nepal, where he will meet with the Government of Nepal, civil society leaders, community groups, students, and businesses and will discuss continued collaboration and partnership between the US and Nepal.

Energy Minister Shakti Basnet has asked the private sector to get ready for the power trade. Addressing the 21st annual general meeting (AGM) of the Independent Power Producers' Association Nepal (IPPAN) on Thursday, Basnet said the government is all set to open power trading for the private sector. According to Basnet, the Electricity Bill 2080 will be registered in the parliament soon and its parliamentary endorsement will pave the way for the private sector to engage in power trading. “The bill is currently reviewed by the ministries concerned,” said Basnet. The government, according to Basnet, is going to implement a campaign called ‘Energy for Development’ to further develop the energy sector. “The campaign is aimed at increasing production, distribution, transmission, trade, and consumption of electricity,” he said. IPPAN President Krishna Prasad Acharya said that the government should open the way as the private sector is ready for power trading. Stating that the country’s electricity generation increased after the entry of the private sector, Acharya said that the private sector should now be allowed to do power trade business in order to increase consumption and export of electricity. Private power producers have been lobbying for their involvement in power trading. This demand stems from the fact that the Nepal Electricity Authority (NEA) currently holds a monopoly on power purchase agreements (PPAs), leaving no other entity in the country authorized to sign such agreements with power producers. The power producers have been gearing up for power trading licenses by establishing power trade companies. According to the Department of Electricity Development (DoED), Nepal Power Exchange Ltd (NEPEX) and Power Trading and Energy Exchange Ltd (PTEEL) have applied for power trading licenses. Similarly, Nepal Infrastructure Bank has applied to the Ministry of Energy, on behalf of the Power Trading Company (PTC) Ltd, and the Himalayan Trading Company is also preparing to register an application for the license. While the private sector in Nepal is still awaiting the trading license to sell electricity in both domestic and foreign markets, some private entities have already signed memorandums of understanding (MoUs) with Indian companies for the cross-border trading of electricity. The Nepal Power Exchange Limited (NPEL), subsidiary of IPPAN has already signed an agreement with Manikaran Power Limited, India to carry out cross-border electricity trade. As per the MoU, the Indian company will buy 500MW of electricity from the Nepal Power Exchange Limited besides investing in the Nepali company itself. During the Power Summit 2023, Nepali and Indian companies signed initial deals for selling 2,200 MW of electricity to India. Karki elected new IPPAN President The 21st AGM of IPPAN also elected a new executive committee. Ganesh Karki has been elected as the new president of the association unopposed. Similarly, all office bearers including Mohan Kurma Dangi as Senior Vice President were elected unopposed. The meeting elected Ashish Garg, Bharat Kumar Khatri, Uttam Vlon Lama, Ram Prasad Acharya, and Anand Chaudhary as vice presidents of IPPAN. Similarly, Balram Khatiwada was elected as the General Secretary. Prakash Chandra Dulal as the Deputy Secretary General. Likewise, Bharat Prasad Nepal, Bharat Kumar Khadka, Kavita Pokharel, Vikram Bista, and Him Prasad Pathak have been elected as secretaries.

President of the Independent Power Producers' Association-Nepal (IPPAN) Krishna Prasad Acharya today said the government should pave the way for the private sector to trade electric power. The private sector has had a large investment in the energy sector, he argued while speaking at the inaugural session of the 21st annual general meeting of the IPPAN today. He stressed the need for the country to make optimum utilization of energy, the foundation of economic prosperity for a country. "Lately, carbon emission reduction has been a global issue. Nepal is one of the countries with the ability to contribute to carbon reduction. There is much potential for clean energy in Nepal. There is potential for hydropower and solar energy," he said. Saying that increment of internal power consumption has been a challenge, he suggested increasing power consumption in industries, irrigation, electric ovens and electric vehicles. The private sector could play a role in power consumption increment and energy export, he was of the view. Referring to the recent Indian visit of Prime Minister Pushpa Kamal Dahal, he said, "The visit focused on economic issues. More so, this focused on energy. This is a matter of happiness for power entrepreneurs." The matter of reaching a memorandum of understanding to export 10,000 megawatts of electricity during the visit was an important achievement itself for Nepal, he said.