The Historical Roots and Systemic Corruption of Nepal's 'Commission Culture' in Infrastructure

In B.S. 1964, the Government of Nepal decided to construct the Pharping Hydropower Project (500 kW) with an estimated budget of 713,273 rupees and 82 paisa. An agreement was signed between the Government of Nepal and the then East India Company (British Government) for this purpose.

Under the agreement, the Nepal government was to provide financial investment, while the East India Company provided technical support. It was agreed that the British government would cover the salaries and allowances of these technicians. Eleven technicians arrived from Britain to begin construction. After two to three months, the technicians' salaries had not arrived from Britain, causing them hardship. They reported this to the then Prime Minister, Shri 3 Maharaj Chandra Shumsher.

Chandra Shumsher ordered, 'We do not have a separate budget to provide for their food and lodging, so henceforth, pay them a percentage from the project's budget.' This order from the powerful Prime Minister was implemented. According to historians, this marked the beginning of the 'percentage commission' (PC) culture in construction work in Nepal.

Similarly, during the time of King Mahendra, who laid the foundation for physical infrastructure in Nepal, the palace would indirectly instruct construction contractors to facilitate the food and lodging of government technicians assigned to projects.

Since contractors had to rely on government technicians for technical oversight, billing, and problem-solving, paying a percentage did not seem like a major issue to them.

This process became more refined toward the end of the Panchayat era. Government technicians began taking a percentage of money directly from contractors in the name of service benefits, which became unofficially accepted as standard practice.

At that time, most contractors could not afford to hire their own technical staff. Since they relied on government technicians for technical work, billing, and problem-solving, paying a percentage was not seen as a significant problem.

After the political changes of 2046 B.S., this practice began to grow into a distortion. Commission money started being used to secure transfers to lucrative projects and for influential employees to bypass senior colleagues for promotions. This money became a tool for appeasing those in high positions and for personal career advancement.

A more distorted form emerged when leadership and high-level officials began abusing their positions to collude with contractors on large-scale projects. The trend of exploiting the state treasury through limited competition increased. For many development agencies, commissions from infrastructure projects became the primary source of income for both leadership and staff.

Employees appeared more like indirect partners of contractors than regulatory bodies. Consequently, the country's physical infrastructure failed to gain momentum. Because they had to work according to the interests of leaders and officials, the professional capacity of Nepali contractors could not grow over time. This led to projects being delayed, quality declining, and the public failing to receive timely services, causing projects to become stagnant.

Technicians assigned to construction work are not limited to 10-5 office hours like administrative staff. In some cases, they have to work for 18-20 hours.

Due to their illicit ties with contractors, officials became morally incapable of taking action against companies that produced poor-quality work or caused delays. They effectively lost their moral standing. On the other hand, contractors also became notorious in the eyes of society.

Currently, Nepal has a strong government with a two-thirds majority. The government has an easy opportunity to solve this problem. The Public Procurement Act, which is currently a barrier in the construction sector, is in the process of being amended. The issue of commissions should be legally addressed within this. If Nepal's physical infrastructure is to be advanced in a timely manner, a law regarding commissions or a system of incentive allowances must be implemented. International practices should be studied while drafting such laws.

Technicians assigned to construction work are not limited to 10-5 office hours like administrative staff. In some cases, they have to work for 18-20 hours. It is necessary to provide incentives to employees working on public construction in remote areas, away from their families.

The Minister of Physical Infrastructure has announced the end of the commission system upon taking office, which is welcome. However, to make this practical, a system of bonuses or special allowances should be legally provided to employees working day and night in remote areas, funded by the project budget itself.

Additionally, a policy should be adopted where employees assigned to a project are not transferred until the project is completed. Frequent transfers have also left projects in limbo. If only this can be done, the 'commission system' that began with Chandra Shumsher's order around B.S. 1968 will end. If this is implemented through legislation, the reputation of both development agencies and contractors would be restored.

(Lamichhane is a central member of the Federation of Contractors' Associations of Nepal.)