Koshi Province Government Plans New Projects Amidst Financial Obligations

Biratnagar. The Koshi Province government, which has a liability of multi-year projects worth 20.61 billion, is preparing to start new projects worth up to an additional 5 billion from the new budget.

According to the Ministry of Economic Affairs and Planning of the Koshi Province government, this preparation is being made with the conclusion that reducing the multi-year liability of 20 billion to 13 to 14 billion and bringing in new projects worth 4-5 billion will not cause many problems.

“The preparation is to reduce the increasing financial liability of multi-year projects to within 13 to 14 billion rupees within the current financial year,” a ministry source said.

The government has decided to tighten the limit for approving new projects to reduce the financial pressure created by the accumulation of multi-year projects over a long period.

According to Sushil Bastola, spokesperson and under-secretary of the Ministry of Economic Affairs and Planning, the current liability of multi-year projects in the province is around 20 billion. The ministry is working on reducing this. “There is a liability of about 20 billion now. After deducting the chronic (long-pending) liabilities, it might be around 16-17 billion,” he said.

According to Bastola, the government is significantly settling old liabilities in the current financial year. “About 3 billion has been reduced so far this year. If an additional 1 billion is reduced by the end of the financial year, it will be 4 billion. Therefore, it is estimated that the liability will be limited to 13 to 14 billion,” he said.

Bastola stated that after limiting the net liability to 13 to 14 billion rupees, there will be no problem in adding new multi-year projects. However, the ministry's stance is that unlimited source consent will not be given for new projects as in the past.

Clarifying the limit for adding new projects, spokesperson Bastola said, “Out of that 14 billion, a maximum of 4 to 5 billion can go to multi-year projects.”

The ministry, realizing that too many projects are concentrated in the physical infrastructure sector, has adopted a policy of maintaining sectoral balance in future multi-year projects. Priority will be given to sectors directly connected to people's lives, such as drinking water and irrigation.

“Now, where drinking water and irrigation are necessary, they will be made multi-year, and it cannot exceed 4-5 billion at most, we don't have that much space,” Bastola said.

Meanwhile, the Koshi Province Council of Ministers has passed the Multi-Year Project Source Consent Criteria 2083. This working procedure had a provision to take projects not included in the red book proposed by the Ministry of Economic Affairs and Planning into multi-year projects based on commitment letters.

According to the new arrangement, multi-year projects could be advanced only on the basis of commitment letters certified by the concerned secretary, to be managed within the budget ceiling of the next year, with limited conditions. However, this provision was removed from the working procedure after MPs objected, expressing concerns that it could increase financial liability on the province and increase discretionary power in project selection. The Ministry of Economic Affairs expects that the recommendation and management of multi-year projects will be more organized after the new working procedure is approved.

Previously, Minister of Economic Affairs and Planning, Bidur Kumar Lingthep, used to criticize the billions of liabilities created by previous governments by indiscriminately awarding multi-year contracts without source assurance, stating that it had disrupted the province's financial balance. However, now the same minister is planning to add billions of new projects.

In a conversation regarding the mid-term budget review of the current financial year and preparations for the upcoming financial year, Minister of Economic Affairs and Planning, Bidur Kumar Lingthep, had stated that the province's financial situation was on the verge of crisis.

“We have the capacity to distribute capital budgets of around 15 billion annually, but we have approved multi-year projects worth 20 billion. This is not a good thing in any way,” Lingthep had said. “Due to this, there is an increasing possibility that the economy of Koshi Province could be in danger or collapse at any time.”

Currently, Koshi Province has remaining liabilities of multi-year projects worth 20.61 billion rupees, which is more than the province's annual actual capital budget.

The provincial government had initially allocated a total budget of 35.8799 billion rupees for the current financial year, but due to weak resource availability and cuts in grants from the federal government, the government was forced to reduce the budget size by about 10 percent. According to the revised estimate, the budget size has now been reduced to 32.4564 billion rupees. Multi-year projects from 2075/076 BS are still not completed in Koshi Province.

Despite a liability of 20.61 billion, the government had allocated only 2.21 billion rupees for multi-year projects in the current financial year.