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Bhattarai Unveils Annual Nepal Budget for 2008/09

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Finance Minister BABU RAM BHATTARAI unveils an ambitious NRs 236 billion (USD $3.47 billion) budget.

The new annual budget (NRs 236 billion) envisages creating new jobs, raises the salary of civil servants, provides relief to the dalits, allocates funds for compensating victims of insurgency, focuses on reconstruction of the country ravaged by over a decade of conflict. It proposes expenditure of NRs 236 billion or $3.47 billion (NRs 111.82 billion under regular expenditure and NRs 124.19 billion for development expenditure). The government plans to get $700 billion as grant assistance and $270 million as loan (47 billion in foreign assistance) and wished to to arrage for the the deficit of $600 million by mobilising internal loans. Pointing to the challenges in revenue generation, the Maoist-led government's budget has been described as unrealistic and has been called populist for its focus on too many programs with popular slogans.

The following is the text of the budget Speech of Fiscal Year 2008-09 delivered to Legislature-Parliament by Finance Minister Dr. Babu Ram Bhattarai on 19 September 2008:

A Brief Review of the Economic Status of the Country of the last Fiscal Year and the
period till today of the current Fiscal Year

Honorable Speaker,
5. The "Economic Survey, 2007/08" that included a critical review of the economic
and social indicators of the last Fiscal Year 2007/08 along with their trends and
characteristics and the opportunities and challenges of the economy has already
been presented before this esteemed Constituent Assembly by the previous
government in July 2008. The "white Paper" I issued just yesterday provides a
glimpse of what status of the country's economy this popularly elected government
inherited from the earlier government and at what footing we are now making the
budget, etc. Before I move on to highlighting the policies and programs of the
budget, I would like to briefly mention about the last Fiscal Year's financial and
fiscal situation based on the latest available information.

6. Against the estimated rate of 5 percent, GDP growth rate grew last Fiscal Year by
5.6 percent at the basic price owing to the smoothening of the peace process,
gradually improved law and order situation because of political understanding,
consensus and co-action, growing investment-friendly climate, increased
opportunities in trade and services sector and increased production of major
agricultural crops. Compared to 6.4 percent in the Fiscal Year 2006/07, the average
annual inflation rate reached 7.7 percent in Fiscal Year 2007/08. This is basically
due to the international price hike of such commodities as food grains, mineral
products and petroleum products, impacting the price of related commodities in the
Nepalese market. Due to the significant increase in the tourism sector income and
remittances, the foreign exchange reserve and the balance of payment surplus are in
a satisfactory condition. The import rose by 16.1 percent against the export rise of
2.4 in the Fiscal Year 2007/08, thereby contributing to the huge trade deficit of 22.2
percent at the tune of Rs. 165 billion 330 million. This trade deficit comes out to be
20 percent of the GDP. Such deficit with India alone stands at Rs. 105 billion 900
million. This is an alarming situation.

7. Going by the latest available information, total government expenditure reached Rs.
163 billion 313 million in the Fiscal Year 2007/08. This consists of Rs. 91 billion
409.7 million (56 percent) as recurrent expenditure, Rs. 55 billion 516.3 million (34
percent) as capital expenditure and Rs. 16 billion 386.9 million (10 percent) as the
amount spent in repaying the principals of domestic and foreign loans. The fact that
recurrent expenditure has outperformed capital expenditure would in a way signal a
weak economic condition of the country.

8. Compared to the revenue mobilization of Rs. 87 billion 712.1 million in Fiscal Year
2006/07, Rs. 107 billion 546.5 million has been mobilized in Fiscal Year 2007/08.
On the foreign aid front, Rs. 25 billion 854.3 million was mobilized in Fiscal year
2006/07 whereas in Fiscal Year 2007/08, it rose to Rs. 34 billion 60.8 million.

9. I have presented the progress report as to how much money was allocated
ministrywise for the Fiscal Year 2007/08 and the how much was spent, to this
august Assembly today. It is not certainly good news that the money allocated to
most of the ministries was not spent timely.

10. Already two months of the current Fiscal Year have elapsed when I am presenting
this budget. I make it a point to telling you briefly what economic situation the
country is in currently, based on the latest available information. Till the beginning
of the third week of September of the current Fiscal Year, Rs. 14 billion 760 million
has been disbursed from the government treasury and Rs. 7 billion 790 million has
been spent. This spending has been made well within the limits set by the Act for
Authorizing Withdrawal and Expenditure from the Consolidated Fund for the
Services and Works, 2008. During the same period, revenue has been collected at
the tune of Rs. 13 billion 40 million which is higher by 13 percent than in the last
Fiscal Year. The government treasury position remains satisfactory. In the last two
months of the current Fiscal Year, the foreign aid commitment has stood at Rs. 18
billion 460 million of which Rs. 2 billion 560 million has actually been received as

Honorable Speaker,
11. The successful election of the Constituent Assembly has proved itself as a
milestone in the process of instutionalizing the Federal Democratic Republican
political system. I am confident that the new Constitution of inclusive and
democratic Nepal with federal structure in place will be enacted well within the
timeframe stipulated in the Interim Constitution. The Nepali people have hoped for
the country's overall socio-economic transformation from their Government which
is made of political consensus and support. Fulfilling their aspiration and hope is
challenging, if not impossible. However, I believe that a clear message of our
making efforts toward fulfilling this aspiration must be communicated to the people
through this budget. This belief inspires me to present a brief analysis of the major
issues and challenges existent in the economy.

12. Issues and Challenges
a. Underdevelopment and Absolute Poverty: Overall underdevelopment and
extreme poverty are major problems of Nepal. Alarming figures of extremely
low per capita income and more than half of population living below absolute
poverty line present an awful image of the overall economic condition.
Average growth rate of 2 percent during the period of last fifty years clearly
reveals that there is structural bottleneck in the economy. Therefore, breaking
the vicious circle of poverty and underdevelopment through rapid economic
growth along with its equitable distribution is the major economic challenge
of the day.

b. Stagnation of Agriculture Sector: Stagnation of agriculture sector has
become the major factor of underdevelopment and poverty. Despite
agriculture sector being a source of employment for about 68 percent of
manpower, its contribution to Gross Domestic Product is only 32 percent.
Poverty is rampant among those engaged in agriculture because the per capita
productivity is the lowest one. Our goal of rapid economic growth and poverty
alleviation can never be achieved until we succeed to increase productivity of
agriculture sector and shift the excess manpower from agriculture to the other
sectors of economy by way of creating opportunities for gainful employment.
Overall transformation of agriculture sector cannot take place without
breaking the century-long feudal production relations rooted in the sector.
Because of the feudal-based production relations, where peasants cultivating
the lands do not have their ownership and those owning the land do not
cultivate, productivity of agriculture is always low creating adverse impact on
the economic growth.

c. Widespread Unemployment and Semi-Unemployment: Despite the
availability of labour force within the county, it has not yet been fully utilized.
Youth force is one of the major prospective resources. Unfortunately, our
youth force is unemployed within our own country and are compelled to
engage in painful foreign employment. Brain drain of educated and trained
manpower is increasing. It has become a major challenge to create
employment opportunity within the country for those youths and skilled who
are marginalized from the mainstream of development, and make them
participate in the process of building new Nepal. In the similar vein, the
problem of widespread semi-unemployment and disguised unemployment in
agriculture and rural sector is rather appalling.

d. Inequality and Discrimination: Pervasive socio-cultural and economic
discrimination and inequality on the basis of class, caste, region, gender has
become a serious problem of the country. Prosperous and just Nepal is next to
impossible unless we come out with the scientific resolution of the problems
created by feudal unitary state power. It has become urgent to properly
address the demands raised by various oppressed castes including Madhesi,
and by regions, women, dalit, indigenous and ethnic groups, etc.

e. Inadequacy of Physical Infrastructure: Inadequate and disproportionate
development of physical infrastructure has impeded overall development of
the country fuelling inequality in the economic ranking of the people.
Majority of our rural areas have not yet been able to integrate into the
mainstream of the economy because development of basic infrastructure
including road networks, electricity, communication etc. have not yet reached
out to these areas. Despite the huge hydroelectricity potential within the
country, we have been facing high deficit, and, even more, the burden of load
shedding. There is an evident lack of drinking water while irrigation system
has not been developed adequately. Absence of North-South road network,
low access of remote districts to the road, lack of expansion of agricultural
roads etc. are the major obstacles to the economic transformation of the

f. Economic Dependency: The fact that large portion of our national budget
continues to get funded by foreign aid due to the meager mobilization of
domestic resources points clearly to our ever-increasing dependency. The
foreign trade deficit has been growing annually at an alarming scale. We have
been relying on imports of basic goods of daily necessities, whereas the
national industries have failed to compete with the imported goods and are
heading to collapse. Likewise, the domestic cottage industries have also
reached near closure due to the lack of required facilities and backstopping.
Economic dependency is thus on rise in all sectors. To free us from this
dependency and enable our industries to stand as competitive in the
international market, we need to rehabilitate the once operational but currently
sick industries, and encourage to install industries that are based on domestic
products and, in particular, agro-products. In the face of increased economic
dependency and at this time of transition, it is indeed a challenge for us to
reduce such dependency and build nationally self-reliant economy.

g. Deteriorating Quality of Public Education and Educational
Discrimination : Large numbers of the country's population are still illiterate
in the country. Public schools are identified as schools for the disadvantaged
people. Each year, large share of the government budget is allocated to public
schools. Bulk of allocation made for the education sector goes to basic
education. Despite this huge investment, quality of the public schools where
children of the majority of the ordinary people attend, continues to deteriorate.
The well-off people do not prefer enrolling their children to the public
schools. There can be no parallel to this frustrating example of the huge
investment in the public education sector. Results of the School Leaving
Examinations clearly attest to the low quality of the poublic schools, and also
indicate hideous differences between the performances of public and private
schools. Charging of fee by the private schools in an uncontrolled manner has
led to further widening the class discrimination, and also prohibited children
of disadvantaged family from competition. The only way forward for ending
such discrimination rests on our ability to provide qualitative and skill
education in the public schools. In this context, eradication of illiteracy by
ensuring production of efficient manpower to cope with the need of the time,
and production of manpower needed for the modern and developed economy
has become one of the major challenges.

h. Corruption and Very Week Situation of Service Delivery : Corruption is
rampant, in various forms and from the lowest to the uppermost level of the
public machinery. Everyday general public are forced to be smacked by
corruption. This has caused a lack of public support and non-cooperation even
for the good works initiated by the government. Creation of a corruption-free
environment to ensure radical improvement in the delivery of public service
mechanism so as to give people a sense of radical change remains therefore a

i. Challenge to Bring Peace Process to Logical Conclusion: The Nepali
people through their struggles and revolts launched in different phases, and in
particular, the people's war, the historic people's movement of 2005/06 and the
Madhesi movement, have vividly expressed their desire for building a society
that is egalitarian and is free from all forms of discrimination such as based on
ethnicity, gender, class and geographical region. It is not possible to meet this
desire in a year until the two-and-half years-long peace process reaches
logical conclusion. Knowing that this task is not easy, the present government
expresses its strong determination to build a well-advanced, egalitarian and
discrimination-free society. Currently, the people have pinned high hopes on
the government for immediate relief. It is essential therefore to immediately
implement the relief programs that would directly heal the wounds of
thousands of families who lost their dear ones in the decade-long people's war
and also the martyr's families. Similarly, it is also necessary to enable
thousands of people who have been displaced and affected by the natural and
humanitarian disaster to feel the presence of the government. It is equally
necessary to provide relief to the ordinary Nepalis who have been hit hard by
the price rise and shortage of essential commodities owing to the inefficient
public distribution system. In this context, in order for the peace process to
arrive at logical conclusion, one important task of the present government is to
extend immediate relief to the ordinary people; however, the other equally
important and challenging task before the government is to complete the
process of constitution building in time based on common consensus and also
in line with the aspirations of all class, caste, gender, and the suppressed and
neglected communities and region to institutionalize federal democratic
republic in the country.

Against the backdrop of the aforementioned challenges and problems, I have
cherished the great goal of building prosperous, advanced and egalitarian new
Nepal while formulating this budget. In doing so, I have received guidance from the
Directive Principles and Policies of the State as enshrined in Nepal's current Interim
Constitution, the Common Minimum Program (CMP) of the national coalition
government, the desire expressed by the Nepali people through the people's war and
people's movement, and the suggestions received from the larger sections of society
including farmers, laborers, women, indigenous and ethnic communities, neglected
and suppressed classes and communities, Honorable Members of the Constituent
Assembly, various political parties, professional and business groups, Revenue
Advisory Committee, intelligentsia and civil society. As this year's budget is the
first after the founding of the federal democratic republic, I have made efforts at
presenting it as original and different in substance from its predecessors. Keeping in
focus these ideas and issues, I have defined this Fiscal Year's budget's vision and
basic principles, principal objectives and priorities in the following paragraphs.

13. Vision and Basic Principles of the Budget
a. Transitional Economy: The main philosophical foundation of this budget
is to eliminate all forms and remnants of feudalism and establish Socialismoriented
industrial capitalism. Therefore, in this transitional economy,
private sector, cooperative sector and public sector will all play a
coordinating role together. Government will play the role of facilitator in the
development of private sector and cooperative sector. Thus, private sector
and cooperative sector will be the two legs of this transitional economy and
a policy of balanced walking with these two legs will be actively pursued.

b. Rapid Economic Growth: Accelerating the current sluggish growth and
laying foundation for the double-digit growth in the next three years is an
important vision of this budget. For this to happen, a kind of 'leap-frogging'
approach will be adopted instead of continuing with the 'crawling of snakes'
approach. Commensurate with this, investment will be directed towards
priority areas to achieve the high growth rate. Public-Private Partnership
(PPP) Approach will be the cornerstone of capital investment that will help
motivate domestic and foreign investors to invest in the priority sectors.
Efforts will be carried out, as a campaign, to compensate the insufficiency
of capital and technology by mobilizing the abundant labor force existing in
the country in the prioritized development projects.

c. Ensuring Social Justice and Security: The results of high economic
growth are not automatically distributed in an equitable manner. In this
context, the state will adopt the policy of formation and operation of
production, distribution and financial cooperatives of small farmers,
entrepreneurs, laborers and consumers, as well as provision of special socioeconomic
security to the conflict victims, poor, oppressed, unable, disabled,
elderly and about-to -disappear communities.

d. Independence and Inter-dependence: In the present globalized capitalist
world, no economy can remain isolated as the island of Robinson Crusoe.
Therefore, policy of inter-dependence of the national economy with the
global economy will be adopted. However, in view of the unequal and
difficult process of development in the Capitalist globalization process,
policy will be adopted to provide maximum possible security to national
economy and development of independent national economy will be
accorded special attention.

14. Objectives of the Budget
In line with the vision elaborated above, the budget has set following objectives:
1. Making democracy more people-centered with the institutionalization of the
federal democratic republic.

2. Sustaining peace in the country by bringing to logical conclusion the peace
process on the basis of the Comprehensive Peace Accord (CPA) agreed
between the Nepal Communist Party (Maoist) and the seven political

3. Accelerating the process of economic and social transformation to
accomplish the great mission of building just, advanced and prosperous new

4. Achieving higher economic growth that comes along with geographical and
regional balance, social justice and employment opportunities.

5. Providing immediate relief to the people to make them feel that the country
has really become a republic.

6. Erecting foundation of a self-reliant and independent economy through
optimally mobilizing the national capital and indigenous resources.

15. Priorities of the Budget
Matching with the above vision and objectives, I have set aside the budget's
priorities policywise and sectorwise as follows:

A. Policy Priority
1. Completion of the Peace Process and Immediate Relief: In order for ensuring
sustainable peace with change by bringing peace process to logical conclusion, I
have attached high priority to the tasks mentioned in the CPA but not yet
implemented, such as providing relief to the families of the martyrs and the
disappeared, conflict-affected persons, and the wounded; providing and
systematizing subsistence support and allowances to the combatants of the
Peoples' Liberation Army, and reconstructing the damaged infrastructure.
Likewise, special attention has also been paid to the relief to those involved in
the people's movement and the Madhesi movement.

2. Accelerated Economic Growth: In keeping with the objective of achieving the
expected double-digit growth within the next three years and for attracting
investment on a large scale to meet that objective, this budget has placed high
priority on building infrastructure of strategic significance and developing social
infrastructure of human resource development such as in education and health.
Also, I have given special priority in the budget to public works and
construction through massive mobilization of the people and acceleration of
economic growth.

3. Social Security and Inclusion: The budget has placed reasonable priority
towards expanding the benefits of economic development to the suppressed
classes, ethnicities, region, and gender and also guaranteeing social security to
the senior citizens, differently abled, widows, Dalits and endangered ethnicities.
In particular, I have made efforts to maintain an appropriate balance between
economic growth and social justice through cooperatives movement, massive
employment creation program and village-oriented development campaign.

B. Sectoral Priorities
1. Transformation of Agriculture Sector: Building new prosperous Nepal is by
no means possible without radically transforming the agriculture sector which is
a source of livelihood for more than two thirds of the population. Therefore, the
budget has attached top priority towards radical structural change of the
agriculture sector which has so far remained subsistence-oriented and also based
on feudal production relations, through its commercialization and modernization
that would ultimately achieve the goals of accelerated economic growth and
social justice. In the same spirit, enhancing export through boosting forest and
agro-based industries that have a comparative advantage, and earning foreign
exchange therefrom have also been given due emphasis in the budget.

2. Development of Water Resources: With the launching of a slogan "In clean
water lies Nepal's power", the budget has advanced a policy of utilizing the
country's abundant water resources in hydropower, irrigation and drinking water
so as to enable this sector to play a central role in the campaign of building new
Nepal. Specifically, production of 10 thousands megawatt hydropower in the
next 10 years and irrigation of the Terai's and hill's large valleys and fields
through the diversion of major rivers are the original program features of this

3. Wider Expansion of Tourism: The budget has put special emphasis on
developing the tourism industry through mobilizing enormous natural and
cultural resources and building necessary infrastructure in that direction. In
particular, this budget has come up with a plan of constructing new airports of
international and regional level and developing an intensive triangular tourism
infrastructure between Kathmandu, Pokhara and Lumbini thereby causing a
tourism revolution in the next couple of years.

4. Qualitative Development and Expansion of Physical Infrastructure:
Development of modern economy is impossible without the speedy
development of physical infrastructure such as roads, railways and
communication. Therefore, this budget has come forward with the big
infrastructure development projects of strategic and long-term significance such
as East-West Railways, Kathmandu-Terai Fast Track, Mid-Hill Highway and
North-South Highway, and strived for erecting the foundation of building new

5. Human Resources Development: In every country's development, building
competent and healthy human resources through investment in education and
health is a matter of central importance. Therefore, along with launching the
slogans of "New Nepal, Learned Nepal" and "New Nepal, Healthy Nepal", this
budget has advanced the programs of qualitative significance in education and
health sector such as eradicating illiteracy within two years, providing universal
access to basic health services and so on.

6. National Industrialization: This budget has resolved to place priority to the
national industrialization by launching a policy of running public sector
industries and sick industries on commercial footing through adopting the
scheme of public-private partnership and encouraging the installation of
minerals, agro and forest-based industries.

16. Campaign for Building New Nepal and Economic Council
The last 50 years' experience of Nepal has already proved that unless the budget
policies, plans and programs are launched in an integrated way on a campaign scale,
and unless they are backed by a high level executing and monitoring mechanism,
they cannot be implemented efficiently. Therefore, in this historical moment of
Nepal entering into the republican era, with an objective of turning the next decade
into a decade of economic revolution, and also for consolidating all important
economic matters through one channel, a high-level Economic Council has been
proposed under the chairmanship of the Right Honorable Prime Minister. The
“Investment Board” and “Cooperative Board” working under the Economic Council
will drive the “two legs” as mentioned above. Likewise, more than 60 projects and
programs starting from the current Fiscal Year, which include different sectors and
keep central importance, will be executed with special priority under the “Building
New Nepal Campaign”. Monitoring of those projects and programs will be
conducted by the special committee constituted under the chairmanship of the Right
Honorable Prime Minister. I appeal all to complete the programs of such nature as
large scale infrastructure, water resources, tourism, urban development, industrial
development, education, health, cooperative, employment generation, programs to
develop the region of political sacrifice, programs honoring martyrs, relief to
conflict-affected people, upliftment of the marginalized class, social protection and
community development, on a campaign footing and render a true meaning to
building new Nepal.

17. Now I would like to present the major policies and programs of the Budget of Fiscal
Year 2008/09 according to the objectives and priorities mentioned above.

A) Nationality and Protection of National Interest
18. The programs of economic development and physical as well as social
infrastructure development will be carried out according to the contribution that
such programs can make to protect and promote Nepal’s sovereignty, national
unity, independence, integrity, national pride, and self-dependence to make a selfsustained
economy. Special emphasis will be placed to extend north-south road and
railways to accrue due benefit from the rapid economic development of the two big
neighbors: India, and China.

19. On the basis of Nepal’s sovereignty, independence, self-dependence and national
interest, the existing policies will be reviewed and new policies will be formulated
according to the contributions they can make to national security, foreign policy,
utilization of natural resources including water resources, and to the mobilization of
foreign aid. The reviewing process of unequal treaties and agreements conducted in
the past will be started from the current Fiscal Year.

20. The Nepalese missions abroad will be mobilized for the promotion of national
interest in the fields such as economic cooperation, tourism promotion, improved
export of Nepali goods and services, foreign employment promotion, and increased
foreign investment. For this purpose, capacity enhancement of the existing mission
will be made, and Nepali missions will be established in other additional countries.

B) Institutional Development of Federal Democratic Republic and State

21. To complete the new constitution making process through the Constituent
Assembly within two years, required level of cooperation, instruments and
resources will be provided to the Assembly with high priority. I have promised not
to let any shortfall of human or financial resources hamper this great task.

22. A Statue of Republic with distinct design will be erected within the vicinity of
Narayanhiti premises to mark and long memorize the day that ended feudal
monarchy through people’s extraordinary courage and sacrifice-led struggle. I have
allocated Rs. 50 million for this Statue which will be made using Nepali technician
and Nepali design. Likewise, the Narayanhiti premises will be developed as a
modern museum. I have anticipated that the Statue of Republic and the museum
will turn the Narayanhiti vicinity to an attractive touristic site.

23. Various programs will be carried out to utilize the property of former kings and
royal families for the benefit of general public. To find out the properties that they
may have hidden abroad, and bring back such properties into the country, a separate
action committee will be formed and work for this will start immediately.
24. To institutionalize the federal democratic republic and bring the peace process to a
logical end, I have allocated sufficient budget for National Peace and Reconciliation
Commission, High Level Truth and Reconciliation Commission, the Commission
for searching the Disappeared Persons, National Inclusion Commission, and State
Restructuring Commission.

25. Various programs will be launched to strengthen republic and national unity
through creating public awareness on inter-regional dependence among mountain,
hill and Terai.

26. Because of the political vacuum and complete absence of accountability in the local
bodies which have a direct bearing on the people, an interim apparatus will be
established through consensus among the major political parties within mid-January
2009 to make local bodies responsible towards the people until an election for the
local bodies has been held. To launch a new campaign of village development
together with the slogan of “Make our Village Better and Beautiful”(Hamro Gaun
Ramro Banau), I have allocated Rs. 7 billion 830 million in the village development
committee grant raising it by hundred percent commencing from the current Fiscal
Year. The village development committee grant will be distributed on the basis of
population, cost and geographical area ensuring a minimum of Rs. 1.5 million and a
maximum of Rs. 3.0 million to each village development committee from this
increased allocation.

C) Sustainable Peace and Guarantee of Peace and Security
27. I have allocated necessary budget for the Ministry of Peace and Reconstruction for
reintegration, rehabilitation and arms management of the combatants of the Maoist
people’s liberation army before mid-March 2009, according to the provisions of the
Comprehensive Peace Accord and other agreements made afterward.
28. Necessary reforms will be carried out to keep on making the Nepal army
democratic and inclusive. To make the recruitment process, training, education and
the basic aspects of the Nepal army more systematic and also to ensure
transparency, reform will be carried out of relevant rules and processes. Through
increasing its professional competence, the army will be deployed in peace and
security, development works, natural disaster relief, and in such works that
contribute significantly to world peace.

29. Various criminal and anarchical incidents will be taken into control through
strengthening peace and security in society by encouraging co-action between
security forces and the people. A code of conduct of the security forces will be
formulated and implemented before mid-December 2008, to guarantee peace and
security for the people, and to make the administration and security entities
including all state apparatuses impartial and accountable. A local peace committee
will be constituted comprising security forces, local administration, political parties,
and representatives of civil society to ensure public participation in maintaining
peace and security at the local level. I have allocated Rs. 105 million for the local
peace committee.

D) Immediate Relief and Reconstruction
Relief and Compensation for the Conflict-affected People

30. The Government is committed to honoring the citizens who lost their lives, and
were made disappeared during the armed conflict, and to providing relief to the
families who lost their soul-mates. The families affected in such a way will be
initially provided a lump-sump financial aid at the rate of Rs. 100 thousand each.
Likewise, scholarships will be provided for the education of the children of those
who lost their lives. I have allocated Rs. 1 billion 500 million solely for this

31. I have allocated Rs. 50 million for residential schools to be operated by Martyr's
Academy in five development regions in order to make proper education
arrangements to martyr's families who sacrificed their lives during the armed

32. I have earmarked Rs. 12 million for the development of Living Together
(SAHAJIVAN) Settlements to the families of internally displaced due to the armed

33. I have allocated Rs. 20 million for herbal collection facilitation related programs to
be implemented in Jumla, Banke, and Salyan by creating self-employment in local
levels considering the benefit of farmers and laborers in conflict-affected areas.

34. The outstanding monthly allowances of the Maoist People's Liberation Army
Combatants as per the agreement will be made available immediately. Now
onwards, I have made a provision to distribute monthly allowances regularly. For
this, I have allocated the necessary amount.

35. The treatment arrangements will be made for the injured people during the people's
war, people's movement and Madhesh movement who have not been treated
properly. The compensation will be provided to the physically deformed people,
and the martyrs will be honored.

36. The monthly subsistence allowances being provided to families of the martyrs of
the people's movement and to the people handicapped as a result of the conflict will
be continued. Additionally, I have arranged the amount under the Relief and
Rehabilitation Program to provide compensation for damaged vehicles and private
properties and looted houses and shops.

37. I have allocated Rs. 20 million for Ram Vrikhsa Yadav Memorial Centre at
Janakpur Hospital and Suresh Wagle Memorial Cancer Centre at TU Teaching
Hospital in memory of the Late Ram Vriksha Yadav and Late Suresh Wagle who
received martyrdom for establishing the Republic and completely rooting out the
feudalistic system.

38. The recently damaged Saptakoshi dam has caused big losses to the peoples and
properties in Saptari and Sunkoshi districts. More than 40 thousand people have
been very badly affected and become homeless. I appreciate the local and
international non-governmental organizations, civil society, security staff, and the
government employees and people in general for their wider support to operate
relief measures for those affected people. It is urgent to implement immediate relief
and rehabilitation programs on one side, and there is also a necessity of restoring
transportation system immediately by reconstructing damaged physical
infrastructure and building alternative bridges, on the other.

The Development of Public Distribution System
39. The Cooperative Public Distribution System can be an appropriate measure for
guarantying the supplies of goods on concessional price for the people in general
and the laborers, farmers, homeless, students and those below poverty line, in
particular. This system can maintain the balance in the market by controlling the
tendency of profiteering and creating artificial shortage of goods by the private
sector to fuel the crisis further. But the poor, disadvantaged and conventionally
exploited people cannot be organized in Cooperatives without empowering them
technically. In view of this, annual subsidy at the rate of Rs. 100 thousands will be
provided to 4,000 Consumers Cooperatives, one each for all village development
committees and one in each for a cluster of 30 thousand populations in
municipalities. The Cooperatives that will be established regionally with a strong
presence of the laborers, Dalit, the poor and students will receive such subsidy. The
Department of Cooperatives will expand the training programs to enhance the
capacity of such Cooperatives. For this, help will be sought from the social
mobilizers who are working in various programs of non-governmental
organizations and Government of Nepal. Such Cooperatives must maintain their
account accurately in a transparent way and must show their account to District
Development Committee and the concerned local body as and when asked for. For
this, I have allocated Rs. 400 million.

40. The identity card will be distributed to the families below the poverty line in those
districts where the poverty alleviation programs are being implemented. For other
districts, the District Development Committees will provide identity cards by
identifying such families. The provision will be made to sale most necessary
consumer goods to such identity card bearers on concessional price through
Cooperative Shops.

41. Provision will be made for the effective food supply as per the calendar by
increasing the storage capacity of Nepal Food Corporation for those remote hilly
districts where local food production is not sufficient. For this, the subsidy to Nepal
Food Corporation has been increased and the management of Corporation will be
reformed. The Ministry of Commerce and Supplies will prepare an action plan and
design estimates within this Fiscal Year to construct new modern Go-downs by
evaluating the current location and status of the existing Go-downs for food security
in an emergency situation. The modern Go-downs will be constructed phase-wise
from the coming Fiscal Year.

42. Incentive will be provided to increase the consumption of local agro-forest based
food items in remote hilly areas by testing through Food Laboratory. To reduce the
increasing dependency of food in hilly districts, focus will be given to agriculture
research and technology.

43. Any kind of obstruction or erection of check post is prohibited on national
highways and feeder roads in order to ease the transportation and reduce the cost of
transportation of essential goods including food items. All the obstructions will be
removed within mid-December, 2008 by installing close circuit televisions or other
electrical vigilance system at the checkpoints of Department of Revenue
Investigation, Police, Army and other agencies. Nobody will be allowed for
syndication or cartelling in public transportation and movement of goods.

44. To stop undue activities which negatively hamper the supply system by creating
artificial shortage, effective monitoring calendar will be published and action will
be taken by mobilizing monitoring teams. In such teams, representatives from
private sectors, civil society or consumer associations/ groups and political parties
will be included and the provision will be made for monitoring by the teams as per
the checklist.

45. To ease the supply of petroleum products, the monopoly of Nepal Oil Corporation
will be ended momentarily and a Regulatory Agency will be set up with the
inclusion of private sector for playing the facilitating role in petroleum products

46. The system of automatic price adjustment with the market price of petroleum
products will be established. The mechanism will be set up to manage the sale of
the petroleum products by the Nepal Oil Corporation as per the purchasing price to
be used by low income people and students as household fuel on the concessional

Social Security
47. The value of the money received in lieu of social security allowances which are
currently being provided to elderly citizens, single women and physically
handicapped persons, has gone down due to the price increase in previous years.
The average age of people belonging to some geographical regions, endangered
ethnicities and Dalit communities is lower than the national average age; hence the
current 75 years of age threshold for providing monthly allowances may not be
applicable to such people. Considering this, massive changes in social security
arrangements have been made effective from 17 September 2008. According to this
new provision:

• Monthly Rs.500 for all age groups of endangered ethnicities,
• Monthly Rs.500 for Dalits, Single Women and people above 60 years of
Karnali Zone,
• Monthly Rs. 500 for all other citizens above 70 years,
• Likewise, I have increased the monthly allowances of blind-disabled. A
monthly Rs.1000 for fully handicapped and disabled and Rs. 300 for
partially handicapped and disabled will be provided.

I have significantly increased in social security allowances as an expression of state
responsibility towards the elderly citizens, dependants and the poor people. I
believe that all the citizens and political parties will cooperate by not misusing by
any means such allowances which comes from the hard-earned income of the
taxpayers. I have increased social security expenses to Rs. 4 billion 410 million,
increasing by 440 percent than last Fiscal Year.

48. These social security allowances will not be provided to those who are getting more
than this facility from the state treasury. The social security system will be reviewed
and made integrated and scientific.

Small Farmers and Debt Relief to Small Household Entrepreneurs
49. Debt has been waived of those borrowers affected by natural disasters and the
conflict, the small farmers below poverty line, and the household entrepreneurs
borrowing from Agriculture Development Bank, Small Farmers Development
Bank, Nepal Bank Limited and Rastriya Banijya Bank upto the principal amount of
Rs. 30 thousands, and full interest due and all kinds of penalties on the loan amount
of above Rs. 30 thousands upto Rs. 100 thousands. Such waived amount is
estimated to be Rs. 9 billion 180 million as per the available statistics; the
Government of Nepal will pay to the concerned banks such amount within the next
ten years including this Fiscal Year. I have earmarked Rs. 400 million for this
purpose. Ministry of Finance will issue a detailed procedure in this regard within
mid-November 2008.

50. I have made provision to waive the interests and all kinds of penalties for those
electricity bill payers who could not pay during the time of conflict.

Reconstruction of Damaged Physical Infrastructure
51. The reconstruction programs of physical infrastructure damaged due to the conflict
will be implemented with high priority. Rs. 4 billion 500 million is estimated for
reconstruction of public buildings, bridges, communication tower and airports
damaged due to the conflicts. I have allocated Rs. 1 billion 280 million in this Fiscal
Year with a view to completing this work momentarily.

Rural Reconstruction and Rehabilitation
52. Road construction, income generating and livelihood training programs in 20
districts and drinking water projects in 38 districts will be started under the Rural
Reconstruction and Rehabilitation Sector Development Program for the
reconstruction and rehabilitation of the physical infrastructures damaged during the
internal conflict and people's war, infrastructure not maintained or fully or partially
obstructed construction in rural and urban areas. I have allocated Rs. 820 million
370 thousands for this program.

5) Economic and Social Transformation
"Commercialization and Mechanization in Agriculture, Transformation in Farmer's
Living Standards"

53. We have an obscure situation in agriculture: despite its being a source of livelihood
for the majority of the Nepali people, this sector is lagging behind. The primary
foundation of development, therefore, will be laid by transforming this sector,
through ending the feudal land ownership and relations that have existed for
hundreds of years, and also through the massive change in its character from
subsistence to commercialization. The present government believes that agricultural
revolution should be the basis of building New Nepal. I would like to stress on that
a strong leap forward is possible in economic development, by establishing
agriculture as an occupation for reliable employment and bringing into it
modernization and commercialization. I have allocated Rs. 5 billion 910 million for
agriculture sector which is higher by 69.30 percent than last year's revised

54. The interest subsidy provided through Agriculture Development Bank will be
continued to Tea, Cardamom and Coffee farming; for the construction of cold
storage; to meet the electricity charges of the Milk Chilling Cooperative Centers, to
meet the demand charges of the electricity consumed by the shallow tube wells and
to floriculture. Subsidy will be provided for transportation of chemical fertilizers
and on the seed and fertilizer's price in 26 remote districts.

55. The impact of recent year's global food crisis has also been seen in Nepal's food
market. To survive through such crises, it is urgently necessary to adopt immediate
measures as well as start immediately the implementation of longer-term measures.
To provide immediate relief to the affected people from food crisis and to help
farmers to increase food production, Rs. 1 billion 225 million has been earmarked.
A food crisis mitigation special project will be implemented immediately.

56. To increase agricultural productivity through the slogan "Cooperatives in every
village, food storage in every house", small farmers will be motivated for farming
through cooperatives models. The agriculture farming will be encouraged, on the
basis of feasibility and without encroachment, utilizing the community forest, freed
Kamaiyas area, new aforestation area, barren land under the electricity transmission
lines and public barren lands by organizing the Dalits, socially poor and
disadvantaged ethnicities, women, homeless, freed Kamaiyas and landless into
Cooperatives. I have allocated Rs. 85 million for providing incentives to
cooperative farming. The Ministry of Agriculture and Cooperatives will publish the
detailed procedures, amend and revise the directives within mid-November and
implement accordingly.

57. For the agriculture technology development and research and for the establishment
of local agriculture products Gene Bank, I have allocated Rs.510 million.
58. I have allocated Rs. 400 million for the implementation of special livestock
program for the direct benefit to 14 thousand families through community livestock
development project to be implemented in Tanahu, Lamjung, Baglung, Gulmi,
Arghakhanchi, Palpa, Nawalparasi, Rukum, Rolpa, Salyan, Pyuthan, Dailekh,
Jajarkot, Surkhet, Banke, Bardia, Doti, Achham, Baitadi districts having densely
populated districts by Dalits and freed Kamaiyas. I have earmarked Rs. 33.3 million
for the implementation of livelihood improvement program for the poor through
commercial livestock in high hill districts such as Darchula, Bajhang, Mugu, Humla
and Jumla.

59. In this current Fiscal Year, additional 2,275 small irrigation projects will be
implemented on the basis of cooperatives and group models. Additional 3
thousands hectares of land owned by small farmers will be irrigated by this
program. For this, I have allocated Rs. 145.4 million.

60. I have allocated Rs. 60 million to increase direct participation of the tea producing
farmers in tea processing and marketing management, and to extend capital grant to
potential tea producing cooperatives for the establishment of tea processing
factories. Such capital grant will be equivalent to 25 percent of the total cost of the
machinery and equipment to be determined based on their investment proposals.

61. Milk producing cooperatives wishing to establish powder milk factories will be
extended grant assistance equivalent to 25 percent of the machinery and equipment.
Likewise, a 15 percent interest subsidy on their bank loans will be provided for the
next five years, beginning this Fiscal Year, for the powder milk factories to be
established in the private sector. I have allocated Rs. 60 million for this programme.
62. With a view to extending commercial seed-market with the involvement of the
private sector, cooperative-private sector will be extended capital grant for the
construction of a 5 thousand metric tons capacity seed store-house in 10 places.

63. Onion production will be implemented as a campaign. A special pocket area
programme will be implemented in 3/4 districts for the production of high value
agriculture products like coffee, tea, ginger, banana, lemon, apple, orange, citrus,
wooden- apple, lapsi, orchids, and fish. Areas for mango and licchi will be
extended in Terai.

64. Special integrated programme will be implemented aiming at protecting of a near
disappearance situation of yak herding being adopted as one of the main professions
by the inhabitants of the mountainous region. Special programme will be
implemented to encourage bee keeping.

65. Considering the potentialities for commercial fish-farming, fish production
programme, from this Fiscal Year, will be implemented as a campaign in an
additional 73 hectres land of Rupandehi, Chitwan, Bara, and Bardia districts by
constructing new fish ponds. I have allocated Rs. 10 million to extend grants to the

66. With a view to ensuring necessary raw materials for the production of livestock
food supplements, commercial maize farming will be done in additional 6 thousand
hectres land of Sunsari, Sarlahi, Bara, Rautahat, Chitwan, Nawalparasi and
Rupendehi districts. I have allocated Rs. 11.50 million for this purpose. It is
expected to substitute 36 thousand metric tons equivalent imports of maize.

67. Additional tax will be imposed to discourage the trend of keeping arable land

68. Toll free telephone services will be extended to enable farmers to seek solutions for
their problems by directly contacting concerned specialist and experts.

Arrangements will also be made to make nationwide broadcasting of such
conversations between farmers and experts via local frequency modulation (FM).

69. A sum of Rs. 186 million has been allocated for the arrangements and construction
of market places, bazzar-stalls, collection centre, managed vegetable markets in
each municipalities, and animal slaughter houses, in partnership among local
bodies, cooperatives, and private sector.

70. With a view to increasing service delivery and self employment, community
agriculture/livestock centre will be operated, one each, in 25 districts with the
involvement of local bodies, local organization, and beneficiary farmers.

Irrigation Expansion of Irrigation, Improvement in living standard of farmers
71. There is no possibility to increase agriculture production unless year-round and
reliable irrigation arrangement is ensured for the wide-field in Madhesh and
elevated-land in hills. Therefore, a green revolution will be brought in for the
maximum utilization of vast amount of surface and groundwater. In addition to
ground water irrigation projects, large and medium-sized irrigation projects in
Terai, and medium, small and projects based on new technology will be
implemented in hills and mountain areas to ensure year round irrigation. A sum of
Rs. 5 billion 800 million has been allocated for the irrigation sector which is an
increase of 42.60 percent compared to the revised estimate of last Fiscal Year.

72. With a view to ensuring irrigation facilities in 36 hectares of arable land of Banke
district, head-works and construction of 15 kilometers long canal and design survey
of 18 kilometers of canal of Sikta Irrigation project, a domestically funded project,
will be completed in this Fiscal Year. I have allocated Rs. 519 million for this

73. Irrigated areas will be extended by completing and reconstructing various projects
which remained incomplete or could not be completed for various reasons. Some 95
on-going projects of mountain and inner Terai region, and 6 of Terai region -
altogether 101 projects, will be completed. 32 new deep tube-wells and 7 thousand
6 hundred shallow tube-wells will be installed in Terai during the current Fiscal
Year. These projects will contribute to extending irrigation facilities in additional
30 hectres of land.

74. Under the Irrigation and Water Resources Management Project, rehabilitation and
construction of 3 deep tube-well clusters and implementation of 53 irrigation
projects will be initiated. Management of 21 thousand hectres of land to be covered
by the Kankai, Sunsari-Morang and Narayani projects will be handed over to the
user groups.

75. In view of the hilly and mountainous areas not expectedly covered by the irrigation
facilities due to the topographical difficulties, those areas will be irrigated through
the provision of irrigation ponds, sprinkler and small-scale lift irrigation schemes
based on new technology. During the current Fiscal Year, irrigation facilities will
be made available in additional 900 hectors of land with the completion of 72 new
technology-based irrigation projects in 38 districts of hills and mountains, and
additional 112 projects will be initiated in 55 districts. For this, I have allocated Rs.
100 million.

76. Integrated development work for irrigation and hydropower will be started from
Veri-Babai, Sunkoshi-Kamala and Madi-Dang diversions.

77. I have allocated a sum of Rs. 20 million for the implementation of river training in
Daraudi river of Gorkha and for the extension of irrigation facilities in Palungtar-

Land Reforms Abolition of Feudal Land Ownership and Production Relations
78. A High Level Scientific Land Reform Commission will be formed for the abolition
of feudal land ownership and production relations. I have made necessary allocation
for this purpose.

79. Integrated land record is needed for the success of the land reform programme. In
order to make land record system reliable, and with a target of extending it in all 75
districts in two years from now, computerized and integrated (single) land
ownership certificates, based on land record, will be made available in 25 districts
in this Fiscal Year. A sum of Rs. 60 million has been allocated for this programme.
80. With a view to protecting public and government land from increased
encroachment, nationwide records of such lands will be published by mid-May

Setting Free of Ploughmen (Haliya) and Rehabilitation of Free Bonded Laborers
(Mukta Kamaiya)

81. Haliyas will be rehabilitated in a dignified manner by totally setting them free of
Haliya practices. Bonded laborers and their families, yet to be rehabilitated, will
also be rehabilitated in this Fiscal Year. Similarly, continuity has been given to the
bonded labour entrepreneur development, skill development, model vegetable
farming and land exchange and adjustment programmes by allocating Rs. 150

Industrial Revival, Development and Private Sector
82. By mid-December of this year, necessary amendments will be made in existing
industrial policy, foreign investment policy, trade policy and other related laws
aiming at creating conducive and business friendly environment in the industrial
sector. With a view to attracting domestic as well as foreign investment, procedures
for the establishment of new business will be made simple, transparent and
scientific so as to ensure a broad-based, sustainable and high growth industrial
environment to be able to compete with the world economy.

83. Government will extend necessary support for the identification, promotion and
development of the products having comparative advantages in the areas such as
hydroelectricity, herbal production and processing, organic farming, information
technology and medicine.

84. An industrial security force will be formed for providing industrial security in the
industrial corridors. Private sector will be involved in the coordination and
mobilization of this force.

85. It is unfortunate that the factories established for the production of agricultural tools
to be used by the farmers for modern farming, and by others for the development
and construction works, are now closed. Likewise, some other government-owned
industries also remain closed. This can be seen as a gross misuse of assets and
resources. In this context, Agriculture Tools Factory of Birgunj and Hetauda Textile
Mills will be brought back into operation in this Fiscal Year. Once these factories
are operationlised, fixed percentage of shares will be sold to the laborers and, also
to the public. In order to ensure markets for the textiles to be produced, Heatuda
textile mills will be developed as a factory producing textiles to be used by Nepal
Police, Armed Police and the Nepalese Army. Possibility of re-operatinalisation of
Birgunj Sugar Facotry will be pursued through technical valuation. Special
programmes will be implemented to increase productivity of the highly labourintensive
Biratnagar Jute Mills and Gorakhkali Rubber Industries. To ensure market
for the products, Governmental agencies will purchase tires to be produced by
Gorakhkali Rubbber Industry. For all of this, a sum of Rs. 300 million has been

86. It appears that there are huge potentialities for minerals in Nepal. Such minerals
remain yet to be explored, however. In this context, foreign investment will be
encouraged for the exploration of minerals where feasibility studies have been
already completed. Multinational companies will be invited for the exploration and
extraction as well as production of petroleum products.

87. The Act relating to the special economic zones will be enacted in this Fiscal Year.
Necessary provisions are made in the accompanying Finance Act for providing
customs and income tax exemption facilities in the special economic zones.

88. There remains a huge potentiality for producing cement in the country. However,
private sector has not been able to establish cement factories due to the lack of basic
physical infrastructure such as electricity and roads. In this context, and with a view
to encouraging private sector for the establishment of cement factories in Udaipur,
Hetauda, Dang and Surkhet, the government will construct access roads to
limestone pits, and will also extend electricity transmission lines. In order to
accelerating the pace of the establishment of infrastructural industries, to increase
Nepal's export capacity and to increase industrial processing of local resources,
special economic zones will also be developed in Jhapa, Dhanusha, Birgunj,
Panchkhal, Jumala and Dhangadi. I have allocated a sum of Rs. 600 million for the
development of these two industrial infrastructures.

89. IT Park located at Banepa will be developed as a special economic zone. Private
sector will be encouraged to invest in the recently constructed special economic
zone at Bhairahawa.

90. As Nepal Industrial Development Corporation is in a state of inaction due to the
inadequate capital and management weaknesses, it will be operated with reformed
management and an additional capital will be raised from the market. At the same
time, the Government equity will be maintained at 70 percent.

91. In view of a need to develop large infrastructure industries in the country, there is
an urgency to establish an infrastructure bank to mobilize capital investment within
the country. This kind of infrastructure bank will be established on the joint
participation of the Government and private sector in the current fiscal year for
which the Government has earmarked Rs. 250 million.

92. Of the total share capital of Hetuda Cement factory, 5 percent will be sold to its
employees and 10 percent to the general public. With regard to 10 percent share of
Nepal Telecom set aside for sale, the remaining share will be sold through
secondary market.

93. The load shedding in the industrial corridor will not be ended. To ensure
uninterrupted power supply, initiative will be taken to establish a thermal plant on
public-private partnership near dry ports in Biratnagar and Birgunj. The emphasis
will be given for energy security by developing bio-fuel. I have allocated Rs.50
million for the development of bio-fuel.

94. The construction work will be initiated for petrol pipe line on public-private
partnership basis from Indian border to Amlekhganj.

95. I have allocated Rs 10 million for the establishment of herbal processing plant in
Karnali Zone.

96. In order to operate State Owned Enterprises (SOEs) in a competitive and
commercial basis with private sector companies, SOEs now operating under
different ministries will be put under a separate holding company. Such holding
company will be established by mid January 2009.

97. In order to improve managerial capability of SOEs, the appointment of leading
mangers will be carried out on competitive basis and terms of reference will be
provided in advance. The necessary policy measures will be adopted for curbing
unwanted political interference in the overall management of SOEs.

98. The Government will make available public and barren land on long term lease to
the private sector if they want to establish dairy industries, amusement parks, tourist
rest houses and resorts, hotels, universities and technical institutes on their own

99. I have proposed Rs.1 billion 520 million for the industrial sector which is an
increase of 119 percent as compared to last year.

Promotion of Tourism for Economic Change
100. Tourism will be accorded high priority in the new economic development policy.
Tourism policy 1995 will be refined and a new policy will be adopted. To this end,
program and policies of all ministries will be oriented towards tourism promotion.
A necessary preparation will be made to declare 2011 as “Nepal Tourism Year”, the
objective of which is to widely publicize within and outside the country in order to
bring at least 1 million tourists per year in the country.

101. As motorable roads are being built at the existing trekking trail in Annapurna area, a
feasibility study will be carried out and necessary process will be followed with a
view to opening new trekking routes at Lamgunj-Annapurna, Lamjung-Manaslu,
Gorkha-Manaslu areas and up to Manasrover for which base point will be Khaptad.
With a view to providing tourism benefits to the residents of trekking routes, an
integrated program consisting of agriculture, tourism training and marketing will be

102. An arrangement will be made wherein Nepal government will guarantee to acquire
necessary funding to purchase two large aircrafts for the Nepal Airlines Corporation
which will enhance its international seats capacity and make the service timely and

103. In order to develop tourism as a main component of poverty alleviation and new
economic development policy, the number of tourists flow will be increased and the
tourism will be developed as a means to enhance income in rural and urban areas.
Necessary infrastructure will be created to develop touristic destinations at Shree
Antu in Ilam, Halesi in Khotang, Manakamana–Gorakhnath in Gorkha,
Swargadwari in Pyuthan, Khaptad in Doti, Ramrosan in Achham and Gadhimai-
Simrounghad in Bara. I have allocated Rs. 280 million for the development of
tourism infrastructure.

104. A royalty waiver will be provided to expedition groups for 5 years from the
beginning of this fiscal year who intend to climb Himalayas in far east and midwest
regions. In order to attract climbers in all seasons, a discount will be provided
on the fees in summer and winter seasons.

105. The construction of International Airport at Nijgharh, Bara will begin from this
fiscal year. Similarly, the construction of Regional Airports at Pokhara and
Bhairawa will also be started. I have set aside Rs. 200 million for these projects,
which will be constructed on public-private partnership basis. I have proposed Rs.
950 million for the aviation sector by substantially increasing the allocation
compared to revised estimate of last fiscal year.

106. I have set aside Rs. 250 million for upgradation and capacity expansion of 14
domestic airports which are important from the point of regional and tourism view
points. I have proposed Rs. 397.8 million for tourism sector by substantially
increasing the allocation compared to revised estimate of last Fiscal Year.

Investing in Physical Infrastructure: Foundation for New Nepal
107. The ongoing construction of 1700 kms-long mid-hill Highway, connecting
Chiyabhanjyang of Panchthar District in eastern region to Jhulaghat and Baitadi in
western region will be named as Puspa Lal Lok Marga (Highway) and remaining
portion of 650 km will be completed within 3 years. About 180 km portion of
Jajarkot-Dailekh, Ghurmi (Udayapur)-Khurkot and Chaynthapu (Panchthar)-
Gopetar (Ilam) will be completed by this year, while the construction of remaining
470 km roads will begin form this year. I have allocated Rs. 350 million for Puspa
Lal Lokmarga for the current Fiscal Year.

108. The construction of Kathmandu-Terai Fast Track Road under BOOT will be
initiated with high priority from this fiscal year. I have allocated Rs. 171.7 million
for management and land acquisition activities under this project for the current
Fiscal Year.

109. As of now, 6 districts which are still not connected by roads are lagging behind
socially and economically. Roads construction will be intensified to meet the
commitment of connecting every district by roads within 2 years. Motorable roads
will be constructed in Solukhumbu, Bajura and Manag districts within current fiscal
year, while continuity will be given to ongoing road construction at Humla.
Similarly, road construction connecting headquarters of Dolpa and Mugu Districts
will be continued. I have allocated Rs. 450 million for the construction of these

110. I have allocated Rs. 150 million for the construction of electric Railways in Terai
from Mechi to Mahakali. This will also cover upgradation and widening of
Railways at Jainagar-Janakpur-Berdibas and to carry out study for the expansion of
Kathmandu Pokhara Railways.

111. I have allocated Rs. 125 million for the construction of North-South Highway
which will consist of Mahakali, Karnali, Kaligandaki and Koshi Highway. Survey
design will be carried out for Mechi Highway consisting of Kechana-Ilam-Phidim-
Taplejung–Olanchungola, Seti Highway consisting of Tikapur-beni-Lode-
Sanfebagar-Khaptad-Chainpur-Urailek-Taklakot. At the same time, detailed survey
design as well as the construction work will be carried out for Bharatpur-Thori
alternative road form this fiscal year.

112. Under the Terai Road Development Program, upgradation of 31 north south and 17
postal roads will be carried out in first phase in Jhapa, Morang, Sunsari, Saptari,
Siraha, Dhanusha, Mahottari, Sarlahi, Rautahat, Bara, Parsa, Chitwan, Nawalparasi,
Rupendehi, Kapilvastu, Dang, Banke, Bardia, Kailali and Kanchanpur Districts. A
total of 650 km roads will be upgraded this year, and under the second phase,
design for 515 km roads will be completed as well as construction will begin from
this year. I have allocated Rs. 775.5 million for this purpose.

113. Upgradation of Baitadi-Satbanjh-Gokuuleswor, Surkhet-Kalikot, Khodpe-Bajhang,
Lower Dungeshwor-Siyakot-Dailekh and Sunkoshi-Okhaldhunga roads will be
strated this year. Upgradation of Janakpur-Dhalkebar, Galchhi-Trishuli-
Sayaprubesi, Tamakoshi-Manthali-Khurkot, Phidim-Taplejung, Bhairawa-
Taulihawa and Changunarayn-Bhaktapur roads will be done.

114. I have allocated Rs. 50 million for Kanti Lokpath, which is under construction as an
alternative road connecting Hetuda-kathmandu valley for a long time.

115. I have allocated Rs. 99.8 million for the construction of Shahid Marga (Tila-

116. I have allocated Rs. 200 million for Benighat-Aarughat-Larke road.

117. The upgradation of Chandra Nighapur-Gaur, Bhaluwang-Pyuthan, Chakchake-
Liwang, Sanfebagar-Martadi, Sanfebagar-Mangalsen, Surkhet-Siyakot, Amiliya-
Tulsipur-Salyan, Basantapur-terathum (Manglung) and Maldhunga-Beni will begin
from this fiscal year.

118. I have allocated Rs. 843.3 million for the construction of industrial corridor up to
Pathliya-Birgunj Dry Port and construction of Sunalui Parasi road.

119. I have allocated Rs.82.1 million for the construction of track road of 40 km along
Chure range covering Dharan-Chatara-Ghaighat-Sindhuli- Hetuda.

120. The construction of about 16 km roads and 8 bridges at Syaprubesi-Rasuwagadhi
will be expedited. I have allocated Rs.649.9 million for this purpose.

121. Kathmandu-Bhaktapur road has become too narrow to cope with the increasing
traffic. Therefore, construction work of expanding this road into 6 lanes will be
initiated from this fiscal year for which I have allocated Rs. 159.4 million.

122. The work regarding the widening of Soaltee mode- Kalanki- Nagdhunga road will
be continued to ease the greater velocity in the traffic system in the valley. A
Ringroad (Gulf course) – Bagmati road will be constructed for Kalanki Bypass and
Chabahilchowk Bypass. Bagmati corridor, Dhobikhola corridor, and Bishnumati
corridor road will be blacktopped. The improvement work at Koteshwor, Kalanki
and Chabahilchowk junctions will be started from the first quarter of the coming
fiscal year to immediately manage traffic pressure in the Kathmandu Valley.

123. I have allocated Rs. 864.5 million for the repair and maintenance of all the sealed

124. The ongoing construction work of 25 bridges on the main roads and feeder roads
will be completed and the construction work of 100 bridges will be continued in
this fiscal year. The design and construction of some main bridges including Tamor,
Arun, Dudhkoshi, Trishuli and Kaligandaki will be started. The designing of Mechi
bridge, Rajapur bridge and Chataraghat bridge of Koshi will be completed and
construction will also be started. For this, I have allocated Rs. 710 million.
125. I have allocated Rs. 400 million for the installment of Belly bridge for the
immediate operation of transport over those rivers where it will take time to
construct the bridges, although roads are already constructed to link the district
headquarters but transport is not in operation due to lack of bridges.

Honorable Speaker,
126. I have proposed Rs. 13 billion 910 million for the road transport sector, which is an
increase of 77.14 percent in comparison to the revised expenditure of the last fiscal
year. The large amount of budget like this had never been allocated for the
construction and upgradation of roads on a massive scale. Considering the
construction of roads and bridges which I have mentioned above, this year will
indeed be a “Year of Construction ".

Development of Hydropower
127. I have proposed Rs. 12 billion 690 million for power sector which is an increase of
113 percent in comparison to the revised expenditure of the last Fiscal Year.
128. A high-level power sector development committee under the chairmanship of the
Prime Minister will be established to materialize the objectives of producing and
utilizing 10,000 MW hydro powers in the next 10 years. Becoming self reliant in
power sector can ensure higher economic growth. This committee, keeping in mind
the development of hydropower as a main focus, will develop a national energy
security policy for the next 40 years on the basis of national consensus.
129. The construction of run of the river type projects, namely, Upper Tamakoshi- 456
MW, Upper Trishuli A-60 MW, Rahughat– 30 MW and Naumure 245 MW,
totaling 791 MW, will be started this year. Likewise, necessary works will be
initiated to start the construction of Upper Trishuli 3 B - 40 MW, Tamor-Mewa -
110 MW, Upper Seti - 127 MW, Dudhkoshi - 300 MW, Tamakoshi 2 and 3 - 500
MW, West Seti - 750 MW, totaling 1827 MW from both the government and
private sectors.

130. Middle Marsyangdi Project of 70 MW will be completed this year. Ongoing
projects like Chameliya (30 MW) and Kulekhani Third (14 MW) will be
constructed quickly and there will be no shortage of funds for the implementation of
these projects. The electricity demand will be managed to provide relief from load
shedding. The incentives will be provided for the use of energy efficient electrical
gadgets such as capacitor, CFL bulb, tube light, choke, etc.

131. Special emphasis will be given for rural electrification from this fiscal year to meet
the commitment of distributing electricity in all villages and households in the next
10 years. For this, I have allocated Rs. 1 billion 520 million for small hydro power
projects which is implemented through alternative energy program. A system will
be put in place in which there will be no chance to divert the power royalty received
by District Development Committees in other sectors until and unless there is a
complete rural electrification.

132. A concrete work plan will be formulated and carried forward to discourage the
tendencies of holding licenses and signing power purchase agreements but not
implementing projects for a long time.

133. The legal provision of not requiring licenses for the production up to 1 MW hydro
power projects will be extended up to 3 MW. The limit of present exemption given
on Environment Impact Assessment will be increased from 10 MW to 50 MW. The
process will be simplified while providing license by forest sector and providing
permission for environment impact study.

134. The State will have a prominent role in the development of national transmission
system. A national transmission system of 400/220 KV high voltage capacity in a
cyclical manner will be developed gradually covering Hill and Terai including the
periphery of Hilly Lok Marga. Similarly, capacity of substations will be increased
and new substations will also be constructed.

135. Immediate steps will be taken for the construction of 500 MW transmission line and
substations connecting the national grid, in order to materialize import and export of
power with the neighboring India. Necessary procedures for the construction of
three 400 KV main cross border transmission lines, namely Butwal-Sunauli (25
km), Duhabi-Jogbani (15 km) and Dhalkebar-Bhittamod (30 km) have been carried
forward. Of these three, construction of Dhalkebar-Bhittamod line will start from
this fiscal year and will be completed by Fiscal Year 2009/10.

Rural Infrastructure: Basis for Employment and Development
136. For the creation of massive employment opportunities through development of
small irrigation and drinking water projects, construction of rural and agricultural
roads, bridges and rivulets, and implementation of income generating activities,
labour-oriented development projects based on people's participation approach will
be implemented in 75 districts. Local communities will select the local level
projects based on their own needs and implement as well. Such amount will be
channeled to the local User Groups through District Development Committees. The
ongoing physical infrastructure projects at the local level can use this fund in case
of insufficiency. It is expected that this would create an additional employment of
10 million labor days to 100,000 people for 100 days. I have earmarked Rs 1 billion
750 million for this programme.

137. Food for Work Programme will be implemented in the region/sub regions where
there are food shortages and no road networks. Emphasis will be given to complete
the ongoing projects. Track opening of 125 km motorable road will be carried out
by providing 6466 MT of food in the 22 districts where there are food shortages
under Rural Community Infrastructure Works Programme. I have earmarked Rs
275.2 million for this programme.

138. In this Fiscal Year, 1805 km of road construction and maintenance of 4170 km road
will be carried out in the 75 districts under Rural Access Improvement and
Decentralization Program implemented through District Development Committees.
Under these programs 325 small bridges, 250 suspension bridges and 6 motorable
bridges will be constructed. For these rural infrastructure programmes, I have
allocated Rs. 5 billion 270 million.

139. With a view to bring local development fee with in the budget, I have made
necessary arrangements for the deposit of such fee and further arrangement to
deposit in the fund through appropriation.

140. I propose to allocate Rs. 20 billion 420 million for the programmes, including rural
infrastructure building and others under local development. This figure constitutes
an increase of 112 percent in the last Fiscal Year's revised expenditure.
141. Feasibility study of electronic Trolley Bus and Cable Car will be carried out for
developing alternative means of transportation and will be implemented on gradual

142. Despite huge investment in agricultural and rural roads, expected outcomes have
not yet been realized due to the problems, such as- ever increasing number of new
projects and non-completion of the ongoing projects within planned cost and time
horizon. Therefore, the small projects that are labor-intensive, based on locally
available resources and capable for swift delivery will be emphasized in line with
the District Transportation Master Plan. Priority will be given to operate
transportation through quality improvement and upgradation of such roads rather
than quantitative expansion. Policy of selecting new road projects only after
feasibility study will be strictly followed. A national archives of rural roads will be

Science and Technology
143. To check the brain-drain of the indigenous scientists and technologists, programmes
will be launched to encourage them to engage in innovative and outcome-oriented
research works grounded on appropriate proposals.

144. A national lab will be set up under National Academy for Science and Technology
with a view to expediting the studies and researches in area of science and

145. The fifth National Science Conference to be participated by about 1200 scientists
from within the country and abroad will be convened in Kathamandu.
146. National Information Bank will be established with a view to protecting important
public information from catastrophe and anthropogenic accidents. Rs. 230 millions
is allocated for construction of building of this bank in the current Fiscal Year.

147. For increasing access of rural people to the modern information technology, Rs.
57.5 millions is earmarked for additional 175 tele-centres in rural communities,
schools and Post Offices. Programmes for establishing one tele-centre in each
Village Development Committee will be launched gradually.

148. Arrangement will be made to forecast and disseminate the chances of catastrophic
floods induced by heavy rain and ice lake explosion. A well-equipped Climate
Change Research Center will be established to carry out studies on the impacts of
climate change in the development of water resources, hydroelectricity, agriculture
and environment.

Promotion of Alternative Energy: Solution to Energy Crisis
149. I propose to observe the Fiscal Year 2008/09 as "Alternative Energy Year" aiming
at accelerating socio-economic development, improving ecological condition, and
resolving the energy crisis currently facing the country by ways of wider use of
alternative and renewable energy, involving community, increasing awareness and
promoting development of such energy.

150. Small hydroelectricity projects of up to 1 Megawatt will be promoted for
distributing electricity to all Nepalese. In such projects, existing government
subsidy will be increased. Similarly, existing subsidy from the Government to
biogas and improved stoves will be increased.

151. 20 Megawatts of electricity will be generated in the periphery of Kathmandu Valley
through Windmill on basis of Public Private Partnership mode of investment.
Similarly, generation of wind energy will be expanded to other potential regions.
152. To fetch minimum facility of lighting, 65000 small and cottage solar power systems
will be installed in low-income households in the rural areas currently deprived of
the electricity. A special programme will be launched so as to fetch solar light to
each home of Rukum district. From this, low income households will at least obtain
lighting facility. Similarly, 25000 biogas plants will be constructed in the potential
areas, 450 solar drier/cooker, 1500 improved water turbines, and 2500 improved
iron stoves and 50000 improved clay stoves will be installed.

153. At present, consumers are badly affected by the problems of price rise and lapses in
supply system of petroleum products created by the pressures of the price hike in
the international market, compulsion of total dependency on imports, and problems
inherent in price adjustment mechanism. To reduce dependency on petroleum
products, industries producing bio-diesel locally and widely available plant- Sajivan
(Zatropha) and mixing Ethanol by up to 10 percent in petrol will be encouraged. For
wider expansion of Sajivan farming, public lands lying barren and lands in the river
banks will be provided to the private sector on long-term leasehold basis. Ministry
of Agriculture and Cooperatives and the Ministry of Land Reforms and
Management will jointly issue the Directives under the leadership of the Ministry of
Forest and Soil Conservation by mid-December of this year.

Information and Communication
154. The Right to Information Rules will be enacted and enforced to ensure the access of
all to the Right to Information guaranteed by the Constitution and to manage the
process regarding this.

155. The working Journalist Rules will be enacted and enforced for safeguarding the
interests of working journalists and for speedy enforcement of the working
Journalists Act.

156. Access to Radio Nepal and Nepal Television will be made countrywide. Languages
and dialects of Janajatis, art and culture, reality of life, history, struggle, sacrifice,
patriotism, national integrity, artistic, educational, ideological and message-oriented
audiovisual materials as well as film production will be encouraged.

157. Rs. 300 millions is allocated to Gorakhapatra Corporation for publication of
Gorakhapatra daily in an inclusive fashion, i.e., publication of materials pertaining
to the original arts, culture, reality of life etc. in various languages and dialects from
various regions.

Urban Development and Housing
158. Unplanned expansion of big cities, including that of Kathmandu, must be managed
immediately; otherwise, such unplanned structures will have to be demolished
resulting in huge loss of property. To avoid this, a long-term detailed plan for
managing existing structures and guidelines for future constructions will be
developed and enforced. An integrated plan of Kathmandu valley will be developed
and firmly enforced. An urban development master plan will be formulated and
planned infrastructure will be developed for the new places that have a potential to
be developed as a city. Formulation of master plan for big cities and building of
infrastructure will be started in the five districts- Kailali, Surkhet, Kaski, Kavre and
Sunsari. Similarly, infrastructure will be built in the district Headquarters not yet
qualified to be a municipality. For this programme, I have allocated Rs. 150

159. Construction of infrastructure already taking place in Humla and Kalikot districts
for integrating scattered rural settlements and increasing the access of dense
settlements to physical facilities will be continued. Such work will be initiated in
various districts in hills, mountain and terai as well. I allocate Rs. 145 millions for
this purpose.

160. A sum of Rs. 5 million has been allocated for the Jaljala area conservation. Rs. 5
million has been allocated for the development of model settlement in Thawang, the
centre of people's liberation campaign. I have allocated a sum of Rs. 248.5 million
for the development of areas honoring political sacrifice.

161. The rivers of Kathmandu valley possess tremendous cultural and environmental
importance. But they are polluted. The banks of these rivers have been encroached.
During the current fiscal year, drainage processing, construction of road on the
banks of the river, construction of parks and afforestation programmes shall be
conducted as a campaign as an endeavor to keep neat and clean the Bagmati,
Vishnumati,and Dhobikhola rivers in the Kathmandu Valley. Taking sands out of
the rivers of the valley will be prohibited. Control dams shall be built in ten places
of these rivers. Bagmati Civilization Committee shall conduct this programme by
mobilizing, inter alia, the local communities. I have proposed to raise at the rate of
0.5 percent the registration fee charged for buying and selling the land within the
municipalities of the Kathmandu Valley to make the funds available for this
campaign. As it is estimated that such a change in registration fee shall generate
Rs.300 million, the same amount of money has been appropriated to the Bagmati
Civilization Committee.

162. The houses and slums built by encroaching the banks of the rivers of Kathmandu
Valley shall gradually be dismantled. Among such dwellers, the real
landless/homeless will be identified and housing arrangements shall be made for

163. Rs. 2 billion 210 million has been proposed for the housing and urban development
sector which is a 61.76 percent rise in the revised housing and urban development
sector expenditure of the previous Fiscal Year.

164. Existing laws shall be more effectively enforced for the construction of seismic
resistant public and private houses/ buildings in the country.

Construction of New Legislature – Parliament Building
165. The construction of well-equipped and modern building of the Legislature-
Parliament, a national pillar for articulating and expressing popular wishes and
problems by the elected representatives, will be commenced this year. Rs. 250
million has been earmarked for the construction of this purpose.

"Basis of new Nepal, Education as Universal Fundamental Right"
166. Rs. 38 billion 980 million has been proposed for the education sector which is a
44.5 percent rise from the revised education sector expenditure of the previous
Fiscal Year.

167. A three-pronged strategy shall be adopted for the reform of the education sector,
which has been established as a constitutionally guaranteed fundamental right. This
includes, in particular, enhancing public access, making education skill-oriented
and vocational through quality improvement in order to link education with life and
productivity, and adopting cost-recovery system in higher education.

168. More than 91 percent people shall have access to primary education in the current
Fiscal Year. For this, the existing programs shall be continued making them more
inclusive and target oriented. Additional 3500 Child Development Centers shall be
established for the highly backward classes of people and Madras, Gumba and
Gurukul schooling system shall be accommodated in the mainstream education.
Arrangements shall be made for alternate schools so as to provide access of
housewives and housemaids to school education.

169. I have allocated Rs. 970 million to continue various scholarship program to be
extended from primary to higher level.

170. The ongoing lunch program for the 24000 Children of Karnali Zone shall be
continued. Day meals for 170000 students and edible oil for 50000 students shall be
distributed in sixteen districts facing food shortage, low access to education and low
girl students enrollment rate. Money shall be made available to the local level so
that it can be implemented locally. The local productions shall be used for feeding
the students in this regard.

Transparency in Investment- Per Capita Funding of Students
171. The system of distributing the school teachers' grants and school building
construction grants without any specific policy, program or norms and relating it to
power, position and access, has created several aberrations and resources have been
misused. Grant for teachers is more in those schools where teacher-student ratio is
low and the grant for the same is less where the teacher-student is high. The system
of sending grants to schools on the basis of the number of students will be strictly
followed to avoid such aberrations and to ensure transparent and judicious
distribution of means and resources. Rs. 19 billion 260 million has been earmarked
for the provision of salary and allowances of a total of 148000 permanent and
temporary teachers and as well Rs. 700 million has been appropriated for the
teachers' grants to be provided to those schools where teacher-students ratio is high.

172. Policy of making the school management committee responsible for the
construction of schools and physical infrastructure development shall be adopted.
School management committee will be given on the basis of accepted norms a lump
sum grant amount for the construction of any kind of schools or their physical
reforms. With Rs. 2 billion 950 million appropriated for this purpose, activities like
the construction of 9000 classrooms, rehabilitation of 4000 classrooms , building
and reform of external environment of 4000 schools, construction of 2000 toilets
and construction of 30 model high schools will be completed.

173. The Government regrets on its failure to make textbooks available in time to the
school students across the country in the past due to the negligence and monopoly
in the printing and distribution of textbooks. Such a shameful situation should end
at any cost and condition. The Government, for this purpose, expresses its
commitment to make the textbooks available in all district headquarters by the
middle of March through creating necessary competitive environment in the
textbook printing and distribution process.

Free Primary and Secondary Education
174. Primary education shall be made compulsory and free in pursuance of the state's
declared policy of making education a fundamental right of all and gradually
making secondary education free. School launch program shall gradually be
extended throughout the nation to attract all to the primary education. Beginning
from this Fiscal Year, school education up to class 8 shall be made free and fee for
class 8 and 10 shall be reduced to gradually make them free. Free education
opportunities shall be provided to all public school students of Karnali Zone and
such a privilege shall extend up to class 12 in the public school for all Dalit students
across the nation.

175. Guardians and local bodies shall be made to participate in the school management
committee. In case of inadequacy of teachers compared to the number of students,
additional grant will be provided to the schools on the basis of per unit cost.
Adequate money has been provisioned for this purpose.

176. 33141 primary level and 12250 secondary level teachers consisting of a total of
45391 teachers shall be trained in the coming Fiscal Year for ensuring availability
of efficient and skilled teachers.

Vocational and Technical Education
177. Educational unemployment has become a problem for the nation due to the failure
of linking education with life and productivity. A campaign will be launched
following the finalization of vocational technical education together with the school
restructuring activity as the problem can only be addressed by bringing in change to
the educational structure. The ongoing regular programs of the technical education
shall be continued, and in addition to that, technical education annex program will
be conducted in 30 schools. Rs. 488.8 million has been appropriated for this.

National Literacy Campaign
178. Illiteracy is the main cause and consequence of deprivation and underdevelopment.
National literacy campaign shall be launched with the slogan of '' Know Letters, Be
Civilized" guided by the determination of eradicating illiteracy in the coming two
years. Local literacy volunteers shall be recruited in each ward of each village
development committee to materialize this slogan. A total of 35000 youths shall
get employment from this program, and this program will be a concrete step taken
against illiteracy. Rs. 1 billion 40 million has been earmarked for this program.

Higher Education
179. Higher education system shall be operated on the basis of cost sharing, and the
institutions related to it will be developed as autonomous agencies.

180. I have allocated Rs. 80 million to establish agriculture, forestry and animal science
university in Rampur of Chitawan district and a university of technology in Mid-
Western region. A medical college will be established in Seti-Mahakali area.

181. The eight campuses being operated in Mugu, Dolpa, Kalikot, Rukum, Jajarkot,
Rolpa, Bajhng, and Sangkhuwasabha districts will be gradually changed into
Tribhuvan university's constituent campuses.

182. In order to provide an opportunity to youths who were deprived of getting education
during the conflict period, open school and Open University concept will be

183. Foreign students and researchers will also be attracted by establishing special and
international standard educational and research centers in the areas like agriculture
and forestry, engineering, medicine, information technology, management, etc.
184. I have allocated Rs. 4 billion 280 million for higher education.

Health: "New Nepal, Healthy Nepal"
185. The primary and basic health facilities will be ensured as a fundamental right of
Nepali people. Likewise, the "health for all" concept will be implemented. In order
to make public health easily accessible to the general public, investment in rural
health services will be increased and a community health policy will be adopted.
186. The arrangement of distributing the most needed medicines free of cost from subhealth
posts and health posts that started last Fiscal Year will be expanded also in
the district hospitals to increase the access of the people to public health facilities.

187. To reduce maternal mortality rate through the provision of maternity services,
infrastructures will be developed in 100 health posts to provide the maternal health
services. A 24-hour operation facility including maternity services will be provided
in eight districts, viz. Panchthar, Jumla, Dailekha, Pyuthan, Siraha, Sankhuwasabha,
Achham, and Gulmi. The maternity services will be provided free of cost to all.

188. A national program will be launched for the treatment of the women suffering from
uterus prolepsis and such a facility along with operation services will be provided to
12 thousand women this year.

189. A free of cost operation service will be provided through Martyr Gangalal Heart
Center to prevent heart disease of the children below the age of 15, of the senior
citizens above the age of 75, and of all endangered ethnic citizens. Likewise, a free
of cost service for the dialysis of kidney will be provided through National Kidney
Center to the endangered ethnic citizens, and to the senior citizens above 75 years
of age.

190. 500 sub-health posts of village development committees which have basic
infrastructure facilities will be upgraded to the health posts and subsequently
effectiveness will be brought into service delivery.

191 In order to carry acute patients easily to the nearby health posts, 2000 stretchers and
355 Rickshaw ambulances will be provided to the rural areas.

192. To support the infrastructure development of health sector, 42 health post buildings,
10 primary health centers, 8 Ayurveda health center buildings, 18 Ayurveda health
post buildings, 4 public health buildings, and 20 maternity rooms will be
constructed. I have allocated Rs. 1 billion 560 million in aggregate to construct all
health related buildings.

193. I have proposed Rs. 15 billion 580 million in health sector in the current Fiscal Year
by increasing 53.92 percent against the revised expenditures of the last Fiscal Year.

Drinking Water and Sanitation
194. Drinking water related programs will be launched in rural and urban areas with a
slogan of "Slogan of Drinking water: Taps in the Villages". In the area of rural
drinking water program which is being implemented under the Ministry of Local
Development, 215 drinking water projects will be completed and the construction
of other 738 projects will continue. Out of 533 projects being implemented under
district drinking water supply division office, 100 projects will be completed and
the construction of the rest of 407 projects will be expedited. Out of 690 projects
being implemented under rural drinking water and sanitation fund, 106 projects will
be completed keeping the rest of the projects going on. I have allocated Rs. 3 billion
300 million to operate different continuing projects in rural drinking water sector.

195. In order to improve the quality of drinking water in 10 projects of Nuwakot,
Morang, Sindhupalchowk, Nawalparasi, Ilam and Jhapa districts, a water treatment
system will be constructed and pure water will be supplied.

196. Together with the search for an alternate source of drinking water, and appropriate
management of the existing sources, the drinking water supply in Kathmandu valley
will be eased within next one year. With a commitment of completing the
construction of Melamchi project within the next five years, 15 per cent work of its
tunnel construction, 22 KM road upgradation work from Lamidanda to Melamchi,
and 18 KM main entrance construction work of the project will be completed this
year. I have allocated Rs. 1 billion 894.6 million for this purpose.

197. In order to provide drinking water in 6 hilly districts of the Western and Mid-
Western Region, Western Nepal rural drinking water and sanitation project will be
operated. An arsenic reduction program will be operated through the Western Nepal
Rural Drinking Water and Sanitation Project in Terai Districts (Kapilvastu,
Rupandehi, and Nawalparai) of Western development region.

198. A legal provision will be made to hold fully responsible the local bodies in solid
waste management. The task of the Solid Waste Management and Resource
Mobilization Center will be restructured as an institution concentrating on technical
cooperation field. To manage the solid waste of Kathmandu valley, the
infrastructure of the land fill site will be developed and an initiative to curtail the
production of solid waste materials will be promoted with the participation of the
communities through local bodies. A provision will be developed to manage and
implement an international standard Sanitary Land Fill Site in Biratnagar.

199. I have allocated Rs. 984.4 million for making drinking water facility available to 83
thousand people by completing 690 community water and sanitation projects in 21

200. I have proposed Rs. 7 billion 960 millions for Drinking Water Sector, which is
65.76 percent more of the revised expenditure of the last Fiscal Year in this sector.

Labor and Employment Creation
201. Necessary steps will be initiated to establish employment as fundamental right of
the citizens. Based on the recommendations of the National Labor Commission to
be set up to settle the problems in the labor sector, necessary amendments in the
existing labor laws will be made in order to safeguard the welfare of the laborers as
well as to create an investment friendly environment.

202. Taking into consideration the abundant labor force of the country, priority will be
accorded to the implementation of short-term and long term labor-intensive
development projects.

203. Employment Information Centers will be established at various parts of the country
and records of the unemployed will be prepared.

204. Based on the local needs and study of national/international labor market demand,
emphasis will be given to the production of competent and skilled labor force.

205. Foreign employment will be made more respectable and the attractive International
labor markets will be explored. Labor agreements will be signed with additional
countries keeping in mind the security of the workers seeking foreign employment.
At least 10 percent seats in the foreign employment will be reserved for the families
of martyrs and disappeared people. A policy to encourage to invest in industry and
infrastructure development will be adopted by discouraging the tendency to use
remittance income received from foreign employment in consumption related

206. In order to increase the access of common people to employment opportunities
provided by private companies, these companies need to mandatorily issue public
notices in national newspapers and other media for the recruitment and selection of

207. Necessary steps will be taken to initiate Pension System for all labors utilizing the
amount accumulated in the Welfare Fund as per the Bonus Act. Minimum wage of
the labors in private and informal sector will be reviewed and increased as per the
need of the hour.

Youth Self-Employment Program
208. In order to provide self-employment opportunities to the youths, a Rs. 500 million
"Youth Self-Employment Fund" will be established. Non-collateral, concessional
periodic loans, up to Rs 200,000 from banks and financial institutions and free
vocational trainings will be provided to the youths interested in carrying out selfemployment
activities in commercial agriculture, agro-Industries or service sector.

209. To develop skills for employment, a total of 14,200 people from Kathmandu,
Panchthar, Dhanusha, Kapilbastu, Humla, Accham, Arghakhanchi, Udayapur,
Khotang, Dhading, Gorkha, Nawalparasi, Bhojpur, Siraha, Sindhuli, Sarlahi,
Myagdi, Rupendehi, Doti, Kailali and Saptari will be given vocational training -
cum- employment. In addition to this, 5000 people will be given six months skill
development trainings in General Mechanics, Electricity, Plumbing, Hair Dressing,
Sewing-Cutting, Electronics Repairing, Motorcycle Repairing, Auto mechanics,
Computer, Welding, Pump-set Mechanics etc. through 13 Skill Development
Training Centers under the Ministry of Labor and Transport Management.

Likewise, in accordance with the local demand, 15000 people from targeted groups,
families of Martyrs, victims of People's Movement, Madhesi, and Under High
School youths will be given short-term skill development trainings.

210. Additional employment opportunities will be provided to 300 people from three
districts of highly remote areas by providing special foreign and youth selfemployment
skill development trainings.

211. I have given continuity to "One Family One Employment Programme" in Karnali
Zone, initiated from the Fiscal Year 2006/07, in the coming Fiscal Year too.

212. With the implementation of this budget, an additional 66,000 educated youths will
get an opportunity of employment through National Literacy Volunteers and
increased number of teachers, Revenue Leakage Control Patrol, VAT market
monitoring inspectors and Youth Self-Employment Programme. Likewise, an
additional 270,000 people will get employment for 100 days through Labororiented
Development Programme based on people's participation, local
infrastructures development programmes and Karnali Employment Programme. In
addition to this, the high public investment in big infrastructures, industrial and
tourism infrastructures and significant rise in private investment resulting from
policy reform measures is expected to further expand economic activities thereby
creating a high level of employment.

Forest and Soil-Conservation
213. Evaluation of Forest and Wild Life Management System will be carried out to
prevent the forest area from exploitation and poaching of wildlife. The policy of
Scientific Management of forest area will be put in place to conserve the forests as
well as to enable marginalized/disadvantaged class, region, castes, gender, socially
disadvantaged and people/ communities residing far from the forest in optimizing
advantage from it.

214. For the scientific management of forests, the Forest Action Plans of all 75 districts
will be updated. Some of the public chakla forests of Terai and Inner Terai belt will
be leased for commercial plantation to communities/cooperatives.

215. Electric fencing will be done in the problematic areas of Jhapa and Sunsari to check
and control the human and property losses from wild elephants.

216. An extensive plantation in public and private lands will be carried out in the form of
a campaign with the objective of expanding the forest area and reducing the
excessive pressure on public forest area as well as to increase income generating
opportunities through strengthening of local supply. For this, 11.5 million plants
including fodder grass,cane, bamboos and herbs will be produced and planted and
provision of care will also be made. The policy of "One Place One Species" will be
adopted in such plantation programmes.

217. At least 75000 families from poor class Dalits, Janjatis and other marginalized
people will be provided with the opportunity of income generation through forest
based industries and occupations and leasehold and community forests.
218. In accordance with the Organic Diversity Convention, a law will be enacted for the
access to genetic sources, sharing of advantages from it and organic safety.
Arrangement will be made for the effective implementation of the forest related
agreements/conventions, of which Nepal is a party.
219. Herbs Development Programme will be implemented on the basis of comparative
advantage and its contribution to the poverty reduction of poor, women,
disadvantaged class and region as well as for the economic development. A Herbs
Processing Center will be established in Karnali Zone.

220. In order to rehabilitate the area affected by the climate change a National
Adaptation Plan of Action (NAPA) will be prepared and implemented.

Poverty Alleviation and Inclusive Program
221. Main thrust of the government is socio-economic development with inclusiveness
as its character. Government is dedicated to provide opportunities and access to the
service delivery for minorities, third sex, dalit and backward Janjatis. High priority
will be provided to those sectors in services such as education, health, drinking
water, social security and all opportunities of socio economic development
including employment.

222. In this fiscal year, intensive program based on human development index for
poverty alleviation will be implemented in 55 districts directly focusing on
backward community including deprived, women, Dalit, Janjati, Madhesi.
Traditional skill promotion, income generation, community infrastructure such as
roads, bridge and culverts, drinking water, irrigation and capacity development
programs such as education, health, and training will be implemented under this
program. I have allocated Rs. 2 billion 978 million in Poverty Alleviation Fund for
this program.

223. 98 small infrastructure development, 200 leasehold forestry, herbal farming,
agriculture and goat rearing, micro finance and marketization program will be
implemented in Rukum, Rolpa, Dailekh, Bajang, Bajura, Jajarkot, Humla, Mugu,
Kalikot and Dolpa districts. For this, I have allocated Rs 199.7 million.
224. I have allocated Rs. 18 million for implementation of the program related to spur,
plantation, protection of public land, social mobilization program, construction of
small infrastructure, women empowerment, public awareness in the areas to the
northern of Mahendra highway in Siraha, Mahottori, Sarlahi, Dhanusha and
Rupandehi districts.

225. Lack of coordination and duplication in implementation has been observed in
income generation programs and community development programs in the rural
areas. An assessment of these programs will be made in order to take the programs
to targeted area and community by integrating the program.

226. In line with the commitment made by the Government of Nepal in ILO Convention
No. 169 and international manifesto regarding the rights of tribal and indigenous
people, I have allocated Rs. 167.8 million to continuity for special program for
uplifting and empowerment of caste, indigenous people, neglected, oppressed, dalit,
muslim, backward madhesi which have fallen behind from the socio economic
development. Access to all programs implemented in local level should be assured
for these people. Programs under the sectoral offices in local level will be
monitored and audited in line with inclusiveness and gender responsive.

Women Empowerment, Transformation of Living Standard
227. There has been an important contribution of women in national economy. In the
current year, programs will be implemented in order to attain gender equality for
women development by ensuring their participation in economic, social and
political process. Gender Responsive Budget Initiative has been implemented. I
have appropriated Rs.32 billion 910 million for the directly benefitting programs for
women which are 13.9 percent of the total budget.

228. Women development program related to poverty alleviation, gender equality and
social inclusiveness being implemented in 1843 Village Development Committees
(VDC) will be gradually extended to all the VDCs. I have allocated Rs. 345.4
million for this program.

229. I have provided continuity to economic, social, legal empowerment and institutional
development programs being implemented in 15 districts namely Baitadi, Bajura,
Bajang, Accham,Doti, Kalikot, Jumla, Mugu, Ramechhap, Sindhuli,
Dhanusha,Sarlahi,Mahottari, Rautahat and Bara. For this, I have allocated Rs. 199.4

230. National Women Commission is working in the field of women rights and
empowerment as well as in the field of rescue of women suffered from violence and
for legal advice. In order to strengthen it by providing resources, I have increased
grant amount to Rs. 31.4 million.

231. I have allocated Rs. 46.2 million in order to provide helps in kind and cash to four
thousand families of 30 VDCs of five districts namely Accham, Banke, Bardiya,
Rolpa and Rukum under Decentralized Support Strengthen Program for children
and families which are vulnerable and affected by conflict.

232. I have increased grant to the amount of Rs.10 million for National Disabled
Federation in order to rehabilitate disabled person based on community approach by
collecting data of disabled person from their physical disability; to imparting skills
and leadership development training; to providing a training for self-reliance life
style; and institutional strengthening of Khagendra Nava Jeewan Kendra, Jorpati.

Social and Cultural Promotion
233. A Cultural Policy will be formulated and implemented within this Fiscal Year and
the preservation and promotional activities will be conducted to preserve the shrine
of Lumbini and Pashupatinath.

234. The activities relating to updating of data and keeping integrated record of seen and
unseen cultural heritage spreading accross the country will be continued and Local
Bodies and Communities will be mobilized for the preservation and promotion of
the places registered in the list of World Heritage.

235. The activities relating to preservation of overall cultural uniqueness of different
languages, literatures, arts, music will be conducted and put forwarded through the
establishment of separate academy for the language, literature, art and music and
drama. I have allocated Rs. 2 million for the establishment of Krishna Sen Ichchhuk
Cultural Academy.

236. I have allocated Rs. 2.5 million to mark century ceremony of the Great Poet Laxmi
Prasad Devkota by launching different activities.

237. The state will accord special priority to solve the core problems of Nepali people
relating to sexual and gender minorities and a common house for 50 people will be
provisioned to live together for their socialization.

Access of Rural People to Financial Services
238. With a view to reducing poverty, ongoing micro- credit programme will be
effectively managed and implemented. A national level micro-finance fund will be
established by integrating and consolidating existing whole- sale micro-credits
providers. Both domestic and foreign capital will be deposited into national level
micro- finance fund, and the fund thus deposited will be made available as credits to
rural cooperatives, non governmental and community organizations including micro
finance institutions on a concesssional terms of interest. Micro finance providing
institutions will be encouraged to implement programmes in rural and high hills
areas. For this programme, Rs. 100 million will be made available in the Self-reliant
Fund to be managed by Nepal Rastra Bank.

Financial Sector and Capital Market
239. For the enforcement of Secured Transaction Act, establishment of secured
transaction registry will be completed within this Fiscal Year. Likewise, Mutual
Fund Act and Trust Act will be enacted within this Fiscal Year for further
promotion of additional areas of investment.

240. The supervision, monitoring and evaluation job being conducted by the Nepal
Rastra Bank will be made more vigorous in order to maintain financial health at a
certain standard of the banks and financial institutions that mobilize common
people's savings.

241. In the last Fiscal Year, simple actions like passport seizure, freezing of property
and debarring from appointments in publicly accountable posts had been taken
against the willful defaulters. Such Actions were taken against only those
willful defaulters who had a principal payment due more than Rs. 50 million.
However, now more stern action will be taken against such willful defaulters.
Actions will also be taken to the certain willful defaulters who have less than
Rs. 50 million principal as due.

242. Additional benches will be established in the Loan Recovery Tribunal keeping
in view the increasing number of cases.

243. In the process of modernizing the transactions of the securities market,
computerizing process of the transactions have started at Nepal Stock
Exchange from this year. In this process, to make the transactions more
transparent and to simplify the ownership transfer process in order to complete
it quickly, infrastructures including legal arrangements will be developed to
implement the Central Depository System in this Fiscal Year.

244. To ensure the sound financial health at a certain standard of those agencies
engaged in mobilization of Contractual Savings like Employees Provident Fund
and Citizens Investment Fund, arrangement will be made to carry out the
supervision, monitoring and evaluation of those institutions from Nepal Rastra
Bank until the establishment of another regulatory agency.

Good governance, Improvement in Service Delivery and Public Accountability
245. To give the sense of good governance to the general public after the political
change in the country, all the government agencies will adhere to and execute
with high priority the dimensions of good governance such as respect for the
people’s voice and upholding the sense of responsibility, maintaining political
stability and violence less society, effective government, qualitative regulation,
rule of law and corruption control. Regulatory role of civil society and mass
media will be further broadened. An Administrative Restructuring Commission
will be formed within mid-December 2008, to make civil service accountable to
the public, capable, fair, and transparent according to the federal system.

246. The civil service, which is the foundation of governance, has not been able to
change its mindset to become pro-public and inclusive. It is necessary to
change such mindset in the present situation. Therefore, it will be made
mandatory to include the ideal sentence “Civil Service for the Public” in each
and every activities of the civil service.

247. I have increased the pay scale of all classes of the government employees by Rs.
2 thousand per month effective from 17 September, 2008 to keep their high
morale and for promotion of good governance. In addition to this, I have
proposed to adjust the pay scale of few classes to eliminate the existing
inconsistency in the pay scale. This proposal I have made for the improvement
in the current pay scale is merely an immediate measure. This subject will be
handled by the Administrative Restructuring Commission and the Commission
will recommend a scientific system of salary increment.

248. To enhance the effectiveness of the service delivery of civil service, effective
implementation of employees' code of conduct, simplification of working
system, modification on work performance evaluation guidelines, grievance
handling and service recipients’ satisfaction survey will be conducted.

249. To provide easy health service access to the civil servants and their families,
civil servants’ hospital constructed by the assistance of Chinese government
will be brought into operation. I have allocated Rs. 90 million for the operation
and management of this hospital.

250. Improvements in the judiciary will be accentuated giving emphasis on the
policy of respecting free judiciary, rule of law and human rights, and to make
justice accessible to all; quick, prompt, and easily available to all. I have
allocated necessary budget to establish Supreme Court benches in Biratnagar
and Nepalgunj after reforming existing laws, and arranging necessary

251. Identifying the sensitive agencies and areas from the corruption control
perspectives, and to expedite investigation of undue and irregular activities and
the law suits of corruption charges, all corruption control agencies’ will be
strengthened. Anti- corruption campaign will be launched with the support of
civil society, non- governmental organization and general public. Possible
corruption on public procurement will be controlled and procurement
monitoring system will be made effective. To control the collusion and
hooliganism at the time of submission of tender, an arrangement will be made
to submit tenders through electronic means.

252. The action plan prepared on the recommendation of Public Expenditure and
Fiscal Accountability study report to curb financial irregularities, strengthen
public expenditure management, and to lessen the financial risk will be
implemented from this Fiscal Year.

253. An arrangement has been made for all ministries and constitutional bodies to
make public their annual programs and plans within mid-October. Since the
present budget has been submitted after the lapse of two months of current
Fiscal Year, arrangements have been made that all the line ministries should get
approval on their programs from the National Planning Commission by 1st
October, and issue the expending authority.

254. For the effective implementation of this budget, an arrangement has been made
to have a progress review meeting on the 7th day of each month under the
chairmanship of the concerned Minister and a review meeting to be held on the
10th day of every two months at Economic and Infrastructure Committee of the

255. The Ministry of Finance will release expenditure authority of unconditional
grant directly to the Local bodies within 26 September. An arrangement has
been made to freeze the capital budget allocated for the Karnali zone and Bajura
district only by mid-November of the next year.

Effectiveness and Transparency of Peace Fund
256. To arrange necessary resources to drive ahead the peace process in an easy
manner, I have allocated Rs.2 billion 500 million from the government source
in the "Nepal Peace Trust Fund" established last year. I have arranged that the
donors’ contribution in this Fund will be included in the budget, and the
spending on programs running through the Fund will be made according to the
regular practices of the government budget release and expenditure. I believe
that the assistance from donor community will continue for arranging the fund
for the smooth operation of peace process.

Utilization of Foreign Aid
257. The Foreign Aid Policy will be timely revised and made contextual for
mobilizing foreign aid in line with the national interest and priorities. The Nepal
Development Forum's meeting will be organized within this Fiscal Year with a
view, among others, to mobilizing additional external resources for alleviating
poverty through rapid economic growth of the economy. A National Action
Plan on Aid Effectiveness will be developed to immediately implement the
reform measures in areas pointed by the recently concluded survey on
effectiveness of foreign aid in Nepal. In order for ensuring transparency and
accountability in the foreign aid management, Aid Information Management
System will be introduced in the Foreign Aid Coordination Division of the
Ministry of Finance. The tendency of mobilizing foreign aid through creating
different parallel structure and substructures in different projects and programs
in the past neglecting the national structures will not be encouraged. The
involvement of international donors and non-governmental organizations at
local level in foreign aid mobilization and management will be discouraged and
Nepalese national and local bodies' leadership will be ensured for this purpose.

258. Non-government organizations must pre inform the government before
accepting cash or commodity assistance from foreign donor agencies. The
registration of such organizations will be cancelled and action will be taken to
the concerned individuals who have misused the assistance and act against the
national interest by accepting such grants.

Honorable Speaker,
259. I have allocated total Rs. 236 billion 15.9 million for the implementation of the
above- mentioned policies and programs which I have stated above. Out of the
total expenditure, recurrent expenditure is estimated as Rs. 128 billion 516.5
million, capital expenditure Rs. 91 billion 311 million and principal payment Rs.
16 billion 189.3 million. This expenditure estimate is higher by 39.7 percent
against the total allocation of Fiscal Year 2007/08 and by 44.5 percent than the
revised expenditure. On the recurrent expenditure side, it is increased by 40.6
percent and on the capital expenditure side by 64.5 percent to the revised
expenditure. The principal payment is lowered by 1 percent against the revised

260. Out of the total expenditure, I have proposed Rs.111 billion 824.9 million (47.38
percent) for general administration and Rs. 124 billion 199 million (52.62
percent) for development related programs.

261. I have included the expenditures incurred as per "The Bill for Authorizing
Withdrawal and Expenditure from the Consolidated Fund for the Services and
Works, 2008" which was passed by this House on 14 July 2008, into the above
mentioned expenditure that I have proposed.

262. Out of the estimated sources of financing of current year, Rs. 129 billion 215
million will be borne from current source of revenue. Out of the total foreign
assistance of Rs. 65 billion 793.8 million, Rs. 47 billion 93.2 million will be borne
by foreign grant, and Rs. 18 billion 700.6 million by foreign loan. There will be a
deficit of Rs. 41 billion 11.6 million even by mobilizing both the sources.

Honorable Speaker,
263. Now, I would like to briefly present the revenue policy of the current Fiscal
Year 2008/2009, principles adopted during the formulation of revenue policies,
implementation arrangements and system of these policies, revenue collection
strategies, working policies, and programmes.

Revenue Policy and Objectives
264. While formulating revenue policy, attention has been given mainly to lead
country toward industrialization by totally ending feudal structure, adoption of a
progressive tax system, transformation of tax administration into an electronic
one, narrowing the gaps between rich and poor, coordinating and linking
economy to other sectors thorough trade facilitation, attracting foreign
investment by creating investment friendly environment, lead a decent life by
complying with the tax laws as well as paying taxes for the income earned from
business and entrepreneurship, and giving a sense of feeling that the tax paid is
also a contribution to oneself. In this context, revenue policies are based on the
following objectives;
a. acceleration of country's economy toward industrialization,
b. maximum mobilization of internal resources for self reliant economy,
c. broadening tax bases instated of raising tax rate,
d. export promotion by attracting domestic and foreign investment,
e. protection to domestic industries and conservation of natural resources,
f. strengthening of tax administration by making it more efficient,
g. special priority for the infrastructural projects,
h. relief to the disadvantaged groups of the society affected by the inflation,
i. strict monitoring of market and control of the illegal trade,
j. controlled sale and distribution of health hazards goods,
k. rationalization of revenue rates committed in bilateral and multilateral
l. directing means and sources toward productive sectors.

Strategy for Broadening Tax Bases
265. In the capacity of the first Finance Minister of Republic Nepal, I have proposed
a budget of special size by discontinuing practices of traditional budget
appropriation. This has been done to honor people's faith, and to meet
expectations of the people from the present government. To ensure adequate
resources for meeting the allocation that I have proposed, I have adopted
following strategies;

a. With a view to giving one time opportunity to pay tax the property or
income accumulated by any individual by paying tax on such property or
income, irrespective of sources, at the rate of 10 percent at the price of
Shrawan 1, 2065. Such tax shall be required to pay by the end of Magh,
2065 on basis of Voluntary Declaration of Income Scheme. After
payment of such tax, the property shall be deemed legal and no source of
such property shall be investigated. Property of those failing to comply
with this provision will be subject to confiscation.

b. House rent tax shall be levied at the rental income at the rate of 10
percent. Exemption of due taxes, fees and the interest has been given to
those individual or entity, who has earned house rent income up to Fiscal
Year 2064/065 but failed to pay tax under Income Tax Act, 2058, can
declare the income and pay tax at the rate of 10 percent by the end of
Push, 2065.

c. Entities conducting business of educational consultations services failing
to pay Value Added Tax, can register in VAT by the end of Poush, 2065,
if they pay the income tax of Fiscal Year 2063/64 and onwards. No VAT
penalty, fees and additional fees charges and interest shall be levied.

d. If any defaulter Brick industries opt to pay tax due, as of the end of
Ashad, 2065, by the end of Push 2065, charges and penalties to be
imposed on such due shall be waived. In case of defaulter Brick
Industries failing to pay due within stipulated timeframe, legal action,
including of cancellation of their registration shall be started.

e. 5 percent education service tax shall be collected from private
educational institutions on their monthly fees from Ashoj, 2065. Service
tax so collected shall be used for the benefit of the poor students of
backward and remote areas.

f. Private educational institutions not yet managed to come into the tax net
can pay tax on their taxable income shown in their financial audit reports
from the beginning to date. If such tax is paid by the end of Push, 2065,
no fee, penalty, interest and additional fee shall be levied on income as
of Ashar, 2064. In the cases, where private educational institutions fail to
utilize such facility, the Government will take legal actions, including of
prevention form appearing in the SLC examination, against such schools.

g. Arrangements have been made for urban cooperative agencies and
associations to accept tax return along with tax amount of the Income
Year 2063/064 assessed on basis of audited report submitted to
concerned entity. Filing such return by the end of Push, 2065 will result
in waiver of filing tax return of the earlier periods and the tax thereon; no
penalty, fee, interest and additional charges will be levied. All
cooperative agencies are requested to utilize this opportunity. Those
failing to utilize such facility will be subject to severe legal actions,
including imposition of taxes for all the past periods.

h. Taxpayers liable to register with Value Added Tax but not registered so
far can register themselves by the end of Push, 2065. Such registration
within stipulated time will result in waiver of Value Added Tax,
additional charges, interest and penalty of the previous years.

i. Custom duty and excise duty on alcohol, cigarette, and tobacco have
been increased to discourage the consumption of the goods hazardous to

j. Government entities involving in collection of non-tax revenue will be
mobilized to review and determine appropriate rate of non-tax revenue
(royalty, dividend, penalty, fee). Similarly, working procedures in the
Government and public corporations will be reformed so as to identify
the sources of revenue growth.

Programs to Increase the Revenue
266. I have adopted following strategies and working procedures for the
implementation of above mentioned revenue policies;

a. Market monitoring will be intensified to bring persons and entities into
tax net, and also doing their business in disguise. From this Fiscal Year,
surveys will be carried out to assess the transaction amount of all
business entity to determine whether their transactions are within the
minimum threshold of the Value Added Tax,

b. Smuggling and illegal import will be controlled through border
patrolling and the development of economic information system.

c. In order to make customs valuation system more scientific anomalies in
valuation will be removed and different valuation methods used by
different customs offices will be made transparent and clear.

d. Revenue investigation system will be strengthened to control the
leakages in tax revenue. Likewise, income and expenditure of the high
profiled people will also be monitored.

e. Special programs will be implemented to bring people into the tax net
who are earning high income from their profession and business.
Impunity being observed in various profession, business and
administration will be brought to a halt.
f. In order to control leakages in excise effectively, movement of the
excisable commodities will be watched effectively. Likewise, sticker
management will be made proper and effective.

g. General increment in the vehicular tax has been proposed in order to
control vehicular congestion in the Kathmandu Valley and to further
contribute toward the mobilization of revenue.

h. Five percent education service tax will be levied and collected from the
educational institutes run by the private sector on the fees collected from
the month of September 2008. The tax revenue thus collected will be
spent for the welfare of the disadvantaged students.

i. Arrangements have been made to control the sales of products which are
injurious to health. Likewise, duty free sale of cigarettes and liquor has
been prohibited. However, facilities to be purchased from the authorized
bonded ware houses will be provided to the persons having diplomatic
and exemption status, same facility will be given to Airlines companies
to consume for their international flights.

j. Arrangements have been made to collect an additional fee of 0.5 percent
during the registration of the sales of land and buildings in the
metropolitan, sub metropolitan and municipality and adjoining village
development committees of the Kathmandu Valley. The fee thus
collected will be spent for the 'Bagmati Civilization Development

k. A working committee will be formed and works will be initiated to
determine the demarcation for the collection of revenue between the
central and local government.

l. Tax payer training program and tax payer’s education program will be
initiated to make the tax administration more tax payer friendly and
various publicity programs will be initiated to make aware taxpayers of
their rights and duties.

m. I have made necessary arrangements for the discloser of the sources of
income to purchase house, land, and vehicles exceeding certain limit.

Strategy and Program for Social Security and Virtuous Conduct
267. I have proposed the following revenue measures to regulate the liquor
distribution and to levy the property taxes for social security and development of
virtuous conduct in order to remove the evils rooted in the society:

a. Within the next two months, selling of liquor from the daily
consumables goods shops will be stopped in the metropolitan, sub
metropolitan and municipal cities. For the goods in stock, during this
time period the vendors will return back such stock of liquor to the
concerned wholesalers, producers or importers and they must accept
those items. Directives will be issued within 45 days to fix the places of
liquor sale, fix the selling time and allow the sale only for certain age
persons and banning the sale of other consumer goods in the liquor

b. Money Laundering Control Department will be established in this Fiscal
Year to control the process of converting black money into white money.

c. With a view to encourage people to declare their property before the
state and live a decent life, the Property Tax Act 2047 will be amended
to make it practical, implementable and timely and implemented in this
Fiscal Year accordingly. A High Level Commission of Experts will be
constituted for this which will submit its report within three months.
d. The one day remuneration of Paush 2065 of officials of constitutional
bodies, the Nepal Government employees, the universities and schools
teachers, officials and personnel of the government owned corporations
and other private and non governmental organizations will be deposited
in the Youth Self Employment Fund and such fund will be utilized for
the employment related promotional activities.

Strategy and Programs related to Revenue Exemption
268. The purpose of tax policy is not only to levy amount from the people, but also to
rehabilitate weaker section of the society, professionals, and special contributing
institutions in the societies through the means of taxation. Bearing in the mind, I
have proposed some revenue exemptions. In addition to that I have proposed to
reduce some tariff rates in line with international as well as national
commitments made by the Government of Nepal. The exemption and reduction
in revenue and reduction in tariff rates are as follows:

a. I have proposed a full customs exemption in the scooters to be used by
physically handicapped persons. In addition to that I have increased the
rebate in land registration fees if the land is transferred and registered to
the disabled and physically handicapped person.

b. I have arranged to provide ten per cent tax rebate in income tax from
remunerations to the women and also increased in rebate in land
registration fees if the women get land transferred to their own name.

c. I have proposed to levy only one per cent custom duty for the CFL bulb
(electric bulb) to make its use wider to help reduce the consumption of

d. I have arranged to provide tax exemption on annual interest income of
Rs. 10000 in the amount deposited to the micro credit institutions, rural
development banks, postal saving bank, and cooperatives in the rural

e. I have arranged to provide 50 per cent exemption in license fee with the
recommendation of Ministry of Environment, Science and Technology
to those brick industries who emit less than 50 per cent of the emission
standard set by the Ministry of Environment, Science and Technology.

f. The existing Value Added Tax exemption for the hydropower having
capacity less than 3 Mega Watt will be expanded to all hydro powers. It
is expected that such exemption will help develop hydro electric sector
and attract foreign investment.

g. With a view to fulfill the commitments made in regional and
international organization and to expand the accessibility to the
information and communication, I have proposed to zero custom duty on
131 items. I have proposed excise duty on some goods to compensate the
revenue loss thereof.

h. The taxpayer who file the tax return for Fiscal Year 2062/063 along
with a payment of fee at the rate of Rs. 100 per month or 0.1 per cent
annually of the assessable income whichever is higher, will get rebate
on the rest of unpaid fee payable under the existing law. It is believed
that small taxpayer will be benefited from this scheme.

i. The special fee being levied at the rate of 1.5 per cent since Fiscal Year
2058/059 as an extra tax has been abolished. I believe that taxpayers will
feel relieved.

Strategy and Programs to Promote Industrial Development
269. With a view to make national economy strong and to promote the investment
opportunities to attract domestic as well as foreign investors, I have proposed
the following concessions and simplification in revenue policy in line with
making it as investment-friendly:

a. I have reduced the customs duty rate for the imports of industrial raw

b. I have made a provision of ten percent income tax exemption on income
to be earned from special industries and information and communication
technology industries which provide direct employment to 500 Nepali
through out the year.

c. Customs tariff has been reduced on the importation of refined palm oil
and packing materials. The customs tariff on the importation of tanker
for dairy industries has been reduced by fifty percent.

d. Eighty percent exemption in the import duties and agriculture
development fee has been provided to the importation of soybean and
sunflower seeds to be used by domestic oil industries as their raw

e. Anti Dumping related Bill will be drafted and presented to the august
legislative- parliament within this Fiscal Year to protect the domestic
industries from the pressure arises from importation of low quality
foreign goods.

Strategy and Programs to Control Revenue Leakages and Smuggling
270. Nepali people have very negative attitudes towards revenue leakage. It has been
felt that revenue administration has been influenced by a handful of smugglers
and black marketers. So I have proposed a controlled policy while proposing a
revenue policy which will not leave any ground of revenue leakage. According
to this, no one will be given any excuse who is involved in the revenue leakage.
In this way, I have proposed the following policies in order to control the
revenue leakage:

a. "Border Security and Revenue Leakage Patrolling" Post will be set up by
designating certain areas to control revenue leakage along with the
border. Likewise, a monitoring team will be set up and mobilized to
monitor the VAT billing system strictly.

b. The Department of Revenue Investigation and Department of Customs
will formulate special procedures and implement it immediately to
control smuggling.

c. A 24 hour- Control Room will be set up in the Department of Revenue
Investigation to initiate action by getting any information regarding
revenue leakage and to monitor and check the consignment trucks passed
through the customs.

d. In order to control revenue leakage effectively, the organizational
structure and working procedure of the Department of Revenue
Investigation will be reformed. Furthermore, by fixing monthly and
yearly performance targets for the unit offices and the Department with a
view to control revenue leakage more effectively.

e. A 24 hour standby two hundred fifty armed police force will be ready in
Department of Revenue Investigation and its unit offices. They will be
under the supervision of the Director General of Department of Revenue
Investigation and their performance evaluation will also be done by the
Director General of Department up to the time when they are deputed to
this department. In order to facilitate trading and business activities and
internal movement of goods, the barriers of the Department of Revenue
Investigation will be removed from today. Instead of it, a flying squad
and on the spot inspection team will be put in place.

f. The meeting of District Level Revenue Leakage Control Committee
formed under the chairmanship of Chief District Officer in the main
customs points and possible smuggling points, districts will be convened
to conducts meetings compulsorily in every fifteen days and it will
formulate and implement revenue leakage control plan effectively.
g. In order to discourage the declaration of under valuation of commodities
at custom points, a system will be developed to obtain the information
from invoice issuing sources and the stern legal action will be initiated
against such practices.

h. The provision will be made to purchase the under valued goods
compulsorily of those importers who submits the documents and bills to
the customs offices and declared the value far below the real value; for
this, necessary fund will be provided to the concerned agencies.

i. Necessary revision in Baggage Rules will be done to allow only the
limited items to the passengers.

j. The Post Clearance Audit System in the customs office will be made
more effective. For this, Joint Audit System will be initiated with the
joint collaboration of Customs department and Inland Revenue

k. A massive search operation campaign in godowns and shops will be
launched immediately where smugglers are involved in tax evasion by
setting up godowns in the border areas and strong controlling actions
will be initiated for transporting the smuggled goods internally.

l. Within the next six months, provisions will be made for those
importations via Birgunj, Bhairahawa, Birartnagar and Mechi to import
only in the sealed containers.

Strategy and Programs to reform Revenue Administration
271. I have promised to make revenue administration business friendly by making it
up to date, simple, transparent and efficient though totally discontinuing opaque
working procedures. I this context, I have adopted a policy of rewarding good
civil servants with financial and other facilities and rewards working in the
revenue. However, those found to be indulged in revenue leakages, and fail to
maintain honesty and virtuous conduct will have to face a harsh policy of
punishment. I express my full commitment for ending collusions between the
revenue administration and business sector so as to control revenue leakages and
to end impunity. In this context, I have proposed following administrative
reforms within the revenue administration;

a. A permanent Central Revenue Board with full power will be formed
within this Fiscal Year to run revenue administration and to determine
revenue policy based on short, medium and long-term through regular
study and research works about revenue policy, revenue administration,
and revenue related rules and regulations.

b. Arrangements will be made round the clock opening of customs offices,
introducing a shift system, having heavy transaction and workloads for
facilitating trade and passengers. A separate desk will be established in
major customs offices by simplifying procedures for the collection of
revenue within the price limit under existing rules of goods to be
imported as accompanied with the passengers.

c. Dry Port Customs of Sirsia, Birgunj will be fully transformed into a ecommerce
office within this Fiscal Year.

d. With a view to making revenue administration efficient and effective,
arrangements will be made to brining in efficient and high quality
manpower from the labour market, and also from other groups / services
of civil service on the basis of their competence. Accordingly, civil
servants working for the revenue group will also be transferred to other
groups/services of the administrative services based on their
performance in the revenue service.

e. Studies will be conducted and research made for designing a separate
system of remuneration and facilities for the officials and staffs working
in the revenue administration.

f. With a view to improving the work performance, existing organizational
structure of the Inland Revenue Department will be changed. Based on
the ratio of work load, additional Inland Revenue Offices will be opened.
In the first phase, number of Inland Revenue Offices will be increase in
the Kathmandu valley by considering the report submitted by Revenue
Administration Organizational Structure Reform Recommendation
Working Group, 2006.

g. Organizational structure of the Department of Customs and offices under
this Department will be reviewed. In a gradual manner, customs
administration will be made officer's oriented. Likewise, restructuring as
well as reestablishment of existing sub-customs offices will be

h. Those who are engaged in illegal trade and business, avoiding the
payment of taxes, and also not adhering to the legal system will feel
uncomfortable because of the policies and programs I have presented.
However, those who are running their profession and business within the
provisions of laws will feel honored for the contribution they are making
toward country's development by paying taxes. This would also bring
about changes in the tax paying habits and will also result an increase in
the revenue collection.

i. New Nepal also means a self-reliant Nepal. Economic self-reliance is
necessary to reach the stage of self-reliant. For this, internal revenue
generation is a prime factor. Hence, I heartily request all industrialists,
businessmen, organizations and individuals who are liable to paying
taxes to pay the tax as per the law. I am committed to making full use of
the taxes collected.

Honorable Speaker,
272 From the revenues policies reforms, and from the adjustments and changes made
in the tax rates and administrative reforms, additional Rs. 12 billion 511.6
million is expected to be mobilized and there will be a net deficit of Rs. 28
billion 500 million. Out of the deficit amount, Rs. 25 billion will be financed
from domestic borrowing and Rs. 3 billion 500 million by last year's cash

273. I hope that proposed domestic borrowing of this level will have no negative
effects in macro economic balances and stability, private sector's capacity to
borrow will not be inhibited and positive contribution is expected for short term
and long term government securities' related transactions by making them active
and effective.

274. From the implementation of the proposed budget, the Gross Domestic Product
growth rate is estimated to be at 7 percent at the end of current Fiscal Year
2008/09. The growth rate in agriculture sector is expected to be at 4.5% and non
agriculture sector at 8.3 percent. Inflation rate is estimated to be around 7.5

275. Nepal Rastra Bank will announce monetary policy soon in order to make positive
effects on macro economic indicators including the price situation in the course
of proposed budget implementation and strengthen the country's international
trade and balance of payment situation.

276. During the course of preparation of the current year's budget, various leaders of
political parties, members of Legislature-Parliament, economists, professors,
academicians, various representatives of business communities, commercial and
commodity organizations, professional organizations, representatives from civil
societies came to my office, even at a short notice, and provided suggestions and
advices. Many citizens have provided valuable suggestions for this budget
preparation, by responding to the public notice issued by the Ministry of Finance,
with a dream of New Nepal. I would like to thank them all.

277. The friendly countries and donor communities who are continuously providing
assistance in Nepal's endeavors for socio-economic development have shown
great courtesy to the first elected Government of Republic Nepal. They have
promised to provide additional assistance to achieve our goal of speedy
development and to move forward the peace process. Additional amount of such
assistance has also been reflected in this budget proposal. I would like to express
my thanks to all friendly countries and donor communities.

278. I have felt that I could not accommodate all the suggestions in this single budget
despite the attempts to incorporate all those suggestions given by all wellwishers
and to address the people's expectations due to a compulsion of
proposing this budget in a short time in this situation where two months have
already gone after the start of this Fiscal Year. Despite this, I am committed for
the effective implementation of those policies and programs mentioned in the
budget during the remaining ten months in order to give a sense of change to the
people. I believe that I will get full support of all Ministers and Secretaries of
Government of Nepal and government employees to fulfill my commitment.

Right Honorable Speaker,
279. This is the first budget of the Federal Democratic Republic of Nepal. All the
Nepali people, particularly those who are excluded from the fruits of
development, segregated, downtrodden and poor, are expecting a dawn of new
era through this budget. All the Nepali people are expecting speedy economic
growth and social justice. However, as I said in the beginning, it is not possible
to fulfill all those expectations right now due to various compulsions. Despite
this, I believe that this budget has started a strong beginning in the direction to
fulfill those hopes and expectations. We still have to travel a long journey. As
has been said, "The first step begins a thousand miles' journey", and this is the
first step towards that long journey. I expect a full company of all of yours in that
great journey and believe that the full support of all Nepali people and the
members of Legislature-Parliament will be secured for the successful
implementation of this budget.

Thank you!


To read the PDF version of the budget, click here.

Budget 2007/08: To read the PDF version of the budget, click here, >, Nepal Monitor, July 12, 2006 .

Budget 2006/07: Last year's budget, Nepal Monitor, July 13, 2006 .

Budget speech of the fiscal year 2006/07, Government of Nepal, Ministry of Finance; delivered by Finance Minister Dr. Ram Sharan Mahat to the House of Representatives on 12 July 2007. For previous budget speeches going back to 1966/67, visit the Ministry of Finance Website.

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Brihát Śhānti Sámjhautā, 2006
(Comprehensive Peace Agreement)

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