Submit your Article

The Department of Customs (DoC) had targeted to collect Rs 57bn in revenue for the month of Baisakh (mid-April to mid-May) but ended up raising only Rs 33bn. The story of the Inland Revenue Department (IRD) is not much different. IRD collected revenue of Rs 34.46bn in Baisakh against the target of Rs 51.76bn. DoC and IRD are the two major revenue collectors of the federal government. With both agencies continuously collecting revenue below the targets, there has not been much improvement in the income of the government till mid-May, 2023. The overall revenue collection has only reached 53.9 percent of the target by mid-May amounting to Rs 756.25bn, a sharp drop from Rs 865.76bn during the same period of the last fiscal year. The most worrying part is, revenue collection has not increased as expected even after five months of the lifting of import restrictions and 100 percent cash margin on opening letters of credit (LC). Amid a sharp decline in revenue collection, the government lifted import restrictions as well as the provision of cash margin in Dec 2022 and Jan 2023 respectively. While imports have gradually surged in the last two months, the revenue collection of DoC has not improved. One of the reasons behind the halt in growth in customs revenue has been the reluctance of automobile dealers to clear the vehicles parked at the various customs yards, say customs officials. “Even after the import ban was lifted, automobile dealers have not rushed to import new vehicles. They have not even cleared vehicles parked for months at the customs yards from the customs office,” said a senior official at DoC. “There are around 4,000 four-wheelers parked in different customs yards for months.” These vehicles were brought based on letters of credit issued before the import ban, and have continued to remain parked at customs yards. “If the four-wheelers are cleared, we can get as much as Rs 8bn in revenue,” said the official. Automobiles are one of the largest revenue sources for the government due to higher rates of taxes. In the fiscal year 2021/22, the government collected revenue of Rs 66.30bn from four and two-wheelers, according to the customs department. Nepal imported vehicles and parts worth nearly Rs 100bn in the last fiscal year 2021/22. As of the first three quarters of the current fiscal year, vehicle imports slumped to Rs 34bn, according to Trade and Export Promotion Centre (TEPC). Similarly, both exports and imports of the country have gone down during the first three quarters of the current fiscal year. According to the TEPC, exports slumped by 26.3 percent by three quarters to Rs 118.27bn and imports also plunged by 18.1 percent to Rs 1.2trn. TEPC data shows the import of capital goods including machinery and iron & steel has also declined drastically. “It is because of the lack of the market demand for goods,” the customs official said. “This also reflects sluggishness in the economic activities.” In early May, the National Statistics Office said that Nepal’s economy could grow by as low as 2.16 percent only in the current fiscal year though international agencies like the World Bank and Asian Development Bank had projected a growth of over 4 percent. The impact of sluggish economic activities is clearly visible in the inland revenue of the government. According to IRD, revenue collection is very poor compared to the target. In fact, the government has failed to collect equivalent revenue collected in the last fiscal year. IRD collected Rs 371.15bn in revenue as of mid-May of the current fiscal year which is 98 percent of revenue collected during the same period last fiscal year. IRD data shows revenue from income tax and value-added tax (VAT), the two major components in the inland tax system, have declined in the current fiscal year. The department has collected Rs 159.05 billion in income tax in the first 10 months of this fiscal compared to Rs 173.40bn during the same period of the last fiscal. The income tax collection has decreased by 8.27 percent. Similarly, VAT stood at Rs 88.67bn this year against Rs 90.68bn in the last year. The collection of VAT has declined by 2.21 percent. According to Raju Prasad Pyakurel, Director of IRD, the slowdown in economic activities, the decline in imports, and poor capital expenditure have contributed to the poor state of the revenue collection this year. “The revenue from the construction sector, manufacturing sector have declined this year,” he said.

A sharp slowdown in economic activities, slackened domestic demand and tighter monetary policy have taken a toll on the economy of all seven provinces of the country. The National Statistics Office (NSO) has forecasted lower economic growth for all the provinces for the current fiscal year. According to NSO, Gandaki Province will have the highest economic growth among the seven provinces in the current fiscal year. Making public the Province-wise Gross Domestic Product (GDP) Estimates on Tuesday, the NSO said that Gandaki's GDP is expected to grow by 3.3 percent in FY 2022/23. The GDP growth of Gandaki in the current fiscal has shrunk by almost 50 percent compared to 6.4 percent in the last fiscal year. The GDP of the Bagmati Province, where the country's federal capital and financial hub Kathmandu is located, is expected to grow at the slowest rate of 1.4 percent. With the growth of wholesale and retail trade becoming negative, the province's economic outlook is bleak. The share of wholesale and retail trade in Bagmati province's GDP is 23.6 percent. NSO has estimated the growth rate of Koshi Province to be 2 percent, Madhesh Province 1.7 percent, Lumbini Province 2.1 percent, Karnali Province 1.9 percent, and Sudurpaschim Province 1.8 percent in the current fiscal year While the NSO has forecasted the lowest GDP growth for Bagmati Province, it still accounts for the lion's share of the country's total GDP, contributing 36.8 percent. The province’s GDP is expected to reach Rs 1,981 billion in FY 2022/23, up from Rs 1,819 billion in 2021/22. The output of Gandaki province is expected to reach Rs 482 billion. The province’s contribution to the national GDP is expected to remain at 9 percent. The agriculture sector is the highest contributor to Gandaki’s economy, accounting for 25.9 percent of the province's GDP. According to NSO, the economic output of Karnali in the current fiscal year is estimated to reach Rs 221 billion. The share of Karnali in the total GDP is estimated to remain at 4.1 percent. The agriculture sector is a key contributor making up 30.8 percent of its GDP. NSO has estimated that Koshi Province's GDP will reach Rs 849 billion in FY 2022/23, up from Rs 780 billion in FY 2021/22. The contribution of Koshi Province to the national GDP is expected to be 15.8 percent. Agriculture accounts for 33.2 percent of the GDP of the province. The GDP of Lumbini Province is expected to reach Rs 762 billion in the current fiscal year from Rs 697 billion in the last fiscal year. The province contributes 14.2 percent to the national GDP. The agriculture sector contributes 29.8 percent to the provincial GDP. The GDP of Sudurpashchim Province is estimated at Rs 376 billion in the current fiscal year, up from Rs 345 billion in the last fiscal year. The contribution of the province to the national GDP has been estimated to remain at 7 percent. The Madhesh Province's GDP is expected to reach Rs 707 billion in FY 2022/23 from Rs 650 billion in FY 2021/22. The share of Madhesh in the national GDP is 13.1 percent in the current fiscal year. With a share of 35.2 percent, the agriculture sector is the highest contributor to the province's GDP.

With dynamic changes taking place in the energy sector, the government has started preparations to amend the Hydropower Development Policy, 2001. The two-decade-old policy is being revised in order to incorporate the latest developments and changes in the energy sector as Nepal gradually moves toward becoming a net energy exporter from a net energy importer. The Policy Research Institute (PRI), a government think tank, has been mandated with groundwork for a new hydropower development policy. For this purpose, PRI on Monday initiated discussions with the concerned stakeholders. Government officials said the current policy covers only the hydropower sector. With new technologies being practiced for electricity generation such as solar, and wind, there is a need to incorporate the concept of energy mix. "There is a need to increase domestic electricity consumption as well as investments in the sector," said Buddha Gurung, Joint Secretary at Prime Minister's Office. During the discussion organized by PRI, stakeholders stressed the need to make the policy private-sector friendly. "The investment of the private sector in hydropower has increased lately. But the government's policy is not private sector friendly," said Ganesh Karki, Vice-president of Independent Power Producers' Association, Nepal (IPPAN). "Currently, the private sector contributes 80 percent to the electricity production. Still, the private sector is ignored. If we fail to complete the hydro project on time, we have to pay a fine to the Nepal Electricity Authority. But when the NEA doesn’t construct a transmission line on time, our power goes wasted. Should we also be paid for the loss?” he said. "So the existing policy is just one-sided." Likewise, the private sector representatives also mentioned the need to allow the private sector to engage in power trading. "The participation of the private sector in electricity production has brought Nepal to this stage. Within a few years, Nepal's installed capacity will reach 8,000 MW, however, all the electricity generated will not be consumed in Nepal. It needs to be sold to India and Bangladesh, for which government initiative alone is not enough,” he said. "Now, we need the participation of the private sector to take a leap in the power trading business." During the discussion, private power producers highlighted the need to ease the overall process of hydropower development. According to them, developers have to visit multiple ministries and departments to get clearance for the hydropower project. According to them, there should be a one-desk policy. They also demanded the government bring policies to encourage the private sector to undertake large-scale power projects. Currently, hydropower projects are being developed at an average cost of Rs 200 million per MW, though in some projects it has reached up to Rs 400 million per MW. According to power producers, the private sector is ready to undertake major projects at a lower cost and the government should introduce policies to incentivize such initiatives. Speaking on the occasion, Gokarna Rajpanth, Secretary at Electricity Regulatory Commission, said the policy should be revised to cover not only hydropower but the entire energy sector. “Preparations are being made to introduce a new electricity act. The new policy should incorporate the issues not addressed by the new electricity act but also brought in such a way that would help in the implementation of the new act," he said. Netra Gyawali, CEO of Rastriya Prasaran Grid Co. Ltd. suggested that the new policy should incorporate the aspect of improving the electricity distribution system. "While we are now emphasizing increasing electricity consumption, our distribution system is not efficient," he said. "These issues should also be addressed by the new policy." Buddhi Paudel, Joint Secretary at Ministry of Forest and Environment was of the view that hydropower projects should also pay attention to water conservation. "If water and the environment are protected, the lifespan of hydropower projects will also be long," he said, "We are trying to amend the laws necessary to facilitate environmental impact assessment of hydropower projects." Arjun Kumar Gautam, CEO of HIDCL said power generation, transmission, distribution, and investment should be kept in one basket. "Earlier, the policy was introduced to increase electricity generation but the other parts were not cared for. That is why, electricity production has been increasing but consumption has not increased," he said, adding, "Along with power generation, equal focus should be given to transmission, distribution, consumption, and investment issues."

The price of gold has dropped by Rs 1, 100 per tola in the domestic market on Wednesday. According to the Federation of Nepal Gold and Silver Dealers’ Association, the yellow bullion is being traded at Rs 110, 000 per tola today. The yellow metal was traded at Rs 111, 100 per tola on Tuesday. Meanwhile, tejabi gold is being traded at Rs 195, 500 per tola. Similarly, the price of silver has dropped by Rs 5 and is being traded at Rs 1,370 per tola today.