Finance Minister Dr Ram Saran Mahat Thursday presented the interim government’s budget estimate of 168.99 billion rupees for the Fiscal Year 2007/08.

‐1‐Right Honorable Speaker,1. I feel pride and pleasure for being able to present the budget forFiscal Year 2007/08 to this esteemed House today as a FinanceMinister of the interim government which was formed in thesuccessful aftermath of the historic Peoples' Movement and thecommencement of the peace process. On this occasion, I offertribute to all martyrs of the Peoples' Movement and express heartfeltgratitude to all Nepali sisters and brothers.2. I have already presented to this august House the EconomicSurvey, 2007 that explains the current trends and features of thecountry's socio-economic indicators and also their challenges andprospects.3. It was my estimate that the GDP growth rate would reach 4.5percent in the current Fiscal Year. Owing to the lack of visibleimprovement in the law and order situation and investmentclimate, and also due to the adverse weather, the production ofmajor crops has declined resulting in the estimated GDP growthrate of only 2.5 percent at actual producers' prices. The consumerprice rise is expected to stand at 6.6 percent compared to the 8percent of current fiscal year.4. In FY 2005/06, the actual expenditures of the government totaledRs. 110 billion 889.2 million, of which the recurrent expenditureswere Rs. 67 billion 17.8 million, capital expenditures Rs. 29billion 606.6 million, and repayment of debt principal Rs. 14billion 264.8 million.5. The revised estimate of total expenditures for FY 2006/07 is Rs.131 billion 851 million, of which recurrent expenditures wouldreach Rs. 80 billion 331.1 million, capital expenditures Rs. 36billion 379.9 million and repayment of debt principal Rs. 15billion 140 million.6. With regard to revenue mobilization, compared to the collectedrevenue amount of Rs. 72 billion 282.1 million in FY 2005/06, thecurrent year has a revised estimate of collecting the revenue of Rs.86 billion 135.5 million which is in excess of the original target.‐2‐Honorable Speaker,7. We have a series of notable political achievements to our creditfollowing the historic Peoples' Movement. The historic"Comprehensive Peace Accord" has been concluded on November21, 2006 to resolve peacefully the decade-long armed conflict.The Interim Constitution of Nepal has been enforced based oneight-party consensus. A culture has developed to bring toconclusion all problems through dialogue and negotiation. Atendency has evolved to engage in mutually consulted and shareddecision making among political parties. The Constitution itselfhas guaranteed the representation of women, Dalits, indigenousand ethnic communities, Madhesis, and the people from backwardregions in the proportional elections for Constituent Assembly.November 20, 2007 has been declared as the date for theConstituent Assembly elections. Necessary laws have been enactedto conduct the election. Citizenship certificates have beendistributed to those over 2.615 million people who were deprivedof citizenship. Verification of Maoist combatants has commenced.Programs such as honoring and supporting the martyrs' familiesand providing relief to those affected by conflict are beinglaunched. The access to road transportation has expanded tovarious parts of the country including in the headquarters of Jumlaand Kalikot districts of Karnali zone, releasing new hope andenergy among the local people. A new wind of development isthus seen blowing for some time in the countryside.8. Still a few significant promises made in the current year remainundelivered. The problems on law and order are still there, duemainly to the country's passing through a transitional phase. Thetasks such as bringing Maoist cantonment management to acompletion, returning the seized properties and rehabilitating theinternally displaced people remain still incomplete.9. It feels like the issues relating to economic development havebeen sidestepped by the political issues which have received aprime space in the national agenda. Incidents causing industrialunrest have often been noticed. Industrial climate has notimproved. Export has declined because of the loss ofcompetitiveness due to high cost of production. Problems ofunemployment have not been rightly addressed. An inclusive and‐3‐judiciously balanced economic growth through increasedinvestment in the rural and backward areas has been long overdue.The dividend that we should have reaped from the immenseeconomic growth our neighbors have achieved has evaded ourcourtyard.10. Problems long suppressed and put aside since centuries are nowunfolding one by one. Challenges that the new generation needs toconfront are piling up. Demands for the right to development arebecoming increasingly vocal. With the democracy restored,villages are competing to claim for more and more infrastructuredevelopment such as schools, health services irrigation, motorableroads and electricity for a quickly visible economic prosperity. In anumber of villages, huge amounts of local donations have fundedroad constructions. Millions of rupees have been raised foraccessing electricity by the local communities, now awaiting thegovernment assistance. The government should come forward tohelp such movements of community pro-activism in all possibleway.11. We can build a well-developed Nepal if we can transform people'sgrowing awareness and aspirations for their rights into a creativeenergy and unleash each Nepali's potential to an optimal extent. Ifwe fail to move towards economic development utilizing the openmoment with enormous potential and pursuing a positivedisciplined and all-inclusive attitude and commitment, we will riskfalling from the height of freedom, self-respect and political featthat were so hardly won by the sacrifice of the countless ofmartyrs, and end up with despair, dejection and deprivationinstead.Hon'ble Speaker,Now, I would like to present the objectives, policies and programsof the next fiscal year's budget.12. While formulating the budget for the next fiscal year, I have madean attempt to address the serious challenges currently being facedby the democratic government that was formed after the last year'sPeoples' Movement. In doing so, care has been taken to protect thegains achieved by the government during this period. I have‐4‐undertaken as the principal guideline of the budget the spirit of thePeoples' Movement expressed in the prime goal of building a"prosperous, modern, federal, inclusive and just Nepal", theInterim Constitution and the common minimum programs agreedamong eight parties. I have adopted a policy of according priorityto the programs that would promote the peoples' rights toeducation, health and employment enshrined in the Constitution,distribute economic outcomes judiciously, enhance native,cooperative, private and public entrepreneurship to reduceeconomic inequality, and uplift the underprivileged regions,classes, gender, castes, and communities. Following are theobjectives of the budget for the coming fiscal year:a) Sustainable Peace, Stability and Strengthening of theDemocratic System,b) Poverty Alleviation and Economic Prosperity,c) Investment Promotion,d) Human Development,e) Reconstruction, Rehabilitation and Relief.a) Sustainable Peace, Stability and Strengthening of theDemocratic System13. A day rarely downs in a nation's history that would change itscourse in an unprecedented way. We all Nepalis are now awaitingthe arrival of that epoch-making day. That day is going to gift usdemocratic rights and privileges for which we will not have tostruggle again and again. On November 20, 2007, ConstituentAssembly elections will be held ensuring a free, impartial andfearless atmosphere. With the objective of building a conduciveclimate for fearless voting by the people of all regions, gender,caste, class, and ethnic communities and conducting elections in afree and fair manner, all necessary cooperation will be extended tothe Election Commission. I have appropriated Rs. 3.5 billion forelections and election related security. The money for this purposewill be made available from the Peace Trust Fund as well.14. Security agencies will be mobilized so as to ensure free movementand safety of the lives and properties of the common people. Allthose violating the law will be punished by bringing them underthe purview of law. With a view to making the police forcescompetent and strong by raising the morale of the police‐5‐personnel, these organizations will be modernized and equippedwith adequate resources. I have allocated Rs. 9.56 billion forpolice forces.15. A State Restructuring Commission will be formed which willrecommend on the inclusive and federal structure of the state tofind its place in the Constitution to be drafted by the newly formedConstituent Assembly. The participation and representation will beensured of Madhesis, Dalits, women, indigenous and ethniccommunities, and people from all classes and groups in allapparatuses of the state structure on an inclusive basis.16. The Draft Three-Year Interim Plan will be finalized on the basis ofthe recommendations of the recently-concluded meeting of theNational Development Council as well as in keeping with thedevelopment strategy exclusively suited for Himal, hills andMadhes regions of the country. The Plan will be brought toimplementation effective next fiscal year.17. The government policies relating to the management ofcantonments for Maoist combatants, reintegration andrehabilitation of the Maoist combatants, democratization of theNepal Army, utilization of the properties of the late king Birendraand his families, in the national interest, and nationalization of theproperties of the Royal Palace will be implemented on a timeboundbasis.18. In order to avoid a situation of representational deficit at the locallevel, necessary institutional arrangements will be made, and localself governance bodies will also be formed thorough consensus.19. Community participation will be emphasized in the local leveldevelopment activities. In this respect, I have continued theVillage Development Committee block grant of Rs. 1 million forthe construction of economic infrastructure such as irrigation,drinking water, road, bridge, and school construction and ruralelectrification. In addition to this, necessary fund will be providedfrom Rural Reconstruction and Rehabilitation Project foreconomic infrastructure development. This new program willcreate additional employment opportunities for the marginalizedrural communities. The Constituency Development Program willbe continued.‐6‐20. All government agencies, NGOs and INGOs implementingdevelopment projects and programs at the district level will bemade accountable to the District Development Committees bystrengthening the involvement of the local bodies in all phases ofdevelopment including in the formulation, implementation,monitoring, evaluation and sustenance of the District Level plansand programs.21. Activities like agriculture, livestock services, cooperatives, health,education and infrastructure development to be implemented at thelocal level will be devolved to the local bodies. Ministry of LocalDevelopment will prepare necessary guidelines and procedures bymid August of the next Fiscal Year. Monitoring to be carried outfrom the centre will also be strengthened. A sum of Rs. 13 billionand 80 million has been allocated for the Ministry of LocalDevelopment.22. Detailed engineering works for the construction of theLegislature- Parliament building will be commenced. Necessarybudget has also been allocated, among others, for strengtheningthe parliament.(B) Poverty Alleviation and Economic ProsperityAgriculture and Rural Infrastructure: Foundation of theEconomy23. It has been realized that agriculture is the mainstay of povertyalleviation. Hence, commercialization and increasing productivityof this sector will be emphasized. In addition to increasinginvestment for the rural roads, irrigation and market promotionactivities, direct allocation of Rs. 5 billion and 820 million hasbeen made for the development of agriculture sector. Compared tothe allocation made in the current Fiscal Year, proposed allocationhas been increased by 47.3 percent. Increased allocation for theagriculture sector is expected to contribute to commercializationand diversification, advanced technology and availability of thefertilizer and seeds. It is also expected that generous allocation inthe agriculture sector will ensure other facilities includingavailability of agricultural credits, and further promote research‐7‐activities and expansion of the markets for the agricultureproducts.24. Plantation of tea in the Eastern hill districts will be expandedaiming at increasing the income of the farmers by focusing onhigh-value cash crops and off-season agro products. Coffeeplantation will be expanded in the Western hilly districts. Byexpanding onion cultivation in the additional 2400 hectares ofSaptari, Siraha, Bara, Sarlahi, Dhanusha, and Rupandehi, attemptswill be made to substitute import of onions. Under 'One VillageOne Product' scheme farming of trout fish as well as production ofLapsi, Sweet Orange (Junar), and Bel will be continued in thecoming Fiscal Year. More emphasis will be given to orangeproduction in the mid hill districts. Fish farming will beimplemented as a campaign to meet ever increasing demand forthe fresh water fish. In order to facilitate export of organicproducts, necessary arrangements will be made for the issuance ofthe certificate that will meet international standard.25. To meet the growing need for the installation of necessaryequipment and to establish tea processing factory particularly inIlam and Jhapa districts of the Eastern Development Region, acapital subsidy equivalent to 25 percent of the total cost of themachinery equipments or an interest subsidy equivalent to 80percent of the interests to be paid for the loan borrowed will bemade available for five years. Cooperatives willing to establishprocessing factories will have an option to opt for any onecategory of subsidy, and such subsidy will be provided for fiveyears. Subsidies facility similar to that to be provided to teaproducers who will be establishing processing factory withparticipation of the cooperatives will also be extended tocooperatives producing milk so as to avoid milk holiday.26. Interest subsidy will be continued to tea, cardamom, and coffeefarming. This subsidy will also be continued for the constructionof cold storage, to meet the electricity charges of the chillingcentre operated by the cooperatives centre, and to meet the demandcharges of the electricity consumed by the swallow tube wells andfloriculture. Existing limit of Rs. 10 thousand with interest subsidyfor the agriculture credit has been increased to 15 thousand.‐8‐Subsidy will also be provided for the transportation of agricultureinputs and chemical fertilizer in 26 districts.27. For the purpose of conducting research on sugarcane farming,working as resource centre for enhancing capacity of the sugarfactories and coordinating the sugarcane farmers and factories, aSugarcane and Sugar Board will be established with therepresentation from among sugarcane producers and sugar factoryowners.28. An arrangement will be made to provide unused public land to thelandless people on the long-term lease to utilize it on commercialand cooperatives farming.29. In order to expand the wholesale and retail markets for thecollection of the agricultural products, the agro-marketsinfrastructure will be developed in various places of Dhading,Chitwan, Bara, Sindhuli, Sunsari, Rautahat, Sarlahi, Solukhumbu,Siraha and Mahottari districts .30. Agriculture research will be emphasized and a Gene Bank will beestablished for the long term protection of biodiversity.31. A decade has elapsed since the implementation of AgriculturePerspective Plan. A mid term evaluation of its implementation willbe carried out. An integrated development of agriculture sectorwill be initiated by consolidating its strengths and correcting itsweaknesses as indicated by the evaluation.Land Reforms32. Service delivery will be made effective by computerizing therecords, land ownership certificates and other documents availablein the Land Revenue Offices and Survey Offices through Geo-Information System. Beginning from the next Fiscal Year, landownership certificates will be provided through computer systemin five Land Revenue Offices of the Kathmandu Valley and sixLand Revenue Offices of Kaski district. There will be gradualextension and expansion of computerized system in other LandRevenue Offices as well.‐9‐33. A passbook will be made available to the landowners from theVDCs as a proof of revenue payment to free them from theproblem of double payment of revenue in case of their failure tokeep safe receipts of their earlier payments.34. Necessary infrastructure to implement scientific land reformprograms will be developed by ending the feudal land ownershipsystem. Efforts will be made to incorporate an integrated record ofthe landholding of a landlord in a single certificate of landownership. The pending tasks will be completed to end the dualland ownership. Necessary amendments will be made in therelevant laws to ensure the participation of the landless people.The rehabilitation program for the Free Kamaiyas (bonded landlabourers) will be given continuity.35. Under the national land utilization project, land utilization maps of36 districts including Kirtipur and Lekhnath municipalities havebeen already prepared. Formulating the law for environmentalbalance and sustainable development, and to increase agricultureproduction, land utilization project will be implemented in thedistricts for which a land utilization map has been alreadyprepared. I have allocated Rs. 970 million for the Ministry of LandReforms and Management.Irrigation Facility and Water Induced Disaster Control36. Necessary allocation has been made to expand surface irrigationand ground water irrigation facilities including irrigation systemby introducing newer technology in 30 thousand hector in thecoming Fiscal Year. A sum of Rs. 3.99 billion has been allocatedfor the expansion of such irrigation facilities. Groups of wateruser farmers will be encouraged to operate and maintain small andmedium sized irrigation facilities while the government will beresponsible more on the operation and maintenance of the largescaled irrigation schemes.37. Headwork construction of the Sikata Irrigation Project will becontinued, and construction of the main cannel will also start.38. Implementation of the Irrigation and Water ResourcesManagement Project will start in various districts of the Western‐10‐part of the country. Under this project, construction of 51 surfaceirrigation projects, and 7 cluster irrigation systems that wouldprovide irrigation facilities in 300 hectors in a cluster of 100shallow tube-wells extending from Nawalparasi to Kanchanpurwill be started. The handover process of the irrigation managementof 24 thousand hector area under Kankai, Sunsari-Morang, andNarayani Irrigation System will be started. The construction workof 147 medium scale projects including Singikhola, Mallaj,Singhat, Khopijangha, Lalbakaiya of Terai, hills, and mountainregion, will be conducted.39. Additional 4 thousand shallow tube-wells will be constructed in 20Terai districts. For this, government will provide subsidies duringthe construction phase on the basis of geographical situation, andfarmers’ demand. In addition to this, the construction work of 25deep tube-wells will be completed.40. I have made necessary allocation to encourage for the constructionand maintenance of irrigation projects according to the farmers'demand. To this end, and also based on the participation ofconcerning farmers, I have proposed to provide subsidy in smallirrigation projects for farmers’ cooperatives up to Rs 300thousand, and for farmers users groups up to Rs 100 thousand.41. Hundreds of demands have been received from the public for rivertraining projects on a spontaneous basis. Given the limitedresources, all of these demands can not be met. Thus, it has beenrealized that projects should be selected on the basis of disastervictim groups’ participation, and with identifying the genuinedemands to achieve maximum benefit from the availableresources. Therefore, arrangement has been made that from thecoming fiscal year, for river training control, government willprovide inputs such as Gabin wires, nylon nets, empty bags aswell as the technical support whereas, the earth work should bedone through public participation. For the natural river trainingcontrol, plantations of cane, bamboo, and reed at the river bankwill be encouraged.Local Infrastructure Development‐11‐42. While constructing the agricultural and local roads, policy thatencourages the economic utility of such roads and promotes themarket for agricultural productions adopted will be adopted. In therural area, in coming fiscal year, 706 K.M. earthen road includingthe agricultural and local level roads, and 580 K.M. gravel roadwill be constructed through implementing the rural road projects.Upgrading and regular maintenance of 405 K.M, and 3700 K.M.road respectively will be carried out. I have allocated Rs 3.35billion for this purpose.43. In the coming fiscal year, construction of 249 new, and 311ongoing suspension bridges will be carried out. Among the ongoing, 215 suspension bridges, and 5 concrete bridges will becompleted.Expansion of Alternate Energy44. Electricity will be generated through construction of 3250 K. W.small scale and micro hydropower projects in places where suchfacility is not available from the national grid system. In additionto this, 20 thousand domestic solar electricity system, and 25thousand small capacity solar lamps will be distributed. Throughalternate energy, 32 thousand biogas plants will be constructed inthe potential areas. In addition to this, 500 solar dryer cooker, 1255improved water mills, and 50 thousand improved ovens will beinstalled. I have allocated Rs. 1.05 billion in these programswhich will be run with coordination and cooperation of nongovernmentalorganizations through the Alternate EnergyPromotion Centre.Forest, Vegetation, Wildlife and Watershed Preservation45. Government investment in the forestry sector has been decliningfor the past few years. In the coming fiscal year, with a significantincrease in the capital expenditure, I have allocated Rs 2.30 billionfor the forestry sector. Through this, programs such as forestry,vegetation, wildlife, watershed preservation and promotion, andtree plantation will be conducted which will contribute to povertyreduction through the increase in forest based productions andenvironmental preservation.‐12‐46. Tree plantation will be conducted producing 5 million seedlings ofa cane, bamboo and herbs, etc. both in the public and private landsin order to extend the forestry area, minimize current pressure ongovernment owned forest, improve the supply, and increase theincome opportunity. Emphasis will be given to intensivedevelopment of herbs such as Pipla, Timmur, Sajyoon which carrycommercial potential.47. Additional 482 community forest user groups will be formedgiving priority to leasehold forestry within the communityforestry. Priority will be given to the preservation of forest andenvironment of the Churiya area.48. A compatible forest management policy will be adhered to formaking the block forest of 5 districts of the Terai and inner Teraicommercially productive. Likewise, identifying the treelessnational forests, a policy measure will be taken to hand over 5 suchforests to private entrepreneurs on the long term contract basis forcommercial plantation.49. With the contribution of forest entrepreneurs, a separate ‘ForestDevelopment Fund” will be established. From the coming fiscalyear, the forest entrepreneurs will contribute additional Rs 5 percubic feet to while purchasing the timber, and a correspondingamount will be deposited in the Fund from government’s part aswell. The deposited amount in the Fund will be spent in treeplantation and forest preservation. The Ministry of Forestry andSoil Conservation will prepare a Fund manual by mid -September2007.Infrastructure development: Road, electricity, andcommunicationRoad50. Expected economic activities could not be carried out in certainareas of the country due to the lack of road facilities. That roadtransportation results in multiple benefits is self evident. Therecent road connection in two districts of Karnali and its positiveimpact on economic activities is a burning example. Therefore, Ihave allocated Rs 9.34 billion to develop road connectivitythroughout the country to increase opportunities of economicgains, and subsequently, to improve the livelihood of the people.This amount is higher by Rs 1.59 billion and Rs. 2.48 billion,‐13‐compared to last year’s appropriation and this year's revisedestimation of the expenditure respectively.51. Under the Terai Road Development Program, construction work of591 K.M road, including the Hulaki and feeder road in Jhapa,Morang, Saptari, Siraha, Dhanusha, Mahottari, Sarlahi, Bara,Rupandehi, Kapilbastu, Banke, Bardiya, and Kailali districts willbe started in the first phase from the coming fiscal year.52. It has been aimed to provide roads facilities within three years tothe district head quarters having no road access. According to this,Jajarkot will have road access within 3 months to come. Thedistrict headquarters of Sankhuwasabha, Bhojpur, Khotang,Solukhumbu and Mustang will have roads access within the nextfiscal year. The on-going roads construction work of Bajura,Manang and Humla will be continued. Similarly, construction ofthe road connecting Dolpa and Mugu district headquarters will belaunched.53. A national transportation network will be expanded by developingthe roads which signify the regional values in differentgeographical regions of the country. The construction and upgradingof Ranke-Ravi- Budhabare-Bhedetaar roads of EasternMahabharat region and Chatara-Gaighat-Katari-Sindhuli-Hetaudaroads of Chure region will be initiated. The construction and upgradingwork of Galchi-Trishuli-Safrubeshi-Rasuwagadhi roadswill be ininitiated. Construction work of Gorkha-Barpak andBhachhek-Sirandanda sector will be started. Mapping andconstruction work of Kaligandaki Corridor which can link theimportant valleys and cultural regions of Western regions will beundertaken. Baglung-Burtibang road will be up-graded. Mappingand track opening of Karnali corridor will be started for theadditional infrastructure development of Karnali region. Similarly,I have allocated budget to promote further the work of Ghorahi-Nuwagaun-Tila-Ghartigaun-Mushikot portion. Construction of theremaining portion of Brmhadevmandi-Jogbudha-Darchula-Tinkerroads of Far Western region will be given continuity.54. Extended mapping and construction work will be continued in thenext fiscal year so as to complete the remaining portion of the midhilly-highways connecting Jhulaghat of Baitadi district in the westfrom Chyangthapu of Panchthar district in the east within five‐14‐years on a phase-wise basis. This work will be accomplished on acampaign scale by mobilizing people's participation.55. Under the roads up-grading program, blacktopping ofChandranighapur-Gaur, Belbari-Choharwa, Biratnagar-Rangeli,Bardanga-Urlabari, Damak-Gauriganj, Bhaluwang-Peuthan,Sanfebagar-Mangalsen, Aamilia-Tulsipur-Salyan and Chakchake-Liwang roads will be launched. The up-grading work of Fidim-Taplejung, Tamakoshi-Manthali-Khurkot, Dhalkeber-Janakpur,Khodpe-Bajhang, Surkhet-Kalikot, Batadi-Satbanjh-Gokuleshwar,Sunkoshi-Okhaldhunga and Basantpur-Terathum (Manglung)roads will be commenced.56. In order to cope with the traffic challenges of the high-traffic areasinside Kathmandu valley, Soalteemode- Kalankee-Nagdhungaroad will be widened. Ringroad-(Gulf Course)-Bagmati road willbe constructed for coping with Kalankee bi-pass and Chabahil bipass.The construction of Bagmati corridor, Dhobikhola corridorand Bishnumati corridor roads will be given priority.57. With the purpose of constructing short-distance alternativehighways connecting Kathmandu and minimizing the cost oftransportation, feasibility study and mapping work of shortdistance fast track roads connecting Kathmandu valley with Teraiwill be accomplished.58. The construction work of the industrial corridor of Pathlaiya-Birgunj-Dry Port and Sunauli-Parasi road portion will becontinued.59. I have provisioned more than double increment in the budget ofRoads Board to ensure resources required for the regular,occasional and periodic maintenance of already constructed roads.60. The construction works of 30 bridges under erection in the mainhighways and sub-highways will be completed and theconstruction of remaining bridges will be continued. Afternecessary study, preliminary work for the construction of Mechiand Rajapur bridges will be launched.Hydro-power61. Despite abundant reserve of water resources, the country isunfortunately facing the problem of load shedding every day andelectricity worth billions of rupees has to be imported. In order to‐15‐end this situation quickly, it is essential to attract domestic andforeign investment. Entrepreneurs are attracted for investments inthis sector due to the growing domestic and external demand forenergy. This is the opportune time to gain national prosperity byutilizing the hydro power of Nepal. Therefore, programs will beoperated so as to mobilize domestic resources for small andmedium scale and foreign investment for large scale hydro powerprojects with the aim of producing 5000 MW hydroelectricitywithin next 10 years period. I have allocated Rs. 7.65 billion in thehydro electricity sector next year.62. The production of Middle Marsyagdi hydro electricity project,which is going to be completed next year, will be connected to thecentral grid, resulting enhancement in the supply of electricity tosome extent.63. With the aim of accomplishing 30MW Chamelia hydro electricityproject by 2011, the ongoing construction work will be givencontinuity. Access road for the Kulekhani-III hydro electricityproject is under construction. To complete this project by 2010, theconstruction work of tunnel and power house will be started.64. Construction work of the hydro electricity projects like Kabeli"A"(30 MW) and Riddi Khola (2.4 MW) will be furtheraccelerated. The construction of hydro electricity projects likeRahughat hydro power project, Trishuli-3 A (60 MW) and UpperTrishuli-B (40 MW) will be expedited by mobilizing financialresources. The construction of access road and works on detailedengineering of Upper Tamakoshi will be completed andconstruction work will be started next fiscal year by mobilizingfinancial resources.65. The large hydro power projects like West Seti, Arun III and UpperKarnali will be implemented shortly with foreign investments.66. Rural level electricity distribution system will be managed to serveadditional 35 areas next year through community electricitydistributing agencies under the community rural electrification anddistribution management program. In case if any private electricitygenerating company wishes to run/operate electrification program,arrangement of cost sharing will be provisioned on the basis of theproposal. Next year, some 185 thousand households will bebenefited from entire program of rural electrification. Besides this,additional Rs. 1 billion has been already made available to‐16‐complete the unfinished rural electrification projects which canimmediately generate electricity to the people. This additionalinvestment would help complete the unfinished electrificationprogram in the entire districts of Terai and 587 VDCs of 37 otherdistricts like Sindhuli, Palpa, Dailekh, Kaski, Tanahu, Gulmi,Ilam, Arghakhanchi and Gorkha. Additional 415 thousand peoplewill be benefited with this scheme.67. In order to attract private sector in the electricity generationbusiness, the law related to survey license, power generation, andpower purchase agreement etc. will be simplified and arrangementwill be made to grant permission within a short span of time."Electricity bond" will be issued for the purpose of securingnecessary capital for the generation of electricity.68. The tendency of holding for long and not initiating the trade evenafter receiving the license to produce hydro electricity projects hascreated hindrances to the power development. The individuals orcompanies who do not initiate their work even after receivinglicense will be charged with increased rate of annual renewal feesto discourage this temperament. Arrangements will be made tocancel the license if the works are not carried out within specificperiod.Information and Communication69. Programs will be carried out with the goal of “telephone at eachvillage, mobile phone in everybody’s hand and internet in eachhouse” with a view to making communication available atpeople’s doorsteps and in everybody’s hands. Program will beinitiated to provide at least two telephone lines in each of the 1007Village Development Committees which still lack telephonefacilities. I have reduced the telephone ownership fee by 33% inorder to facilitate the general public’s access to telephone service.70. With the full utilization of existing optical fiber, microwave andsatellite link, a program of installing tele-centers will be initiatedfor providing citizen’s access to modern information technology.Initiatives will be taken to expand the network of BroadbandInternet service down to the village level. Information andcommunication technology will be expanded down to the ruralareas by making the postal service fast, smooth, reliable,commercial and diversified.‐17‐71. Law related to right to information will be formulated in order toensure the citizen’s right to information. Necessary amendmentswill be made in law with a view to protect the rights and benefitsof the working journalists.72. New transmission centers will be installed in Terathum, Namcheof Dhankuta and Chamere of Surkhet to expand the transmissionof Nepal Television. A sub-station of Radio Nepal will be installedin order to cover its broadcasting in the various districts and areasof Karnali Zone. I have allocated a sum of Rs. 2.13 billion for theMinistry of Information and Communication.Urban Development73. National Housing Policy, 1996 will be refined with a view ofpromoting planned housing development and promotion of privatesector investment in the areas of housing and land development.The provision of land holding ceiling will be waived for theplanned housing construction companies with the condition thatthe land will be utilized for the same purpose within five years.Necessary policy will be formulated to facilitate leaseholdproperty transaction.74. Program related to infrastructure works will be initiated to developcluster housing areas in some places of Humla and Kalikotdistricts where the study related to providing physical facility byintegrating scattered settlements was concluded this year.Feasibility study on developing cluster housing area will be carriedout in Pyuthan and Myagdi districts next year.75. The unplanned urbanization has made it difficult to acquire landfor additional physical infrastructure development in suchunplanned areas. The government cannot afford the infrastructuredevelopment costs like road and sewerage by providingcompensation for land from its own resources. Hence, a LandDevelopment and Acquisition Policy will be formulated for urbandevelopment, which will make a provision of beneficiaries'contribution to the infrastructure development.76. I have allocated necessary amount for the physical infrastructuredevelopment for Integrated Urban Development in Itahari ofSunsari and Attaria of Kailali. In addition to the initiation ofconstruction of a ring road in Biratnagar, planned urban‐18‐development work will also be carried out. The preliminary workon the construction of outer ring road in Kathmandu will becompleted.77. The role of the Solid Waste Management and ResourceMobilization Center will be directed towards the field of technicalassistance, while the local bodies will be made fully responsiblefor solid waste management. As “Rivers can not be the destinationof sewerage”, necessary policy will be followed to preventcontamination of river water in urban areas including KathmanduValley. I have set aside a sum of Rs. 1.27 billion for the urbandevelopment program.Targeted Programs for Poverty Alleviation78. The impacts and effectiveness of the programs alreadyimplemented aiming at alleviating poverty will be reviewed, and apolicy will be followed to uplift the living standards of thedeprived community, class and area through affirmative actionsand targeted programs. A sum of Rs. 51 billion has been allocatedfor the programmes such as rural infrastructure, capacitydevelopment, grant to local bodies, programmes based on people’sparticipation, and social security that would directly contribute topoverty reduction,.79. Intensive program on poverty alleviation will be carried out in 40districts including districts of Karnali Zone, which are consideredbackward on the basis of Human Development Index, and also inall the Village Development Committees of southern Madheshbordering with India. Income generating programs like promotionof traditional skills and innovation led enterprise; communityinfrastructure like roads, bridge, drinking water and irrigation; andcapacity development programs like education, health and trainingwill be carried out by directly targeting the ultra poor, women,Dalits, indigenous people, Janajatis and backward Madhesicommunities. As many as 80 thousand households will bebenefited from the implementation of 3 thousand 500 projects inthe next Fiscal Year. I have allocated a sum of Rs. 1.77 billion forthis program in the Poverty Alleviation Fund.80. Maternal and Infant Care Fund will be established in 25 poordistricts considered to be backward on Human DevelopmentIndex. Essential health services related to emergency and indoor‐19‐services will be provided free of cost from the district hospitalshaving a maximum of 25 beds and the primary health centers.81. Various programs will be implemented with a view to raising theincome earning of the poor and backward class throughagriculture. These programs include off-season vegetable growingin plastic sheds, goat exchange program in 38 districts, fisheries bywomen’s group at the highway side of Kailali and Kanchanpurdistricts, Parwar farming extension in 11 districts of Madhesh,potato farming in 20 districts and ultra poor targeted program in 10districts. Community livestock development program will beimplemented in 22 districts having a high population density ofDalits and freed bonded labor. Program on commercial farming of12 priority herbs will be implemented in 12 poor districts.82. The “One family One job” program in Karnali being implementedsince last Fiscal Year will also be continued effectively.83. I have given continuity to the day meal and cooking oildistribution program in 11 districts having food shortage, very lowaccessibility to the education and low enrollment rate of girls.Additionally, the day meal program is continuing in Karnali zone.84. A scholarship at the rate of Rs. 350 annually will be provided tothe girls students for all Dalits studying in primary level, all girlsstudents of Karnali Zone and fifty percent girls students among thetalented and deprived of each schools in other districts.Scholarship at the rate of Rs. 1700 annually will be provided for40 thousand talented girls students and 20 thousand talented boysstudents in secondary and lower secondary level. An annualscholarship of Rs 1700 will be provided to all students of primaryto secondary level from marginalized cast groups namelyChepang, Raute, Mushahar, Dom, Dushad, and Badi.85. I have allocated budget for the programs to be implemented byNational Commission for Upliftment of Indegeneous Janajatis;Deprived, Suppressed and Dalit Upliftment DevelopmentCommittee; National Dalit Commission and Gumba Managementand Development Committee. From these programs, variousprograms including preservation of endangered languages andscripts, preparation of dictionary and grammar in motherlanguages, literacy program and scholarship in higher andvocational education, maintenance of ancient Gumbas will beconducted.‐20‐86. I have made provision of 20 percent rebate on land registration feefor Dalits. Dalit related programs will be effectively monitored byNational commission for Dalits.87. I have allocated some amount for the preservation of lakes situatedin Madesh. Necessary budget provision has been already made inthis fiscal year for the operation of Janakpur Railway, which is theonly railway service in Nepal.Women Empowerment88. Women are significantly contributing to national economy. In thenext year, the programs which support gender equality will beconducted by ascertaining their participation in economic, socialand political process for women empowerment. I have broughtinto effect the concept of gender responsive budget. According tothis, I have allocated an amount of Rs. 19.09 billion in the nextfiscal year for programs directly benefiting the women.89. The Women Development Program related to poverty alleviation,gender equality and social mobilization, which is beingimplemented in 1624 village development committees, will beexpanded to additional 54 village development committees.90. I have given continuity to the provision of 20 percent rebate inregistration fee on land ownership transfer to women.91. Women's Participation will be increased for the posts such asvolunteer, development organizer/co-planner and social mobilizer.92. I have given continuity to the programs related to economic, socialand legal empowerment and institutional development which arebeing implemented in 15 districts including Baitadi, Bajura,Bajhang, Achham, Doti, Kalikot, Jumla, Mugu, Ramechap,Sindhuli, Dhanusha, Sarlahi, Mahottari, Rautahat and Bara.93. I have continued the incentive allowances for mothers during theirdelivery period. A Women Health Volunteer Fund and aMotherhood and Infant Care Fund will be established.Furthermore, programs related to motherhood and infant healthwill also be broadcasted in local language.94. Housing development plan will be implemented under immediaterelief program for ecomomic and social upliftment of women in 10districts seriously affected by conflicts.‐21‐95. Special programs will be conducted in 40 districts for economicself-sufficiency of deprived, ultra-poor, landless, Dalits, Janajatisand Madhasi women. Special programs will be lunched forupliftment of Badi women.96. Senior citizens' health care program will be lunched in all districtsby extending health services and facilities to senior citizens in orderto provide solid contribution for their social security. A freetreatment provision has been made through Shahid Gangalal HeartFoundation for the treatment of serious heart patients over the ageof 75 and the children below 15 years with poor economiccondition.97. I have given continuity to the Allowances to be received by seniorcitizens, disabled, weak and helpless widows. Additionally, anamount of 10 percent of the monthly pension amount as medicalallowances will be added to the pension for government pensionholders over the age of 75 by the next fiscal year.98. The social security situation of senior citizens is being complicateddue to a shift to nucleus family oriented structure from joint familystructure. Thus, a law will be prepared to implement a contributorypension system for reliable senior's security of labor, workers andself employed people apart from government employees.(C) Investment PromotionIndustry and Export99. Industrialization is not possible without the development oforganized private sector with an enterprising and risk-bearingability. It is necessary to raise the morale of private sectordecreased for the last few years. To address this situation, a policyhas been undertaken in the next year's budget to guaranteeindustrial and investment security, reform in legal andorganization structure for creation of investment climate,procedural simplification, additional provision for sick industryrehabilitation and opportunities for foreign, non-resident Nepalisand private sector investment.100. It is necessary to free industries from incidents such as bandha,strikes, gherao and lock-up. For this, new measures will beadopted by finding the basis of compromise among themanagement and laborers. Due to the almost daily obstructions inhighways, consumers are bound to purchase high priced goods in‐22‐the internal market, supplies are interrupted and exports are down.A law will be enacted to stop obstructions in national highwaysand feeder roads and impose penalty for violators. A separateIndustrial Security Force will be established to guarantee securityin industrial corridor.101. A Special Economic Zone related law will be enacted fordevelopment and management of industrial estates, exportprocessing zones, tourism and recreational spots and specialcommercial areas. Rajbiraj Industrial Estate will be transformed toSpecial Economic Zone. A Garment Processing Centre, covering150 bighas, will be established in Simara, Bara. A preliminarystudy for the construction of Special Economic Zone will bestarted in Nepalgunj of Mid-Western region and in appropriateplace of Kailali or Kanchanpur of Far Western Region.102. An Investment Board with full authority will be set up forindustrial investment promotion. It will have a separate office andall the facilities to investors will be provided through this Board.103. The financial accessibility is not easy at the present financialmarket for technical and skillful youth entrepreneurs to transformtheir vision into successful economic transaction. An appropriatepolicy will be made public soon to address the situation includingthe provision of covering the risk insurance on investment byGovernment of Nepal on entrepreneurial capital fund by operatingcompany.104. Strict policy will be adopted to discourage all forms of cartelingand syndicate systems which increase the business cost, hit theconsumers and negative impact on efficiency of the economy.105. There is a negative effect on exports and credibility of Nepaliproducts in international market due to the competition with fakegoods for the products such as Carpet, and Pashmina using Nepaliarts and skills. To correct this situation, a special label of NepaliCarpet and Pashmina will be developed and provision will bemade to put such labels compulsorily in Carpets and Pashminasexported from Nepal. A provision will be made to bear 70% of thecost of first registration of such labels and trademarks in importedcountries by Government of Nepal and remaining by relatedproducer's unions. The Government of Nepal will help relatedproducer's unions in creating necessary infrastructure forregulation of labels.‐23‐106. Arrangement will be made to clear by mid January 2008 allapplications pending with One Window Committee for thecustoms duty draw-back facilities under the Industrial EnterprisesAct107. If sold to permitted export houses, tax as per the law will berefunded to concerned industries assuming that such sales areequivalent to export. Customs facility will be provided at thepremises of export house and goods will not be inspected again atexport customs point if goods are delivered in a sealed containerfrom export house to export points.108. To encourage exports, a provision will be made to provide facilityof bank guarantee for all the taxes levied on imports of rawmaterials imported by those industries which have exported morethan 60% during the period of last 12 months. Provision will bemade to release such bank guarantee from the related customspoint. Likewise, provision will be implemented to refund the taxon flat rate from customs point to export oriented industries at thetime of export.109. For trade facilitation, the construction work will continue toexpand multimodal system at Mechi Customs point next year.Feasibility study will be carried out for construction of dry port inKavre-Sindhupalchok and Rasuwa- Nuwakot area considering theexisting weak physical facilities for trade through Chinese border.110. The commercial banks can not provide long term loans easily forhydropower production and infrastructure related industries whichneed long period for commercial production. In addition, singleobligor limit is also a hindrance for investment in such sectors. Toimprove the situation from next year, Nepal Rastra Bank will issuenecessary directives. Banking sectors will be encouraged toestablish Infrastructure Bank.111. Private sectors will be encouraged to establish two cementindustries in Dang and Surkhet considering increasingconsumption and demand of cement. For this, road and electricityservices, as infrastructures facility, will be provided in concernedindustrys' areas. The lime stone mines, consumed by UdayapurCement Factory, will be open also for private sectors by notlimiting the scope of necessity for the Factory.‐24‐112. "Industrial Rehabilitation Fund" related procedures have alreadybeen approved for rehabilitation of sick industries from internalconflicts. A provision will be made to contribute in the Fund byNepal Rastra Bank and Commercial Banks. I have allocatedRs.500 million from Government of Nepal.113. With the long term vision of developing infrastructure for medicaltourism and teaching in higher education, the foreign investorsincluding private sectors will be encouraged to develop andoperate the infrastructure of universities and specialized hospitals.The government will assist in land acquisition to build suchinfrastructures in the regions excluding Kathmandu Valley.114. An appropriate arrangement will be made for removing theobstacles seen in the course of ensuring the Non Resident Nepalisparticipation in the country's development by utilizing theirknowledge, skill, capital, and technology.115. 115 The carpet and garment industries will be provided 75percent income tax rebate for five years effective from the transferyear if such industries relocate themselves outside the KathmanduValley. The Government will build infrastructure like, road,electricity, and sewerage in those areas if two or more industrieshave been transferred to a single location with a provision ofretaining one thousand or more workers there.116 In order to increase the employment opportunities through thedevelopment and promotion of Small and Cottage Industries, aMicro Enterprise Policy will be implemented. A separate fund willbe established under the micro credit program in order to increaseself employment through such programs for the trained humanresources.117. In order to enhance the competitive capacity by taking advantageof the available opportunities in the world market, it is necessaryto seek a way out to facilitate Nepalis entrepreneurs for investingabroad. With this measure, there will be an increase in the nationalincome as well the international credibiltiy of the Nepaleseentrepreneurs and national capitalists in the long run. Byacknowledging this fact, a legal provision will be made stipulatingcertain conditions to make the foreign investment open for thoseindustries which transfer technology from Nepal, establish anauxiliary subsidiary company abroad by the Nepalese holding‐25‐company under operation as a public limited company in Nepal,and the mutual fund investing in portfolios instruments of foreigncapital market. Nepal Rastra Bank will prepare other procedures inthis regard.Tourism Development118. A new Tourism Policy, 2007 will be formulated by incorporatingthe long term vision and broad-based reform agenda of the tourismsector. In order to increase the quality and quantity of touristsunder the Special Tourism Promotion Program next year, NonResident Nepalis (NRNs), Nepalese diplomats, residential andhonorary consulates, Nepalese students and worker communitiesabroad will be mobilized to implement “ Send Home a Friend"program. Likewise, the renowned Nepalese mountaineers, athletes,and others will be involved by awarding the brand ambassador topromote "Nepal For All Seasons" program.119. Necessary infrastructure building works will be started in order toconstruct second International Airport which is feasible in Nijgarhof Bara district. The Government will attract foreign investment bybuilding necessary infrastructures including land acquisition forthe construction of international airport of regional level inBhairahawa and Pokhara.120. Modern equipment will be installed in Tribhuvan InternationalAirport to make airlines flights well managed and more reliable.121. The sick hotel industries are now passing through a revival stage.As the arrival of tourist is being increased, hoteliers are required toincrease their investment to maintain the standard of hotels as perthe guests' expectations. The Government will provide hotelierssome concession on customs duties at the import of furniture andfixtures in order to minimize the investment cost to some extent,the customs exemption will also be provided to the hoteliers forthe importation of the vehicle for the use of tourist as well.122. The national heritages of cultural significance will be preserved. Abudget is allocated for the development and preservation of theLumbini Area Development, Greater Janakpur Area Development,and Pashupati Area including other culturally and archeologicallyimportant sites. A provision has been made for deducting theexpenses of upto Rs. 1 million for the income tax purpose if suchamount is invested by Nepali firms and companies in schemes‐26‐devoted to preservation of national religious and cultural heritagesites and development of sports infrastructure.Financial Sector Reform123 Insolvency Administration Office and Secured TransactionRegistrar’s Office will be established next year. Anti MoneyLaundering Act and Banking Fraud Control Law will bepromulgated to control financial crimes. Likewise, a separateCommercial Bench in 6 different Courts will be established toexpedite the hearing and decision of the cases related to thefinancial sector.124. Small depositors have not been attracted to the capital markets dueto the lack of Mutual Investment Fund. Due to this, on the onehand, the interest rate has not been competitive and on the other,the liquidity position has been rising. A trust law will beformulated to allow the commercial banks with certain standard tomanage the mutual fund. An arrangement will be made to establisha regulatory body for the regulation and supervision of the Pensionand Mutual Investment Fund related transaction.125 An arrangement will be made to allow the Non Resident Nepalisand organized foreign investors to invest in the secondarysecurities market.126. The foundation for reinsurance market has been built up due to theexpansion in the size of life and non life insurance business. TheInsurance Committee will be made active next year to startreinsurance business. The cost of insurance will be reduced byreviewing the fees payable to Insurance Committee by theInsurance Companies.127. The supervision, monitoring and evaluation work by Nepal RastraBank will further be strengthened to maintain financial health ofthe banks and financial institutions. Actions against the willfuldefaulters of the banks and financial institutions will remaincontinue. The Priority has been given to strengthen theinstitutional capability of the Loan Recovery Tribunal.128. The micro credit program will be made available to the doorstep ofthe poor and deprived people to ensure their access to the financialservices. A micro credit policy will be brought next year. Aresponsible institution will be set up at the central level tostrengthen and supervise the micro credit institutions.‐27‐129. In order to develop Nepal Stock Exchange an autonomous body bydivesting the government ownership, an arrangement will be madeto sell its ownership to the listed companies, employees of theNepal Stock Exchange and the public.Public Enterprises Reform130. Government's share investment in the Public Enterprises hasreached to more than Rs. 68 billion until FY 2006/07. Out of thisinvestment, less than 40 billion only has remained as governmentinvestment showing 42 percent capital loss. The total accumulatedloss is more than Rs. 47 billion. In order to manage governmentinvestment in public enterprises by considering such a severeeconomic mismanagement, institutional reform will beimplemented and the Privatization Act will also be amended.Labor and Foreign Employment131. The labor pact has been concluded recently with United ArabEmirates for theprotection of rights of the labors going to foreign employment.Similarly, the works of concluding labor pact are in the final stagewith Malaysia and South Korea. The labor pacts will continue withother countries also. Necessary arrangement will be made for theinsurance scheme of Rs.500,000 to every person going to foreignemployment for the period of agreement. The provision of LaborAttache will be made gradually in the countries where theNepalese labors are high in number. The access and capacity ofNepalese Embassy will be increased in other countries. A foreignemployment rehabilitation fund will be established for recuingthose victimized in course of foreign employment.132. Skills development training programs will be launched consideringthe demand of national and international labor market. Priorityshall be given to martyrs' families, peoples injured in People'sMovement, handicapped, blind, women, conflict affected peopleand under privileged community including very poor for thetraining programs which promote the industries based on local rawmaterials. In the coming year, I have arranged a budget to providetraining opportunities for 33,000 people from the governmentagencies.133. A significant amount has been deposited in the National WelfareFund established under the Bonus Act. To utilize this Fund for the‐28‐larger benefits of laborers, a separate working manual will beissued soon.Economic Diplomacy134. With an emphasis on economic diplomacy, Nepalese embassieswill be mobilized for economic co-operation, tourism promotion,trade expansion and diversification, promotion of foreignemployment and promotion of foreign investment. Machinereadable passport system will be initiated to comply with theinternational standard. A sum of Rs. 1 billion 140 million has beenallocated for the Ministry of Foreign Affairs.(D) Human DevelopmentEducation135. I have allocated Rs. 28.39 billion for the Ministry of Educationand Sports. This is an increase of Rs. 5.38 billion as compared tothe allocation of the last year's budget.136. A serious shortfall of teachers has been noticed in schools wherethe proportion of student to teacher is high, as the number ofteacher could not increase in proportion to the students. To addressthis problem, following arrangement will be made in the nextfiscal years:An additional grant will be provided for hiring 12000 teachers inthose primary, lower secondary, and secondary schools whichstudent-teacher is ration is high. The teacher grant scheme will beinitiated on trial basis. The grant will have to be utilized by theSchool Management Committee for hiring teachers with priorityfrom among women, dalits, and the disabled holding teacher'slicense. It is believed that pressure on the financial resources willbe less with the use of about 3800 teachers from this policy.137. A grant of to Rs. 450 thousand per school will be provided to SchoolManagement Committee for the construction of classroom andphysical facility on the basis of the design and map approved by theCommittee. The grant will be provided to schools for theconstruction of school buildings which have their own income‐29‐sources on the basis of cost sharing. Ministry of Education andSports will issue directives related to the grant into effect before midof August 2007. More than 6000 class rooms and 1500 toilets forgirls of more than 2500 schools will be constructed with the amountof Rs 1.50 million allocated to the Ministry.138. At least 2500 schools will be handed over to the community in thecoming year as there has been seen considerable improvement in thequality of education of schools already handed over to thecommunity.139. With view to publishing and distributing cost free text books in timeon a cost-effective basis, the priority of all textbooks of the primarylevel will be arranged through the private sector by mid November2007.140. Madarasa, Gumba and Gurukul will be expanded up to lowerSecondary and Secondary level by continuing its mainstreaming intothe primary education. I have given continuity to Samahit educationprogram to increase the access to education for the handicapped andthose children who have special educational need.141. A grant worth Rs. 50 thousand each will be provided under the "VillageEducation Program" to those 300 Village Development Committeesof 30 districts, where the literacy rate is less than 40 percent, bysetting up Community Learning Centres to conduct the literacyrelated activities. With this scheme, 104 thousand people will beliterate, 50 thousand people will get literacy education and 8thousand two hundred eighty women, Dalits, and indigenous,Janajati, will participate in literacy education and income generationprogram.142. The primary level teachers totaling 25 thousand and lower secondarylevel teachers numbering 15 thousand will be offered in-servicetraining. In addition to this, 490 deprived and dalits women will beprovided pre-service training which subsistence allowance.‐30‐143. Agriculture and Forestry University will be established in Rampur,Chitwan by merging both the institutes of Agriculture and Forestryunder the Tribhuvan University. Actions shall be initiated incooperation of local people and Tribhuvan University to build aregional university by amalgamating the constituent campus of theFar Western and Mid-Western region.144. Arrangements will be made to institutionalize sports from the schoollevel. In view of helping the Nepalese people earn a distinct identityin international competition, the government investment will beincreased for the development of cricket, Tae-qondo and football.145. I have proposed to earmark Rs. 12 billion and 180 million in healthsector. This figure is Rs. 2 billion and 870 million more as comparedto the previous year. I hope, the proposed budget will contribute tothe prompt and qualitative delivery of basic health services. Theimplementation of this budget, I hope, shall contribute to curb thepopulation growth rate, reduce child and maternity mortality rate,improve the physical facilities in hospitals and hence to increase theaverage life expectancy.146. The number of beds in hospitals shall be increased. Construction ofhospitals and health centers shall be given continuity. Budgetaryprovision has been made to upgrade 25 sub health posts into healthcenters on the basis of population and geographical location.Concessions shall be made available to the students of communitySchools while providing medical services in government hospitalsand primary health centers. Additional budget has been earmarked toimprove the supply of medicines and equipments in the hospitalsand health centers. Mandatory provision has been made to explicitlymention an indication "For free distribution and not for sale" in theexternal cover of the medicines that are meant for free distribution.147. Integrated child disease management program will be implementedin 64 districts with additional 16 districts in 64 districts to reduceinfant mortality rate. 10 million vitamin tablets and 80 million IronTablets will be distributed. School vaccines program will be‐31‐implemented in 44 districts as well as administering Polio dropsprogram will be continued.148. Vaccines will be provided against encephalitis. Spraying medicineswill be launched in a broader scale to control kalajar.149. A program will be launched establishing a permanent fund in everyvillage development committees to encourage women volunteerswho are under the family planning and secured maternity program.Thirty five (concerning the eradication of Prolapse 25, ENT 5 andspecialist 5) free mobile health camp will be launched. NepalMedical Association and Non-Governmental Organizations will bemobilized to operationalize the camp.150. The policy taken by the Government of Nepal current year to senddoctors, who have completed M.B.B.S. under the scholarshipprogram of the Government of Nepal to provide their services inremote and rural area health centers, will be continued.Drinking Water151. Diarrhearal disease has taking toll of several lives due mainly to nonavailability of safe drinking water. The incident related tocontamination of drinking water has shadowed the achievementsmade so far in drinking water distribution. In this context, basicrights of the people will be protected by ensuring them with theavailability of safe water. Similarly, drinking water projects will beconstructed in areas with no drinking water facilities, and waterdistribution system will also be improved where facilities alreadyexists. Communities' participation will be emphasized in thedrinking water sector. A sum of Rs. 5 billion and 330 million hasbeen allocated for the drinking water sector. Some 1.95 millionpeople are expected to be benefitted with basic water facilities afterthe implementation of this budget.152. Amongst on going drinking water and sanitary projects, 126 will becompleted in the coming Fiscal Year. Similarly, some 449 drinkingwater projects under phases five and six will also be completedthrough rural water and sanitary fund.‐32‐153. Under the Small Town Drinking Water and Sanitation Project, 18projects of Ratnagar, Lekhanath, Birendranagar, Sunwal,Tribhuvannagar, Tulsipur, Budhabare, Birtamod, Belbari,Bardhaghat, Lamahi including other places will be completed.154. The implementation of Melamchi Drinking Water Project will becarried forward.155. Necessary allocation has been made for the maintenance of thedrinking water supply system in Biratnagar, and for supplyingadditional water from new sources.156. Arsenic test will be completed in 350 thousand shallow tubewelldrinking water scheme in Jhapa, Morang, Mahottari, Chitwan,Banke, Bardiya and Dhang districts.(E) Reconstruction, Rehabilitation and Relief157. A guaranteed environment will be made to all internally displacedpeople (IDPs) to return to their homes. The relief package will beprovided to rehabilitate IDPs, which includes expenses fortransportation, educational relief, house repairs and construction, andfoods. Similarly, an interest free agriculture credit of for five yearswill be provided to enable to them cultivate first crops.158. Social reunion and security program will be launched forrehabilitation of conflict victims such as orphans and single women.Assistance will be provided for transplanting artificial limbs to thosewho were physically deformed during conflict.159. Agriculture Development Bank will exempt payment of interest tothose borrowers who pay principal amount within fiscal year2007/08 for the loan amount up to Rs 50 thousand that was lentduring fiscal years 2000/01 - 20054/06. Those qualifying for thisexemption will be a person or one of his family members who werekilled in the conflict, internally displaced people and people whowere physically deformed during conflict. For other conflict victims,an interest rebate of 50 percent will be provided to those who mangeto pay full principal amount and 50 percent interest for the loanamount up to Rs 50 thousand. Beside these, concessions will also beprovided to other borrowers.‐33‐160. Reconstruction of Village Development Committees' buildings,communication repeater stations, health posts, police posts, bridges,power houses, which were destroyed during the conflict, will becarried out. In order to complete reconstruction works withinstipulated time, cost and design based on new thinking, the Ministryof Peace and Reconstruction will prepare and implement long,medium and short term plans. I have earmarked a sum of Rs. 1billion and 80 million 80 million billion from the internal resourcesfor the next fiscal year for this purpose.161. Monthly subsistence allowances and free education up to bachelorlevel being provided to martyrs’ family will be continued. Anarrangement will also be made for providing monthly subsistenceallowances to completely disabled and free treatment facilities tomartyrs’ family members in the public hospitals.162. A 100 percent rebate will be provided in all kinds of registration feesand duties while transferring ownership titles to the family memberssuch as husband, wife, son and daughters of martyrs who lost theirlives during Peoples’ Movement.Peace Fund163. A separate Peace Fund is in operation and will be continued for nextthree years to carry out activities such as Cantonment Managementof Maoist Combatants, Maintenance of Law and Order, Election forConstituent Assembly and Management of Internally DisplacedPeople. Necessary arrangements have been made for bothGovernment and donors will contribute to this Fund. I haveearmarked Rs 1 billion from the Government to this Fund. I expectthat donors will provide additional fund to this Fund. The monthlyincome and expenditures of the Fund will be made public in amonthly basis. Similarly, the income and expenditures of the Fundwill be audited by the Office of the Auditor General of Nepal.Hon'ble Speaker,Improvement in Service Delivery and Effective ImplementationArrangement164. A policy of respecting free judiciary, rule of law and human rightswill be given continuity. National Human Right Commission will bemade operational and activated for human rights protection and‐34‐promotion. I have allocated additional budget for all levels of courtsto assist in rendering justice and to improve operations of Office ofthe Attorney General and Government Advocate Office. I believe,this will further contribute in the effective performing of justice. Ihave allocated Rs 969.9 million for courts.165. Existing laws related to civil service, police service, military serviceand other government services will be reformed in order to makethese services inclusive, service oriented and responsible.166. In order to make public service delivery more effective and prompt,a Master Plan of E-Governance Working Procedure will beimplemented. For this, I have allocated necessary budget.167. The records on citizenship and passport distribution will linked tothe computer network and thus service delivery will carried forward.168. The Notary Public Council has been established in order to performthe functions like attesting the documents, certifying the copies ofthe original documents and issuing affidavits, for travelling abroad.In order to minimize the compulsion of the people to come to thecenter to get such documents, the deserving people who can performthese functions in the district level will be authorized by providingnotary public certificate.169. It is necessary to review pay scale of government employees fromtime to time to help maintain ethics and promote work efficiencyand for sustaining their livelihood. In line with this, to ensure thatthe recommendations of High Level Pay Commission, 2061 couldbe fully implemented with a new action plan in the beginning of FY2009/10, I have increased a total of 27% on basic pay scaleincluding converting the existing 10% allowances. The new payscale for the government employees will be implemented from the17th of July 2007.170. From the viewpoint of controlling corruption, corruption sensitiveagencies and sectors will identified and an island of integrity will beidentified and in addition to the work of converting such sectors intoan Island of Integrity, the investigation and accusation relating tocorruption and irregularities will be made efficient and realistic. ACampaign of zero tolerance against the corruption shall be launched‐35‐with the support and participation of the civil society and nongovernmentalorganization.171. A sum of Rs. 10 billion and 890 million has been allocated fir NepalArmy's regular operation. Necessary amounts required for NepalArmy to be involved in the protection of National Parks and WildlifeConservation, and for development works to be implemented byNepal Army, has been provisioned in concerned ministries'allocation.172. National interest will be given topmost priority on foreign aidmobilization. Mobilization of bilateral and multilateral assistancerelated to development and construction work contributing insustainable peace process will be arranged.Effective Implementation Arrangement173. Effective implementation of policy and program in the current fiscalyear will be continued in the coming fiscal year. For this, anarrangement has been made to have progress review meeting on the7th day of each month under the chairmanship of Minister and abimonthly meeting will be organized at the concerned Ministry foreffective monitoring and evaluation of the program.174. An arrangement has been made wherein all ministries andconstitutional bodies will make public their annual programs andplans within mid July. Such programs will be approved andnecessary work instructions will be issued within first quarter of theyear. The annual progress report and financial statement by allministries will be made public compulsorily within first four monthsof a fiscal year.175. The system of delivering approved programs and authorization toconcerned entities within mid-August will be observedcompulsorily. The authorization for unconditional block grants tolocal bodies will be issued directly by the Ministry of Finance within23rd July of a fiscal year. And capital expenditures allocated forKaranali Zone and Bajura District will be freezed only in midNovember of next fiscal year.Hon’ble Speaker,‐36‐176. To implement policies and programs as stated above, I haveallocated a total expenditure of Rs. 168 billion and 995.6 million. Ofwhich, Rs. 98 billion 172.4 million and 91 thousand has beenestimated for recurrent expenditure; Rs. 55 billion 261.6 million and82 thousand for capital expenditure, and Rs. 15 billion 561.4 millionand 27 thousand for repayment of principal amount. This estimate ishigher by 17.4 percent as compared to total allocation of Fiscal Year2006/07 and 28.2 higher than the revised estimate of the sameperiod. The revised expenditure as compared to estimate is 22.2higher in recurrent expenditure, 51.9 in capital expenditure, and 2.8in repayment of principal.177. Of the total expenditure of Rs. 93 billion 743 million and 45thousand has been earmarked for general administration, and Rs. 75billion 252.5 million and 55 thousand for development programs.178. Out of the total estimated expenditure Rs. 99 billion 605.9 millionand 56 thousand will be borne from current source of revenue; Rs.27 billion 460.9 million and 14 thousand from foreign grant, and Rs.17 billion367.4 million and 30 thousand from foreign loan. Thus, atotal of Rs. 44 billion 828.3 million 44 thousand will be mobilizedfrom foreign aid. However, despite resource mobilization from thesetwo sources, there will be a deficit of Rs. 24 billion 561.3 million..‐37‐Revenue Policy and ProgramsHon’ble Speaker,179. While formulating revenue policies, I have taken main basis of thesuggestion received from Revenue Advisory Committee, other tradeorganizations, professionals and experts. I have accorded highimportance to the areas of helping to revitalize export, industriesbased on domestic raw materials and reforming investment climate.I have adjusted revenue policy and rates in accordance withcommitments to the bilateral and multilateral treaties and agreementsfor which Nepal is a signatory.180. I have already expressed in the preceding paragraphs about theextended facility to carry over the losses for income tax purpose bythe Industries, customs rebate to cut down the cost of the tourismindustries, and income tax rebate for the infrastructure industries. Ihave also mentioned earlier the reform in the Customs refundprocess to reduce the cost of exporters. Now, I present other revenuepolicies and reform programs.181. In view of the recent depression in export trade, export duty hasbeen reduced in corrugated sheet, synthetic yarn, galvanized ironpipe, plastic products, rice bran and molasses and similarly, exportduty levied on veritable ghee has been reduced by 50 percent.182. Bonded warehouse and cash guarantee facilities has beenprovisioned for exporting industries for their import of packagingmaterials that are not produced in Nepal.183. A facility of bank guarantee shall be extended to air service operatorwhile importing engine of the aircraft temporarily in lieu of sendingits own engine abroad for repair.184. Fifty percent rebate on imports tariff will be given to micro bus andmini bus to be imported by the private and government hospitals asper the beds capacity. In addition, I have proposed only one percentduty on the import of ambulance and dead body carrying vehicleunder certain provision for the private hospitals.‐38‐185. Considering the situations of price escalation and to give some reliefto those having been able to live with marginal income, I haveincreased the tax exemption limit to Rs. 115 thousand for anindividual and Rs. 140 thousand for the couple.186. Arrangement has been made to allow loss carry forward system ofone income year up to 12 income years in case of infrastructureindustry and 7 income years in case of other enterprises.187. Individuals having income from house rent until Fiscal Year2005/06 but failing to pay tax in accordance with the Income TaxAct, 2001 (BS 2058) shall be allowed amnesty of remaining fees andinterests provided 15 percent of such house rent income is paidbefore mid January, 2007.188. Except tax exempted agencies, non filers as well as cooperatives,association or agencies who submit their returns and pay theirunpaid income tax before mid December 2007 will be given rebateon fees and the interest.189. The provision for unexpected risk set aside in the reserve fund byindividuals doing general insurance business in accordance withInsurance Act and Rules shall be allowed as expenses for deduction;and the fees and interest due to such expenses not allowed earliershall be exempted.190. In order to make Value Added Tax refund process faster,arrangements have been made to provide refund within 30 days fromthe date of application in case of regular exporter.191. In order to provide relief to the people of the areas where theelectricity has not reached and to promote solar energy,arrangements have been made to provide Value Added Taxexemption on the batteries used in the machinery and equipmentsproducing power from solar energy on the recommendation ofAlternative Energy Conservation Center. Zero rate facility shall beprovided to local industry which produce and sell such batteries.192. Provision of refund has been made for the amount payable as taxderived from deducting input tax from output tax collected by theclothes, tyre tube and match factories using wooden stick. Sugar‐39‐Mills and Wheat Flour Mills shall be provided the refund of 50percent of the amount to be derived as above.193. Existing bank guarantee or cash deposit system has been removedfor the export of excisable goods under self removal system. Fromthis, it is expected to minimize the shortage of current capital in theindustries and help to encourage export.194. Keeping in view of the highest interest of taxpayers and make taxadministration easy, the deadline for the submission of excise taxreturn under self-removal system has been changed to 25th dayinstead of existing 7th day of the month after the transactionoccurred.195. For the purpose of providing relief to the brick industries beingaffected due to unusual situation in the past; exemption shall beprovided on arrears including interest, penalty and late fee up to midJuly 2006, if they pay all excise duty arrears before mid January2008.196. There is a slight increase on the excise duty being levied oncigarette, liquor and cement. Excise duty shall be levied on theimports and domestic production of all types of paints.197. Legal arrangements for administrative procedure have been made soas to complete necessary formalities for submitting tax returns andmaking tax payments through electronic devices within this FiscalYear in order to facilitate the taxpayer.198. Registration fee, for the transaction of land purchase and salewith value exceeding Rs. 25000 has been reduced to 33 percent.199. Arrangement has been made not to impose any fee for theregistration of the mortgage made against the loan provided by cooperativesauthorized by Nepal Rastra Bank to deal on financialtransaction.200. In order to provide relief and encourage conflict-stricken and sickcinema halls, arrangements have been made to provide the rebate inpenalty on the arrear of cinema development fee up to mid July 2006‐40‐if they settle unpaid cinema development fee before Mid January,2008.201. I have provided rebate to Nepali newspapers on fee payable under“Hulak Darta Samachar Patrapatrika”. Nepal Government has highlyacknowledged the contribution made by Frequency ModulationRadios in rural area to disseminating information. Accordingly, therebates on renewal fee and royalty given in the current year will becontinued in the coming year as well. In order to minimize theiroperation cost, I have made the arrangement of providing completerebate on annual renewal fee and 50 percent on royalty. Likewise,rebate being provided to television agencies will also be continued.202. From the revenue policies reforms, and from the adjustments andchanges made in the tax rates and administrative reforms, additionalRs. 4 billion and 61.3 million revenue is expected to be mobilized.However, there will be a net budget deficit of Rs. 20 billion and 500million.203. The net budget deficit of Rs. 20 billion and 500 million equivalenteven after the mobilization of additional revenue as proposed abovewill therefore be financed from domestic borrowing. It is hoped thatdomestic borrowing proposed to be mobilize will have no effectsmacro economic balance and stability. Nor will it be inhibitingprivate sector’s borrowing. Alternatively, in addition to making itactive and effective it will also help contribute to short term and longterm government securities’ related transactions.Hon’ble Speaker,204. At the end Fiscal Year 2007/08, that is, from the implementation ofthe proposed budget, Gross Domestic Product growth rate isestimated to be at 5 percent. Inflation will be around 5 percent.205. Nepal Rastra Bank will announce monetary policy soon in order tomake positive effects on macro economic indicators including pricesituation in the course of proposed budget implementation andenhance sustainably ably country’s international trade and balance ofpayment situation.206. I take this opportunity to express my gratitude to my fellowministers, members of the Interim Legislature - Parliament, FinanceCommittee, Members of the National Planning Commission, and‐41‐leaders of the political parties for their kind cooperation andsuggestions thorough various means during the preparation of thisbudget. Also, I would like to express my appreciation to NepalChamber of Commerce and Industries including representatives ofother industrial and business communities, professional, economistand respected Nepalese sisters and brothers.207. On behalf of the Government of Nepal, I would like to express mysincere appreciation to the friendly countries and donors’communities for their continued assistance in the socio economicdevelopment endeavors. At the same time, I am also confident thatdonors’ communities will continue to extend such support for thedevelopment of the country.Right Hon’ble Speaker,208. Every possible effort have been made to meeting andaccommodating the increasing demand for, and aspirations of themembers of the Interim Legislature-Parliament, political parties,various organizations, and members of the civil society. I regrethowever and also render my sincere apology for not being able toaccommodate all the aspirations due mainly to resources constraintsand current economic situation.209. I have annexed more categorized details about the proposed estimateof revenue and expenditure. Also, progress reviews of the ministrywisepolicies and programmes of the current Fiscal Year budget,progress report of the public enterprises, statements of technical andother assistance, expenditure details under various budget heads andsub-heads, and the source book have been separately submitted.210. Finally, I am confident that implementation of this budget woulddefinitely contribute to poverty reduction and help in makinginvestment-friendly climate in the country. This budget will helpcreating favorable situation to boost the economic activities likesocial and physical infrastructure development, income generation inlocal levels, employment. In addition, I expect that it will provideopportunities to live with dignity and freedom utilizing our ownrights and sovereignty which we all Nepalese seek continuously.Also, I am hopeful that I get all supports from the political parties,and Nepalese sisters and brothers in the implementation of thisbudget. Thank you !Jai Nepal !source: mof.gov.np‐42‐