ECONOMY  

Kathmandu Thursday July 12, 2001 Ashadh 28,  2058.

Objectives, Strategies and Programs
Abstract of Budget estimates for fiscal year 2001/02

The prime objective of this budget is to reduce poverty by strengthening the liberal and market oriented economic reform policies pursued earlier for building a healthy and strong economy. On the one hand, it is imperative to achieve broad-based sustainable higher economic growth rate by best utilizing available resources, while on the other hand, it is also necessary to ensure the access of deprived people to benefits created by such growth, create opportunities for human development and employment, and guarantee the social justice and security. Following policies will be adopted to achieve these objectives of this budget:

Improving the environment for investment, Bringing dynamism in financial sectors, Keeping public expenditures to an affordable limit, Enhancing the access of deprived class to productive resources, Strengthening good governance and decentralization.

The following will be the strategies and programs to meet the desired objectives:

Commercialization of Agriculture and Forestry Sectors, Rehabilitation of Sick Industries, Investment Promotion, Export Promotion, Information Technology (IT), Financial Sector Reform, Capital Market Development, Public Expenditure Management, Resource Mobilization, Reform of Public Enterprise, Social Sector Development, Poverty Alleviation and Employment Promotion, Decentralization, Good Governance and Administrative Reform and Integrated Internal Security and Development Program.

Expenditure Proposals

Now, I would like to submit the estimates of expenditure for the FY 2001/02.

Total expenditure for the next FY 2001/02 is estimated at Rs 99,792.219 million is estimated to be spent in the next FY. Out of this, I have allocated a sum of Rs 49,321.941 million for the regular expenditure and Rs 50,470.278 million for the development expenditure. The allocation as a whole is higher by 19.9 per cent as compared to the revised estimates of the current FY. As for regular and development expenditures it is higher by 13.5 per cent and 26.9 per cent, respectively. When compared to the preliminary estimates of the current FY, total expenditure is higher by 8.9 per cent only.

Regular Expenditure

Of major allocation for regular expenditure, Rs 14,114.0 million is set aside for external and domestic debt servicing, Rs 10,428.8 million for education, Rs 5,794.6 million for police (including both civil and armed), Rs 4,521.2 million for defense and Rs 2,228.0 million for health.

To improve the current situation of peace and security, Nepal Police, Royal Nepal Army and other agencies related with peace and security will be linked up with the development programs and mobilized in an integrated way. I have allocated fund for this purpose.

This August session is aware of the fact that local bodies are the foundation of the multiparty parliamentary democratic system. I have allocated Rs 311.3 million for the election of local bodies to be held next year.

In order to deliver allowances being provided to the elderly citizens, destitute, widows, blind and disabled smoothly through local bodies, provision of lump sum grant to local bodies has been made. A total of Rs 580.0 million has been allocated which is an increase of 9.4 per cent compared to the previous FY.

I have allocated Rs 708.2 million for distribution of voter’s identity card in 40 districts.

Development Expenditure

Of the total allocation, development expenditure accounts for 50.6 per cent. Of this, 37.2 per cent has been allocated for social services, 60.0 per cent for economic services and 2.8 per cent for constitutional bodies, general administration and others.

The amount allocated for social services is higher by 33.8 per cent as compared to the revised estimate of the current FY. The amount allocated is higher by 18.8 per cent for education, 45.1 per cent for health, 34.4 per cent for drinking water and 33.1 per cent for local development.

Likewise, as for economic services, the allocated amount is an increase by 27.9 per cent compared to the revised estimates of the current FY. Of this, it is higher by 12.8 per cent for transport, by 17.4 per cent for electricity and by 28.8 per cent for agriculture, irrigation, land reform and survey, and forestry put together.

I have provisioned Rs 90.6 million for the Karnali Zone Special Agriculture Development Program. Similarly, I have allocated Rs 91.0 million for 21 districts without access or having partial access to transport facility where special agricultural production program is launched and also to ensure timely delivery of improved seeds.

I have allocated Rs 148.7 million to provide continuity to commercial goat farming and sheep substitution being carried out in 22 districts along with special program for commercial poultry farming in 9 districts of Far Western Region. To implement sericulture in ten districts, a sum of Rs 51.7 million has been allocated.

For the market development of agriculture products being supplied in the Kathmandu Valley in general and for developing systematic markets in northern, eastern and southern entry points of Kathmandu in particular, a total of Rs 101.2 million has been allocated. In addition, necessary amount has been allocated for the development of agriculture market in appropriate rural areas.

For small irrigation special program, I have allocated Rs 70.0 million. In order to extend additional irrigation facility through Agriculture Development Project, Janakpur I have provisioned Rs 65.5 million.

I have allocated Rs 21.0 million to be channeled through National Dairy Development Board in order to develop milk processing factory in Kohalpur and to install milk processing centers in five feasible locations.

I have provisioned a total of Rs 3,870.5 million for agriculture sector which is higher by 47.0 per cent compared to the revised expenditure estimates of the current FY.

A total of Rs 1,520.5 million has been allocated for Second Irrigation Sector Program being carried out in 35 districts of Eastern and Central Development Regions, for Nepal Irrigation Sector Program being carried out in 40 districts of Central and Mid-Western Development Regions. Similarly, the program will also include Irrigation Development Program being implemented in four districts (Banke, Surkhet, Dailekh and Kalikot) of Mid-Western Development Region. A sum of Rs 754.8 million and Rs 516.8 million has been allocated for Sunsari-Morang Irrigation Project (Third) and Bagmati Irrigation Project, respectively.

To install shallow and deep tube-well, in addition to the surface irrigation, as per the demand of farmer in the Terai region (based on feasibility), a total of Rs 170.6 million has been allocated. Likewise, Rs 201.5 million has been allocated for Praganna Irrigation Project in Dang District. For river training and, repair and maintenance of completed projects Rs 361.4 million and Rs 230.0 million has been set aside, respectively.

Similarly, I have also allocated funds for Sor  ha-Chhattis Mauja Canal, Duduwa Irrigation Project, Kankai Irrigation Project, Mallaj Irrigation Project and Chadubandh Irrigation Project.

Total allocation made for Irrigation Sector is Rs 4897.2 million which is 20.4 per cent more than the revised expenditure estimate for the previous year.

A total of Rs 258.0 million has been allocated for forestry management work plan, forest protection and tree improvement program, as well as the programs which help control poverty in rural areas such as community forestry, lease-hold forestry and livelihood forestry programs.

I have set aside necessary funds for study, research and development of medicinal herbs and plants under threat. Under this, plants of these herbs will be grown and distributed through tissue culture and technology will be developed for commercial farming of such medicinal herbs. I have also allocated funds for the establishment of Herbs Development Center. I have allocated a total amount of Rs 780.2 million for the forest sector.

The program of treating of hazardous effluent emitted from industries, including those in Hetauda Industrial District, and make it environment friendly will be continued. I have made provision of Rs 401.0 million for this purpose.

I have allocated funds needed for entrepreneurship development through training and skill enhancement as well as for the programs of creating self-employment opportunities.

I have allocated Rs 60.0 million for infrastructure development for the establishment of export processing zones in the dry ports of Birgunj and Biratnagar and Bhairahawa.

The total amount set aside for industry, commerce and supplies sector is Rs 1266.6 million.

A sum of Rs 169.3 million has been proposed for the installation of 90,856 telephone lines in 50 different places of five development regions. In addition, exchanges with the capacity of 150 lines each will be established in the following areas. Phikkal, Surunga, Karsiya, Hile, Hanuman Nagar, Lukla, Golbazar, and Chainpur of Eastern Development Region, Matihani, Jiri, Pokhriya, Chandranigahapur, Rajpur, Pharhadawa and Geetanagar of Central Development Region. In the like manner, Pumdi Bhumdi, Galyang Bazar, Chanauta, Aruna Khola, and Majhuwa of Western Development Region, Khajura, Taratal and Narayanpur of Mid-Western Development Region and Bramhadev Mandi of Far-Western Development Region.

Rs 70.9 million has been appropriated to install at least two telephone lines in each 534 Village Development Committees of Eastern Development Region within coming two years under the Telecommunication Sector Reform Project

In the coming FY, seven transmission centers will be set up in Parbat, Gulmi Sankhuwasabha, Doti, Achham, Dadeldhura, and Baitadi in order to expand the coverage of Nepal Television all over the country. I have allocated Rs 40.0 million for this purpose.

To transmit the radio program to remote parts of the country, I have made provision of Rs 36.0 million for opening up of new FM Stations and erection of additional studio building. In addition to this, I have allocated necessary funds for construction of the Press Council building in the Communication Village and Media Development Trust.

Rs 453.2 million has been allocated for the communication sector.

Besides the existing transport network of Mahendra Highway, the government is endeavoring to develop two alternative highways linking east and west. Under this endeavor, highway will be expanded to link mid-hill districts along with developing postal highways into a major highway. The alignment of such highways will be based on the existing roads under construction and planned east west roads and the south to the north highways. For this, feasibility studies and design estimates will be initiated.

According to the policy of building roads connecting the district headquarters, construction of link roads to the district headquarters of Bajhang, Achham, Rukum, Kalikot, and Jajarkot will be completed in the next FY. I have allocated necessary funds for this purpose.

I have allocated a total amount of Rs 471.1 for the construction of Mahakali Highway (Satabanjh-Baitadi- Darchula Sector), Jaya Prithivi Bahadur Singh Road (Khodpe- Bajhang), Sanfebagar-Martadi Road, Sanfebagar-Mangalsen Road, Tanakpur Link Road, Dasaratha Chanda Road (Baitadi- Jhulaghat), Sahajpur- Dipayal, Ugratara- Meloili and Mahendranagar- Budhar in the Far Western Development Region.

I have allocated a total of Rs 659.5 million for the construction of the Karnali Highway (Surkhet-Jumla Section), Karnali-Manma Highway, Chhinchu-Jajarkot Highway, Rapti Highway, Holeri-Chunwang, Devsthal-Kaindadaa-Chaurjahari-Dolpa, Surkhet- Ranimatta-Dailekh,, Amelia-Tulsipur-Salyan and Chakachake-Libang in the Mid Western Development Region.

I have allocated Rs 347.5 million for the Western Development Region for the construction of Rudrabeni-Burtibang-Dhorpatan Road, Baglung-Burtibang-Musikot Road, Baglung-Beni- Jomsom road, Beshisahar-Chame Section, Drabyashah Road, Harthok-Ridi-Tamghas Road and upgrading up the improve the Gorusinghe-Sandhikharka Road.

Similarly, I have made provision of Rs 989.1 million for the construction of B. P. Koirala Highway (Banepa-Sindhuli Section), Kalu Pande Road, Trishuli-Rasuwagadhi-Syaphrubeshi Road, Galchhi-Debighat Section, Kanti Highway, maintenance of Tribhuvan Highway, Puspalal Road, Namobuddha-Lubhu Road and repair and maintenance of the Kodari Highway and upgrading of the Barhabise-Kodari section in the Central Development Region.

For the construction of the Mechi Highway (Phidim-Taplejung section), Sagarmatha Highway (Gaighat-Diktel section), Katari-Okhaldhunga (including bridges), Naradmuni Thulung Road (Hile-Leguaghat-Bhojpur) and Basantapur-Chainpur-Khadbari Road, I have allocated a total amount of Rs 285.0 million for the Eastern Development Region.

I have allocated Rs 70.0 million for upgrading and extension of inner city roads in Kathmandu. Under this program, the road from east side of Ratna Park to Bhadrakali will be extended to 5 lane, an alternative road from Bhadrakali to Maitighar will be constructed, and fencing of Tundikhel will be carried out. Similarly, I have allocated Rs 20.0 million for the construction of Bishnumati link road as a part of the inner ring road within Kathmandu valley.

I have provisioned Rs 490.0 million for repair and maintenance roads. A Road Improvement Fund Act will be enacted to establish a Road Fund for maintaining sustainability of the road infrastructure and for ensuring availability of sufficient fund for repairs and maintenance of roads in future.

A total of Rs 956.5 million for the construction of large bridges, suspension and other small bridges has been earmarked including a sum of Rs 40.0 million for Rapti bridge (Dang), a sum of Rs 25.0 million for Sunkoshi Bridge (Kavre).

I have allocated Rs 100.0 million and Rs 210.0 million for postal roads and other link roads, respectively.

I have allocated Rs 471.50 million for capacity expansion and physical improvement of Tribhuvan International Airport.

For transportation sector, I have made provision of Rs 6366.7 million inclusive of the projects mentioned above. This is 12.8 per cent higher than the last year’s revised expenditure estimate.

Construction of the Kaligandaki ‘A’ hydroelectricity project will be completed and the plant will be commissioned in the coming FY. I have allocated Rs 2864.3 million for the final phase of construction of the project. Similarly, I have allocated Rs 2575.8 million for Middle Marsyangdi hydroelectricity project with an installed capacity of 70 MW.

I have made provision of Rs 203.3 million for electricity transmission line, Rs 1814.2 million for electrification program including rural electrification, and Rs 95.8 million for survey and feasibility studies.

I have proposed a total expenditure of Rs 9299.8 million for electricity sector which is 17.4 per cent higher than the revised expenditure figure for the previous year.

In order to revitalize the tourism sector from the present state of slackness, an intensive tourism promotion drive and basic service development program will be launched. I have allocated Rs 30.0 million on the top of the resources to be made available by Nepal Tourism Board.

I have allocated Rs 402.6 million for tourism sector.

A sum of Rs 115.0 million has been allocated for the construction of electric crematorium including the physical infrastructure development in Pashupatinath area.

The total of Rs 40.0 million has been allocated for the activities including rehabilitation of Mayadevi Temple under Lumbini Master Plan. Similarly, necessary amount has been allocated for the development of Devghat area.

Necessary amount has been allocated for the promotion and development of language, arts, literature, music etc.

A total of Rs 366.1 million has been allocated for the youth, sports and culture.

A sum of Rs 120.0 million has been allocated for the construction of Information Technology Park in Banepa. The amount has been allocated for the establishment of Venture Capital Fund and to train approximately 20 thousand persons on IT sector at lower, medium and higher-levels in the coming FY.

Necessary amount has been arranged for the eradication of child labor and to impart various skill development training to 5,365 persons from Skill Development Training Center, Vocational Training Center, Mobile Training and Women Skill Development Training Center.

The amount of Rs 165.2 million has been allocated to the development of labor sector.

A sum of Rs 60.9 million has been allocated for the eradication of illiteracy within two years at least in five districts out of twenty districts covered by the National Literacy Campaign Program.

Necessary amount has been allocated to conduct technical education and vocational training as a model in 15 Secondary Schools of the country and to make it employment oriented.

The amount of Rs 1,277.0 million has been allocated for the expansion of Basic and Primary Education Program from current 60 districts to 75 districts of the country to make easy enrolment of children in Primary Schools.

The provision of scholarship for the children of martyr’s from Primary up to Higher-level study will be continued.

The total amount of Rs 3,503.2 million has been allocated under development expenditure for the education sector, which is an increase by 18.8 per cent over the revised estimate of the current FY.

Necessary budget has been allocated to establish the Primary Health Center in each of the remaining 25 constituencies in line with the target of establishing such centers in all 205 constituencies of the country by the coming FY. Also there is program to upgrade the Primary Health Centers into 15 beds Hospital in those districts where Integrated Internal Security and Development Programs are under implementation.

Necessary amount has been allocated for the expansion of zonal mental hospitals of Koshi, Janakpur and Seti. Adequate funds have been appropriated to add 40 beds, 50 beds, 51 beds and 64 beds in Maternity Hospital, Kanti Children Hospital, Gangalal Heart Center in Kathmandu Valley and B. P. Koirala Cancer Hospital in Bharatpur respectively. A total of Rs 986.7 million has been allocated for hospitals including construction of an emergency ward and Trauma Center in Bir Hospital.

Requisite amount has been allocated to extend the maternity ward in the Primary Health Centers in each of the 205 parliamentary constituencies with the objective of reducing the maternal mortality rate.

A sum of Rs 3,007.2 million has been allocated as development expenditures for the health sector which is higher by 45.1 per cent in comparison of revised expenditure estimate.

Rs 551.9 million has been allocated for drinking water scheme and income generating activities to be conducted through Rural Water Supply and Sanitation Fund by raising income of rural women by reducing their time spend on fetching drinking water.

Rs 188.6 million has been allocated to provide continuity to survey and construction of small town drinking water projects in small 12 towns as well as Phikkal, Trijuga, Prasa, Ratna Nagar, Bandipur, Lekhanath, Birendranagar and Atteria.

Rs 893.0 million has been allocated for 1,163 on going projects at district level.

Drinking water supply will be augmented within Kathmandu Valley through the improvement in existing drinking water system and rehabilitation program. A total of Rs 300.0 million has been allocated for this purpose.

Rs 1,427.0 million has been allocated for the preparation of final design report of Melamchi river diversion, construction of Melamchi Pulbazar-Timure section of main entrance road, construction of adit entrance road, final design estimate and construction of water treatment plant under Melamchi Drinking Water Project.

Rs 3992.8 million has been allocated as development expenditure under drinking water sector which is 34.4 per cent higher in comparison to the revised expenditure estimate of current FY.

The block grant to local bodies (including Kathmandu Valley Mapping Project) has been increased to Rs 3056.5 million to institutionalize the local development program. The amount being provided to honorable members of the Parliament has been continued.

Rs 500.0 million has been allocated for the construction of rural and agriculture roads and improvement program by integrating programs aimed at providing road access in rural areas.

Rs 141.6 million has been allocated to implement Remote Area Development Program in 22 districts and Special Area Development Program in 25 districts by integrating these two programs so as to implement in an efficient and effective manner of the country under single institution.

Rs 91.4 million has been allocated to manage solid wastes of the Kathmandu Valley and for the construction of landfill site.

Rs 353.0 million has been allocated to conduct the development activities for food shortage in 27 food deficit mountainous districts of Mid and Far Western Region under Work for Food Program.

Total development expenditure of Rs 6,406.1 million has been allocated in the local development sector which is higher by 33.1 per cent in comparison to revised estimated expenditure of current FY.

I have allocated Rs 206.3 million for the Poverty Alleviation Fund.

I have allocated Rs 261.1 million to women, child and social welfare sector.

Necessary amount has been appropriated to the Commission for Investigation of Abuse of Authority, Election Commission, Office of Auditor General, Public Service Commission and other constitutional bodies to enhance their physical facilities and efficiency.

Voluntary Retirement Scheme will be continued in next FY for right sizing the bureaucracy and for making civil service efficient and effective. I have made necessary allocations for this.

Rs 600 million has been allocated for the implementation of development activities under the Integrated Internal Security and Development Program.

I have allocated necessary budget for the strengthening of revenue administration.

Of the total allocation of Rs 99,792.2 million of the above mentioned regular and development program Rs 56,546.2 million will be met from the existing source of revenues Rs 14,120.8 million will be met from the foreign grants and Rs 16,420.1 million from the foreign loan, living a deficit of Rs 12,705.1 million.

Revenue Proposal

Now, I would like to present revenue proposals.

While proposing the tax proposals for the next FY, I have focussed my attention to the improvements needed for creating investment friendly environment, bringing all economic activities under income tax network and establishment of social justice and development of a flexible and reliable tax structure.

Updating revenue related laws, improvement in the existing operational process of VAT on the basis of past experiences and effective measures to control revenue leakage are the other areas of focus.

Administrative capabilities will be geared up and additional measures adopted in order to bring more industrialists, traders and entrepreneurs who fall under VAT domain, but are yet to be brought under its fold. In the context of broadening the VAT network, measures to register all the traders dealing with vehicles, motor-bikes, television, air-conditioner, electronic equipment, spare parts of vehicles, computers, color-lab, telephone, cellular phone, tiles, marble slabs, hardware under the VAT regime.

A Bill has been submitted to the current session of the Parliament to comprehend all income-earning activities and improve income tax related laws for making the tax system more transparent, simple and hassles free. Beginning from 16 July 2001, existing district level VAT as well as Tax Offices will be amalgamated into district Inland Revenue Office.

I have made a proposal to require all tax paying traders having transactions above Rs 1.0 million to issue bill of sales mandatory with all details of their registration and date of sale to appear on every such bill.

As against the existing practice of registering businesses separately with the VAT and Tax Office, I have made an arrangement for such registration in one office either at the place the business headquarters is located or the place concerned business is located.

In order to make customs evaluation practice based on transaction price more accurate and realistic and thereby make customs administration effective, arrangement will be made for exchange of inter-customs information, extension of Automated System for Customs Data (ASYCUDA) and periodic monitoring of international transaction prices of imported goods.

The central monitoring unit at the Ministry of Finance will be linked with the Information Management Systems of its departments and thus, the monitoring practices will be made more manageable and effective. The Department of Revenue Investigation will be strengthened to make it more active in identifying and curbing revenue leakage. A Bill to establish revenue cadre will also be submitted to the Parliament. The present practice of patrolling major customs points introduced in the current FY will eventually be replaced by such cadre.

In order to make commission agency service more transparent and bring it under the tax net, the concerned government agency will require to submit to the Department of Inland Revenue the details of the contracts for the construction, procurement of goods and services, consultancy and local agents for the projects financed with domestic or foreign sources within one month of such contracts. Delinquent local agents, are allowed to submit their income tax returns by 16 October 2001. Fines so far falling due will be waived for those who clear their dues by the specified date. One hundred per cent fine will be charged to those defaulters, who do not submit the statement on specified time and their businesses will be suspended.

To start honoring the taxpayers, the Department of Inland Revenue will begin issuing identification cards at this time, to the top ten income tax payers as a mark of distinction and to make them eligible for the use of Commercially Important Persons (CIP) waiting lounge at the Tribhuvan International Airport whenever such persons are travelling by air via this airport.

I have made arrangement for local and foreign non-government organizations to compulsorily deduct tax on house-rent, tax on remuneration and other taxable income at source, and get Tax Clearance Certificate after depositing them in the respective tax office. I have also made arrangements under which transactions of those organizations who do not get such certificate will be suspended, their imports prohibited, extension of agreements with such organizations will not be entertained and their registration will be cancelled..

Now, I will present proposals on indirect taxes.

Customs duties have been slightly changed in line with Nepal’s effort to acquire membership in the World Trade Organization, for providing minimum protection for rehabilitation of sick industries and also to adjust Harmonized System, with 2002 version of the World Customs Organization.

The ASYCUDA system applied in Bhairahawa, Birgunj, Biratnagar and Tribhuvan International Airport customs offices has made customs evaluation and checking system easier, transparent and effective. In view of this, this system will be enforced in other customs points as well.

For providing effective protection to industries of milk and milk products, mustard oil, cement and textiles, I have raised tariff on imports of such products.

A 50 per cent rebate on tariff has been provided on cotton yarn imported by textile industries. If textile product of such industries is procured by apparel industries and their output (in the form of readymade garments) exported, facilities of bonded warehouse will be provided to the cotton yarn so imported.

One per cent customs duty will be levied on the importation of machinery and spare parts for rehabilitation of sick industries at the recommendation of the Sick Industries Recommendation Committee.

Tariff concession is provided on capital goods imported by the film producers, by companies dealing with hydropower generation, transmission and distribution, poultry business, tea industry, horticulture and floriculture industries.

In order to promote export of Pasmina, I have made arrangement for 80 per cent tariff rebate on raw wool imported by Pasmina industry.

I have raised tariff on import of video parts, video camera, wristwatch, spectacles, marble, granites, album and posters.

I have raised export tariff applicable to processed oil, vegetable ghee, plastic products and copper wire.

It is estimated that an additional revenue of Rs 200.7 million will be mobilized as a result of the proposed changes in tariff rates and strengthening of administration after adjusting recently provisioned duty refund.

Inland Revenue Department will return a certain per centage of paid tax amount to the buyer to encourage to seek invoice from the VAT registered seller, the purchase of VAT related goods and service of more than Rs 25,000.00 for commercial purpose should be executed only with VAT registered tax payers and the invoices should be taken and kept themselves in the route.

I have made the arrangement that Internal Revenue Office can buy the goods itself or make it buy to other in case of under invoicing. Rs 2,000.00 or cent-per cent of evaded tax amount, whichever is higher, would be fined in such case. Government offices will have to buy from the VAT registered seller in case of goods and services costing more than Rs 25,000.00 at a time.

I have made the arrangement for those taxpayers who have not submitted tax return and have not paid tax amount up to FY 1999/00 and who will submit the tax return, pay tax, additional charge and interest amount by December 10, 2001, will be waived additional charges, interest and late penalties. I have reduced the rate of additional charges of 10 per cent in VAT act to 5 per cent.

The due date of paying the amount of VAT collected by hotels and travel agencies have been increased from one month to two months.

The excise duties have been increased in health hazard commodities like cigarette, beer, wine and alcohol. Likewise, the provision of warning words as ‘Injurious to Health’ has been made mandatory to appear in the packets of tobacco and related commodities.

Production of plastic bags of less than 20 microns will not be allowed considering its negative impact on environment.

Excise duty of Rs 5.0 per sack has been levied on locally produced as well as imported cement to make some contributions in internal revenue from the construction sector.

An additional revenue of Rs 1,334.40 is estimated to be mobilized from the changes in the tax rates of VAT, excise and vehicle tax as well as changes in the tax base and administrative reforms.

Now I want to propose the direct tax related proposal.

I have made the arrangement that the importers not registered with income or VAT, have to pay advance income tax at the rate of 2.5 per cent of customs price of such imports as an advance income tax at the customs point. Exporters of basic agriculture products also have to pay 2.5 per cent advance income tax at customs point.

I have made a proposal of imposing 10 per cent Capital Gain Tax on the sale of Securities and Shares on the basis of initial price of 1st day of FY 2001/02. The Nepal Stock Exchange Limited will collect this tax at source during the transaction.

Temporary-residents involved in satellite business are required to pay 5 per cent advance tax instead of existing 15 per cent.

An amount of Rs 10,000 or 0.5 per cent of taxable income, whichever is higher, will be charged as a penalty to the taxpayers who have not submitted tax return as prescribed by Income Tax Act, 2031. Mandatory provisions have been made to maintain books and accounts for professionals viz. doctor, engineer, advocate, consultant, auditor and so on. Those professionals have to have their accounts audited compulsorily, if their annual transactions exceed Rs 1.0 million.

If the taxpayers who have filed appeal on tax assessment, pay 75 per cent of disputed tax and penalty and withdraw appeal within March 13, 2002, remaining or 25 per cent tax, penalty or fee will be rebated.

Tax defaulters, who are liable to pay income tax in accordance with the Income Tax Act, 2031, shall be given amnesty and no inquiry will be made on their source of income and property earned before mid July 2000, provided they declare the self assessment value of their property at the price of July 16, 2001 and pay 10 per cent tax. Non compliant tax defaulters are subject to detailed investigation any time and confiscation of such property.

Registration fee to be levied on property transfer during family partition is exempted up to the value of Rs 50,000, and beyond this amount progressive rate of registration fee has been proposed.

Additional revenue of Rs 440.0 million is estimated to be mobilized from the proposed changes in direct taxes and administrative reforms.

I have proposed a special fee of one per cent of import value at the customs point and one per cent Special Tax on actual income of tax payers accordingly in order to meet the increasing need of additional expenditure for providing internal security and for the security of industry and commerce to be provided by the government. No such special fee shall be levied on that have tariff rates of less than 5 per cent. I hope all will take it as a temporary ad hoc measure.

I have made an arrangement to waive the Telecommunication Service Charge in order to encourage paging service.

Additional revenue of Rs 1,730.0 million is estimated to be collected from the proposed changes of non- tax revenue and its reforms.

The other rates of taxes have been kept unchanged except changes made on the rates of direct and indirect taxes through this budget. The proposed changes made in the customs tariffs, export service fee, agriculture reform fee, excise duties, levies on tobacco and liquors, liquor control service fee, special fee and house and land registration fee, services fee, transaction suspension fees will be made effective from today and other revenue related proposals will come into effect from July 16, 2001.

Apart from the revenues to be realized from the existing sources, there will be an additional revenue mobilization of Rs 3705.1 million from the changes in the rates of tax and non-tax revenues and administrative reform. The net deficit will stand at Rs 9,000.0 million.

The deficit of Rs 9,000.0 million, which I mentioned above on the basis of expenditure estimation, is proposed to be met through internal borrowings.

Towards the end of my presentation, I must reiterate that a consensus of all the political parties has become all the more significant to enable people at large to participate in the monumental task of economic restructuring in an environment of peace and free from all kinds of fears. Participation of the people is a condition precedent, be it a task of rural infrastructure building or that of poverty alleviation. I, therefore, do solicit active support of all concerned for the policies and programs enunciated under this budget.

For the economic restructuring to take its root, unflinching and time enduring efforts are needed. In this context, I see it clearly that the private sector should take a pivotal role in such task for which an enabling environment is necessary. This is the approach underlying the agenda of policy and institutional changes I have proposed. I believe that progress of economic reforms will work for a healthy and reliable economic structure to emerge. I expect that the economy will grow at 6 per cent during the next year. With the money supply limited to 12 per cent, inflation rate is expected to be in the range of 5 per cent. The additional effort to mobilize revenue resources is estimated to result in a ratio of revenue to GDP at 13.26 per cent.

Actual income and expenditure for FY 1999/00, revised estimates of income and expenditure for FY 2000/01 and estimates of income and expenditure for the FY 2001/02 are presented in the Annexes.

A brief description of technical assistance made available to His Majesty’s Government by friendly countries and donor agencies as well as International Non-Governmental Organizations has been presented separately.

I would like to express my gratitude to Honorable members of parliament, distinguished representatives of various organizations, such as, industries, commerce and tourism, intellectuals, teachers, professors, civil servants and representatives of civil society for their support in preparing this budget. At this moment, I would also like to extend thanks on behalf of His Majesty’s Government of Nepal, to friendly countries, donor agencies and their representatives for their continued support in the socio-economic development of Nepal.

Notwithstanding the fact that we were all prepared for the budget presentation to the Parliament in the month of May as was done for the first time last year, the successive events that intervened during the month did not allow us to keep that time-table. I would, however, like to assure this session of the Parliament that we will restore that practice of budget presentation next year.

(An unofficial rendering of the budget estimates for fiscal year 2001/02.)