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Kathmandu Tuesday May 22, 2001 Jestha 09, 2058.
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Govt in
favour, ADB against STW subsidy
By Bhaskar Sharma
KATHMANDU, May 21 - The government and the Asian
Development Bank (ADB), one of the major multilateral lending agencies to Nepal, have
agreed to wait for the next two months before taking any concrete decision on the proposed
reintroduction of subsidy in Shallow Tube Wells (STWs).
According to government sources, the ADB, at a meeting
attended by the two sides at the Finance Ministry last Thursday, outright rejected to
support the government’s plan to reintroduce subsidy in STWs that was scrapped last
July. However, following a strong stand taken by the government at the meeting, a
tentative agreement was reached to study the issue in detail for the next two months, he
said.
Even Dr Richard Vokes, Resident Representative of the ADB,
talking to The Kathmandu Post Monday, conceded that both the government and the ADB will
study in detail the subsidy issue. "The study will take at least 6-8 weeks," he
said.
The understanding to further study the impact of subsidy
reintroduction was reached after both the government and the ADB stuck to their grounds.
While the government is in favour of resuming subsidy in STWs, the ADB is against it.
Though the two sides have sat for a series of meetings in
the past few weeks over the subsidy issue, it was only in the last meeting that the
government defended the subsidy regime strongly, according to the source. The
government’s arguments were based on a report prepared by the National Planning
Commission (NPC) recently, said the source.
According to the report, which was made available to The
Kathmandu Post, lack of subsidy has seriously dampened the demand for ground water
systems, causing deceleration in Agriculture Gross Domestic Product (AGDP) growth which is
a prerequisite for poverty reduction in a sustainable manner.
In addition, the report also argues that the performance of
the past subsidy regime cannot be termed as a gross failure since almost four thousand
STWs were being installed each year. Though there were inefficiencies, the report says,
the negative aspects could have easily been corrected by introducing a flat rate of
subsidy (per unit of the system by technology).
It was the ADB that had successfully coaxed the government
to scrap subsidy in micro irrigation schemes during the signing of the Second Program
Loan, under the 20-year Agriculture Perspective Plan (APP). The Bank had even threatened
to withdraw its agriculture loan if the government moved forward with its subsidy ideas.
The ADB, prior to subsidy removal, had stressed that
inadequate allocation of subsidy was hampering the supply STWs. It argued that removal of
subsidy, resulting in greater private participation, would ensure higher demand of the
micro irrigation scheme through higher supply.
However, against the ADB’s expectations, the
installation of STWs, in the post subsidy removal period, declined depressingly, prompting
the government to rethink over its earlier decision. Only 23 STWs (7 under process till
April, 2001) were installed out of the targeted 4300 STWs this year, while only 1500 STWs
were installed last year, out of the proposed 8800.
The report, among others, stresses that the STWs is the
only viable alternative for the successful implementation of the Plan. Decline in the
installation of STWs after the revocation of subsidy comes as a major damper to the
mega-agriculture plan, which aims to revamp the stagnant agriculture sector and targets to
irrigate 612,000 hectares of land during the plan period.
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