Delay in sanctioning loans hampering CGISP effectiveness

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KATHMANDU, Sept 30 - Experts present at an evaluation programme of the Community Groundwater Irrigation Sector Project (CGISP) have stressed upon the need to shorten the time taken to sanction loans for farmers.

Addressing the programme organised by Development Finance Department of the Nepal Rastra Bank (NRB) here today, Krishna Pradhan, Executive Officer at the NRB said, "The present findings show that it takes a minimum of 43 days for a loan to get sanctioned."

According to the present system, the farmers first approach the Participating Financial Institutions (PFIs) for the loans. The PFIs in turn asks the NRB branch. After the necessary investigations and preliminary survey, the NRB branch offices coordinates with its headquarter and asks for the loan from the Rural Self Reliance Fund (RSRF). The loan is finally approved and disbursed.

There is a need to shorten the period so that the targeted farmers can be more benefited, he added. The CGISP is a US $ 42 million seven-year project that is set to complete by December 2004. The CGISP is financed by Asian Development Bank (ADB), Manila.

The project targets to install 15000 Shallow Tube Wells to irrigate approximately 60,000 hectares in 12 districts of the Terai region. Farmers seeking to install the shallow tube wells seek loans from the Nepal Rastra Bank through the PFIs. Currently Nepal Bank Limited and Sahara Cooperatives of Jhapa are the only PFIs recognised by the central bank.

Addressing the programme Aqmal Siddhique, a high level official from ADB headquarters in Manila, pointed out the problems hampering the successful implementation of the CGISP.

"The important issues are drawing of credits from the imprest account, inadequate physical capacity of the PFIs and procedural problems related with the approval of new PFIs," he added.

Pradhan, presenting a paper on progress report of the project, informed that 24 Village Development Committees from four districts have been benefited in last fiscal year. He said that Rs 3.3 million was disbursed to install 91 tube wells in the area.

Gopal Kafle, Director at the NRB, also presenting a paper on evaluation of CGISP, said, "The lengthy process of depositing sanctioned loan in the account of RSRF has created problems."

"The loan granting period should be shortened and simplified by revising the existing procedural aspects," he added.

The loan is provided to the farmers without any collateral. Further no subsidy is provided to the farmers on installing the shallow tube wells. However, the ADB provides training and other technical assistance to the farmers.

Speaking on the same occasion, Bijayanath Bhattarai, Deputy Governor of the NRB, expressed hope that the project would meet its target before the project life comes to an end. "Continuous evaluation of the project would increase the productivity and enhance the efficiency of the PFIs," he said.

Jitendra Ghimire, Deputy Director General at the Department of Irrigation and Narayan Prasad Poudel, Deputy Director at the NRB, also spoke on the occasion.

‘Treaty’s spirit should be maintained’

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KATHMANDU, Sept 30 - Federation of Nepalese Chambers of Commerce and Industry (FNCCI) has reiterated that the Nepal-India Trade Treaty, first signed in 1991 and modified in 1996, that is set to expire this December, should be extended without changing its basic spirit.

The call for maintaining the basic spirit comes at a time when India is demanding review and revision in certain provisions of the Treaty. The Indian demands for change in the Treaty had come recently amidst claims that some Nepali items had invited the surge clause in the Treaty.

A Nepali delegation carried out talks last Friday and Saturday to settle the issues of contention presently plaguing the Nepal-India bilateral trade. However, no substantive understanding was reached during the talks.

FNCCI, at a press meet organized here today, highlighted the recommendations made by the Joint Economic Council (JEC) of the FNCCI and the Confederation of Indian Industries (CII). The recommendations had been submitted to both the Nepali and the Indian governments recently.

Among the major recommendations include allowing the JEC to define surge and rules of origin. India had raised both the issues and had urged upon the need to define them. The JEC has recommended that it be allowed to define the two topics as per the understanding reached between CII and FNCCI.

"If the private sectors of the two sides have reached an understanding, then there is no reason why the two governments should not act accordingly. The recommendations of the JEC must be taken into account," said FNCCI officials today.

The JEC had also recommended imposing a maximum of 30 per cent value addition slab on Nepali exportable goods. However, the value addition slab for some goods, as per JEC’s recommendations, should be increased phasewise.

The Indian government so far has, however, turned a deaf year to the recommendations of the JEC. FNCCI officials opined that the present Indian stand may be prompted due to the upcoming elections in India.

Since India faces election in the next few months, it is likely that the central government is under tremendous pressure forcing it to act as the state governments and some business establishments wants. Asked on if the issue is more political than trade, one of the officials said, "It may be."

Among the other recommendations of the JEC, as disclosed by the FNCCI today, includes early establishment of laboratory testing facilities at various places, waiving of state duties and taxes on various products and the scrapping of anti-dumping duties on zinc oxide, among others.

Ravi Bhakta Shrestha, FNCCI President, Prabhakar SJB Rana, Co-Chairman of JEC, Diwakar Golchha, Coordinator of JEC, Senior Advisor Padma Jyoti, and Rajendra Khetan, JEC member, among others, were present at the press meet today.

Oriental Insurance to introduce new policy

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KATHMANDU, Sept 30 - The Oriental Insurance Company Limited, a non-life insurance company, is going to introduce ‘Nagarik Suraksha’ - citizens’ security - policy, with a view to provide more facilities to the insured. This is exclusively new policy to be introduced shortly in Nepal after getting an approval of Insurance Board.

The citizen security policy is a combination of Personal Accident and Hospitalization insurance with a graded sum insured limits and discount facilities for groups and families.

B D Banerjee, Chairman-cum-Managing Director of The oriental Insurance Company Limited, India, speaking at a press meet here today said that they are going to introduce the Nagarik Suraksha policy following the success of the policy in India.

The company is in operation in Nepal for the past 44 years and has been providing service across the kingdom through its 12 operating offices at different parts of the country.

The company is the largest private insurance company and second largest non-life insurance company with a total premium of Rs 160.1 million, total incurred claim Rs 84.2 million and a total investment of Rs 260.1 million.

According to a press release distributed during the press meet, the company settled more than 790 claims and issued 7,263 policies last year.

Banerjee said that the company has been awarded an "AAA" by Credit Rating Investment Security India Limited (CRISIL), a number one credit rating agency in India.

Rakesh Kumar, Manager of The Oriental Insurance Company Limited said that the company has employed 68 Nepali and has provided employment to another 100 people indirectly through its agencies and it is the largest tax payer among the non-life insurance companies in Nepal.

1991 Co-operatives Act set for amendment

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KATHMANDU, Sept 30 - At a time when fraudulent acts and absconding of proprietors of co-operatives are on the rise, experts have pointed that provisions to check such malpractice should be incorporated in the second amendment to the Co-operatives Act, 1991.

The second amendment to the Co-operatives Act 1991 was proposed by the Co-operative Board, which forwarded the proposals to the Ministry of Agriculture and Co-operatives.

However, the proposal is presently at the Ministry of Law, Justice and Parliamentary Affairs. The proposal would be forwarded to the Lower House for the approval, said Khadga Bahadur Shrestha, President of Central Consumers Co-operative Union Nepal (CCCUN).

He was speaking at a discussion programme on "Income tax levied on the co-operatives’ and the 2nd amendment of the Co-operatives Act 1991," organised by the CCCUN here today.

Shrestha also said that since the Co-operatives Board has not taken the suggestions of co-operatives it is likely that the amended Act would have practical shortcomings.

The gathering today suggested that many provision-wise reforms need be inculcated in the amended Act. Among others, tax exemption to the co-operatives must be provisioned and co-operatives found swindling or absconding with deposits must be stringently dealt with. The provisions for punishment in the current Act are very weak and insufficient.

Furthermore, participants suggested that the Kathmandu valley be considered as a single unit and Registrars finalise the registration procedure for new co-operatives strictly within 35 days.

A committee including representatives from various co-operatives was also formed in order to pressurise the government for including their suggestions while amending the Act.

Economy, finance and market

By Supa Upadhyay

Domestic money market:

The Average Weighted Discount Rate (AWDR) of 91-day Treasury Bills (TBs) further rose by 36 basis points to 4.22 percent compared to 3.87 percent of previous week. The rupee was traded higher at NPR 98.96 and lower at NPR 98.95 for 91-day TBs. The NRB had received 18 bids worth NPR 1350 million against the notified amount NPR 750 million. The Repo rate for member banks and institutions have been quoted at 4.7219 for the trading days 18 to 24 September 2001. The outright purchase facility for bank, institutions and other on TBs is also available. In the regular weekly auction, the NRB is going to issue 91-day TBs worth NPR 600 million on September 25, 2001.

Domestic capital market:

A declining trend in the stock market gained momentum and bounced back to its previous two-week’s level, this week. This week, the NEPSE Index - 100 opened higher at 273.01 improved further in all consecutive trading days and eventually closed at 283.38 for the week, netting a sharp gain of 18.16 points over the week. This week, trading was estimated at 39219 shared valued NPR 2.06 million compared to 35613 shares valued NPR 14.5 million of previous week. Commercial Bank and Finance companies shared 89.05 percent and 9.91 percent respectively of total traded amount. Commercial banks, Production Sector, Finance/Insurance sector, and other sector improved. While, Hotel Sector and Business Sector remained unchanged. Out of thirty-eight traded companies, twenty companies improved, eight companies lost and ten traded companies remained unchanged at their previous prices. Bank of Kathmandu, Nabil Bank, and NIC Bank registered the first, the second and the third most traded companies trading 12968, 4000 and 3778 shares respectively. Share of Nabil Bank, Indosuez Bank, Standard Chartered, Himalayan Bank, Nepal B’desh Bank, Everest Bank, NIC Bank, Bank of Kathmandu, Everest Insurance, and Nepal Merchant Bank & Finance were able to trade in all five working days. Like wise, Nepal Bank Ltd, and Siddhartha Finance were able to trade in four working days.

Forex round-up:

The USD weakened against the EURO and JPY over the week but it improved against the GBP. The Fed and other Central banks have already pumped billions of dollars in extra reserves into their economics and arranged special currency swaps to address immediately liquidity problems. A series of coordinated interest rate cuts has sliced overight rates by 25 to 50 basis points in most of the world.

On the back of weaker dollar many regional currencies improved while INR remained very vulnerable and weaker against the dollar over the week. Despite the Indian currency market being relatively sheltered the US attacks had raised risks for the currency, analysts said. The NPR also buoyed by the INR depreciated 70 paisas against the dollar over the week.