Municipal Non-Tax Revenue
Expansion Needed For Better Output

By Rup Khadka

MUNICIPALITIES can generate revenue from non-tax sources, such as user charges, regulatory fees, rental incomes and income from the sales of local resources. These sources have been important in the context of the present ‘fend-for-yourself’ environment.

Efficiency

Municipalities provide such public services as water, sewerage, electricity etc., which are generally not so attractive for the private sector. There has been a growing emphasis on the finance of these services through user charges. User charges are justified on both the efficiency and equity grounds. Since the imposition of user charges reduces the wasteful use of municipal services, it promotes efficiency. Besides, imposition of the user charges on the users of the services on the basis of actual use of municipal services is also justified from an equity point of view. Since user charges are based on the quantity consumed by each user, they give local governments a clear indication of the level of service preferred by citizens. User charges also can be used to influence private behavior toward socially desirable ends.

Municipalities also can generate some revenue from some regulatory fees. It may be necessary to take approval of the municipalities to construct buildings and to set up industries, business or profession etc. in the municipal area. Municipalities can charge some fees to recover their administrative costs or they may even levy such fees as regulatory fees on revenue earners.

Similarly, municipalities can generate some rental income from the users of the municipal property. For example, municipalities can develop market areas or construct shopping complexes and rent them out to any persons or organisation and charge rent from their users.

In Nepal also, municipalities are authrised to generate reveue from such non-tax sources as user charges, fees, rents and income from the sales of local resources. For example, they are empowered to levy service charges on the user of services provided by them and charge fees on valuation of fixed asset and building permit. They can construct toilets, swimming pools, guesthouses, market places, and gymnasium and collect rent from their users. Municipalities also receive some income from the sale of sand, gravel, boulders etc.

Municipalities do not generate much revenue from non-tax sources. For example, in 1998/99 they generated Rs. 189 million from non-tax sources. Of the non-tax sources, service fee was the biggest source providing Rs. 45 million, which was about 24 per cent of total non-tax revenue. Municipalities also generated Rs. 26 million from the building permit fee. Rents from market, shops and buildings provided Rs. 22 million revenue. Building permit fees and rental income from market/shops/buildings were the second and the third largest sources of revenue, providing about 14 and 12 per cent of the total non-tax revenue, respectively.

Not all municipalities use all non-tax sources and not all sources are equally important from the revenue point of view for each municipality. However, it is critical to generate additional revenue through non-tax sources considering existing composition of revenue under which municipalities generate more than 80 per cent of their total tax revenue from the local development fee. This is because the future of the local development fee is uncertain in the context of the possible entrance of Nepal to the World Trade Organisation. It is, therefore, necessary to develop property taxes as their major source of revenue. But it would not be possible to develop property taxes over night. Property taxes alone would not be sufficient to generate required revenue for the municipalities anyway.

Municipalities should adopt a general policy to finance private goods and services, which can be sold in units and benefit only to their users through user charges, which are justified on both the efficiency and equity grounds. Municipalities can also maintain graveyards and cremation grounds and impose user charge for this Similarly, they could also manage public toilets and charge from their users.

Periodic Review

Municipalities should levy fees for the provision of their service. Such fees also could be levied on persons or organisations for the conduct of trade in the municipal areas. Similarly, municipalities should make attempts to generate revenue through rental income from shops and markets owned by them. Rent must be reviewed periodically to keep pace with inflation.

Agenda Of Action For NIDC

By Shiva Chandra Shrestha

THE shareholders of the Nepal Industrial Development Corporation are going to hold the 41st annual general meeting today. They might be perplexed to note the losses amounting to Rs. 27 crores for the two years ending 054/55 and 055/56 the losses for the subsequent two years 056/57, 057/58 and the current year 058/59 might be more than Rs. 27 crores. Thus, in total until now the accumulated losses may be more than Rs. 50 crores. Such an alarming situation is the outcome of several ruthless/immature decisions taken in the past which led to such a financial dilapidation of the only industrial development bank in the Kingdom of Nepal.

Experiments

During the period of last eleven years or so, a number of chairmen (more than eight) have been appointed by the Government. So is the case with that of the General managers. A number of experiments have been made including that of the appointments of individuals from within who continued for four years, and another for two years from outside. All the appointments were politically made with the hope of achieving better results. There is a strong criticism that NIDC was simply a learning ground with all the privileges attached to and exercising authorities without accountability tended to prevail. Another feature of the period had been the avoidance of the principles and practices of industrial finance for the purpose of satisfying the needs of certain individuals / groups and consequently it became doubtful whether the loans outstanding (Rs. 205 crores as on 31/3/056 after provisions for doubtful debts and after capitalised interest suspense) are fully secured or not to cover up both the principal and the interest unpaid. Moreover, the cash income was limited. In the year 2050 B.S. a large number of skilful officials were given retirement by a political decision on the ground of completion of 25 years of service (instead of 30 years in the government and in other corporations) and the gap thus created could not be, in time, adequately fulfilled. In regard to the limitations of the board of directors, some remarks may hold good. The role of the members of the board of directors from different ministries and the Nepal Rastra Bank are not clearly defined and they are busy with their own parent official duties. One representative from the private shareholders is absolutely helpless except when he is dynamic and is prepared to fight for justice with the majority group, being the nominees of the ruling circle.

There are broadly five types of equity investment in thirty two industries / companies and the total investments amounted to about Rs. 13,93 crores and the provisions for possible losses Rs. 4 crores and the net value shown is around Rs. 9.71 crores.

One of the agendas is the election of one representative (currently, there are two candidates) in the board of directors from among the private shareholders. There are about 535 voters with about 31000 votes. The Salt Trading Corporation Ltd and the Nepal Bank Ltd hold 11000 and 3000 votes respectively. In such a situation, the candidate supported by these organisations will win the election as in the past.

As to the question of the appointment of auditors for the last two years, the appointees of the Auditor General will be formalised for the fees and out of pocket expenses already fixed or at the same level of fees. Also, the market price of the shares has been adversely affected in the stock exchange.

In the context of the above scenario, the following factors should be considered in depth in order to resolve the outstanding issues. The ruling group within the NIDC should prove their worth to the institution in view of their privileges. How are we to ascertain that they are the assets? Let there be no occurrence of the incidents that happened in the oldest bank of Nepal. The Nepal Rastra Bank should take up the matter at the earliest so that further deterioration can be contained by the management of assets including personnel resources. The enforcement of scientific management to fully utilise the potentialities of under privileged manpower be given top priority. The crux of the problem is the non-availability of the fund for further investments on the one hand and non-recovery of the dues from the loanees on the other hand.

Plan of Action

Under the miscellaneous agenda the management, the board of directors and the line ministry should have some concrete proposals for revitalising the sick corporation. In the absence of such proposals, the following two issues be may discussed in the annual general meeting for definite conclusions of implementation plans.

- Adopting measures to reduce drastically the establishment cost by 33%.

- Disclosure of material facts by the members of the board of directors towards strengthening the NIDC.

- Let the petty shareholders holding less than 1% of the share capital suggest ways and means to save the industrial banks although it is ultimately the Government which should take up the issues seriously and direct those concerned to come out with a plan of action at the earliest.

Festival Of Hiding Shiva

By Dhurba K. Deep

DEVOTEES worship Shiva, the presiding deity of the Hindu pantheon in different forms of his divine personality such as the linga, animal, ascetic, supernatural and others. However, in the festival of Pahan Charay or Pasa Charay, Shiva is worshipped in his most unusual form locally known as Luku Mahadyo (the hiding Shiva).

The other deities worshipped during this festival include Shwet Kali, Bhadra Kali Kumari. This particular panel of goddesses is called Gana Devatas The Nepalese people particularly the Newars of Kathmandu Valley, worship these Devatas by sacrificing animals.

There is a belief that these deties fly over the roof tops of their devotees’ houses to sacre away the evil spirits hanging in the air and protect them from the Devil’s destructive force.

In the Newari language. Pahan means a guest. Pasa means a friend and Charay means the fourteenth day of the dark fortnight which is very special for the Tantrik worshipping of Shiva and the Gana Devata (patron deities) mentioned above.

Kathmanduites celebrate this festival with their friends and family members, invited this festival also known as Pishach Chaturdashi signifies the fourteen day of the dark fortnight traditionally prescribed to worship Shiva as (devil incarnate) mansahari.

Shiva on this day is worshipped in the Luku Mahadyo form. Luku means hiding and Mahadyo means the god of all gods. A question may arise here: why Shiva who is so almighty himself is called a hiding god? In answer to this question a very popular legend goes as this: Once Parvati-wishing to please her divine consort Shiva prepared a very special feast which includes meat, fish, garlic, ginger, rice beer and strong alcoholic drinks and asked Lord Shiva to join her for the feast. Shiva is a vegetarian by nature but he could not say no to his beloved wife Parvati. So Shiva took her to a lonely mustard field where they hid themselves among the mustard plants and enjoyed their private feast to their complete satisfaction. But no sooner had Lord Shiva ate all those forbidden foods he was all sweat with the hot Tamasic Bhojan (intoxicating food), which he just gulped down. This eventually led him to dance a wild devil dance. Ever since this particular day is known as Pisach Chaturdashi and Shiva as Lukumahadyo, the hiding god.

The folk belief is that Lukumahado always lies hidden in the garbage pits. So the Lukumahadyo of every neighbourhood on this day is carefully dug out of the garbage dump, bathed with holy water and duly worshipped with many ceremonial offerings. Oil lamps are lit up. The smoke collected from these lamps is used for making gajal, a very special eye liner which the devotees put around their eyes as a blessing from the god worshipped. This eye liner is strongly believed to keep the evil spirits away and improve one’s eyesight very much. Elaborate feast is prepared to celebrates the occasion.