Print Edition - 2018-09-12 | MONEY
Of roads and revenue
- Despite raising billions in taxes from the use of infrastructure and on vehicles, the annual budget for the repair, maintenance and improvement of the Valley’s roads remains inadequate
Sep 12, 2018-
The sight of municipal workers frantically filling in potholes and repairing roads in the Kathmandu Valley ahead of the recently-concluded Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Co-operation (BIMSTEC) Summit showed just how little attention the government pays to maintaining infrastructure on a day-to-day basis.Mega events like the BIMSTEC summit prompt the Valley’s authorities to go into overdrive, rushing to put on a presentable veneer to the Capital’s normally run-down and pockmarked streets. This state of affairs is due to a number of factors but largely with the fact that the budget allocated to maintaining roads is never adequate.
A total of 36.59 billion was collected in the last 2017-18 fiscal year from the use of infrastructure and taxes on vehicles, of which Rs13.2 billion was meant to be earmarked for road repair and maintenance. However, the current budget allocated only Rs 5.5 billion for this purpose. Roads Board Nepal, the public body responsible for distributing the allocated budget to the Department of Roads and local bodies for maintenance, said that it distributed Rs 5 billion to the Roads Department and Rs 2 billion to local governments from the funds it had received from the Finance Ministry as well as from funds carried over from the last fiscal year.
“Although the law mandates that we receive all of the funds collected from road tolls, tolls levied on registered vehicles and those levied on fuel, the Finance Ministry is not following through,” says Krishna Singh Basnet, executive director of the Roads Board. “We’ve been lobbying to receive this entire amount that is due to us for several years now.”
As per the Roads Board Act, the board is authorised to carry out road repair and maintenance, distribute budget to different government agencies, prepare plans for repair and maintenance, and monitor progress. However, as the Board does not receive the budget due, it is unable to expedite repair and maintenance work. To complicate issues further, one more layer—provincial governments—has been added, following federalism. “We are now discussing how to distribute amounts to provincial governments for road maintenance,” says Basnet.
The Road Department also sought around Rs18 billion for repair and maintenance works this current fiscal year; it received less than one third of what it demanded. “Due to the lack of an adequate budget, we are unable to conduct maintenance works as per the need assessment we make every year,” says Mukti Gautam, spokesperson at the Road Department.
According to the department, repair and maintenance works are carried out in three phases: regular maintenance, periodic maintenance and road rehabilitation. Regular maintenance is done whenever cracks or potholes appear; periodic maintenance is conducted every five-six years; and rehabilitation is done after 15 years.
Another stakeholder, automobile dealers, has also begun protesting the state of the Valley’s roads despite the large amounts that are collecting from them as taxes. In the last fiscal year, the government raised around Rs 114 billion from the automobile sector. As customs revenue alone, the government raised Rs 80.23 billion, which puts the automobile sector in the top five contributors of revenue collected from customs offices, according to the Department of Customs. Furthermore, the Department of Transport collected Rs 23.64 billion as vehicle registration fees, road construction and maintenance fees, licence fees, and embossed number plate fees, among others.
“Despite raising large amounts of revenue from the automobile sector, the government has failed to improve the condition of roads, which is in turn affecting vehicle sales,” says Shambhu Dahal, president of the Nepal Automobile Dealers’ Association (NADA). Proper road conditions help economic activities thrive, bringing prosperity to people and resulting in increased vehicles sales, says Dahal. According to the global Logistic Performance Index, released by the World Bank in July this year, Nepal’s quality of trade and transport-related infrastructure fell from a rating of 2.27 to 2.19.
However, this year’s budget speech has provided room for cautious optimism. The speech said “completed road projects will be brought under the Road Board for sustainable road repair and management. The financial resources will be managed through road tax based on the principle of road user pay and the repair and maintenance of large roads will be transferred to the Roads Board.” The automotive industry welcomes the spirit of this budgetary provision, says Dahal.
Acting President, NADA
Transport is the backbone of a country’s economy. But we all know how dire the state of our roads is. Road construction projects are always either stalled or delayed. The central bank also does not help matters, for it adopts dubious policies. We have been urging the government to come up with more concrete policies. But all the provisions that are present in the Industrial Policy have not been addressed in the Financial Act. At present, a policy conflict can clearly be seen. The situation is similar with taxation too.
The government takes the necessary steps to scrap the syndicate in the transport sector, but it fails to manage the transport sector well. Authorities are unable to even manage insurances for victims of road accidents. NADA has always been advocating for road safety. Traffic police statistics state that 75 percent of road accidents occur in Nepal due to the negligence of drivers.
The government’s plan to go electric is also going nowhere. It has been urging people to use electric vehicles, with an aim to make 50 percent of the vehicles in Kathmandu electric in a span of 10 years; however, the management of necessary logistics such as electricity supply and installing charging stations are far behind the plan.
Immediate Past President, NADA
The automobile sector is one of the main forces that drive a country’s economy. In Nepal’s context, the demand for automobiles have soared, inside and outside the valley. If we look at the latest data, 60 percent of sales in Nepal occur inside the valley, while 40 percent sales are conducted outside the valley. I believe NADA has helped the country reach where it has with its ‘one house one vehicle’ concept. However, there are many underlying problems in our country, such as the existing high rate of customs duty, poor road condition, valley-centric government policy making and poor traffic management. Without addressing these issues, the sector cannot flourish.
Executive Director, CG MotoCorp
The government’s move to revise taxes and set it according to an automobile’s engine is a progressive step. However, imposing taxes on vehicles according to which province they belong to is a decision that concerned authorities should rethink. We should perhaps learn a lesson from our southern neighbour, where the government has imposed Goods and Services Tax to avoid double taxation. The corporate sector is open for money, but not for charity. In this context, I do not expect any type of tax subsidies from the government. However, it’s the government’s job to maintain an environment conducive for doing business. There is a need for devising and enforcing long-term policies, rather than focusing on short term ones. This could involve facilitating entrepreneurs with provisions to open assembling plants, developing infrastructure and promoting the electric vehicles, among others.
Published: 12-09-2018 08:17