With that much of money, what the state could have done? With Rs 15 billion, the government could have effectively completed construction of Sikta Irrigation Project. This would have enabled farmers in mid-western region irrigate additional 42,000 hectares of cultivable land and switch to three harvest a year from single harvest at present.[break]
“The impact it would have made on farmers´ lives, food security and macro-economy exists beyond numbers,” says Rameshore Prasad Khanal, former finance secretary.
With the money, the government could have even completed two irrigation projects of the scale of Rani Jamara at the same time. Each of them would have helped irrigate additional 45,000 hectares of cultivable lands, enabled farmers to enjoy three harvests a year and ensure food security in the poorest region of the country. Control of damages that Karnali River inflicts every year is another benefit that cannot be calculated in figures.
With the amount, the government could have constructed one-third stretch of the four-lane Mid-hill Highway (1,776 km). “This would have brought instant income and social benefits to about two million people and also opened up the prospect of developing hydropower projects in 16 places, tourism destinations in 15 places and housing and agricultural projects in 15 places,” said Khanal.
However, the governments that repeatedly complain of financial crunch to effectively implement projects of national interests are eagerly doling out such huge resources to subsidize fuel. And who gains from such generosity extended in place of due adjustment in fuel prices?
“Clearly, it is relatively better-off urban families that own vehicle and complex cooking system, big hotels, restaurants, gas-run automobile operators and tourists that benefit from this subsidy regime,” said Khanal.
The state is presently providing monthly subsidy worth Rs 1.96 billion on petroleum products. However, more than half of total petroleum imports is consumed in the Kathmandu Valley alone. Petrol and liquefied petroleum gas (LPG) consumed by relatively well-off urban consumers rake up a monthly subsidy of Rs 418 million. Likewise, subsidy on kerosene, which is no longer regarded as poor man´s fuel because of its price being fixed equal to diesel, stands at Rs 50.62 million. Diesel, the major industrial fuel, on the other hand, rakes up a monthly subsidy of Rs 1.58 billion.
“It is true that industries are in bad shape, but their gloom has little to do with fuel price,” said Khanal, who opined that there was no need to subsidize diesel as well.
Clearly, oil subsidy pledge as non-budgetary expenditure is a waste and has come at a huge social cost. Worse still, it exists in the form of foreign currency grant, because the money is paid to the Indian supplier in Indian currency purchased by selling hard-earned convertible currency.
“Saddest part of this evil is that cheaper supply has distorted people´s rational consumption behavior,” said Khanal, stressing the need to check irrational consumption.
Given the situation, he urged the government to get its priorities right: Who does it want to serve?
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