Budget prioritizes cooperatives, but is almost silent on regulating them

Published On: May 30, 2020 06:21 PM NPT By: Republica  | @RepublicaNepal

KATHMANDU, May 30: In the budget for fiscal year 2020/21, the government has talked much about facilitating a number of programs to generate employment opportunities via cooperatives, but it has failed to outline mechanisms to monitor the largely unregulated sector where several cooperatives have misappropriated billions of rupees of their members.

For the past few years, the government has been considering cooperatives as one of the main pillars for carrying forward development activities. In the budget unveiled at the time the economy is largely devastated by the threat of coronavirus, the government is offering large amounts of subsidy in many businesses that will be carried out via cooperatives. Establishing credit information center, promotion of cashless transaction and advance technology and facilitation of merger are among the programs to be launched in the sector, reads the budget.

Apart from mentioning the merger of cooperatives and self-regulation, the budget offers no concrete plan for monitoring cooperatives while the local governments are apathetic to do the job.

Paritosh Paudyal, chairman of Nepal Federation of Savings and Credit Cooperative Union, said there were no clear working procedures for self-regulation of cooperatives. “In addition, the absence of a clear policy and set target along with lack of incentives might not facilitate cooperatives to go for mergers,” said Paudyal, speaking at a post-budget discussion program organized on Saturday.  

Sudarshan Dhakal, former registrar of the Department of Cooperatives, said the government needs to focus more on maintaining a strong database of cooperatives that have been mobilizing around Rs 600 billion. According to him, the government can ensure maximum benefits to farmers if the cooperatives are mobilized in the entire supply chain of agro products. “To prevent anomalies in the sector, it would be better if the monitoring is carried out by the cooperative members followed by multiple oversight agencies including the associations concerned,” said Dhakal.   

The budget this year talks about handing over the Poverty Alleviation Fund-run revolving fund in 64 districts to the cooperatives. Under the program, 32,000 social organizations are mobilizing funds worth Rs 19 billion as seed money to run enterprises by poor people. The government envisions creating additional 150,000 jobs through the program.

Similarly, the budget envisions to promote large-volume agricultural production via cooperatives. For the purpose, cooperatives will be mobilized to ensure effective irrigation facilities, easy availability of funds, fertilizers and seeds, promotion of high technology and market accessibility. In addition, the government has set aside grants for cooperatives which will be used to conduct contract farming, land pooling and to install cold storages.

The government has also decided to provide subsidies to cooperatives for the plantation of fruit saplings in public land and the production and processing of cotton, silk, wool and natural fibers. Cooperatives will also be mobilized to provide credit to youths returning from foreign employment, educated unemployed and those from the poor and deprived communities, to start cottage and small industries.

Similarly, the small farmers’ microfinance will be provided soft loans to mobilize Rs 3.60 billion through 1,000 cooperatives to promote agro enterprises. The government has waived the income tax for all cooperatives operating in rural municipalities. Those operating in municipalities, sub-metropolitan and metropolitan cities will have to pay taxes of 5 percent, seven percent and 10 percent, respectively.  

Krishna Hari Baskota, former secretary at the Ministry of Finance, said cooperatives need to cash in on the opportunities provided by the government by maintaining self-discipline. “Still there is a lot left to be done at both central level and local level governments to benefit the country largely from the cooperative-based businesses,” Baskota said.   

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