KATHMANDU, Oct 23: In response to identified issues with the 'Project Contract Norms-2077,' the government has introduced a more stringent set of guidelines for multi-year contracts. The new norms come with strict provisions aimed at addressing distortions and enhancing efficiency.
As per the revised arrangement, contracts for multi-year projects not included in the annual budget must be approved within the month of Kartik (mid-October to mid-November) of each fiscal year. In the past, the Ministry of Finance had the authority to approve multi-year projects throughout the year. However, this process led to project delays and affected capital expenditure.
Dhaniram Sharma, the spokesperson for the Ministry of Finance, revealed that the Council of Ministers has sanctioned the new standards. Unlike the previous norms, this time the standards were presented before the Council of Ministers and were devised with the consensus of all ministries.
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Under the new standards, a minimum of one-quarter of the budget allocated for multi-year contracts must be guaranteed for the same fiscal year. This means that a multi-year contract can be approved only if a project worth at least Rs 1 billion receives a budget allocation of at least Rs 250 million. The budget is allocated based on the estimated project completion time of four years.
Following this adjustment, projects allocated Rs 10 million in the annual budget will be eligible for multi-year contracts, with an upper limit of Rs 40 million. This is a substantial shift from the previous practice, where a budget of Rs 10 million could result in contracts of up to Rs 500 million. Consequently, the government has been burdened with financial commitments from previous contracts, leading to an accumulated obligation of over Rs 400 billion. As a result, the government is now focusing on creating new projects.
The new standards stipulate that multi-year contracts will be permitted only for projects that have fulfilled all prerequisites, including feasibility studies, environmental assessments, land acquisition, and tree cutting.
Some multi-year projects faced uncertainty as contract agreements for new projects had not been granted this year. However, it is anticipated that ministries will obtain approval for multi-year contracts by November and commence work in a timely manner after completing the necessary processes.
Dhaniram Sharma stated, "After Dashain, we will engage with ministries that undertake significant capital expenditures, and we hope that the new multi-year contract standards will enhance the efficiency of capital spending."
