August 2021 Analysis: Domestic Politics and Governance

Posted by : Shaleen Shah


Date : 2021-09-20

Domestic Politics

On August 18, 2021, President Bidya Devi Bhandari under the recommendation of the Sher Bahadur Deuba government promulgated an ordinance in order to to amend the the Political Parties Act-2017 in order to facilitate party splits. Previously, provisions of the Political Parties Act-2017 said that if a party has control over 40 percent of its Central Committee and Parliamentary Party members, then it can register a new party. The ordinance changed 40 percent to 20 percent and the clause in the provision from “and” to “or.”

As a result, after the ordinance was promulgated, the CPN-UML (UML led by KP Sharma Oli) split as Madhav Kumar Nepal applied for Communist Party of Nepal Unified Marxist Leninist (Ekikrit Samajbadi), a new party, at the Election Commission. Furthermore, the Janata Samajbadi Party also split after Mahantha Thakur registered a new party under the name of Loktantrik Samajbadi Party. Later, on August 19, 2021, as many as six writ petitions were filed at the Supreme Court against the ordinance.

Consequently, the Parliament now has six political parties–Nepali Congress, Janata Samajbadi Party, the Maoist Centre, Loktantriik Samajbadi Party (LSP), and CPN (Unified Socialist). Rastriya Prajantra Party, Rastriya Janamorcha, and Nepal Majdoor Kisan Party are not recognized as national parties, and they are represented by one lawmaker each. Experts noted that as UML has split, the Nepal led faction will support the Deuba government.

However, the Thakur faction hasn’t yet decided about joining the government. Upendra Yadav and Baburam Bhattarai’s JSP is aiming to have an electoral alliance with the Maoist Centre. Thakur’s LSP will likely contest with the JSP as both parties’ constituencies are in the Madhes region. It is uncertain whether Congress and LSP will create an electoral alliance. Since Oli and Dahal have disagreements, alliances between the UML and Maoist Centre is unlikely and alliances between Nepal and Dahal is more likely. On August 29, Madhav Kumar Nepal was elected as the Parliamentary Party leader of CPN (Unified Socialist).

Furthermore, the Deuba government’s Cabinet expansion is still in the pipeline. According to the Election Commission’s timeline, this is likely to occur after August 25 after Madhav Nepal’s party is registered.

The CPN-UML had recommended stripping 14 of its House of Representatives from their positions citing that they were planning to split the party. However, Agni Sapkota, on August 29, decided to not carry out this action since they have already formed a new party. Furthermore, on September 2, KP Oli had filed three writ petitions at the Supreme Court to issue an interim order to the Election Commission to invalidate the registration of a new party, CPN (Unified Socialist), under Madhav Kumar Nepal, however, the Supreme Court under a bench of Chief Justice Cholendra Shumsher Rana refused to fulfill Oli’s request.


The 58th annual report of the Auditor General, published on August 19, presented to President Bidya Devi Bhandari on August 21, outlines several issues with governance pertinent to:

  • Problems with governance in Covid-19 management and procurement of medical goods,
  • Issues with policies of supply and distribution of goods,
  • Expense of public funds and
  • Issues with financial audits

These issues with governance will be analyzed and discussed in this paper citing possible solutions and recommendations towards the end.

Issues with Governance in Covid-19 Management and Equipment Procurement

The Auditor General’s ‘Special Audit Report on Covid-19 Management’ outlines problems with management during the Covid-19 outbreak and issues with procurement of medical goods during the outbreak. The report outlines that although Covid-19 was first detected in Nepal towards the end of January in 2020, the government created a risk assessment and action plan only four months later in May 2020.

Omni Business Corporate received the purchase order to procure equipment such as Personal Protective Equipment (PPEs), protective goggles, and testing kits even after quoting 13.9 percent higher rate than other suppliers. In April 2020, the government cancelled this contract with Omni Business Corporate. Although the Department of Health Services’ cost estimate for procuring medical equipment was $9.07 million, Omni’s proposal quoted $10.03 million. The auditor general’s report asks why it was awarded to the now blacklisted Omni Business Corporate in the first place.

Furthermore, the federal, provincial, and local governments had lapses in coordination while handling quarantine centers in the border points of southern Nepal. People moved across borders, went missing from quarantine centers, but the authorities didn’t take proper measures to curtain these events, citing that they didn’t have enough equipment and funds to run the centers effectively.

The report outlines that the government took up responsibility to conduct antigen tests, but due to lack of equipment and human resources, the tests didn’t take place until July 2020. Furthermore, there were delays in the medical equipment procurement process. The Department of Health Services started the procurement process only on April 2.

The report stated that, as per section 71 of the Public Procurement Act-2007, a procurement committee cannot be formed under the chief advisor of the Health Minister (which was the situation)–instead, the chief of a concerned public entity or a senior officer nominated by the chief should head such a committee.

Issues with governance in procurement of agricultural goods

The Auditor General’s report cited that the government had lapses in policies regarding the supply and distribution of agricultural equipment such as chemical fertilizers, creating problems for farmers. The report said that although the Ministry of Agriculture and Livestock Development estimated that there is an annual demand of approximately 600,000 tonnes of fertilizers, this estimate is outdated and there haven’t been studies to find out the current demand. Spokesperson for the Agriculture Inputs Company, Bishnu Prasad Pokharel, said that the current demand is over 1.1 million tonnes, and there is a supply of only 400,000 tonnes. Nepal imported 366,794 tonnes in 338 days in 2018, and 358,086 tonnes in 253 days this year. There were also delays in the supply period of fertilizers, averaging 224 days, even though contractors are given

70 days. The Auditor General’s report says that the government needs to carry out studies in this sector and set up proper policies and strategies to resolve these issues.

Issues with governance in management of public funds seen through financial audits

The Office of the Auditor General’s 58th annual report contains information from audits of 5,462 public offices and institutions. The report states that out of the Rs. 5.33 trillion which was audited, 12.69 percent, or Rs. 644.4 billion, is “yet to be updated, or unsettled.” Furthermore, Rs. 418.85 billion (Rs. 104.38 billion last fiscal year) has been considered as ‘beruju’ or irregular amount, meaning “such a transaction indicated or found on audit as a transaction carried on without fulfilling such requirements as to be fulfilled in accordance with the prevailing law or a transaction of which such accounting as to be maintained has not been maintained or a transaction which has been carried on in an irregular or unreasonable manner”, according to Section 2(r) of the Financial Procedures Act 1999. This ‘beruju’ or irregular amount is 2.86 percent of the federal expenses, 2.74 percent of the provincial expenses, and 5 percent of the local government expenses.

Conclusions and recommendations

The issues in governance outlined in the 58th annual report of the Office of the Auditor General show lapses in accountability in public administration in different areas such as procurement of medical goods, management of quarantine centers, procurement of agricultural goods, and management of public funds. Such issues have been seen to be added in the Office of the Auditor General’s reports every year, but efforts to resolve these issues have been scarce.

Although the Public Procurement Act 2007 is meant to resolve problems with procurement of goods and services, even after being amended 10 times, the Act’s effects are still not ideal. Furthermore, only one Public Procurement Management Office in Kathmandu is not enough to oversee public procurements of the country.

Although political parties, the CIAA, concerned government agencies, federal ministries and related agencies should work towards resolving the issues outlined in the Auditor General’s report, actions by these actors have been scarce. The Auditor General’s recommendations are not legally binding, and there is no suitable system to implement these recommendations. Consequently, implementing the Auditor General’s recommendations remains a challenge.