Elected representatives benefit the cooperatives they are associated with by providing them with hefty sums in the form of grants. 

Akash Chhetri: Centre for Investigative Journalism-Nepal

ONE: The Triyuga Municipality in Udaypur in June/July 2018 Asar provided a grant-in-aid of Rs 5.5 lakh to the Ushakiran Multipurpose Cooperative Society Limited. The municipality paid the sum in various installments: Rs 50,000, as per voucher no. 775, on July 4, 2018; Rs 50,000, as per voucher no. 873, on July 9, 2018; Rs 50,000, as per voucher no. on July 9, 2018; and Rs 4 lakh, as per voucher no. 640, on June 26, 2018.

Harimaya Shahi, the president of the cooperative, is also a member of Ward-3 of the municipality. The municipality’s mayor, Baldev Chaudhary, said he was not aware that the grant had been provided to a cooperative whose president is also a member of the municipality. “The grant might have been provided through the ward office’s budget. It was not provided by the municipality’s decision, and certainly not mine,” Chaudhary said.  

Shahi said the cooperative had taken the grant-in-aid from the ward office to conduct a program. “If we have the capability, we can ask for grant and conduct programs. The ward office gave us the program, and we conducted it,” Shahi said. She said the grant-in-aid was spent on producing woman entrepreneurs.

The municipality has provided grants to other profit-oriented institutions as well. It provided such grants to other cooperatives in May/June and June/July. It provided Rs 50,000, as per voucher no. 417, to Namuna Women’s Savings and Loan Cooperative Society; Rs 50,833, as per voucher no. 438, to Kakani Women’s Multipurpose Cooperative Society; Rs 50,000, as per voucher no. 596, to Jyoti Women’s Cooperative Society Limited’ Rs 50,000, as per voucher no. 706 to Ganga Jamuna Women’s Savings and Loan Cooperative; and Rs 1 lakh, as per voucher no. 549, to Namuna Savings and Loan Cooperative Limited.

It is being claimed that the grants the cooperatives received have been spent towards producing women entrepreneurs. But the municipality has no idea how many women entrepreneurs were produced and what they have been doing. The Triyuga Municipality has provided grants worth Rs 9 lakh to cooperatives in the fiscal year 2018/19 alone.

TWO The Phedap Rural Municipality in Tehrathum has also spent its budget on the construction of a building for a cooperative society. It provided Rs 1.23 million to two cooperatives. On April 24, 2018, Janakalyan Community Development Multipurpose Cooperative Society was provided Rs 7.55 lakh, and the Women’s Cooperative was provided with Rs 4.79 lakh. Of the two cooperatives, the former has a shareholder and trustee, Rajendra Subedi, who is also a member of Phedap Rural Municipality-2.

The rural municipality has formed a committee to distribute grants. It is on the recommendation of the committee that the grant was provided, said Hari Prasad Changwang, the chairperson of the rural municipality. “We provided the grant for the construction of the building. I’m not aware which cooperative a member of the rural municipality is connected with,” Changwang told CIJ.

Subedi, on his part, feigned ignorance about the grant. “I don’t know anything about the grant. I just heard from you about the release and the receipt of the grant,” he said.

THREE: Another instance of gross misuse of grants is seen in Rambha village in Palpa. The local level provided a grant of Rs 7 lakh to Laligurans Savings and Loan Cooperative Society Limited, as per voucher no. 81, on 27 June, 2018. Bhoj Bahadur Bishwakarma, who is the ward chairperson of Rambha Rural Municipality-4, is a trustee and shareholder.

Bishnu Prasad Bhandari, the rural municipality’s chairperson, said, “At first, we thought that we could get the grant for constructing a building or physical infrastructure. But these types of grants cannot be given to savings cooperatives. I did not have firsthand information, but I have come to know that the grant was provided due to the insistence of friends.” 

Bishwakarma, however, feigned ignorance about the said grant “Our rural municipality has provided grants for buffalo and goat rearing, but I do not know anything about the grants provided to Laligurans Cooperative. Please go and ask the rural municipality’s chairperson about this,’’ municipality’s chairperson, Bishwakarma said.”

FOUR: On July 11, 2018, the Baijnath Municipality of Banke provided a grant of Rs 1.5 million, as per voucher no. 532, to Bankatwa Dugdha Savings and Loan Cooperative Society. This grant seems to have been received due to the political access of the officials of this cooperative. Girwan Bikram Parajuli, the son of CPN (Maoist) leader and former agriculture minister Hari Prasad Parajuli, is a shareholder of this cooperative. The rural municipality is led by Man Bahadur Ruchal Thakuri, a representative of the ruling Nepal Communist Party.

Thakuri said he had provided grants to ordinary farmers’ cooperatives. He further said, “We provided the grants to the farmers so that they wouldn’t have to go out in the market looking for loans. They have been doing their work by putting in their own money in addition to the grant we provided them.” Deepak Karki, the manager of Bankatawa Dairy Cooperative, said he used the money to buy a milk processor. “When I received the grant, I was not a member of the cooperative. That money was used to buy a building and a machine.”

The Baijnath Municipality has provided grants worth Rs 2.5 million to five cooperatives in the area. The rural municipality has given a grant of Rs 2.5 lakh to Baijnath Cooperative Society Limited on July 9, 2018; Rs 2.5 lakh to Nawa Paluwa Multipurpose Cooperative Society Limited, Rs 2.5 lakh to Lalpur Milk Production Cooperative Society Limited; and Rs 2.5 lakh to Women Micro Farmers’ Cooperative Society Limited, on July 11, 2017.

The 56th report of the Auditor General states that the Baijnath Municipality has failed to maintain appropriate policies, criteria, and procedures while handing out such grants. It says, “Since cooperatives are a member-oriented business enterprise, providing them with grants without formulating appropriate policies, criteria and procedures goes contrary to the main essence and spirit of the cooperatives.”

FIVE: The Shikhar Municipality in Doti is found to have gone one step further than the cooperatives, providing a grant of Rs 8 lakh to two profit-oriented companies. On November 13, 2017, the municipality provided Rs 6 lakh to Shivani Travels and Tours Pvt. Ltd. Similarly, on April 26, 2018, it provided Rs 2 lakh to Genius Generation Academy Pvt. Ltd. Both of the non-profit organizations are operated by Bhim Balayar. 

Joshi, the mayor, admitted that the ward chairperson had provided the grant to a private school.” I have come to know about this only,” he said. “We had sent a development budget to each ward, and the ward chairperson provided that money to the school.” He added, “We feel we have made a big mistake. We are ready to do whatever needs to be done to rectify the mistake.”

Joshi provided the grant to Shivani Travels and Tours Pvt. Ltd., which was started by Balayar, towards starting rafting services on the Seti River. “He came to us saying that he had registered a company and that he can run it well. It was on this basis that we provided the grant to him,” Joshi said.

Balayar has his own logic about receiving the grant. “Our school teaches students differently. We received the grant after the ward chairperson provided it to our children’s school,” he said. “I’m a democrat, but I took the grant to do some work. This shouldn’t be interpreted negatively.”

He claimed that the municipality had given him the grant to start rafting because of his experience. “There was no one in the Far West who could do rafting, so we got this grant,” he said.

The budget of the Fiscal Year 2077/78 has also announced a policy of encouraging cooperatives. The budget statement of the Finance Minister Yubaraj Khatiwada says, “Cooperatives will be encouraged in programs related to the promotion of domestic and small enterprises, agricultural production, storage and processing, and poverty alleviation. Farmers’ easy access to agricultural materials, capital, technology, and the market will be ensured through cooperatives.”

According to this year’s budget statement, Rs 3.6 billion of credit will be invested to promote agriculture and small business by providing loans to small farmers’ development microfinance institutions through 1,000 cooperatives. However, the Auditor-General’s report has concluded that the distribution of grants without fulfilling any criteria contrary to Rule 36 (1) of the Financial Procedure Rules, 2007. The 56th report of the Auditor-General states, “There is a provision in the rules that the approved budget should be spent on the pre-determined projects. The budget received from the Government of Nepal should be spent on public works, but it has been spent on the construction of cooperatives’ buildings. It should be spent only on the capital works of the Government of Nepal and the local level.”

Similarly, the 56 report states that the local government has not been able to provide accessible and quality service to citizens in the distribution of benefits by ensuring public participation, accountability and transparency. The report makes it clear that providing government aid to non-profit private businesses amounts to irregularity.

Khemraj Nepal, an expert and former secretary of the local government, said that it was wrong of the local government to provide grants to the cooperatives that are associated with people’s representatives. “One cannot provide grants like this,” Nepal said. “It isn’t wrong of the local governments to provide the grants, but they should consider whom and how they are providing them. Local governments should not provide grants to saving and credit cooperatives.” 

Former Acting Auditor-General Sukdev Bhattarai Khatri said the code of conduct of local government officials has a provision that forbids allocation of grants to the cooperatives that are associated with people’s representatives. “Most of the people’s representatives at the local level are trying to think of themselves only. A person elected by the people cannot release the budget based on the interests of a certain group. This is wrong from the point of view of good governance.”