Technical Assistance Consultant’s Report

Project Number: 36172

April 2009

Nepal: Preparing the Governance Reforms and

Decentralization Cluster Program I
(Financed by the Japan Special Fund)

Prepared by Total Management Services in association with PRAD Nepal and InLoGos Nepal
Kathmandu, Nepal

For Office of the Prime Minister and Council of Ministers

This consultant’s report does not necessarily reflect the views of ADB or the Government concerned, and
ADB and the Government cannot be held liable for its contents. For project preparatory technical
assistance: All the views expressed herein may not be incorporated into the proposed project’s design.
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Volume 1: Main Report    
Volume 2: Annexes   
January 2009 

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Table of Contents 
Preface & Acknowledgement ................................................................................................... iv
Abbreviations and Acronyms.....................................................................................................v
Executive Summary .................................................................................................................... vi
CHAPTER I: THE CONTEXT, WORK DONE AND THE REPORT ........................................1
1.1  The Context ............................................................................................................................................................1
1.2 Objective and Scope of the Study .......................................................................................................................1
1.3  Approach and Methodology ...............................................................................................................................2
1.4 Other Activities during the TA ...........................................................................................................................8
1.5 Limitations of the Study.......................................................................................................................................9
1.6  Organization of the Report ..................................................................................................................................9

CHAPTER II:  DECENTRALIZATION IN NEPAL – LEGAL AND INSTITUTIONAL
FRAMEWORK ..........................................................................................................10
2.1 Decentralization Efforts & Achievements.......................................................................................................10
2.2 Legal and Institutional Framework of Decentralization ..............................................................................12
2.3 Key Issues, Gaps and Challenges .....................................................................................................................14
2.4 Changing Political Context and Federalism ...................................................................................................19

CHAPTER III:  MANDATES PROTOCOLS AND SERVICE DELIVERY IN 
AGRICULTURE........................................................................................................21
3.1 Service Delivery Mandates, Policies and Protocol ........................................................................................21
3.2 Organizational Set up and Business Process..................................................................................................23
3.3 Service Delivery Capacity and Beneficiary Perception ................................................................................29
3.4 Reforming Policies Institutions and Business Process for Better Service Delivery .................................31

CHAPTER IV: MANDATES PROTOCOLS AND SERVICE DELIVERY IN RURAL 
INFRASTRUCTURE................................................................................................34
4.1 Service Delivery Mandates, Policy and Protocols .........................................................................................34
4.2 Organizational Set Up and Business Process .................................................................................................37
4.3 Service Delivery Provision and Beneficiary Perspective .............................................................................40
4.4 Reforming Policies, Institutions and Business Process for Better Service Delivery ................................41

CHAPTER V:  REFORMING GOVERNANCE FOR BETTER SERVICE DELIVERY...........45
5.1 Institutions, Mandates and Capacity ...............................................................................................................45
5.2 Business Processes ..............................................................................................................................................51
5.3 Ensuring Marginalized and Disadvantaged Groupsʹ Access to Public Services .....................................54
5.4 Reforming Policies, Institutions and Business Process for Better Service Delivery ................................57

CHAPTER VI: PILOT TESTING SERVICE DELIVERY IMPROVEMENTS ..........................63

6.1 Baseline Public Perception Survey & Approach to Pilot‐Testing ...............................................................63
6.2 Pilot‐testing New Ideas for Improvements in Service Delivery .................................................................67
6.3 Evaluating Pilot Test Results: Citizen’s Report Card....................................................................................71
6.4  Lessons of Pilot‐testing and Recommendation for Replication ..................................................................75

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List of Figures:
Fig 3.1:   Fund Flow and Planning Process Diagram in Agriculture Sector at the District Level
...................................................................................................................................................28 
Fig. 5.1:   Institutional Structure of LBs (LSGA ‐ 2056) ......................................................................49 
Fig 5.2:   Fund Flow from MoF to LBs.................................................................................................52 

List of Tables
Table 1.1:   Sampled Districts......................................................................................................................6 
Table 1.2:   Number of CMS, ASC & LSC and the Sample Allocation by Selected Districts .............7 
Table 2.1:   Status of Decentralization Progress in Nepal .....................................................................11 
Table 3.1:   Types of Institutions under the Ministry of Agriculture and Cooperatives ..................23 
Table 3.2:   SWOT Analysis of Central Organizations ..........................................................................25 
Table 3.3:   SWOT Analysis of District Level Organizations/Institutions (DADOs/DLSOs)...........26 
Table 3.4:   Comparative Indicators of Extension Service Delivery in SAARC Countries...............30 
Table 4.1:   Merits and Demerits of the Implementation Modalities...................................................39 
Table 4.2:   Types of Service Delivery System ........................................................................................41 
Table 5.1:   SWOT of MoLD ......................................................................................................................46 
Table 5.2:   Tasks and Responsibilities of LBs ........................................................................................48 
Table 6.1:   Selection of VDC and Municipality for Piloting ................................................................65 
Table 6.2:   Service Recipient Household by Type of Service Providers ............................................71 
Table 6.3:   Service Satisfaction Perception by Type of Residence ......................................................72 
Table 6.4:   UCs Formation & People’s Perception ................................................................................74 
 

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Preface & Acknowledgement 
We  are  delighted  to  submit  this  Final  Report  of  the  assignment  on  ʺTA  4834‐NEP:  Preparing  the 
Governance  Reforms  and  Decentralization  Cluster  Program  Iʺ.  This  Report  has  been  prepared  by 
completely  restructuring  and  rewriting  to  include  further  review  and  analysis  of  decentralization  issues 
and  presenting  the  identified  gaps  and  reform  recommendations  in  a  systematic  framework.  We  believe 
that the analysis and recommendations presented will be helpful to the Government in its initiatives and 
to  the  ADB  in  its  support  to  government  efforts  at  decentralization  of  governance  and  improvement  of  
public service delivery in Nepal.  

We thank with gratitude Dr. Bhoj Raj Ghimire, Chief Secretary, Office of the Prime Minister and Council of 
Ministers  (OPMCM),  Government  of  Nepal  for  his  overall  support  and  guidance  as  Chairman  of  the 
Steering  Committee  as  well  as  Mr.  Gambhir  Bhatta  and  Mr.  Surya  Prakash  Shrestha,  Senior  Governance 
Officials,  Asian  Development  Bank,  Manila,  Philippines, for  their  very  positive  support,  valuable 
comments and helpful understanding during the performance of this assignment.  

Our  heartfelt  thanks go  also to Mr. Yubraj  Bhusal,  Joint Secretary,  OPMCM for overall coordination and 

support  as  Project  Director,  during  the  initial  period  of  the  TA  and  also  Mr.  Tana  Gautam,  Secretary, 
OPMCM for his support and Mr. Toya Gyawali, Under Secretary, OPMCM for his contribution as Project 
Director in the later period.  

We owe our gratitude to Mr. Surya Prasad Acharya, Under Secretary, MoLD and Mr. Mahendra Poudyal, 
Under  Secretary  MoAC  for  their  contribution  as  respective  Ministry  focal  persons,  as  well  as  to  other 
members of the Steering Committee for their guidance and suggestion, to the MoLD and MoAC teams for 
providing information and support; and to the Thematic Group Members for their guidance and support.  

Similarly,  we  offer  our  heartfelt  thanks  also  to  the  Secretaries  of  MoF,  MoAC  and  MoES,  the  Director 
Generals of the Departments of Agriculture and Livestock Services and the respectable officials of different 
Ministries and Department for their professional advice during visits and interactions.  

Likewise,  we  owe  our sincere thanks  to  the Representatives  from the  eight  survey districts and  the Pilot 
VDCs/Municipalities  for  their  valuable  coordination;  the  LDO  and  DTO  Chiefs  as  well  as  the 
Secretary/CEO  and  coordinating  committee  members  of  the  Pilot  VDCs/Municipalities,  for  their  equally 
valuable information support, experience sharing and hospitality.  

Our thanks go also to the District Chiefs of Central Line Agencies, the Technical Social Mobilizers and the 
Community  Group  Representatives  for  information  and  experience  sharing  and  for  their  active 
participation in the pilot‐testing activities. We are very grateful to also the chairpersons and officials of the 
ADDCN, MuAN and NAVIN for sharing their invaluable views and insights.  

Finally, we wish to thank Mr. Prithvi Raj Ligal, Team Leader of the Study Team for his ably leading the 
team  and  other  members  Mr.  Jagdish  Gautam,  Mr.  P.R.  Gautam,  Dr.  Devendra  Shrestha,  Mr.  Ramesh 
Adhikari  and  Dr.  Bidya  Nath  Koirala  for  their  proactive  contribution.  We  wish  to  also  thank  Mr.  Prajol 
Shrestha,  Executive Director  and  Mr.  Rajiv  Adhikari,  Mr.  Atul  Shrestha  and  Mr.  Sagun  Shrestha,  Project 
Coordinators  of  TMS  for  their  proactive contribution  and  Mr.  Bigya Bajracharya,  Mr.  Nischeet Maharjan 
and Mr. Rajkumar Maharjan for their all round assistance in making the assignment a success.  

Padma Lal (P.L.) Shrestha 

Chairperson, Total Management Services  

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Abbreviations and Acronyms

ADB Asian Development Bank LBFAR, 2056 Local Body (Financial

ADDCN Association of District Administration) Regulation, 2056
Development Committees of Nepal (1999 AD)
AGO Auditor General's Office LBFAR, 2064 LBFAR, 2064 (2007 AD)
ASC Agriculture Service Center LBFC Local Bodies Fiscal Commission
CBOs Community Based Organization LBs Local Bodies
CDO Chief District Officer LBSC Local Bodies Service Commission
CEOs Chief Executive Officers LDO Local Development Officer
CLA Central Line Agencies LDTA Local Development Training
Academy
CMS Community Managed School
LGCDP Local Governance and Community
COs Community Organizations
Development Program
CRC Citizen’s Report Card
LSC Livestock Service Center
DADO District Agriculture Development
LSGA Local Self Governance Act, 2055
Office
(1999 AD)
DAGs Disadvantaged Groups
LSGR Local Self Governance Regulation,
DAO District Agriculture Office 2056 (1999 AD)
DDC District Development Committee LSSC Livestock Service Sub Centre
DDF District Development Fund MAN Management Association of Nepal
DIMC Decentralization Implementation MIS Management Information System
Monitoring Committee
MoES Ministry of Education and Sports
DIAP Decentralization Implementation
MoF Ministry of Finance
Action Plan2058 (2002 AD)
MoLD Ministry of Local Development
DLSO District Livestock Services Office
MuAN Municipal Association of Nepal
DMC District Management Committee
NAVIN National Association of VDCs in
DOLIDAR Department of Local Infrastructure
Nepal
Development and Agricultural
Roads NGOs Non-Governmental Organizations
DoLS Department of Livestock Services NPC National Planning Commission
DTCO District Treasury and Controllers' OPMCM Office of the Prime Minister and
Office Council of Ministers
DTO District Technical Office PPA Public Procurement Act, 2063
(2007 AD)
FCAN Federation of Contractor
Association of Nepal PPR Public Procurement Regulation,
2064 (2007 AD)
FCGO Financial Controller General Office
SMC School Management Committee
FNCCI Federation of Nepalese Chambers
of Commerce and Industry SWOT Strengths Weaknesses
Opportunities and Threats
GABR Government Allocation of
Business Rules, 2064 (2007 AD) TA Technical Assistance
GIS Geographical Information System TSMs Technical Social Mobilizers
GoN Government of Nepal UCs Users' Committee
GRDCP Governance Reforms and UGs Users' Group
Decentralization Cluster Program UDTC Urban Development Training
ICT Information and Communication Center
Technology UNCDF United Nations Capital
LAA Local Administration Act, 2028 Development Fund
(1971 AD) VDC Village Development Committee
LBAs Local Bodies Associations VDF Village Development Fund
VDP Village Development Program

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Executive Summary 
I. Contextual Background
1.1 Context and Objective
1. Governance reforms in Nepal have centered on reorganizing central administration and improving
its relationships with local administration, which presently, is composed of five development regions, 75
district development committees (DDC), 58 municipalities and almost 4000 village development
committees (VDC). Plans for good governance in Nepal have had aimed at (i) inclusive and participatory
governance, (ii) effective public service delivery, (iii) improved government accountability and
transparency, and (iv) accelerated decentralization. Such a government policy and strategy is practically in
full alignment with ADB's country assistance strategy for Nepal.

2. In a context like this, the overall goal of this TA on Preparing Governance Reforms and
Decentralization Cluster Program I (GRDCP TA No. 4834-NEP) has been to enhance local governance for
inclusive service delivery and poverty reduction by ensuring that the rural poor, in particular, have better
1
access to services in agriculture and rural infrastructure sectors . The intended outputs of the study are: i)
review of service delivery protocol at the central level; ii) assessment of service delivery needs at local
level and iii) pilot-testing of measures for service delivery improvement and making recommendations for
replication.

1.2 Approach and Methodology

3. In line with the TA's intended focus on local service delivery in partnership with local community
groups while also targeting governance at all levels, the study followed a three pronged methodology
consisting of three successive methodological stages, namely (i) the identification of binding constraints
and gaps in service delivery and ideation of measures to overcome the constraints, (ii) the pilot-testing of
new ideas/approaches for improving service delivery and (iii) learning lessons of experience from pilot-
testing and recommending replication measures for better service delivery at grass-roots level.

4. Accordingly, besides reviewing the relevant laws, rules, regulations, operating procedures and
modalities of service delivery in local people's vital registration, certification, and minor dispute settlement
and in the devolved services of agriculture and rural infrastructure sector, it has also reviewed mandates
and capability of the concerned central line agencies (CLA) and the Local Bodies (LBs) at the grass-root
level as well as intermediate governance actors like the Local Bodies' Associations (LBAs), relevant to
local peoples participation in local development governance.

1.3 Other TA Activities

5. During the TA, the approach taken for pilot testing service delivery improvements and initial
findings of the pilot testing done was shared with the ADB team fielded for preparing the Local Governance
and Community Development Program (LGCDP) so that relevant experiences could be used in the design
of the LGCDP.

6. Also, a study tour was organized for high level GoN officials to observe good governance practices
and service delivery models in the State of Andhra Pradesh in India. The participants observed good
governance practices in the State besides learning about the State’s governance reforms initiatives
through interactions with and presentations from resource persons.

1
Rural infrastructure sector replaced education sector during the study period.

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II. Decentralization/Devolution: Legal/Institutional and Operational

Framework
2.1 Achievements in Legal/Institutional Framework for Decentralization
7. The half-hearted initiatives at decentralization during the 1960-1990 period of party-less Panchayat
regime and the fifteen year period (1991 - 2006) of multi-party constitutional monarchical democratic
experience in Nepal saw several initiatives at decentralization and local governance. A landmark
achievement has been the enactment of the Local Self Governance Act (LSGA) 2055 (1999 AD), as also
the constitution of the Decentralization Implementation Monitoring Committee (DIMC) under the Chair of
the Prime Minister.

8. Another praiseworthy initiative, which was a direct positive fallout of the LSGA has been the 5 year
Decentralization Implementation Action Plan (DIAP) 2058-2063 (2002-2007 AD) which aimed at i)
strengthening capacity of the Ministry of Local Development (MoLD) and the National Planning
Commission (NPC) to plan for enhancing democratic decentralized governance, ii) strengthening
institutional programming, management and governance of DDCs and VDCs to effectively implement their
mandates, roles and responsibilities defined in LSGA, and iii) supporting operationalization of Village
Development Programs (VDP) by using social mobilization techniques.

9. Implementation of decentralization however, was not sufficiently enthusiastic, and performance

has been considerable but largely lack-luster. Presently, the LSGA, together with the out-dated Local
Administration Act (LAA) 2028 (1971 AD) as amended fourthly latest in 2058 (2002 AD), remain the
prevailing principal legal-institutional mandates governing local administration and local governance in
Nepal.

2.2 Continuing Issues, Gaps and Challenges in Decentralization

10. Despite the reasonable achievements in public awareness about good governance and
implementation of local self governance, there are continuing gaps and challenges that call for attention.
They belong in matters of constitutional, legal-institutional framework and policy, plans and procedural
arrangements for decentralization.

A. Constitutional Commitments and Enabling Laws

11. A fundamental constitutional issue of highest importance, in the dramatically changed current
political context of Nepal, is the major issue of the criteria for defining and structuring federalism by
dividing, as it were, the existing unitary State into a number of smaller states or provinces to be declared
constituting the Federal Republic of Nepal

12. Also, while the constitutional delegation of authority for conducting Government business calls for
improvements in terms of balance in power or authority with responsibility and accountability in
governance, the design and specification of business allocations in the Government Allocation of Business
Rules (GABR) 2064 (2007 AD) too, call for improvements by way of a redesign based on a systems
approach to governance.

13. Gaps continue in legal-institutional framework of LSGA and in the 22 of the 23 earlier sectoral laws
continuing to be in conflict with the LSGA.

B. Planning and Plans

14. In the area of planning, gaps include absence of a real strategic planning, as different from just an
action plan like the Decentralization Implementation Action Plan (DIAP) of 2058-2063 (2002-2003 AD),
performance of which remain un-reviewed and un-acted upon till now by the Decentralization
Implementation Monitoring Committee (DIMC) which by rule is required to meet annually under the Chair
of the Prime Minister.

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C. Institutional Structures & Capacity
15. Gaps in this area relate to the terms of relationship between the Government and the LBs defined
under Article-1, Part-5 of the LSGA whereby power of government is still dominantly retained by the Center
through either restrictive or constrictive provisions in the LSGA in matters of institutional structure,
functional and budgetary allocation, staff recruitment, employment and secondment etc.

D. Fiscal and Financial/Fund Flow Management

16. In the area of fiscal and financial management, Local Bodies continue to lack leadership and
management not only in innovations in resource mobilization but also in mobilizing known or assigned
sources of revenue, and in the management of financial accounting & auditing. Further, the Local Body
Fiscal Commission does not appear to be independent and effective enough to support LBs with increased
shares and sources of revenues.

E. Procurement and Supply Chain Management

17. Procurement administration problems of the LBs have been eased considerably by the recent
issuance of a comprehensive Local Bodies Financial Administration Rules (LBFAR) 2064 (2007 AD) in
place of the earlier LBFAR 2056 (1999 AD). However, gaps continue to remain in respect of the LBFAR
2064 failing to address the supply chain management perspective in its design. Also the will and capacity
to manage local procurement and assets inventory duly, transparently and accountably still remain a
problem.

F. Information, Communication and Documentation

18. Information and communication which is a very important aspect of management or governance
continues to be ignored, in practice, both by central line agencies (CLAs) and LBs in respect of both
internal and external communication. Documentation of management system and control of documents are
even more ignored, at huge costs of economy, efficiency, transparency and accountability in governance
and public service delivery.

G. Monitoring Quality and Effectiveness of Service Delivery

19. Because quality standards of service realization and delivery are largely undefined and ignored,
cost effectiveness, coverage and quality of public service delivery and use of scarce resources of public
bodies remain largely poor.

H. Top Government Review

20. The fact that a top government body like the DIMC very boldly and rightly provided for in the LSGA
failed to sit in its annual review meeting since after the year 2058 (2002 AD) is a singular example of
serious top governance-deficit in Nepal which, hopefully, emerging new Nepal will not only correct early but
also learn not to default in future.

III. Service Delivery in Agriculture

3.1 Mandates, Policy and Protocols
21. Ministry of Agriculture and Cooperatives (MoAC) is the lead Ministry that is mandated to perform
all government functions of policy, planning and programming in agriculture, livestock and fisheries
development; agriculture research and trainings, agriculture extension; generation and transfer of
technology, development of norms, standards, regulation and certification of agriculture inputs; operation
and regulation of veterinary and quarantine, and supervision and monitoring their implementation.

22. Agriculture sector is guided by three long-term plan, policy and strategy that came into force in last
one decade. The 20-year Agriculture Perspective Plan (APP, 1995-2015), adopted a strategy to promote
outputs in horticultural crops, livestock products and selected food crops for achieving an annual growth
rate of 3.5% in Agriculture Gross Domestic Product (AGDP) during the 20 years plan period covering the

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9th to 12th Periodic Plans. To drive the engine, the strategy gave emphasis on technology, rural
electrification, fertilizers, irrigation and agriculture roads.

23. The National Agriculture Policy (NAP), 2061 (2004 AD) was formulated to further the gains of APP
with an objectives to enhance agricultural production and productivity by promoting competitiveness in the
regional as well as world markets through developing commercial and competitive agriculture and
conserving and promoting use of natural resources, environment and biodiversity. The policy gave
emphasis to productivity gains by adopting suitable technology, devolving authority to LBs and
encouraging women to participate in agricultural activities. Besides, the policy emphasized promoting
cooperatives for commercial production and marketing, encouraging public–private partnerships and
improving land resources management through enacting appropriate legislation with involvement of local
bodies.

24. Agriculture Extension Strategy (AES) 2063 (2006 AD), as a follow through of the NAP 2061,
emphasized output oriented agriculture extension services with a central focus on the needs of the poor
and disadvantaged farmers and also the farmers and entrepreneurs of different categories on participatory
basis. The approach gave importance to the use of simple audio-visual communication technologies for
agri-extensions and encouraged partnerships with CBOs, NGOs and private sector in agriculture extension
by limiting the role of public sector mostly as facilitator and regulator.

25. Within these long-term policies and plans the Three Year Interim Plan (2008–2010) aims to
modernize and commercialize the agriculture sector, by following a strategic objective of achieving broad
based, gender inclusive and sustainable growth in agriculture.

26. Devolution of Agriculture Extension Livestock Services to DDC was implemented in 2002, as per
the “Guidelines for the Implementation of Devolved Agriculture Sectoral Programs 2059 (2002 AD)”. The
Guidelines 2002 have defined the roles and functions of different CLAs under the MoAC to support the
implementation of the devolved programs, as well as to provide agriculture and livestock services to
beneficiaries at local level. Except for routing agriculture related budget through District Development Fund
(DDF) to district agriculture/livestock offices under devolution, all other programs, personnel, financial,
technical and administrative matters are controlled by the District Agriculture Development Office (DADO)
of the Department of Agriculture (DoA), and District Livestock Services Office (DLSO) of the Department of
Livestock Services (DoLS).

3.2 Organizational Capacity and Business Process

27. Although staffed with a large pool of skilled manpower and institutional networking to grass-root
level, there are many gaps and issues in the services rendered by the MoAC. Absence of an effective
operating system of policy research, analysis and continual improvements in the system; non-clarity in the
delineation of functions between the central and local level, ineffective coordination and lengthy decision
making process; top heavy structure at the department level; weaknesses in developing suitable
technology and dissemination of new technology; inadequate reach of extension services, poor
infrastructure facilities and budgetary allocation to ASCs and LSCs are the key gaps and issues in the
sector.

28. Manuals and guidelines specify the roles, responsibility and accountabilities at different levels of
CLAs and of the LBs. Regional Directorates of Agriculture and Livestock are responsible for providing
technical backstopping to the district level offices. District level offices of agriculture and livestock are
responsible for planning and implementing all district level programs. However, the Ministry and
Departments at the Center suffer from lengthy decision making process.

29. DADOs and DLSOs prepare the district level annual programs on agriculture with consultative
participatory meetings organized by DDC to fine tune them. Such programs mainly deal with agriculture
and livestock extension services, and to a certain extent, marketing and institutional support. While
preparing these programs nationally prescribed operational strategies like Pocket Package Strategy (PPS)
and Group-based Extensions are closely followed. However, non-synchronization of district programs
between the CLAs and LBs has been a major problem in agriculture and livestock services at the district
level.

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3.3 Service Delivery Gaps

30. Baseline public perception surveys showed very few respondents having participated in agriculture
and livestock extension program/activities and very few farmers participating in regular
extension/dissemination programs. Also, the quality/standards of services provided are felt not satisfactory
by a large proportion of service recipients.

31. DDC and the VDC are not financially participating with even token investments in building such
infrastructures, except in certain isolated cases like the one at Sisuwa in Kaski where the local people and
the Municipality/VDC were joining in investment of funds for building service centre, thereby building their
sense of ownership.

3.4 Reforming for Better Service Delivery

32. Reform measure recommended to strengthen institutional and management capacity at central
and local levels include reformulating businesses allocated to MoAC in the GABR, defining services quality
standards and integrating CLA and DDC agricultural services planning; rational restructuring of the top-
heavy Department of Agriculture into appropriate specialized agencies; enabling agri-extension services to
be responsive to the needs of both grass roots level disadvantaged farmers as well as the technologically
more sophisticated entrepreneurial farmers; promoting DDC ownership of district level development plans
through DDC financial participation; strengthening information, communication and documentation as well
as due monitoring of agriculture devolution implementation; and above all, installing a top government
review mechanism within the MoAC to secure effective implementation of policy, plan and institutional
reforms.

IV. Service Delivery in Rural Infrastructure

4.1 Institutions, Policies and Plans
33. The Ministry of Local Development (MoLD) is the Central Line Ministry responsible for local
infrastructure development besides local governance. Department of Local Infrastructure Development and
Agricultural Roads (DoLIDAR), under the Ministry, is the CLA mandated to provide technical backstopping
to and supervision of all construction activities at the local level. The district offices of DoLIDAR, namely,
District Technical Office (DTO) carries out and supports development activities in all construction works of
the LBs, through its office located within the DDC premises.

34. The devolution of district level infrastructural programs, particularly small irrigation and drinking
water programs, and rural roads including agriculture roads etc. from the central government to the DDC
substantially increased the volume of the district level infrastructure programs and thus justified a capable
technical office of the DDC on its own. Organizational relocation of DTO from the DDC to the DoLIDAR, in
such a situation, raises this issue as challenging the basic spirit of decentralization.

35. Recognizing gaps in implementing LSGA and its associated rules and regulations on account of
(i) lack of long term vision, (ii) non-devolution of the local infrastructure related functions to the LBs, (iii)
lack of a clear enough concept on rural and urban infrastructure, Government declared and brought to
effect the Local Infrastructure Development Policy (LIDP), 2061 (2004 AD).

36. Rural Infrastructure Reconstruction and Rehabilitation Plan, 2007 (RIRRP) under the Three Year
Interim Plan (2008-2010), aimed to rebuild and reconstruct the conflict-damaged/destroyed infrastructures
and to complete planned infrastructure development activities which could not be accomplished due to
conflict. RIRRP covers seven sub-sectors, of physical infrastructures such as: (i) roads and bridges; (ii)
water supply and sanitation; (iii) irrigation and river training; (iv) rural electrification; (v) communication; (vi)
buildings/physical facilities; and (vii) civil aviation facilities.

4.2 Business Process and Gaps

37. LSGA and related regulations require LBs to be responsible for formulation, implementation and
operation of infrastructure development at the local level as well as use of Users Committees (UCs) for

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implementation of construction at beneficiary group level. Similarly, the LIDP, 2004 clearly requires that the
construction work shall be done through UCs, local NGOs and CBOs depending upon nature, size, and
technology involved. Only works which are technically complex in nature are to be done through
procurement contracts.

38. The instrument of UC has been an effective approach for LBs to undertake small local construction
works. The advantages of the approach are the increased local ownership and accountability, use of local
labor, reduced costs, etc. The UC approach has been found working effectively in the remotest of VDC in
the country, even in the insurgency situation. In the remote areas, private sector contractors are either non-
existent or unwilling to undertake too small-scale public or community works, for obvious reasons of
profitability.

39. Because of success of UCs at beneficiaries' group level by ensuring completion of the local rural
infrastructure project in time and within cost, more and more communities at the grass root level are
demanding such approach for rural infrastructure construction. However, anomalies, such as, formation of
UCs without including beneficiaries, contracting out their works by UCs, and the lack of technical and
administrative knowledge e.g. of government rules and regulations, accounting etc. among the UC
members, and frequent political interference in the formation of UCs and in allocation of funds are
emerging problems in the use of this, otherwise, very effective tool.

40. Household (HH) survey conducted to gauge citizen’s perception on satisfaction or dissatisfaction
with participation in the planning service realization and delivery concerning rural infrastructure showed
almost 50% people having participated in the plan formulation meeting, 75% people having taken part in
budget formulation meeting, and more than 90% participated in fund collection and monitoring and
evaluation meeting. Community perceptions on service delivery showed more than 75% respondents
satisfied with service delivery by LBs.

4.3 Reforming for Better Service Delivery

41. Reform measures recommended to strengthen institutional and management capacity at central
and local levels include re-formulating businesses allocated to MoLD in the GABR; providing enabling laws
specific to private sector participation in rural infrastructure development; sensitizing DoLIDAR to extend its
techno-engineering focus to also social-engineering need; designing Users Committee (UC) structure and
procedure to be demonstratively beneficiary-centered and beneficiary-involved, corruption-free and
politically neutral; improving information and communication linkage between and among CLAs, their
district offices, DDCs, Municipalities and VDCs and installing a top government review mechanism within
the MoLD to secure sustainable effective implementation of policy, plan and institutional reforms.

V. Service Delivery in Governance

5.1 Institutional Mandates & Capacity
a) Central Level Institutions
42. Ministry of Local Development (MoLD) is the principal central institution mandated to frame policy,
legal-institutional framework and to implement decentralization and devolution of governance functions to
local level. MoLD's role embodies the twin facets of local governance namely, local development
governance and decentralized service delivery. As a facilitator and coordinator of local development and
decentralization/devolution, it coordinates the functioning of local bodies as well as the relationships of
local bodies with other line agencies, both at the centre and at the grass-root level.

43. MoLD has, besides five divisions within the Ministry, one Department of Local Infrastructure
Development and Agricultural Roads (DoLIDAR), one Local Development Training Academy (LDTA) with
five Village Development Training Centers, two Women Development Training Centers and one Urban
Development Training Center located in various regions of the Country.

44. Other associated institutions include Decentralization Implementation Monitoring Committee

(DIMC), Local Bodies Finance Commission (LBFC) plus one Remote Area Development Committee and

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one Gumba Development Committee. The Ministry has altogether 127 staff plus 76 positions in DoLIDAR
comprising mostly engineers and agronomists.

b) Local Level Institutions

45. LSGA mandates DDC and Municipality/VDC as Local Bodies, rather than as local self-governance
organizations. It defines the functions, responsibility and authority of the Village, Municipal and District
Councils as respective governing bodies; VDC, Municipal Board and DDC as executive bodies; and VDC
Chairman, Mayor and DDC Chairman as respective Chief Executive Officers (CEOs). The Act has
assigned 16 different tasks to DDC, 10 to Municipality and 11 to VDC.

c) Meso-level Institutions
46. Three key meso-level or intermediate level actors that have been pro-active in advocating and
promoting local self-governance in Nepal have been the Local Bodies Associations (LBAs) such as the (i)
Association of District Development Committees of Nepal (ADDCN); the (ii) Municipal Association of Nepal
(MuAN); and the (iii) Association of Village Development Committees of Nepal (NAVIN). They have been
instrumental in drafting the LSGA and LSGR, formulating the 5-year DIAP, recommending the formula
based distribution of Central Government conditional and unconditional grants to and revenue sharing with
LBs, establishment of the LBFC etc. However, unsustained institutional capacity and resource base on one
hand and failure to maintain political neutrality in its works on the other hand are reported to be
constraining their institutionalization as LBAs effectively serving and supporting their member LBs.

5.2 Business Process

47. LSGA, LSGR and LBFAR provide policy and procedural guidance for involving key stakeholders in
a 14-step participatory planning and programming process. However, there are reports that in practice the
participatory planning process has become just a ritual without much participation of people, thereby
raising question whether annual plans are responsive to felt local needs. Coordination between CLAs and
DDC in the planning and implementation is ineffective. Planning cycle of the CLAs and LBs are not
synchronized. Vital information such as budget ceiling, guidelines and directives from MoLD and CLAs are
not communicated in time to the DDCs.

48. Fund flow mechanism introduced in 2003 has been the key process followed, until recently, in
releasing fund from center to district level offices and to different levels of LBs. The recently promulgated
Local Bodies Financial Administration Rules (LBFAR) 2064 (2007 AD) has enabled budget release of
unconditional grants directly from MoF to Local Bodies. Fiscal powers entrusted to LBs to raise revenue,
however, suffer from the problem of limited authority as well as overlap and duplication. A number of
revenue sources are shared between levels of government. Certain revenues are shared by the center
with DDC while others are shared between LBs.

49. Reported financial and personnel business process bottlenecks include: trimester budgetary fund
release process requiring submission of complex supporting documents for each trimester release
resulting in avoidable undue delays, and equally time taking personnel and financial administration
procedure for deputation of persons, payment releases for construction works done, internal and external
audits etc.

50. Enabled by the Public Procurement Act (PPA) 2064 (2007 AD) and Public Procurement Rules
(PPR) 2064 (2007 AD), Government corrected the gaps of LBFAR 2056 (1999 AD) by issuing a more
comprehensive LBFAR 2064 (2007 AD), which, however, still remains to address important aspects of
supply chain management such as in-bound and out-bound logistics and inventory management.

5.3 Ensuring Marginalized and Disadvantaged Groups' Access to Public

Services
51. Despite the seeming recognition of the situation and the need, the marginalized and socially
disadvantaged indigenous sections of Nepal's population continue to remain outside of public services
delivery network. The way to tackle this issue lies in specifically targeted programs through and by the

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VDCs by ensuring engagement and participation of these groups in grass-roots community development
programs that are truly community-centered and community-involved.

5.4 Reforming Governance Structure and System

52. Recommendations have been made covering a whole range of issues concerning governance
reform and decentralized service delivery. They include (i) reforms in constitutional commitments and
delegations in the new constitution being drafted by the Constituent Assembly; (ii) reforms in the
Government Allocation of Business Rules (GABR) 2064 (2007 AD), the Local Administration Act (LAA)
2028 (1971 AD), and the LSGA 2055 (1999 AD); (iii) strategic decentralized governance planning and
implementation of an "action cum training oriented Local Governance and Community Development
Program; (iv) redefining the institutional structure and system of relationship between the central and local
government bodies, including reforming the Local Development Training Academy (LDTA) and the Urban
Development Training Center (UDTC), and strengthening the Local Bodies Associations (LBAs) as
effective intermediate level decentralized governance advocates; (v) enabling Local Bodes to build their
financial infrastructure capacity and financial resource base; (vi) further improving the new PPA 2064
(2007 AD) and the new LBFAR, 2064 (2007 AD) by addressing also the logistics and asset inventory
management aspects of procurement and supply chain management; (vii) introducing a modicum of
management system documentation and document control in governance; and, above all, (viii) mandatory
top government monitoring and review of decentralization/devolution plans and policies.

VI. Pilot-testing Service Delivery Improvements

6.1 Approach to Pilot-testing
53. The approach followed, subsequent to a baseline public perception survey on service delivery by
LBs and CLAs, comprised: (i) selecting the "change ideas" for service delivery improvement as well as the
DDCs (5), VDCs (5) and Municipalities (3) for pilot-testing; (ii) agreeing on modalities for implementing
proposed pilot-tests, and (iii) implementing the pilot-tests and drawings lessons and recommending
replication. This approach was based on also findings from a rapid pubic perception survey of services
delivered by CLA district offices and LBs as well as field level interactions with stakeholder groups.

54. The design of pilot-testing included formation of an inclusively representative coordination

committee, upgrading of VDC Secretary to Non-gazetted class I level, recruitment of Technical Social
Mobilizers (TSMs), establishment of a Poverty Alleviation and Social Upliftment Fund (PASUF), formation
of service recipient groups, and use of Citizen's Report Card (CRC) for evaluating performances.

6.2 Pilot-testing Ideas/Changes for Service Delivery Improvement

a) Governance Service at Grass-roots Level
55. Pilot-testing in governance at VDC level included establishment of Help Desk/Public Relation
Desk, updating and posting of Citizen's Charter in LB premises, establishment of NGO desk,
computerization of vital registration and certification system, training for capacity building and office
infrastructure and an initial operational support to VDCs.

b) Agriculture & Livestock Services

56. Pilot-testing in this area included projecting ASCs/LSCs as competent technical information cum
testing service centers for agricultural and livestock services by equipping them with testing equipment and
supplies, support with basic infrastructures including ICT, establishment of twenty four/seven (24/7)
veterinary drug service, supporting training of agriculture and livestock extension service workers, and
formation of agriculture and livestock groups with technical backstopping by ASC/LSC technical personnel.

c) Rural Infrastructure Services

57. Piloting of rural infrastructure was targeted at alleviating poverty and improving livelihood of the
poor and the disadvantaged community. Accordingly, ideas or initiatives tested included two aspects. One
was construction/renovation and maintenance of shelter infrastructure facilities e.g. small community

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drinking water system and sanitation, especially construction of the household toilet facility; and the other
was helping income generation and livelihood improvement of the poor and the disadvantaged
communities through provision of deep tube well support for off-season vegetable farming cum drinking
water.

6.3 Lessons of Piloting Experience and Suggestion for Replication

58. Recommendations for replication in the Governance services at local level included in the main (i)
making VDC the focal point for all development activities and making this work by upgrading the status and
authority of the VDC Secretary, supported by a staff complement of 4 assistants including a TSM, and
setting up an inclusively representative coordination cum monitoring committee to ensure VDC
effectiveness in both planning and implementation; (ii) introducing appropriate ICT-enabling in service
delivery, and (iii) using Citizen Report Card as an effective instrument for monitoring planning and
management of VDC development works and service delivery.

59. Similarly recommendations for replication in agriculture and livestock services included mainly (i)
strengthening ASCs/LSCs as effective technical testing cum information service centers in agriculture and
livestock extension services; (ii) encouraging DDC and VDC ownership of respective development plans
through financial contributions from their respective funds; and (iii) introducing smart public-private
partnership and networking in agriculture and livestock extension services to both the grass-roots level as
well as the small and medium agri-entrepreneurs.

60. Likewise, recommendations for replication in the rural infrastructure services included mainly (i)
making UCs politically neutral and more beneficiary-centered and beneficiary involved without the need to
sub-contract their works to visible or invisible sub-contractors; (ii) training UC members and (iii)
mainstreaming marginalized and disadvantaged communities in public service delivery network through
grant support in the area of community infrastructure development for healthy human shelter and income-
generating employments.

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CHAPTER I: THE CONTEXT, WORK DONE AND THE REPORT

1.1 The Context

1. Decentralization of most public service provision to local governments is a worldwide
trend. The experience so far is that decentralization reduces corruption in the service delivery
system and helps to improve public service delivery -- particularly in developing countries, where
central governments lack adequate local information necessary to monitor. The improvements in
service delivery, however, are a function of the services that are devolved, the extent to which
public administration and financial authority is devolved, and the degree of political accountability
of local government officials to the local residents.

2. Although the process of decentralization in Nepal has been ongoing since long, clear and
systematic process began only after the restoration of democracy in 1990. The Constitution of
Nepal 1990, in its Directive Principles of the State Policy, incorporated decentralization as "the
means for ensuring optimum participation of people in governance”. Promulgation of enactments
and regulations related to decentralization e.g. Local Self Governence Act (LSGA), 2055 (1999
AD), Local Self-Governance Rules, 2056 (1999 AD), Local Body (Financial Administration)
Regulation (LBFAR), 2056 (1999 AD) as well as the National Framework for Decentralized
Governance and Capacity Building (2002 AD) and Decentralization Implementation Action Plan
(DIAP), 2058 (2002 AD), with time bound actions to implement LSGA provisions, were some of
the important actions that demonstrated commitment of the government to local governance.
Some basic services such as, agriculture extension and livestock services, primary education and
primary health services were devolved to LBs and community management committee in fiscal
year 2002, and rural infrastructures such as small irrigation, community drinking water and rural
and agriculture roads in the year 2004. The Interim Constitution of Nepal, 2063 (2007 AD) spelled
out decentralization as a means to socio-economic development and service delivery at the grass
root level.

3. In spite of all these, the process of decentralization in Nepal, however, remained half
hearted in its planning as well as implementation. Fluid political situation, absence of elected
bodies for a long time due to local elections not held because of the country-wide escalating
insurgency are among the main reasons for such a slow paced decentralization. Devolution of
authority for service delivery at local level also remained confusing, inadequately prepared, and
central hesitation in parting with authority and finance. The practice of direct appointments of key
staffs in the LBs by the centre has caused dual loyalties among district level staffs and this has all
the more constrained smooth and sustainable functioning of the local bodies. These issues have
significantly affected the momentum of decentralization and public service delivery to citizens in
the country.

1.2 Objective and Scope of the Study

4. In line with ADB’s strategy for Nepal emphasizing support to poverty reduction, through a
combination of accelerated broad-based economic growth, inclusive social development, and
good governance, which is also in line with the Government’s priorities in governance reforms,
decentralization and effective service delivery, the overall goal of the present study is to enhance
local governance for inclusive service delivery and poverty reduction by ensuring that the rural

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poor, in particular, have better access to services in agriculture and rural infrastructure sectors2.
The scope of the study covered the following:
• An analysis of service delivery standards to serve as benchmarks for the program;
• Identify gaps between the unmet needs and lack of capacity at the central level agencies;
• Develop a realistic action plan for strengthening the capacity of central institutions and local
governments, as well as community-based organizations, to deliver better services (including
ways of increasing transparency and accountability, and reducing corruption in local service
delivery);
• Develop clear and achievable plans for effective decentralization (including monitoring
systems) in the rural infrastructure and agriculture sectors;
• Review and pilot test new approaches for improving service delivery and suggest for nation
wide replication; and
• Redesign tools (such as citizens’ report cards and public expenditure tracking surveys3) to
ensure that local service providers can be held accountable for their performances.

5. To achieve the above mentioned objectives and the scope of work, the study was
proposed and organized into the following four components:

A. Review Service Delivery Protocols in Central Bodies

6. This included review of institutional, financial and fiscal, business processes, and other
provisions of service delivery policy including devolution arrangements and provisions for the local
government service at the ministry and central agency level.

B. Assessment of Service Delivery Needs in Specific Sectors at the Local

Level
7. This included assessment of institutional, financial, and fiscal business processes, and
other provisions of sector-specific service delivery policy at the district and local levels. Specified
sectors were agriculture and education, which was later changed to rural infrastructure.

C. Improvement of Service Delivery Provisioning

8. Provisioning entailed building capacity of local governments, as well as community based
organizations, to deliver services effectively, and use of tools such as Citizen’s Report Card for
making service providers accountable for their performances.

D. Preparing GRDCP4
9. Prepare GRDCP report focusing on sustained governance reforms over the long term at
the central government level, and service delivery effectiveness at the local level.

1.3 Approach and Methodology

10. The study followed a three pronged approach represented by three interlinked blocks. The
first block deals with the identification of binding constraints on service delivery and the measures
to rectify these constraints. The second block deals with the pilot testing of new approaches/ideas

2
Rural infrastructure sector replaced education sector during the study period at ADB’s request.
3
Expenditure tracking of government scholarship program was dropped after dropping of Education sector.
4
As per the revised scope of work, designing of GRDCP for possible ADB funding was changed
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in service delivery and the the third block deals with lesson learning from the pilot testing and
replication to extend good governance and public service delivery nation-wide at local level with
improved transparency and accountability (see fig 1.1).

11. In line with the approach chosen, a step-by-step methodology was followed starting with
the first step of reviewing policies, acts and regulations, norms and standard as well as the
service delivery modality of the devolved tasks in agriculture and rural infrastructure. This included
also review of Government of Nepal Allocation of Business Rules, to understand the mandates of
the concerned ministries, their organogram and personnel strengths, fund flow mechanism,
monitoring and feedback system etc. related to delivering public services. This was followed by
consultations with different stakeholders namely, the political party representatives, line agency
officials at the ministry and department levels and grass-root level offices in the district, officials at
different levels of LBs, NGOs and COs. A series of workshops were held to discuss issues in-
depth; and household level baseline survey was carried out to understand public perceptions on
different issues of service delivery. Finally, alternative innovative ideas/approaches for improved
service delivery in the sectors were identified and designed for pilot-testing and the tests
implemented in the selected VDCs and Municipalities. Lessons were drawn from the tests done
and recommendations made accordingly for countrywide replication.

1.3.1 Review of Documents

12. Extensive review of all pertinent documents such as: LSGA, Local Self-Governance Rules
(LSGR) 2056 (2000 AD), LBFAR and GoN Allocation of Business Regulation (ABR) (2007 AD) as
well as some associated documents like Local Service Acts 2006 (draft), GoN Financial
Regulations and Procurement Laws and Regulations and associated administrative rules
governing current procurement practices was carried out in-depth. Reviews were done of also
available relevant policies, plans, procedures and guidelines.

1.3.2 Interaction Meeting

13. The study also included interaction meetings with key institutions involved in
decentralization and local governance. Interaction meetings included two sets: (i) central level
meetings and (ii) local level meetings. Central level meetings covered the relevant line ministries
and departments/agencies under them.

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Fig-1.1 Schematic diagram of Approach and Methodology Followed

Enhancing Local Governance for

inclusive service delivery and poverty
reduction

Identification of binding Pilot-testing innovative approaches Enhancing good governance at local

constraints and reforming measures on service delivery provisioning level- transparency & accountability

Identifying Constraint Participation of political Citizen’s Report Cards

in Service Delivery representatives, NGO/CBO,
gov agencies and voiceless in
decision making

Public Expenditure
Capacity Protection of Tracking Survey*
Enhancement vulnerable groups

Citizen Charter
Local government Social Inclusion

Induction in decision
Meso level institutions making body Partnerships with civil
(MuAN, ADDCN, society-NGOs/CBOs
NAVIN)
Fund for poverty alleviation
and social upliftment programs Strengthening user‘s
LDTA and other local committees
body training centers
Skill training and special
income generating programs
Participation of stake
NGOs/ CBOs holders in
Technical social programming
mobilizers

Better financial control

Government agencies Fund flow and and audit system
financial reporting

Support for physical Transparency in

Business process service provisioning
infrastructure and
reengineering
capacity
enhancement

Targeting service
delivery in Local Level planning
municipality, DDC, and budgeting
and VDC services
Use of ICT in service
delivery

* Used for tracking scholarships (education) at the grass root level but dropped later.
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14. At the local level, interactions were carried out with officials of the district line agencies of
the devolved services e.g. District Education Office (DEO), District Agriculture Development Office
(DADO), District Livestock Office (DLSO), District Technical Office (DTO), Agriculture and
Livestock Service Centre (ASC and LSC) offices and District Treasury Controllers Office (DTCO).
Interaction meetings were conducted also with local non-governmental organizations (NGOs),
community based organizations (CBOs) and Civil Society Groups including Women’s Groups to
discuss and explore their role in the service delivery at the grass-root level.

1.3.3 Workshops
15. Two separate workshops were organized: one among the stake holders at the centre and
another with the representatives from the major political parties in the country. The objective of
the stakeholders’ workshop was to sensitize participants about the GRDCP TA and seek their
views in designing programs for better service delivery. The objective of the second one was to
understand the views and position of each political party on the wider issues of governance and
decentralization and service delivery improvements in the changed political context of federalism
for restructuring Nepal's governance system.

1.3.4 Thematic Group Formation

16. Five thematic groups, each comprising 5 to 6 members, were formed to interact on
thematic topics and to obtain their professional advice on matters of thematic interest. The group
meetings were convened at different stages of the study -- at the initial review stage, planning
stage, designing stage and lastly at the piloting stage. Thematic groups were formed on themes
indicated below (Details are included in Annex 1.1 of the Annex Volume):
• Agriculture;
• Livestock;
• Education;
• Governance and Decentralization; and
• Fiscal Administration.

1.3.5 Interaction with Local Bodies (LBs)

17. An in-depth interaction with the LBs namely, DDC, Municipalities and VDC was carried out
to assess the service delivery needs and institutional capacities of the LBs. These interactions
examined the institutional, financial and fiscal business processes and other provisions of service
delivery policy at the district and local levels. It also examined the current status of procurement
laws, regulations and associated administrative rules and their implications on decentralization.
Eight DDCs, nine Municipalities and twenty four VDCs (Three from each district) representing
mountain, hill and terai districts of the five development regions were selected and visited for in-
depth interactions.

1.3.6 SWOT Analysis

18. SWOT analysis of LBs (DDCs, Municipalities and VDCs including few pilot municipalities)
was conducted. Besides, LBAs (ADDCN, MuAN & NAVIN) strengths, weaknesses, opportunities

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and threats were analyzed. SWOT analysis was carried out also of the MoLD and MoAC including
of service delivery outlets in agriculture and livestock (ASC, LSC).

1.3.7 Base Line Survey

19. A base line survey was carried out in selected districts to collect baseline data on the
status of service delivery for identifying areas of improvements. Households for the baseline
survey were selected from the catchment area of sampled community schools and agriculture and
livestock service centres/sub-centres of the selected districts. During the baseline survey, the
Service Providers’ (school teachers and School Management Committee (SMC) in the case of
education and officials of the service centres in the case of agriculture) were interviewed in-depth
to assess and identify gaps in their institutional capacity for effective service delivery. (Details are
included in Annex 1.2 of the Annex Volume)

A. Selection of Districts
20. A total of 8 districts as shown in table 1.1 below were sampled for baseline household
survey. Districts were selected to represent both geographic-administrative and ecological
regions of the country. Six of the selected districts were the ones which GoN had selected for full
devolution with effect from FY 2005/06.

Table 1.1: Sampled Districts

Development and Ecological Selected for Justification for selection
Region Sampling
District
Eastern Development Region Non-pilot district for full devolution
Mountain Solokhumbu Represent mountain district
Terai Morang Resource rich district
Central Development Region
Hill Bhaktapur Represent the hill district from central region
Western Development Region
Hill Kaski Resource rich district
Terai Rupandehi Some innovative program launched
Mid-Western Development
Region Jumla District with low HDI ranking
Mountain Dailekh Low HDI and selected for full devolution
Hill
Far-western Development Represent one single district of the far
Region Kanchanpur western region
Terai Citizen’s Card pilot district

B. Sampling Design and Sample Size

21. The sample frame for the baseline survey on education was the number of Community
Managed Schools (CMS) i.e. schools whose management has been transferred to School
Management Committee (SMC); and Agriculture and Livestock Service Centres and Sub Service
Centres (SSC) of the selected districts. However, at the later stage of the study "education" was
dropped and replaced by "rural infrastructure" sector. For random sampling of schools before this
change took place, 25 % each of the CMS and aided community school were selected. In Jumla
district, however, where transfer of school management to the community has not taken place, a

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minimum of 5 aided community schools were sampled. This resulted in a total of 127 schools
sampled (61 CMS and 66 aided community schools). In the agriculture sector, 11 ASC and 29
LSC/SSC were selected for baseline study depending on the prevalence of the pocket and non-
pocket program in the districts. Table 1.2 below shows the details.

C. Household Survey
22. The nature of the study demanded both demand and supply side of service delivery -- i.e.
the institutional capability in delivering quality services as well as the demand for such services.
This was strongly felt by the study team as well as the ADB. A total of 1000 households, 125 from
each selected districts irrespective of the size of the district were selected to assess beneficiary’s
perspective on the satisfaction of services delivered from the service outlets. Households were
sampled by the catchment areas of the sampled school/agriculture and livestock service centre as
these households were the beneficiaries of the services rendered.

D. Survey Instruments
23. Baseline/Household survey questionnaires and necessary checklists were developed.
Survey questionnaires and checklists were pre-tested in one non sampled district. Survey
instruments were finalized based on the feed back from the pre-test.

Table 1.2: Number of CMS, ASC & LSC and the Sample Allocation by Selected
Districts
No. of
Sample No of Sample Sample
Livestock
No of allocation Agri. allocation allocation
District Service
CMS * (25% of Service (25% (25%
Center
total) Center of total) of total)
and SSC
Solokhambu 9 2 4 1 12 3
Morang 111 28 4 1 17 4
Bhaktapur 18 5 6 2 11 3
Kaski 78 20 6 2 14 4
Rupendehi 14 4 4 1 18 4
Dailekh 6 2 6 2 12 3
Jumla 0 0 4 1 15 4
Kanchanpur 9 2 4 1 18 4
Total 245 61 38 11 117 29

Source: DOE, DOAC and DOLS * Community Managed Schools (CMS) are those where school management has
been transferred to local community through SMC; SSC

1.3.8 Pilot-test Program

24. With a view of testing the appropriateness of new ideas/concepts in improving service
delivery (both in terms of improving awareness about the service and ease in receiving quality
service without any hassle), a pilot program was carried out in five of the eight surveyed districts.
From each district, one VDC and one Municipality were selected for pilot testing.

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1.3.9 Dissemination Workshop

25. A dissemination workshop was held to share the study findings and lessons learned from
the pilot program and to get comments and suggestions from the participants. All major
stakeholders, including representative from the donors’ community supporting in decentralization
and representatives from pilot VDCs/Municipalities participated in the dissemination workshop.

1.4 Other Activities during the TA

26. A separate Decentralization Sector Report was submitted to ADB as part of the TA
besides the inception report and two interim reports detailing the reviews of government policies,
enactments and rules as well as the detail findings of the baseline household survey and
interactions at the centre and grass root level. There were two other activities performed during
the TA:

A. Input/Support to LGCDP Preparation

27. The approach taken for pilot testing service delivery improvements and the initial findings
of the pilot testing done was shared and discussed extensively and intensively with the ADB team
preparing Local Governance Community Development Program (LGCDP), a program under
MoLD which is being supported by a pool of development partners including the ADB. The initial
lessons learned from pilot testing new approaches in service delivery under the ongoing GRDCP
TA, specially setting up an inclusively representative coordination cum monitoring committee to
ensure VDC effectiveness in planning as well as implementation, upgrading the status and
authority of VDC Secretary and the merit for such upgradation, provision for Technical Social
Mobilizers, introducing appropriate ICT-enabled service delivery, training of VDC personnel,
establishment of a separate fund for poverty alleviation and social upliftment, need for more social
inclusion of the marginalized and socially disadvantaged groups, and issues and measures to
strengthen User's Committee approach in grass root level infrastructure development activities
etc. were discussed in great detail. It was also recommended that the piloted VDCs be included in
the first phase of LGCDP program implementation, since baseline for such programs were
prepared by the study team during piloting.

B. Study Tour of Government Officials

28. As part of the GRDCP TA, a study tour was organized for high level GoN officials (2
Secretaries, 3 Joint Secretaries and 2 Under Secretaries) to observe good governance practices
and service delivery models in the State of Andhra Pradesh in India. The participants interacted,
shared experiences and observed different interventions in governance reforms in the State
including in the area of ICT enabled service delivery. The study tour was led by Mr. Tana Gautam,
Secretary, Office of Prime Minister and Council of Ministers (OPMCM).

29. Through different interactive sessions and presentations from the resource persons, the
participants learned about Andhra Pradesh’s experiences in governance reforms including in e-
governance. The participants made field visits to observe successful governance reform programs
in the State. The notable ones were: e-Seva5, use of ICT by Road Transport Authority of
Hyderabad, services provided by the Greater Hyderabad Municipal Corporation and Social Audit
program in Rangga Reddi district.

5
Electronic services
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30. E-Seva, which operates in a Public Private Partnership (PPP) modality, is an innovative e-
Governance program in Andhra Pradesh. It is a “one stop shop” for citizens who are provided
transparent and user friendly services like paying utility bills, issuing birth/death certificate and
submitting passport forms etc. The study tour participants also observed service delivery at Road
Transportation Authority which extensively used ICT for service delivery. The participants also
learned about services provided by The Greater Hyderabad Municipal Corporation. The Municipal
Corporation provides its services by adhering to its Citizen’s Charter, provides citizen friendly
services and ensures transparency and right to information. The corporation uses ICT tools like
online procurement system and online grievances redress system to improve transparency and
service delivery. The participants also visited Rangga Reddi district to observe implementation of
the program of the transparency and accountability of the National Employment Guarantee
scheme in Andhra Pradesh.

1.5 Limitations of the Study

31. The study has pilot-tested and recommended some new approaches and methods for
improving service delivery in local governance, agriculture and rural/urban infrastructure services.
Obviously, the strength of the recommendations is somewhat limited because of being based on
only a six month piloting. Nevertheless, the approaches and methods recommended have been
found effective in improving service delivery and also in helping the marginalized communities
mainstream themselves in the services net, and thereby helping in poverty alleviation and
economic growth. However, given the limited experience from the short duration of the piloting,
caution should be taken in replicating all recommended approaches at a go. It is recommended
that a stepwise and performance result based approach be taken in replicating the
recommendations in other parts of the country.

1.6 Organization of the Report

32. The report is organized in two volumes, namely Volume 1: Main Report and Volume 2:
Annexes. Main Report comprises six chapters including this chapter I. Chapter II discusses
decentralization/devolution in Nepal touching upon the progress achieved as well as the gaps and
issues in the governance system including the issue of federalism in the changed political context.
Chapter III highlights the service delivery protocols in agriculture, issues in service delivery and
recommends a reforms action plan. Chapter IV examines the role of rural infrastructure
development in alleviating poverty and enhancing social inclusion and recommends a reforms
action plan. Chapter V reviews the central and local level capacity in service delivery and role of
meso-level organizations and recommends action plan of reforms in the governance system for
better public service delivery. The chapter also highlights the issues of extremely poor
performance in public service delivery to the marginalized and socially disadvantaged/deprived
groups and the indigenous people. Chapter VI describes the pilot testing of new approaches and
ideas for improving service delivery, lessons learned from the pilot testing and recommendations
for replication.

33. Volume 2: Annexes include data and information details referred to in the six chapters of
the Main Report, but organised as a separate volume with individual annexes numbered in
relation to each chapter. Such annexes number 2 each related to chapter I and II; 14 related to
chapter III; 4 related to chapter IV; 5 related to chapter V; and 6 related to chapter VI.

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CHAPTER II: DECENTRALIZATION IN NEPAL – LEGAL AND

INSTITUTIONAL FRAMEWORK

2.1 Decentralization Efforts & Achievements

34. Although, in the process of reforming governance system, a number of actions had been
taken in decentralization and local governance before the 1950s, concrete actions began only
with the enactments of Nepal Municipality Act, 1953 and Village Panchayat Act, 1956. These
Acts were brought in for spatial arrangement of urban and village level local government bodies
respectively. During the 30 years period of Panchayat6 regime, several attempts were made to
decentralize central level tasks and functions to LBs and to revamp LBs to function on
decentralization principles. In this regard, the Decentralization Act, 1982 had focused on the
following:
• The Line Agencies of government in the district were brought under the direct control of the
District Panchayat;
• The Line Ministries at the center were required to provide timely forecasts of resources to be
allocated to the districts;
• The District Panchayats were devolved the authority to plan district development; and
• The Users Committees were made the principal organ at the lowest local level for planning,
implementation and management of development at the grass-roots.

35. After the restoration of multiparty democracy in 1990, a new democratic constitution --The
Constitution of the Kingdom of Nepal, 2047 (1990 AD) -- was promulgated. The constitution
vested sovereignty in the people, provided for good governance and decentralization as means to
development and emphasized cooperation with and respect to the civil society, human rights and
freedom of expressions etc.

36. The fifteen years of democratic experience from 1991 to 2006 was a period of several
initiatives in local governance. LSGA was enacted and LSGR and LBFAR were issued during this
period. Other development actions included constitution of DIMC and the Local Body Fiscal
Commission (LBFC), finalization and presentation of Local Service Act to the Parliament, and
policies for devolution of powers and functions of the sectoral ministries to the DDC, VDCs and to
the Municipality. The devolution of basic services in agriculture, rural infrastructures, basic health
and education is a very important milestone in the decentralization journey of Nepal.

37. Besides, there has been qualitative transformation in the awareness of and advocacy for
decentralization. Recognition of the need for more inclusive local government system; greater
participation of women, dalits7 and other marginalized and disadvantaged sections of the
communities in the decision making process; increased share for the local government bodies
over the local resources; and greater use of planning by way of periodic and annual planning are
certain hallmarks of the post-1990 local government and decentralization development in Nepal.

38. Janandolan (Peoples Movement) II brought an end to the 1990 Constitution of multi-party
constitutional monarchy and commencement of the Interim Constitution of Nepal (ICN) in 2006

6
Party-less political system in Nepal
7
Oppressed so called lower caste group regarded as untouchables by so called high class group
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with a full section on decentralization and the local governance system8. Objective of local
government, as laid down in the ICN, is to make services available at the very local level and to
‘institutionalise democracy from the very lowest level’. Good governance with transparency,
accountability, participation, an end to unitary character of state9 and provision for a president are
some of the important references in the ICN. It established an inclusive and representative
Constituent Assembly,10 for formulating a constitution for the country. Table 2.1 summarizes
status of decentralization progress in Nepal, in a way.

Table 2.1: Status of Decentralization Progress in Nepal

Benchmark Progress Remarks
Status
Elected Local Bodies (LBs) Yes Local Bodies (LBs)11 Officials are elected for 5 years term.
Officials and Council However, only nominated LB officials are in place at present.
Locally appointed Officials No Chief Executive Officers at LBs and Line Agency Heads at
district offices are deputed from Central government.
Locally approved budget Yes DDC Budget is prepared and approved by respective
Council of the LBs under the guidelines and Budget ceiling
provided by central government. However, Central
Government can add or remove programs and can modify
priorities.
Municipalities’ budget is approved by the respective Council.
Mandate to local government Partially LBs can hire staffs and fix salaries too, except for Chief
as regards to employment yes Executive Officer and Accountant
and salaries
Authority of LBs on Partially LBs are given some authority for tax collection and resource
Revenues/Resources yes mobilization within the criteria fixed by Central Government.
Central Government distributes development fee to
Municipalities, which is collected at the custom point on the
basis of a determined formula.
Authority for sale of defined public goods and objects is
given to LBs.
Revenue sharing between LBs and Central Government in
some of the specified areas is practiced, such as electricity,
tourism, forestry, etc.
Borrowing Power of Local Yes, but Some Municipalities have, however, obtained loan for
Government not different capital works from Town Development Fund.
exercised GoN working on a formula based grants to LBs for
implementation soon.
Transparent No Block grants including administrative grants are provided by
intergovernmental transfer central government to LBs largely on ad-hoc basis.
Clarity in expenditure No A lot of overlapping between LBs and Central Government

8 Interim Constitution 2006, Article 139-40

9 Directives principles of the State, Interim Constitution 2006.
10 Distribution of 601 seats of the assembly: 335 for proportional representation, 240 for first-past the post system and 26
members for the nomination by the Government. Of the seats in the Constituent Assembly, 50% to women, 31.2% to the
Madhesis, 13% to Dalits, 37 % to marginalized and ethnic communities, 4% to the candidates from remote areas, and
31.2 to others.
11 Local Bodies (LBs) refers DDCs, Municipality and VDCs

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assignment
Capacity of LBs to collect tax
and deliver services
Financial accounting and
auditing
Central Government ability to
monitor and correct progress
for effective decentralization
prevail.
Very low Financial and technical capacity of LBs is very low. Capacity
building programs and efforts too inadequate.
No, Very few DDC have proper account and internal audit
section.
No There are several Committees including the DIMC chaired
by the Prime Minister. However, they seldom are effective.

39. In summary, although some achievements have been made during the period on
decentralization and devolution, the overall performances remained lacklustre. The underlying
factors are the absence of a "political will" and a "decentralization champion" at the centre, and
reluctance as well as a lack of shared enlightened understanding among central agencies about
decentralized system of governance. The decade long armed insurgency and political instability
complicated the matter further.

2.2 Legal and Institutional Framework of Decentralization

40. The prevailing situation concerning decentralized governance system in Nepal is such that
the Local Administration Act (LAA), 2028 (1971 AD) and the LSGA are still the principal enabling
laws governing decentralization and local self governance, virtually irrespective of any stipulations
on the subject in the current interim constitution. Presented below are highlights of positive
features as well as gaps in the legal and institutional framework for local administration and local
self-governance as provided for in these laws.

A. Local Administration Act (LAA), 2028 (1971 AD)

41. Based on the emphasis laid in the regional planning approach to development in the
Fourth Plan (1970-75), the LAA enacted in 1971 under the then Partyless Panchayat Constitution
divided Nepal into five Development Regions each headed by a Regional Administrator, and
seventy-five districts each headed by a Chief District Officer (CDO), charged with the
responsibilities to function within the authority of prevailing government policy, rules, directions
and under the general supervision of the regional administrator .

42. The preamble of the LAA states that the intent of the Act is to “amend and consolidate the
local administration laws in keeping with the principles of decentralized governance system, and
to maintain peace and order.” Paradoxically, however, this Act enacted as early as in 1971 under
the Panchayat constitution amended in 1966, has been amended on ad-hoc basis four times (the
latest in 2058 or 2002 AD), but never as a unified Act. This was despite the nation having passed
through several constitutional changes since 2028 (1972 AD), e.g. the “improved party-less
Panchyayat constitution following a referendum in 2036 (1980 AD); the constitutional monarchical
multi-party democratic constitution of 2047 (1990 AD), following the 2046 (1990) peoples’
movement; and the latest the Interim Constitution of Nepal 2063 (2007 AD) as a Federal
Democratic Republic, following the joint political movement by the Seven Party Alliance (SPA)
and the Nepal Communist Party (CPN) Maoist

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B. Local Self Governance Act (LSGA), 2055 (1999 AD)

43. In 1995, the government appointed a High Level Decentralization Co-ordination
Committee (HLDCC) under the chair of Prime Minister to make policy recommendations on
decentralized governance. Based on its recommendations the LSGA was prepared and came into
effect in 1999, as unified enactment in place of the separate DDC, VDC and Municipality Acts
and Rules of 2048 (1992 AD). The Local Self Governance Regulations (LSGR), 2056 and the
LBFAR 2056 were enacted in 1999. LBFAR 2056 (1999 AD) has subsequently been improved
and amended as LBFAR 2064 (2007 AD).

44. The LSGA does not seem to address adequately and appropriately all legal, institutional
and sectoral problems and issues related to decentralized governance. Almost twenty-three
existing sectoral Acts conflict with the LSGA12. (Details are included in Annex 2.1 of the Annex
Volume) Nevertheless, it represents a landmark improvement in the local governance system of
Nepal in terms of:
• Separation of executive and legislative powers secured in local governance through
mechanisms of (executive) committees and (governing) councils;
• Principles and policies of decentralization spelled out (although not liberally and precisely
enough) as an integral part of the Act;
• Sectoral tasks, functions and services better defined (more devolution-oriented) and
widened than before;
• Stakeholders’ participation and representation expanded for local users’ groups including
women as well as disadvantaged and weaker sections of societies in local governance and
development process;
• Accountability and transparency in service delivery recognized better than before;
• Taxation and revenue base strengthened through introducing concept of revenue sharing
(Local Govt. Fiscal Commission), and through authority to wider taxation, service charges and
fee collection, loan raising etc.; and
• Facilitative, coordinating and catalytic role of central government defined more
specifically, including recognizing Local Bodies Associations (LBAs) and providing for
representation at DIMC.

45. The Local Self-Governance Act (LSGA) provides for two-levels of LBs -- villages and
municipalities at the lower level and districts at the higher level. These local level bodies are
called respectively Village Development Committee (VDC), Municipality, and District Development
Committee (DDC). Interestingly and may be also significantly, these LBs have been defined as
autonomous corporate bodies rather than as local government bodies. Currently there are 3913
VDCs, 58 Municipalities and 75 DDCs. DDCs are further divided into 9 Ilakas (Blocks) while
VDCs/Municipalities are divided into 9 Wards (neighbourhoods) or more. Each Ilaka of a DDC
covers 5 or more VDCs depending on the size of the VDC.

12
GON had attemted to take the necessary ammendment bill in the parliament as early as in 2002 but could not
succeed in getting it through. As a result except for the ammendments in Educational Act, conflict in other Acts still
remained unresolved.
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2.3 Key Issues, Gaps and Challenges

46. Besides the brief outlines of the LAA and the LSGA as the current de-facto legal and
institutional framework of decentralization in Nepal, there are certain other issues and challenges
in the constitutional, legal, and plan provisions concerning implementation of decentralization that
call for attention. They are briefly outlined below:

2.3.1 Constitutional Commitments & Delegations

A. Constitutional Commitments
47. Constitutional commitments to decentralized governance in earlier constitutions were more
in the mode of deconcentration or delegation of some central authority than of real devolution or
autonomy. The Interim Constitution of Nepal 2063 (2007 AD) contains positive provisions on
decentralization, as follows, which while being praise-worthy remain to be demonstrated in action
through enlightened policies, laws and real rule of law.

i) In the Preamble to the Constitution

• Pledging to accomplish the "progressive restructuring of the state" in order to solve the
problems existing in the country relating to class, ethnicity, region and gender;
…………..
• Expressing the "full commitment to democratic values and norms" including the
competitive multi-party "democratic system of governance" …………..,
• Declaring Nepal as a "federal, democratic republican state", upon duly abolishing the
monarchy.
ii) In the Directive Principles and Policies of the State
• Article 33 (c): To adopt a political system fully upholding the universally accepted
concepts of..........right to information of the people, transparency and accountability in
the activities of political parties, public participation and "impartial, efficient and fair
bureaucracy", and “to maintain good governance”, while putting an end to corruption
and impunity;
• Article 33 (d): To make an inclusive, democratic and progressive "restructuring of the
State, by ending the existing centralized and unitary structure of the State" ………..
• Article 34 (2): The objective of the State shall be to maintain peace and order, protect
and promote human rights, promote public welfare in the society, and create
opportunities for the "maximum participation of the people in the governance by way of
self-governance"; while at the same time maintaining a system where people can
enjoy the fruits of democracy.
B. Constitutional Delegation
48. Clause (1) of Article 43 titled "Conduct of business of the Government of Nepal" en-joins
the Government that "The business of the Government of Nepal shall be conducted in
consonance with the spirit of the people's joint movement, political understanding and culture of
collaboration." "The Common Minimum Program" set through mutual consent shall be the policy
basis of the operation of the Government of Nepal".

49. Clause (2) of Article 43 delegates to the Government legal power "to allocate and transact
the business of the Government"; as per rules approved by the Government; and

50. Clause (3) further stipulates that "no question whether the rules referred to in clause (2)
has been observed shall be inquired into in any court (of law)".
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51. It is questionable whether constitutional delegation of governance authority to the
executive to such an absolute extent, without at the same time, subjecting or requiring the
"Allocation and Transaction of Business Rules" to observe certain fundamental rules or guiding
principles of good governance, as a matter of balancing authority with duty and responsibility, will
ensure promotion and sustenance of good governance in practice.

52. Indeed, it seems to be a lack of such a “political will” and "self discipline" in the successive
national political and administrative governance leadership, that explains the continuing gaps
between government policy pronouncements and delivery of good governance services to citizens
through an appropriate and adequate determination of policies, translation of the policies into
legal mandates and protocols, and their firm implementation through exemplary honest practice of
"rule of law".

C. The Common Minimum Program

53. The 50-point common minimum program (CMP) of 21 August 2008 under the Interim
Constitution of the interim government of CPN (Maoist), Communist Party of Nepal (United
Marxist and Leninist) [CPN (UML)] and Madhesi Janadhikar Forum (MJF) contains
decentralization and governance-related provisions readable as follows:

i) State restructuring concerning implementation of the federal democratic

republic:
• All acts, rules and regulations that contradicts with the declaration of republic on May
28, 2008 shall be scrapped;
• Special attention shall be paid to constitutional supremacy, independence of judiciary,
fundamental human rights, press freedom and rule of law;
• All women, Dalits, Muslims, Janajatis13, Madhesis14 and backward people shall be
included in all state mechanisms constituting and reforming necessary acts;
• Autonomous local government shall be established based on consensus of political
parties till next local government is elected;
• Bureaucracy, Nepal Army, Nepal Police and Armed Police shall be mobilized
independently forming a Monitory Task Force under the existing legal parameters;
• Sustainable peace in realization of security;
• Crime, anarchy and the culture of impunity shall be ended, consolidating law and
order; and
• To make independent and accountable administration and security organs, the Code
of Conduct (CoC) shall be developed for the people’s realization of security.
ii) Immediate relief concerning reconstruction
• Top priority to reconstruction of infrastructure damaged during armed conflict shall be
given.
iii) Socio-economic transformation
• Top priority shall be given to agriculture, hydroelectricity, tourism, human resources
and physical infrastructure development;
• Cheap, easy and effective services shall be provided, strengthening people’s service
providers’ institutions. Both domestic and international investment shall be attracted;

13
Indigenous people with their own language and culture
14
Original inhabitants of Tarai or inner Tarai region
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• Professional skill and commitment towards neutrality of the civil servants shall be
enhanced. Culture of impunity shall be ended, pursuing transparency and governance;
• Effective corruption control shall be established and
• The budget for drinking water, sanitation and rural infrastructures programs shall be
increased.

2.3.2 Enabling Laws and Allied Policies, Plans & Procedures

54. Continued anomaly in the LAA as amended fourthly and latest in 2058 (2002 AD) with
respect to principles of decentralization or decentralized service delivery up until now has already
been pointed out in sub-section 2.2A above. Certain gaps in provisions and practices observed in
relation to LSGA, LAA and allied laws and related policies, procedures and plans are summarised
below. They pertain to governance functions of planning of vision, values, priority objectives,
goals and programs, defining of organizational structure or responsibility and authority of
implementation; financial/fund flow mechanism; and other business processes of decentralized
governance or basic service delivery.

A. Planning & Plans

55. Vision, values, principles and policies expressed in the LSGA appear more flowery and
literary than down-to-earth and emanating from a sincere political commitment to decentralization
based on adequate understanding of and serious learning from the country's past experiments
with decentralization. Clauses defining the functions, responsibility and authority of the VDC,
Municipality and DDC and their respective CEOs do not articulate the larger role & responsibility
of the CEO of an organization, namely, the chief responsibility of setting vision-mission and
strategy for the development of respective VDC, Municipalities and DDCs, as well as of defining
and setting up a "quality management system of public service delivery".

56. The policy principles enunciated suffer from definitional commissions and omission with
respect to the essential attributes of good local self-governance and a total management system
required for it. They are not enlightening enough to enable or encourage qualitatively effective
planning and implementation of decentralization. The policy direction and design seem liberal on
delegation of responsibility, but not commensurately liberal on devolution of authority to LBs.

57. A very praise-worthy plan initiative, although a sad point of implementation cum
monitoring-deficit concerning "decentralization/devolution" in Nepal, has been the Five Year
"Decentralization Implementation Action Plan (DIAP), 2058 (2002 AD) approved for
implementation by the Prime Ministerial Level DIMC.

58. The DIAP was an admirably comprehensive action plan to implement decentralization of
governance in Nepal. It included a whole range of responsibility-specific and time-lined programs
of activities necessary to achieve decentralization objectives articulated as follows in "A National
Framework Document for Decentralized Governance and Capacity Building" by the NPC and
MoLD.
1) Strengthening capacity of MoLD and NPC including sectoral ministries (i.e. central level
institutions) to formulate, improve and further elaborate policies for enhancing democratic
decentralized governance and empowerment of the rural poor based on the experiences at
the local level;
2) Strengthening the institutional, programming, management and governance capacities of the
LBs (mainly DDCs and VDCs level) to effectively implement their prescribed mandates, roles
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and responsibilities (defined in LSGA) and thereby to be more responsive and accountable to
rural populace; and
3) Supporting the operationalization of Village Development Program (VDP) by using the
principles and techniques of social mobilization in rural villages across Nepal for
empowerment and poverty reduction efforts.

59. The DIAP included development of packages with a clear definition of

i) Responsibility and authority of the central government and DDC/VDC/Municipality level
LBs;
ii) Functionaries accountable to LBs;
iii) Provision of necessary fund;
iv) Capacity development of LBs to deliver services; and
v) A monitoring mechanism.

60. However, owing to causes (of political instability and insurgency) within and outside the
control of the governments up until recently, the DIAP could not be fully operational. The DIMC
has not met since the 3rd meeting in January 2002, although reportedly the MoLD has recently
initiated steps for convening the 4th meeting of the DIMC, seven years after the last meeting.

B. Institutional Structure and Terms of Relationship between Government

and LBs
61. Real power of governance is still dominantly retained at the Centre. Clauses 234-247
under Article-1 Part 5 of the LSGA spell out the terms of relationship between the Central
Government and LBs. The ToR commits the Government to various supports to the LBs as well
as subjects them to mandatory compliance to Government directives and orders. However, a
really positive provision is clause 241 requiring mandatory organisation of Prime Ministerial Level
DIMC to monitor performance of decentralized governance.

62. Among other positive features are clause 235 reserving Government authority to
implement special programs of "institutional strengthening and capacity building of LBs"; clause
236 providing for additional conditional (incentive) grant besides the specified minimum annual
grant; clause 237 providing for central government option to set up Fiscal Commission to study,
research and recommend to Government on taxes to be levied by LBs, revenue sharing between
central government and LBs and policy measures to be adopted on making the taxation and
accounting system relevant to time; clause 243 requiring Central Line Agencies (CLAs) to
classify/specify local infrastructure works as VDC, Municipality and DDC program, providing direct
program grant estimates timely and routing non-program grant through MoLD and providing
necessary relevant technical support; and clause 245 requiring district level offices of CLAs to
provide necessary cooperation requested by LBs.

63. Among other reasonable terms are clause 234 reserving central government powers to
monitor and issue directives to LBs on matters such as performance of allocated function, respect
to priorities to the benefit of disadvantaged ethnic groups, women and children and preference to
environmental balance; clause 240 specifying the channels for LBs to contact with the central
Government; clause 244 mandating DDCs to constitute Coordination Committees composed of
the development sectoral unit Chief of the DDC, the Mayor and Coordinator of service centres.

64. Among provisions which are either restrictive or constrictive to the power of LBs are clause
242 reserving right to hand in to any committee, organisation or authority any or all power

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provided by LSGA (such a provision makes LBs sub-servient and accountable to CLAs rather
than to LBs); Clause 238 providing for Central Government authority to terminate LBs under
specified circumstances, and clause 239 giving the central Government authority to operate LBs
by either extending tenure of elected officials of LBs or by adopting other means. Such a clause
makes LBs vulnerable to misuse or abuse of authority by central government, as happened
actually by the then central government deciding to neither call for due election nor to extend the
tenure of previously elected representatives, and instead choosing to amend the clause through
an ordinance authorizing GoN to arrange operation of LBs through other alternative means of
deputing Government appointed officials to fill positions of elected officials.

65. Absence of clear definition of central government vis-à-vis local government function has
resulted in central government continuing to involve in local level services better carried out by
LBs. Also, viability of division of local governance into as many as 75 DDCs, 58 Municipalities
and 3913 VDCs continue to be questioned.

66. LSGA authorizes LBs to decide position creation, employment and compensations for
staffs but clause 253 specifies that GoN shall appoint a secretary (LDOs in DDC, CEOs in
Municipality, Secretary in VDC) to execute the day-to-day activities of the LBs. This has created
an environment of dual loyalty wherein the Secretary is more loyal to the MoLD than to the LBs,
telling adversely on the LB's institutional capacity building.

67. Article 5 of Part 2 and Part 3 of the Act provide for the semi-judicial power to the VDC and
Municipality respectively. Certain power at District Level vests also with the DAO under LAA 2028,
but not with DDC under LSGA 2055.

68. GoN has established the Local Development Training Academy (LDTA) at the centre
along with units in regions to provide training to both elected and appointed LB officials and to act
as a research, consultancy and information resource centre for local development governance,
and the Urban Development Training Centre (UDTC) at Pokhara for HRD training for Municipality
staffs. However, because of a lack of clear and firm government policy and sustained
implementation of real rural and urban-linked local development, the LDTA and UDTC have not
been particularly effective as national training institutions for local governance.

C. Procurement and Supply Chain Management

69. LSGA requires LBs to make procurement as per rules given in LBFAR, 2056 (1999 AD),
and also to look at the provisions made in FAR, 2056 (1999 AD) for matters not covered by
LBFAR, 2056 (1999 AD). Because of this, from time to time, LBs had to look at the procurement
regulation of GoN as provisioned in the FAR in their procurement activities. In order to meet this
gap, besides other financial matters, LBFAR, 2064 (2007 AD) was promulgated recently following
the enactment of a new procurement law by way of the Public Procurement Act (PPA) 2063 (2007
AD) to replace the FAR 2056 (1999 AD).

D. Information, Communication and Documentation Control

70. Nepal's CLAs and the LSGA do not appear to have established and documented
appropriate and adequate system and procedure for: (i) internal communication and information
exchange between the various levels and functions of the organizations, and (ii) communicating to
and receiving, documenting and responding to communications from external interested parties or
service recipients.

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71. There is some sort of a system but not an appropriate and adequate "unified system of
documentation and document control" concerning governance in Nepal. Although document
control appears good at enabling laws level, and reasonably good at by-laws level, it is poor to
very poor at the level of service quality norms or standards as well as standard operating
procedures (SoP).

72. Under DIAP there has been reasonable progress in the area of LB profiles, GIS Maps,
DTMP etc. However, the District Information and Documentation Centre (DIDC) badly require
strengthening.

E. Monitoring Quality, Efficiency and Effectiveness of Service Delivery

73. Since standards of service and related work procedures are not defined well enough, in
practice there is little to monitor conformance to standards or to take any corrective and
preventive actions of quality control. In addition, lack of trained personnel constrains such
performance in practice. As a result, be it service delivery by DOs of CLA, or by the LBs, people
at large seem to feel that: (i) service provided do not fulfill the needs of the citizens; (ii) services
do not reach all the target groups; (iii) service quality is not satisfactory enough; (iv) only very
limited proportion of people have access to services; and (v) use of resources (human, financial
material) for provision of services is poor.

F. Top Government Review

74. It is observed that since the enactment of the LSGA, the DIMC met three times in the
years 2056, 2057 and 2058 (2000, 2001, and 2002 AD). These meetings were chaired by three
different Prime Ministers, which is an interesting indicator of top government stability. The DIMC
made many important decisions, particularly on the formulation and implementation of the DIAP.
However, besides failing to meet after 2002, it has also not succeeded in making and
implementing decisions of designing, establishing and maintaining quality systems & procedures,
which are a sine qua non to ensure good government performance.

2.4 Changing Political Context and Federalism

75. The Interim Constitution of Nepal envisions federal structure of governance for the State.
All the major political forces in the country have adopted an agenda of federal structure. However,
the fundamental basis for devising a federal structure is not clear yet. Different political parties
and national/regional level groups advocate their own basis for federal structuring. Most groups
favour creating five to fourteen federal units. The most advocated criteria for federal structure
include caste, language, culture, historical identity, natural resources, and population. However,
whatever may be the final basis of the federal structure and its number, it has to duly consider
certain facts and risks as follows:
• Nepal is a country with 100 different community groups, 92 spoken languages, and 8 religions
professed. Nine minority groups (Bahun and Chhetri excluded) have dominance in 47 districts,
3 groups have majority in one district each, and one group (Tharu) has majority in 4 districts
(Census, 2001)

19 Ibid Article 140

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• With the state re-structuring into province or region with self-rule, the size of the district will
probably be enlarged, thereby, changing the present demographic ratio. Obviously, the
chances are that the strength of the community with largest population will be diluted to
minority and the minority groups will be further pushed to the minuscule size. This can negate
the intended benefits from the federal system.

76. In the matter of local government and decentralization, one of the most important
characteristics of the Interim Constitution is its premises for federal structure and provisions for
‘division of power’ and ‘sharing of revenue between the government and the local self government
agencies’. 19 All these provisions have direct bearing on the form and content of the future local
government and decentralization system20.

77. One important rationale of the demand for federal structure is linked with territorial
association of certain marginalized indigenous communities. The groups affected by state
discrimination find themselves, in one way or other, associated with the geographical territory.
Since historically the State of Nepal was formed by amalgamation of multitude of small
principalities ruled by various ethnic and indigineous population within certain territorial boundary,
federalism is an opportunity for them to exercise their association with their ancestral land and
territory. Some areas of the country have concentration of the certain communities who express
strongly for the federal structure so that they can reclaim and preserve their ancient home identity,
language, symbols and culture, more strongly.

20 Ibid Article 141

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CHAPTER III: MANDATES PROTOCOLS AND SERVICE

DELIVERY IN AGRICULTURE

3.1 Service Delivery Mandates, Policies and Protocol

3.1.1 Mandates of the Ministry of Agriculture and Cooperatives (MoAC)

78. The MoAC is the lead Ministry that is mandated to provide policy guidance in agriculture
planning and programming, coordinating with other concerned ministries and agencies,
supervising and monitoring the implementation of the programs and projects related to it. The
major objective of agriculture programs and projects is to achieve faster growth rates in
agriculture sector, so as to contribute to the overall development and to eliminate poverty from the
country. The main strategies for attaining these objectives have been to implement the programs
to generate and disseminate appropriate technologies and provide adequately - the required
technical services and needed production inputs to the farmers and entrepreneurs.

79. The Nepal Government Allocation of Business Rules 2007 has mandated the MoAC with
26 businesses, which include formulation and implementation of agriculture and cooperatives
policies, development of cereal and other crops, horticulture and industrial entomology, livestock
and fisheries development, veterinary services, and agriculture research and development of
farms and centres. Besides, MoAC is also mandated with the business of training, agriculture
extension, transfer of modern technology, development of norms, standards, regulation and
certification of agricultural inputs, quarantine systems and formulation and implementation of
policies, plans and programs related to agriculture, and agriculture marketing and pricing. Annex
3.1 (in the Annex Volume) contains the list of business allocated, which reads like a shopping list
and is not structured to reflect the long-term strategic directions and components of MoAC role.

3.1.2 Agriculture Policies, Plans and Protocols

A. Agriculture Perspective Plan (APP 1995-2015)
80. APP, 1995-2015, is a long term perspective plan of Agriculture Sector that envisioned an
annual growth rate of 3.5% in Agriculture Gross Domestic Product (AGDP) during 20 years period
that covers from the 9th to 12th Plan. In order to achieve the targeted growth, APP adopted a
strategy to prioritize outputs and selected horticulture crops, livestock products and important
cereal crops as the major components of the sub-sector. Strategic inputs selected included:
technology, rural electrifications, fertilizers, and irrigation and agriculture roads. The APP
provisioned targeted programs of poverty alleviation as well. The Ninth and the Tenth Plan
contained the thrusts of the APP, but implementation lacked drive and coordination necessary
from the concerned multiple ministries, departments and related agencies as well as the budget.
Consequently, the achievements lagged behind targets.

B. National Agriculture Policy (NAP), 2061 BS (2004)

81. NAP 2061 was formulated to further the gains of APP. Its main goal was to contribute to
food security and poverty alleviation by achieving high sustainable economic growth through
commercial and competitive agriculture system. Its 3-point strategic objectives included: i)

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enhancing agricultural production and productivity; ii) promoting competitiveness in the regional
as well as world markets through developing commercial and competitive agriculture, and iii)
conserving and promoting use of natural resources, environment and biodiversity.

82. The Policy selected 26 supporting goals (No. 1 to 26) for the first strategic objective, 12
goals (No. 27 to 40) for the second strategic objective, and 7 goals (No. 50 to 56) for the third
strategic objective.

C. Agriculture Extension Strategies (AES), 2006

83. The AES 2006, as a supporting strategy to NAP 2061, set its purpose or mission as:
providing participatory, economic and result-oriented agri-extension services which, while
focusing on the deprived classes, addresses on a priority order basis, the needs of various levels
and sections of farmers and agri-entrepreneurs. Likewise, the strategy stated its vision or goal as:
contributing to the national goal of poverty reduction by promoting competition in the pricing
network (from production to market management) together with growth in agriculture capacity and
productivity within the overall framework of sustainable livelihood.

84. Key objectives included supporting the national goal of poverty reduction through the
improvement of the sustainable livelihood by enhancing production and productivity through a
network of agriculture system linked from production to marketing network; and devolution of
more functions to LBs. Among other objectives are: encouraging partnerships with CBOs and
NGOs and private sector in agriculture extension by redefining and limiting the role of public
sector as facilitator and regulator, developing resource centre in different locations to support fast
dissemination of technology, promoting of group approach in extension services, use of ICT and
creation of district agriculture development fund to carry out these activities.

D. Agriculture Policy in Three Year Interim Plan (TYIP) - (2008 - 2010)

85. The Three Year Interim Plan aims to modernize and commercialize the agriculture sector,
by employing the APP and the NAP 2004 as the overarching policy for the development of
agriculture. The plan set the objective as achieving broad based, gender inclusive and sustainable
agricultural growth. The Plan seeks to orient agriculture to commercialization and
competitiveness, both in internal as well as in external markets, promote co-operative activities,
develop and promote irrigation, agriculture roads, agriculture credit, research and extension, rural
electrification and agricultural markets to enhance production and productivity of agriculture that
should help achieve 3.6% growth per annum during the plan period.

3.1.3 Devolution of Agriculture and Livestock Extension Services

86. The devolution of agriculture extension and livestock services was implemented as per the
“Guidelines for the Implementation of Devolved Agriculture Sectoral Programs 2059”. The
Guidelines 2059 defined the roles and major functions of different central as well as regional
agencies under the MoAC to support the implementation of the devolved programs. The roles and
mandates of different organizations concerned with agriculture and livestock services to
beneficiaries at the district level are defined by the Guidelines. (A summary of the guidelines is
included in Annex 3.2 of the Annex Volume).

87. Devolution of agriculture and livestock extension services through the delegation of
authority in planning and expending the allocated budget to the district/local government is an

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evidence of Government commitment to decentralization and devolution. Decentralization in
agriculture has promoted greater participation and certain ownership of the beneficiaries in
planning and implementation of agriculture programs as well as in mobilization of local resources,
skills and private sector as well as community organizations involvement in agriculture and
livestock extension.

3.2 Organizational Set up and Business Process

3.2.1 Organizational Setup

A. Central Level
88. Under the National Agriculture Policy of 1992, the then Government restructured the six
agriculture related departments, namely, 1) Food Technology and Quality Control, 2) Livestock
Services, 3) Food and Agriculture Marketing Services, 4) Fisheries Development, 5) Agriculture
Extension Services, and 6) Horticulture Development into a unified Department of Agriculture
Development. The Agriculture research activities, that used to be under the then Department of
Agriculture was restructured by an act of parliament as an autonomous institution named National
Agriculture Research Council (NARC).

89. However, this arrangement remained short lived and multiplication of departments
occurred again, starting with the Department of Livestock Services followed by the Department of
Food Technology and Quality Control. The reason cited was practical difficulties in technical
administration of relatively different technical professions. Existing institutions of various types
under MoAC are presented below in Table 3.1.

Table 3.1: Types of Institutions under the Ministry of Agriculture and Cooperatives
Departments Centers Committees Boards Companies Corpor Councils
ations
Department Agriculture Kalimati Fruits National Dairy Agriculture Dairy National
of Information & & Vegetables Development Inputs Devt. Agriculture
Agriculture* Communicati Wholesales Board Company Corpora Research
on Center Market tion Council
Department Seeds Cotton National National Veterinary
of Livestock Quality Development Cooperatives Seeds Council
Services* Control Board Development Company
Center board
Department National Animal Feeds National tea & Agri. Lime
of Agriculture Production Coffee Industry
Cooperatives Research & Development Development
Development Board Board
Fund
Department Chandradangi
of Nutrition & Seeds & Milk
Quality Production
Control Committee

* Extension Services of these Departments at the district and the grass-roots levels have been devolved to the
respective DDCs through the Guidelines 2059

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90. The issues relating to central institutional set ups in Agriculture was very much deliberated
during the agricultural bureaucrats consultations during the GRDCP TA where high level officials
of this sector and the participants of the workshop suggested restructuring of DOA into separate
departments based on major functional scope.

91. Present organizational structure of the Ministry of Agriculture and Cooperatives consists of
4 departments, 3 central level offices, 2 autonomous councils, 3 development boards, 1
corporation, and 2 companies. All the departments have regional level offices. Departments of
Agriculture and Livestock Services have district offices in all the 75 districts while Department of
Cooperatives has 38 division offices at the service level. The organizational structure includes
extension of technical services to VDCs through 378 agriculture and 999 livestock service
centres. The aggregate human resource under MoAC comprises of 10,130 personnel under the
government’s civil service, NARC employs around 1,825 officials as agriculture research and
related administrative staffs and 2,034 officials are deployed in different boards, corporation, and
companies under the MoAC (organizational charts of MoAC, DoA and DoLS are presented in
Annex 3.3, 3.4 and 3.5 respectively in the Annex Volume).

B. Local (District) Level Organisations of MoAC

92. In line with the Agriculture Policy of 1992, the district level agriculture and livestock
offices were also brought under the umbrella of District Agriculture Development Office and the
positions of the Officer In-charge upgraded to class I. However, it remained short lived and along
with the bifurcation of the departments into separate units at the centre, the agriculture office at
the district also bifurcated into separate offices of agriculture and livestock office. Agriculture
and livestock services now have offices in all 75 districts in Nepal. The district level agriculture
and livestock offices are supported by the field level offices of ASC and LSC/LSSC located at the
Ilaka level in each district.

93. The downsizing of structure in the MoAC has resulted into cutting down of large number
of Agriculture offices at the local level, that too at the ASC or the front line office in agriculture
extension services. The slash down in the number of ASCs and the field staff resulted in a sharp
decline in the capacity of these offices to deliver services to the farmers. The field level
discussions, as well as the piloting of agriculture extension and livestock services at the VDC
level, clearly showed that the extension services in agriculture have been affected adversely by
the restructure reform program in agriculture sector.

C. SWOT Analysis of the Central and District Organizations in Agriculture

and Livestock
94. SWOT analysis of the central organization in Agriculture and Livestock is presented in
table -3.2. It shows that the organization has the strength of a large pool of skilled manpower and
institutions. However, it suffers from problems of duplication in functions and weaknesses in
implementation capability and coordination of its institutional system. SWOT analysis of district
level organizations/institutions (DADOs/DLSOs) are presented in table 3.3.

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Table 3.2: SWOT Analysis of Central Organizations

Strengths Weaknesses Opportunities Threats
• Large Organizational Set up • Weak inter agencies co- • Agriculture is the • Competitive
(Central to Local Level) ordinations main source of disadvantage with
• Qualified and Skilled • Lack of holistic/cross – livelihood and respect to
manpower in central level sectoral approach income neighboring
• Favorable agri- countries'
• Friendly Government Policy • High administrative cost
ecological zones / products (due to
(Agriculture Policy, 2061, • Lack of central & regional
Climatic variability inequalities in
Agri-enterprise Promotion laboratories to meet WTO subsidy)
Policy, 2063, APP etc.) requirements • Full devolution of
programs • Donor driven
• Existence of NARC with a • Duplication of functions & priorities and
network of outreach research responsibilities. • Emerging
systems
station. entrepreneurs’
• Common norms for all • Fragmented
• Establishment of WTO, associations
ecological regions farmlands
Agribusiness Promotion, GIS • Expansion of
• Inadequate generation of resulting in low
Sections in MOAC and Marketing networks
appropriate technologies labor productivity
Departments • Emerging micro
• Poor enforcement of
• Existence of sub -sector irrigations schemes
laws/regulations
Boards, Corporations, like Nepal SIMI,
Committees in central, • Inadequate financing CGWS in Terai and
regional and district levels • Under use of regional FMIS etc
• Establishment of National directorates • Proposed
Agricultural Research and • Top heavy central Agriculture
Development Fund (NARDF) department University for
• Strong professional • Minimum use of ICT in professional
associations and Societies service delivery and development
governance Establishments of
• Initiation of Performance
agro-based
Based Management System • Duplication/Redundancy
industries using the
(PBMS) on program and activities
local raw materials.
• Initiation of Crop Insurance • Lack of work standards
• large donor support
System in few crops and transparency
• Poor documentation and
documentary control
• Weak ownership and
participation of
stakeholders

95. A SWOT analysis of the district level organizations is presented in Table 3.3. These
organisations represent the permanent institutions of the government responsible for service
delivery in the agriculture sector.

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Table 3.3: SWOT Analysis of District Level Organizations/Institutions

(DADOs/DLSOs)
Strengths Weaknesses Opportunities Threats

• Permanent institutions • Poor Inter agencies co- • Dominant sector • Agriculture may get
with technical sections ordinations among service • Favorable agri- less priority in
(DADOs/DLSOs) providing partners ecological zones / devolved programs
• Qualified and • One man decision-making/ Climatic variability • Multiple stakeholders:
competent Subject low consultation with SMS • Agriculture and DADOs/DLSOs,
Matter Specialists • Weak database/MIS livestock extension CBOs, NGOs
(SMS) in each functions already • Fragmented farmlands
• High administrative cost
sections devolved resulting in low labor
but low level of program
• Good infrastructure budget • Emerging productivity
facilities entrepreneurs • Small land holding
• Lack of district level
• Well equipped with laboratories, resource associations with high cost of
modern ICT facilities centers to meet WTO • Expansion in production
(Computers, Internet, requirements Marketing networks • Farmers' may use
Telephone, Fax etc) and collection centers Pesticides, poor
• Common norms for all
• Provisions of ecological regions • Emerging micro- quality fertilizers,
Fertilizer/Pesticide irrigations schemes inputs haphazardly for
• Training, field visits are
Inspector for quality like Nepal SIMI, quick returns etc
supply driven, not demand
control CGWS in Terai and • Too large ratio of
driven
• Devolved programs FMIS etc farmers and technical
• Minimum use of ICT
with flexibility in • Establishment of agri- workers
facilities in service delivery
program selection industries based on • Frequent transfers of
• Mobility constraints to
• Implementation of local raw materials staffs
serve clienteles
Small Irrigation • Increasing trends in
Programs • Duplication of program
diversification and
and activities
• good network with commercialization
research stations • Lack of work standards
• Involvement of private
and transparent evaluation
sector/NGOs
• Poor documentation and
• active farmers
document control
institution
• Weak implementation
• Vast market
capacity
opportunity
• Lack of dynamism in
responding to the
changing emerging
demands

3.2.2 Business Process

96. The business process of MoAC and its departments and district offices are spelt out in the
manuals and guidelines. The manual specifies the roles of different units within the Ministry as
well as the accountabilities of the LBs at the grass root level. The Ministry and Departments are
responsible for drawing up policies and norms. Regional Directorates (agriculture and livestock)
are responsible for providing technical backstopping to the district level offices. District level
offices of agriculture and livestock are responsible for planning and implementing all district level
programs.

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A. Decision Making and Coordination
97. There is a lack of efficient and effective coordination among the different agencies
concerned with various aspects and functions of agriculture development. There are duplications
in the roles and responsibilities of the internal divisions in the Ministry. For example, the role of
agricultural business policies is performed by Agricultural Business Promotion and Statistics
Division as well as the Planning Division which is often overburdened. The policy unit within the
Planning Division of MoAC is not adequately equipped to perform policy research and analysis.
The Geographical Information System (GIS) and Statistics Sections in the Ministry are not
equipped enough to provide the benefits of these tools in the planning, monitoring and evaluation
of agricultural activities by all needy departments and their district level extensions.

98. Similarly, the decision making process of the DoA and the DoLS is somewhat lengthy. For
example, files even in the department level, have to be moved from the commodity program office
to MoAC through program director, DDG and DG. Issues of decision making in the district are
forwarded to the MoAC through DADO/DLSO, RD/RLD, program director, DDG and DG.

B. Planning and Implementation

99. District level programs in the agriculture sector mainly deal with agriculture and livestock
extension services, and to a certain extent, marketing and institutional support. Nationally
prescribed operational strategies like Pocket Package Strategy (PPS) and group-based
extensions are closely followed in district level programming. Resource and location allocations of
these programs are finalized at the district level.

100. District Agricultural Development Office (DADO) and District Livestock Services Office
(DLSO) prepare annual agriculture and livestock programs based on the NPC's broader
guidelines and Ministry/departmental specific program guidelines and budgetary ceilings. District
agriculture and livestock officials participate in the Ilaka level planning workshops organized by
the DDC and collect demands for specific programs. These demands are then adjusted to
available resources, matched with production or extension targets at the district level and
synthesized into a district level plan. This version is then presented to Agriculture Sector
Committee at the DDC which recommends it to District Development Council for approval. This is
incorporated in the annual District Development Plan and sent to NPC for approval. Sanctioned
programs are implemented by DADO and DLSO.

101. A significant part of agricultural development activities, however, is planned and

implemented as central level programs by the Program Directorates in the DoA and DoLS.
Programs which involve more than two districts, or are highly technical or research oriented, or
designed to provide technical assistance to district offices, or involve implementation of central
level policies are normally classified as central programs. Such programs are approved by NPC
and implemented by respective Directorate of the Department through respective DADO/DLSO.

102. Different extension approaches were applied in the past e.g. the commodity based method
and result demonstration programs in early 1960s to T&V21 Group Approach, and Farmers to
Farmers (FtF) approach later on. More detail is included in Annex 3.11 in the Annex Volume.
Among the recent approaches, the FtF evolved through practice by Sustainable Soil Management
Project, the Group Approach initiated through the Third Livestock Development Project and

21
Training and Visit Extension Approach
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Agriculture Extension and Research Project, and LIF and DEF applied by APP-SP are innovative
approaches which could be refined further and scaled up in future. This FtF and the T & V Group
approach are the key extension approaches followed in the devolved agriculture extension and
livestock services.

C. Fund Flow
103. District offices of MoAC are authorized to spend budgets within their jurisdiction. However,
the major technical and budgetary decisions in the agriculture sector still rest with the
Ministry/Departments although; the district level extension service is channelled to a great extent
through the district level offices. Financial authorization letter in devolved sector (subjects) go
directly to the LDO, who then issues authorization to district offices to operate accounts within
applicable norms and regulations. DDC is responsible for keeping accounts and conducting
interim audits of all the expenses as per LBFAR. Final audits are held in the district offices as per
norms set by AGO. District level offices are also required to hold public hearings on budgetary
status and audit reports.

Fig 3.1: Fund Flow and Planning Process Diagram in Agriculture Sector at the
District Level

* Modified from Pokhrel, et. al. (2005) based on field level discussions

104. ASCs and LSCs are, however, not provisioned as budget expenditure units. So, the
center chiefs are dependent on their respective district offices even for small and petty
expenditure. This not only affects the efficiency of their operation, but also is demoralizing in the
eyes of their contemporary peers, and in the esteem of the clientele. In such situations, they
remain as the technicians with little or no resources at hand to support as per the needs/demands
of their clienteles.

D. Monitoring and Evaluation

105. Monitoring of "district level" as well as “central level” agricultural programs is carried out by
DADO/DLSO (district level), RAD/RLD (regional level) and DoA/DOLS (national level). Progress
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of both types of programs is reported to RAD/RLD and DoA/DoLS in trimester basis. For
monitoring and resolution of problems trimester reviews are held at the central level. For
resolution of specific problems in implementation at the district level MoAC has instituted a District
Agricultural Development Committee (DADC) led by DADO. DADO coordinates all government,
non-government and private organizations for program support and facilitation at the local level.

106. LSGA also requires impact evaluation of district level programs, particularly in assessing
impacts on program beneficiaries. Political instability and insurgency since 1999 has adversely
affected implementation of this provision.

3.3 Service Delivery Capacity and Beneficiary Perception

3.3.1 Service Delivery Capacity

A. Service Delivery Capacity in Surveyed ASC and LSC/LSSC
107. Service delivery in agriculture extension and livestock services are carried out through 378
ASCs, 999 Livestock Service Centres (LSC) consisting of 359 LSC and 640 Livestock Service
Sub Centre (LSSC). The distribution of grass root level agri-extension service offices (ASCs) in
the Mountain (16), Hill (39) and the Tarai (20) districts are 4, 6 and 4 ASCs respectively,
irrespective of the size of the district and the population. With this distribution one ASC has to
cover from 7 to 25 VDCs.

108. Manpower provision at ASC, in most cases, is two extension worker (JT/JTA) and a
support staff. As there is no provision for transport facility and travel allowance is meagre, it is
virtually impossible to reach and provide services to the farmers in all VDCs. Norms exist (details
included in Annex 3.7 and 3.9 respectively) regarding the types and number of equipment,
chemicals and supplies used for testing soil and diagnosing diseases in crops, essential
veterinary medicines as well as types of services to be provided by ASC and LSC.

109. The baseline survey and interactions conducted to review the situation of ASCs/LSCs and
their service delivery showed that many centres do not even have their own offices. Quite a few
were sharing offices with each other, under one roof, which incidentally was seen as convenient
by farmers/clienteles. Of the surveyed ASCs/LSCs, 60% of the centres operated from hired space
facilities, and 20% to 40% staff posts were vacant. Almost all of the visited centres lacked
equipment and essential facilities. Only 20% had telephone connections, 10% of ASC had motor
bike (because of project support) while none of the LSCs had motorbike, only 30% of the ASCs
had some equipment such as sprayers, soil testing, and seed testing, whereas 60% of LSCs had
microscopes and some surgical equipment, 50% had artificial insemination equipment and only
20% had the essential but simple outfits like travis in order to provide services.

110. DDC and the VDCs were not found allocating funds for building such infrastructures,
except in certain isolated case like at Sisuwa in Kaski, where the local people and the
Municipality/VDC shared funds for building the service centre. However, in the commercial and
diversification areas, the beneficiaries were seen willing to participate for services on cost sharing
basis. In some cases, VDCs were seen supporting small programs on training and selected
activities on ad hoc basis.

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B. Agriculture Extension Service Delivery in SAARC Countries
111. Presented below is a comparative chart that indicates agriculture extension service
delivery in Nepal compared to other SAARC countries. The table indicates the burden of
extension worker in SAARC countries at over 1000 households (HH) per extension worker, with
highest of 4562 HH in Pakistan and lowest of 1235 HH in Bangladesh, compared to 1879 HH in
Nepal. The professional:assistant ratio of 1:15 in Nepal is second only to the lowest of 1:20 of
Bhutan. The high "farm family: extension worker ratio" and the low "professional:assistant ratio" is
indicative of a large gap in farmers' access to technical advices/support from professionals in
matters beyond their knowledge. This situation is also well reflected by the baseline survey of this
GRDCP study -- lack of knowledge regarding new technology among extension workers eroding
the confidence of the farmers in seeking advice from JT/JTA in the surveyed districts.

Table 3.4: Comparative Indicators of Extension Service Delivery in SAARC

Countries
No of farm Ratio of Radio No of
Per capita
Countries families per professional receivers extension
cultivated land
extension worker to assistant per 1000 workers

Bangladesh 0.11 1235 1:07 40 11262

Bhutan 0.08 1481 1:20 14 240

India 0.31 1604 1:03 78 61388
Nepal 0.14 1879 1:15 30 2074
Pakistan 0.31 4562 1:07 97 2864
Sri Lanka 0.22 1251 1:09 167 1273

Source: Proceedings of National Extension Workshop, DoA, Kathmandu

3.3.2 Beneficiary Perception on Service Delivery

112. The baseline survey showed very few respondents (less than 2 %) participating in
agriculture extension programs/ activities implemented by ASCs. Similarly, very few farmers are
seen participating in the activities on regular extension/ dissemination programs, such as: soil
management, training on different trades e.g. bee-keeping, fisheries or other farming, pests and
diseases control, marketing management, etc. Participation in livestock services (0.63 %) is not
any different from the agriculture programs (details are presented in Annex 3.12 and 3.13 in
Annex Volume).

113. Farmer participation in improved animal breed production, improved forage and fodder
production, training on animal husbandry, and educational tour program is low. Inadequacy of
such programs to cover the farmers under the Service Centres/ Sub-Centres due to low level of
technical manpower and inadequate budgetary support for the service centres are cited as
reasons for lack of participation by many farmers.

114. Regarding response by these centres to farmers' demand, lack of prompt services for
pests and diseases control is found to be a severe problem faced by many farmers. Other lacking
areas include supply of improved seeds, and technical skills or knowledge of the service provider.
Support services for service delivery are severely lacking, as glaringly indicated by the large

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numbers of respondents who reckon their problems as serious. Furthermore, the
quality/standards of services provided are also not satisfactory as expressed by a large proportion
of service recipients

115. Also, as pointed out in sub-section 3.3.1 'B' above, the baseline survey under the present
work had indicated a large gap in farmers' access to technical advices from professional
extension workers in the survey districts (Details on summary of information on provision of
extension staffs, number of VDCs and farm families served etc. are presented in Annex 3.14 in
the Annex Volume).

3.4 Reforming Policies Institutions and Business Process for

Better Service Delivery
116. Having reviewed the issues related to the policy, plans, institutional arrangements, legal
instruments and business processes and also bearing in mind feedbacks from beneficiary and
secondary stakeholder groups during field interactions at various levels, the following reform
measures are suggested to address the impediments to good service delivery in agriculture and
livestock services.

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Reform Action Plan: Agriculture Livestock Service

Areas of Reform Problems/Issues Action/Measures Responsibility Expected Outputs

Action
1. Constitutional NA NA NA NA
Commitments
and Delegations

2. Enabling Laws
Policy/Plans
/Procedures
1. Inadequate structuring and 1. Reformulate the 26 points business OPMCM, MoAC, MLUPA, LBA MoAC initiating action to
specification of MoAC business allocation to MoAC in the GABR based on reformulate the
2.1. Enabling Laws
allocated in GABR 2064 a systems approach to government business allocated to
business in agriculture MoAC
2.2. Policy, Procedures & Plans
a1.Mismatch between the planning a1. Synchronize the planning / programming DADO/ DSLO, DDC DADO/ DSLO & DDC
cycle of the DADO / DLSO and DDC cycle of the DADO / DSLO and the DDC integrated district level
duly agriculture development
services plan prepared
A. Planning & Plan
and implemented
(Vision, Values,
Strategies, a2. Lack of clarity with respect to a2. Make agricultural services devolution MoAC, MOF Beneficiary farmers are
Goals, Programs developed agri-services vis-à-vis planning and implementation guideline better served
of Activities) DADO / LSDO services at different clear and complete with trained manpower
level and budget allocation
a3. Absence of quality standards and a3. Define and enforce quality standards and MoAC, DoLS, DADO/ DLSO and Beneficiaries assured of
norms of services norms of services Service Centers quality services
b1. Many specialized agency functions b1. Restructure DOA into adequate and MoAC, MOGA Service delivery
of agriculture centralized in a single appropriate specialized functional improved in all
B. Institutional DOA with top heavy organizational departments specialized sub-sector
Structure & structure of agriculture
Capacity b2. Agri-extension services able to b2. NARC researching and developing local- DOA/ DOLS, NARC, DDC/ VDC, Resources allocated to
cater to needs of neither the poor need based technology and DOA/ DOLS NGO/ PS NARC/ DADO/ DoLS
and disadvantaged groups of building competence/ capacity of service adequately

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Areas of Reform Problems/Issues Action/Measures Responsibility Expected Outputs

Action
farmers nor of the relatively bigger delivery to both the disadvantaged and
entrepreneur-farmers satisfactorily entrepreneur groups of farmers
c1. No or little investment participation c1. Establish and maintain DDC ownership of DDC, DoA, DoLS DDC beginning to
C. Financial/fund by DDCs in agriculture & livestock District level agriculture plan by starting allocate its fund in also
Flow mechanism services in their districts with token financial investment from DDF District level agriculture
development programs.
d1. Very poor supply of essential d1. Allocate necessary fund to provide to the MoAC, MoF, DoA, DoLS, DDC, Budget allocated
D. Procurement &
testing equipment, wares, chemics ASC/LSC/LSSC, core equipment and ASC/LSC procurement made and
Supply Chain
etc. and related infrastructure supplies, as well as storage and logistic supplied to
Management
support to ASCs/LSCs support facilities ASCs/LSCs/LSSCs
e1. Ineffective Management Information e1. Initiate a process of management system MoAC, MEST, DDCs, LBAs Agriculture information
System (MIS) at Central Level, and documentation and document control in system established and
E. Information, inefficient information and governance of agriculture, including use of working at both central
Communication communication between CLAs and appropriate ICT and district level
& Documentation local DDC/ VDC levels

F. Monitoring f1. Implementation of devolution in f1. Install and implement rigorously a system MoA/ DoA/ DoLS, DDC, LBAs Appropriate agriculture
Service agriculture and livestock not of monitoring implementation of devolution services delivered to
Realization & monitored duly enough in agriculture and taking immediate intended/ targeted
Delivery corrective actions beneficiaries.
g1. Implementation of Government g1. Design and install a Top Government OPMCM, MOAC, MOGA Annual top government
G. Top Government
policies, strategies, plans and Review Mechanism within the MoAC to review held, decisions
Review and
institutional reform measures in periodically review and reform strategic/ minuted and acted upon
Continual
agriculture sector not monitored structural changes in Agriculture service duly and diligently,
Improvement
and reformed effectively sector

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CHAPTER IV: MANDATES PROTOCOLS AND SERVICE

DELIVERY IN RURAL INFRASTRUCTURE

4.1 Service Delivery Mandates, Policy and Protocols

117. Despite more than five decades of supposedly democratic governance under five
constitutions and ten periodically planned development, majority of the population in Nepal
continues to suffer from inadequate access to basic services like safe potable water,
elementary education, gainful employment, health care, transport and communication
connectivity, proper housing employment and markets for rural produces of all kinds etc. Lack
of basic infrastructure services has deprived vast majority of rural inhabitants from the
enjoyment of the benefits of even a modicum of development. This has resulted in a wide
disparity in the living conditions of the rural vis-à-vis urban population. Poverty alleviation and
economic growth requires socially guided basic infrastructure development. Such an approach
alone provides access of the poor to basic services. Strengthening governance and institutional
frameworks concerned with rural infrastructure is thus a highly important priority to promote
poverty alleviation and economic growth.

118. Mandates and protocols in terms of legal and institutional arrangement, policies,
procedures and plans concerning provision and delivery of services in rural infrastructure over
the last decade or so are briefly as follows:

4.1.1 Local Self Governance Act, 2055 (1999 AD)

119. The DDCs, Municipalities and the VDCs are the LBs governed by elected local
representatives. LSGA gives extensive role to DDCs and VDCs in local level development
planning in general and rural infrastructure development planning in particular within the
district, municipal and village development areas. It requires the DDCs to prepare District
Periodic Plans (DPP) for the development of the district by comprehensively taking into
consideration the situation, needs and potential of the district, and aspirations of the local
people. Annual Plans based on DPP is prepared by following a 14-steps planning process for
local level planning provided by the NPC and MoLD. (Details are presented in Annex 5.5 in the
Annex Volume). Not all the districts have followed the District Periodic or Strategic Planning
process. Those who have prepared have mostly done so with the help of consultants, NGOs or
donor project support. During the periodic and annual planning cycle, a bottom-up process for
identifying local needs or demands are usually followed by the district authorities through a
series of participatory meetings organized at settlement level.

4.1.2 National Strategy for Rural Infrastructure Development, 2054

(1997 AD)
120. Poverty alleviation was a prime objective of the Ninth Periodic Plan which was drawn up
in line with the long term Agriculture Perspective Plan (APP). The APP was designed to
generate substantial opportunities for rural employment through diversification,
commercialization and industrialization of agriculture. This obviously required ensuring
availability of means and resources for improved agricultural practices, and easy access to
market for agricultural products as well as to the basic human services. Government has been

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trying to address these needs through a variety of basic rural infrastructure development
programs.

121. Earlier, three different actors, namely the CLAs, LBs and donor-driven projects were
implementing rural infrastructure development at local level virtually without any coordination.
This resulted in costly avoidable multiplicity in the planning, implementation, technology use,
involvement of beneficiaries etc. in programs implemented and operated by different agencies.
Also there were many gaps in specifics such as standards, work norms and practices,
appropriate technologies, financial and human resources, basic facilities for satisfactory
program operation etc. The National Strategy for Rural Infrastructure Development, 2054 (1997
AD) was the result of the recognition of these gaps at the time.

122. The stated "key objective of this strategy" is the development of country wide basic rural
infrastructure (with strong emphasis on rural/agricultural roads) in a planned and sustainable
ways by adopting the labour-based, local resources-oriented, environment-friendly techniques
and following the government decentralized participatory approach". The strategy had 10
supporting objectives, along with corresponding indicators of outputs.

4.1.3 Local Infrastructure Development Policy (LIDP), 2061 (2004 AD)

123. There were strong and widespread feelings that despite a long period of implementation
of the LSGA and the National Strategy for Rural Infrastructure Development, 2054 (1997 AD),
qualitative outcome was not forthcoming from the local infrastructure development programs
carried out at the local level. This issue was reviewed in-depth and a comprehensive "Local
Infrastructure Development Policy (LIDP), 2061 (2004)” was formulated and put to
implementation.

124. The LIDP defined "local infrastructure" to include (i) Local Transportation, (ii) Irrigation &
River Control, (iii) Micro-Hydropower & Alternative Energy, (iv) Water Supply, Sanitation &
Sewerage, (v) Housing, Building and Urban Development, (vi) Solid Waste Management, and
(vii) Social Infrastructure.

125. The "policy goal" was defined as "contribution shall be made in poverty alleviation by
improving the social and economic conditions of the local people at their own initiation and
participation". Likewise, the "policy objective" stated was "by means of physical and social
infrastructure, the access of local people including women, disabled, backward, oppressed, and
neglected and Dalit class to social service, economic opportunities and resources shall be
increased".

126. Stated policy "strategies" included:

a) Programmes relating to infrastructure to be operated by the line ministries shall be devolved to
the LBs;
b) Development of appropriate institutional structure and technical capacity shall be enhanced for
the local infrastructure development;
c) A concept and working style shall be pursued to mobilize local resources, means and skill in the
local infrastructure development by means of people's participation; and
d) An effective utilization of available resources shall be made by maintaining harmonization
among the donor agencies involved in the local infrastructure development.

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4.1.4 Rural Infrastructure Reconstruction and Rehabilitation Plan,
2064 (2007 AD)
127. RIRRP is a part of the Government’s three-year interim plan. The planning exercise
shared a common pool of information, used same norms and parameters, and worked on
similar premises. Stated objectives of RIRRP are as follows;
• Rebuilding/reconstructing the conflict-damaged and destroyed infrastructures,
• Rehabilitating the rural infrastructures which fell into disrepair during the 11-year long conflict,
and
• Completing the planned infrastructure development activities which could not be accomplished
due to conflict situation.

128. RIRR Plan covered seven subsectors of physical infrastructures and facilities as defined
by the LIDP 2061 (2004 AD). The programmatic scope in the selected sub sectors of RIRR
Plan incorporates reconstruction and rehabilitation activities and has been delineated with a
rural perspective using the scoping framework mentioned earlier and in consultations with
concerned agencies.

4.1.5 Key Initiatives of Development Partners in Rural Infrastructure

129. Within a general understanding of LIDP 2061 (2004 AD) definition of rural infrastructure,
there are fourteen significant joint initiatives between government and nine development
partners, besides the smaller projects undertaken by CBOs and NGOs. Through these
programs, there are one or more district-driven projects undertaken in all seventy-five districts
of Nepal, all with some form of social mobilisation component. Depending on the nature of
individual programs, the lead government agency for execution and coordination differs: There
are eight such programs under the MoLD, two programs under MoWR, and four programs
under MPPW (Details are included in Annex 4.1 of the Annex Volume).

4.1.6 Guideline on Integrated Rural Accessibility Planning (IRAP) for

Nepal, 2005
130. The IRAP is a local development-planning tool, particularly useful for the identification
and prioritization of need-based local infrastructure projects aimed at improving access of rural
communities to basic needs and social and economic services. It uses "accessibility" as a
common denominator in an integrated and participatory process.

131. The Guideline introduces the different IRAP tools available to help local authorities to
undertake regular local-level planning in the context of decentralization in which they are
gradually assuming higher roles and responsibilities for rural access planning and local
infrastructure development. Portraying the structure of the local-level planning context in Nepal,
the Guideline shows where and how this process can or may be applied. It also offers an
explanation as to why it is better to look at "accessibility" instead of "transport" only. The
guideline comprises all steps and activities including data collection and compilation,
accessibility mapping, identification of access-poor communities, and finally project
identification and prioritization.

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4.1.7 Operating Procedure for Local Level Physical Infrastructure
Development Programs
132. Government had developed in 2062 (2005 AD) and updated in 2064 (2007 AD) the
operating procedure for programs of local level physical infrastructure development through
Users Committees (UCs) composed of representatives of local people or community
organizations (COs) of the VDC where social mobilization programs are under way.

133. Structure of joint investment participation specified includes 70% by central government,
10% by VDC and 20% by the UCs in cash for programs in VDC; and 60% by central
government, 20% by the Municipality, and 20% cash by the UCs for programs in Municipality.

134. The FY2007-08 budget, which is in a way the first policy statement of the seven-party
coalition government after the restoration of House of Representatives, has set out a policy
direction for the reconstruction and rehabilitation of rural infrastructures. The policy elements
incorporated in the budget include (i) expediting reconstruction of various damaged/destroyed
district infrastructures, (ii) completion of ongoing rural roads within a set timeframe and budget
(iii) spending 70%of budgetary allocation on ongoing schemes for rural roads (and the
remaining 30% on DDC prioritized rural roads under the approved DTMPs) (iv) mobilization of
users’ committees, particularly from the low income communities, for the construction of rural
infrastructures, and (v) introduction of performance-based grant system to support the
development activities of LBs. The budget has envisaged a DTMP-Roads Construction Fund
for the planned development of rural roads. It has also initiated relief and reconstruction
activities with an initial budget allocation of Rs. 1.1 billion drawn from domestic resources.

4.2 Organizational Set Up and Business Process

4.2.1 Organizational Set Up

135. The Ministry of Local Development (MoLD) as the Central Line Agency (CLA)
responsible for local infrastructure development as well as promoting and supporting local
governance bodies has established a technical department – Department of Local infrastructure
Development and Agricultural Roads (DoLIDAR) for technical support to DDCs.

A. Department of Local Infrastructure Development and Agricultural

Road (DoLIDAR)
136. The objective of DoLIDAR is to undertake rural infrastructure development programs in
accordance with decentralization policies of the government in coordination with other
concerned agencies and government line departments. DoLIDAR undertakes local
infrastructure development activities funded through the government and donor agencies.
DoLIDAR is responsible for making the local authorities technically capable and competent and
ensuring their accountable, participation by providing technical backstopping to the local
authorities in local infrastructure development.

B. District Technical Office

137. Following establishment of DoLIDAR under MoLD, the technical wing under the DDC
was removed from the DDC structure and instituted as the District Technical Office (DTO)
under DoLIDAR at the centre. Although DTO is a separate office, it is located alongside the

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DDC office and supports DDC in carrying out all the DDC approved infrastructure programs in
the district. The devolution of district level infrastructural programs, particularly small irrigation
and drinking water programs, and rural roads including agriculture roads etc from the central
government to the DDC substantially increases the volume of the district level infrastructure
programs and thus justified the needs for a capable technical office at the district. The
organizational relocation of DTO from the DDC to the DoLIDAR - a department of the MoLD at
the Centre - raises several issues as follows touching on decentralized governance:
• DTO placed outside the purview of DDC undermines the authority of local government and
defeats the concept of self-governance. It amounts to virtually counter decentralization. Section
257 of the LSGA rightly empowers DDCs to set up sectoral offices and the LSGR stipulates
qualification criteria for DDCs to establish such sectoral units. Instead of encouraging and
equipping DDCs to establish sectoral branches in line with the principle of devolution enshrined
in the LSGA, this step has tended to strengthen the process of centralization in the name of
decentralization.
• DTO operating outside the DDC framework has been transferring even the existing human
resource and physical equipment from the DDCs to DTO under DoLIDAR. This has stripped
DDCs off their technical resources and told on their capacity. DTO, as a technical unit, tend to
focus more on technical rather than on social aspects.
• Chances of other organizations to grow at local level with increased community involvement will
suffer as a result of community activities overly limited to respecting the technical directives of
the DTO. Community interests and ownership and people’s participation in planning and
implementation of projects will be adversely affected by concentration on technical aspects at
the cost of social aspects.

4.2.2 Business Implementation Process

138. LSGA and its associated regulations require LBs to be responsible for formulation,
implementation and operation of the plans for the development of infrastructure at the local
level. LSGA and its rules also require engaging User Committees (UCs) in the program
implementation. Similarly, the Local Infrastructure Development Policy, 2004 clearly requires
that the construction work shall be done through UCs, local NGOs and CBOs depending upon
nature, size, and technology involved in the construction of the project. Only works which are
technically complex in nature shall be done through procurement contracts.

139. During the GRDCP TA field visit, it came to knowledge that more than 80% of projects
are executed by UCs in the case of DDC, VDCs and Municipality. UCs’ micro-project
implementation modality has its advantages - increased ownership, use of local labour (both
skilled and unskilled), greater local accountability, reduced costs etc. In addition, in the remote
areas (sometimes as much as several days walking distance from urban centres), private
sector contractors are either non-existent or (when available elsewhere) unwilling to undertake
small-scale public or community works. For Nepal, using the UC option may not appear
particularly impressive. However, for certain countries this may prove a valuable innovative tool
for micro-project implementation in remote rural areas. It has its drawbacks - sometimes poor
technical design and implementation (particularly in the context of weak DDC backstopping and
low skill levels at the local level) and a tendency to focus on too small or too large investments.
A brief review of the implementation status of basic services provisioned, regulated and
programmed in three legal, regulatory and policy documents, namely, LSGA, LBFAR and Local
Infrastructure Development Policy, 2061 has been presented in Annex 4.2 of the Annex

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Volume. Experiences from GRDCP TA field visit showed three modalities of implementing rural
infrastructure works. They are briefly described in the text and table 4.1 below.
a) UC Implemented and operated: The UCs are involved in the entire process in this
approach: identification, planning, implementation, monitoring, evaluation, operation and
maintenances of the infrastructure projects. An individual user participates as per the rules
and regulations of the UC. Given the difficulties of attracting private sector contractors to
work in remote rural areas and a widespread dissatisfaction with existing procurement
arrangements, almost all micro-infrastructure funded by LBs have been exclusively
implemented by local UCs. This approach has been found very good, indeed ideal in many
cases.
b) UC/UG managed: The User Committee (UC) or Users' Group (UG) is involved, in principle
only. Only few members of the UC/UG are involved in the construction. These members'
working modality is not much different from that of a contractor. The only difference is that
the contractor is registered as a firm, whereas the UG may or may not be registered or
organized as a UC. The UC/UG informally contracts some technical part to a contractor
because of their lack of technical know-how.
c) Contract out: The work is contracted out to a registered contractor. The construction
responsibility of the contract package is solely on the contractor. As a profit-making entity,
the contractor makes use of human and physical resources and seeks to maximize profit
from the contract.

Table 4.1: Merits and Demerits of the Implementation Modalities

Implementati Merits Demerits
on Process

• Easy to administer • Sometimes elite dominant. No minimum

• No bidding process is involved qualification of UC members is defined
UC • No competitive bidding process
• Cost efficient (need not to pay tax)
Implemented
• Ensure sustainability • Work quality may suffer due to lack of
technical know-how
• High people participation
• UC liable to party political influence
• Maximum use of local resources

• Qualified technical as well as • Relatively less people’s participation in

UC/ UG administrative human resources operation of the infrastructure at the
Managed used community level
• Timely completion of the • Not assured to be proper, because of lack of
construction work technical know how and ownership

• Qualified technical and • Needs administrative supervision

administrative human resources • Less community involvement/ ownership
used
• Less chances of utilization of local resources
Contract out • The technical quality of the
• No full assistance of quality because of less
infrastructure projects relatively
community involvement/ownership
better
• Timely completion of the
construction work

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140. The UC approach has been found working effectively in the remotest of VDC in the
country, even in the insurgency situation. The approach is directly beneficial to households in a
community by ensured completion of the rural infrastructure project in time and within cost. As a
result, more and more community at the grass root level demands such approach for rural
infrastructure construction. However, a really working User’s Group or user committee
approach needs to address aspects such as follows:
i) Capacity-building: During the field visits, one of the DDC staff members stated that the
minimum qualification of UC members should be defined and agreed upon. Most of the UCs
does not have the capacity to implement, operate and maintain the infrastructure projects.
The capacity-building of UCs through training in leadership, management skill, record-
keeping and financial management and orientation in codes of conduct must be given a
very high priority.
ii) O&M: operations & maintenance is rarely given attention by program implementers,
including the local government. The O&M is one of the weakest features in most of the
infrastructure project implementation. The O&M must be considered in the very beginning of
the project and UCs members given due orientation.
iii) Politics of Consensus: There are always possibilities of politicization of the UC at local
level Party politicization adversely affects implementation of the infrastructure projects.
Awareness raising and training programs on the costs of party politicization and benefits of
non-partition approach should be provided to members of UCs immediately upon the
formation of committees.
iv) Inclusiveness: UCs should be formed and operated with sensitivity to gender
mainstreaming in local infrastructure development. Women empowerment should be a
fundamental base. Similarly, priority should be given to benefit the disadvantaged
indigenous nationalities, Dalits and other marginalized communities by making the local
infrastructure development programs truly community-centered and community-involved.

4.3 Service Delivery Provision and Beneficiary Perspective

4.3.1 Service Delivery Provision in LSGA

141. The LSGA provides the legal framework for decentralization or devolution of central
government authority to LBs for providing and delivering public services to citizens. LSGA
Article 189 and Article 28 respectively ordains and empowers DDCs with sixteen functions,
duties, and authority and VDCs with eleven. For example, services like, agriculture, education,
health and drinking water, were devolved to DDCs. A review of legal and regulatory provision
for UCs as per LSGA, LBFAR and Local Infrastructure Development Policy is presented in
Annex 4.3 of the Annex Volume.

4.3.2 Modes of Service Delivery

142. Modes of public service delivery including local infrastructure services in Nepal can be
categorized as follows:

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Table 4.2: Types of Service Delivery System
Modes Business Process Example
Direct Service Delivery Central Government produces and provides Service delivered by DADO, DLSO,
by Central Line the service directly through CLA offices DHO, DoE, DTO and DWO at district
Agencies (CLA) extended at district level level
Decentralized Service Central government provided authority to Service delivered by the LBs: DDC,
Delivery through LBs LBs for service delivery. The role of civil VDC and Municipality
society for service delivery are expected in
this system
Service Delivery Government transfers responsibility of Service delivered through Public
through PPP delivering public services to private Private Partnership (PPP)
companies and undertakes responsibility of
only monitoring compliance to codes and
agreements
Alternative Service Government and private Service delivered through UCs/UGs
Delivery sector/NGOs/CBOs enter into co-operative Community Organization such as in
agreements based on shared objectives VDC (Jhalari) and by Tole/Lane
and working relationships through Users' Organization (TLOs) such as
Committee (UC) or Users' Groups (UGs) Mahendranagar in Municipality

4.3.3 Beneficiaries' Perceptions about Satisfaction with Service

Delivery:
143. A household (HH) survey was conducted in the survey districts to gauge citizen’s
perception about satisfaction with participation in the planning process as well as service
delivery concerning rural infrastructure. Almost half of the people were found participating in the
plan formulation meeting, 75% in budget formulation meeting and more than 90%, on average,
in fund mobilization as well as monitoring and evaluation meeting. Community perceptions on
service delivery indicate more than 75%, on average, reporting that they are satisfied with
service delivery provided by LBs. Details are presented in Annex 4.4 of the Annex Volume.

4.4 Reforming Policies, Institutions and Business Process for

Better Service Delivery
144. The fact that "rural infrastructure" as a subject sector of the study was a replacement of
the original "education sector", nearly towards the fag end of the study, has posed limitations to
the depth of its study. Nonetheless, based on review of the existing mandates, protocols,
policies, plans and feedbacks from the interactions with stakeholders in the field, certain
reforms or improvemental actions are recommended in the policies, institutions and business
processes for bettering infrastructure service delivery at local level. They are outlined in the
Reform Action Plan Matrix that follows:

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Reform Action Plan: Rural Infrastructure
Areas of Reform Action Problems/Issues Action/Measures Responsibility Expected Outputs
1. Constitutional NA NA NA NA
Commitments and
Delegations
2. Enabling Laws
Policy/Plans
/Procedures
a. Inadequate structural design and a. Redesign and reconstruct the OPMCM, MLJPA, MoLD, MOLD initiating actions to
specification of MoLD business eighteen-point businesses allocated LBA redesign/ reconstruct businesses
allocations in the GABR 2064. to MoLD in the GABR based on a allocated to MOLD
system and process approach to
defining government business in rural
2.1. Enabling Laws infrastructure sector
b. Absence of enabling laws specific b. Provide enabling laws specific to MoLD, MPPW, FNCCI, Enabling laws provided
to participation of private sector participation of private sector in local FCAN
in rural infrastructure rural infrastructure
development
2.2. Policy, Procedures
& Plans
a1. Not all DDCs prepared and a1. DDCs assertively using DPP for rural DoLIDAR/LBs Effective use of resources in
updated DPP with due priority to infrastructure priority needs basic rural infrastructure
A. Planning & Plan rural infrastructure.
(Vision, Values,
Strategies, Goals, a2. DOLIDAR/DTO tendency to focus a2. Sensitize the technical-engineering DoLIDAR/LBs Better satisfaction level of rural
Programs of on technical at social cost of oriented DoLIDAR to the need for residents from local
Activities) beneficiary people’s participation social-engineering and introduce infrastructures
appropriate manual on social
mobilization
b1. Moving DTO out from DDC and b1 Empower DDC to set up own DTO DTO set up in DDCs.
establishing it as a seperate with MoLD / DoLIDAR providing MoLD/GON
B. Institutional
entity under DoLIDAR technical support.
Structure &
undermined the authority of DDC
Capacity
leading to conflict at the district
level

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Areas of Reform Action Problems/Issues Action/Measures Responsibility Expected Outputs
b2. Ineffective coordination and b2. Develop mechanisms to ensure LBs, DoLIDAR-DTO Improved relationships among
linkage among DDC/DTO with integrated DDC/CLA sectoral plans the service provisioning agencies
other CLAs at field level leading to better service delivery

b3. Insufficient capacity of
governmental staff in PPP
planning and management
b4. User Committee (UC) formation
and operation tending to move
away from being User Group
(UG)-centered & UG-involved to
becoming Procurement Manager
C. Financial/fund Flow c1. Weak financial management
mechanism practices
d1. Inappropriate and conflicting uses
of UCs affecting small local
D. Procurement &
construction contractors/firms
Supply Chain
leading to potential local-political
Management
abuses
e1. VDCs and municipalities do not
receive proper guidelines on rural
infrastructure from DDC and/or
E. Information, MoLD in time
Communication & e2. LBs not duly informed on relevant
Documentation policy such as the LIDP, RIRR
etc.
b3. Build Capacity of government staff in MoLD/DoLIDAR/LBs Improved service delivery by LBs
the preparation of PPP projects
designed to attract bidders and
assure a truly competitive bidding
b4. Provide and implement procedures to MoLD/DoLIDAR, MPPW, Beneficial use of the User Group
ensure that UC formation and MoF, LBs, LBAs (UG) concept institutionalized as
operation is UG-centered and UG- User Committee (UC) for
involved national-wide application
c1. Review audit skills and resources in DoLIDAR/LBs Visibly better accounting and
DoLIDAR and DDCs for all LBs needs auditing
d1. Form, enable and equip UCs to truly MoLD, DoLIDAR MoF, MoLD-DoLIDAR and FCAN
perform as politically neutral and MPPW, LBs, LBAs, FCAN immediately consult to make UC
corruption-free UCs without sub- an effective tool for grass-root
contract purchase of UC works from level infrastructure construction
local private contractors without adverse effect in formal
construction contract business
e1. Introduce procedure of timely MoLD Participatory Planning Process is
information flows as per LSGA effectively implemented
e2. Introduce system of timely information MoLD Service providers are better
and communication of all relevant informed to provide services as
policy, procedure and plan-program per government policy and
changes procedure and to better
satisfaction of people

F. Monitoring Service f.1 Weak supervision and monitoring f.1 Review existing MoLD/DoLIDAR DoLIDAR/LBs Service recipients feel of
Realization & of LBs by DoLIDAR practices on program monitoring and transparency and accountability
Delivery streamline PMAS reporting in service delivery

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Areas of Reform Action Problems/Issues Action/Measures Responsibility Expected Outputs
g1. Implementation of government g2. Strengthen LIDP 2061 (2004 AD) by OPMCM, MoLD, MoGA, Annual top government review
G. Top Government policies, plans, institutional providing for a top government review MPPW held, decisions minuted and
Review and reform measures in rural mechanism within MoLD to acted upon duly and diligently,
Continual infrastructure not monitored and periodically review and reform
Improvement reformed effectively strategic/structural changes in rural
infrastructure sector

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CHAPTER V: REFORMING GOVERNANCE FOR BETTER

SERVICE DELIVERY

5.1 Institutions, Mandates and Capacity

5.1.1 Central Level Organizations

A. Ministry of Local Development (MoLD)
145. Ministry of Local Development (MoLD) is the principal central institution with the mandate
to frame policy and legal-institutional framework and to implement decentralization and
devolution of governance to local level. MoLD is an overarching institution for decentralized
governance and service delivery. Its role embodies two facets of governance – local
development activities and service delivery. Thus in the socio-economic development endeavour
of the central government, MoLD has been playing a role of local development leader cum
facilitator.

i) Mandates and Functions of MoLD

146. Government of Nepal ABR, 2064 has mandated the Ministry with functions that includes
developing the local governance system and strengthening local authorities as capable, effective,
and responsible institutions to (i) facilitate access of people in a transparent and accountable
manner and (ii) manage local self governance system. Allocated functions also include
developing institutional mechanism and processes to enable local government to implement local
and community development programs and activities. (details of MoLD mandates are included in
Annex 5.1 in the Annex Volume)

147. The Ministry plays role as a facilitator and coordinator of decentralization and devolution.
It coordinates the functioning of LBs as well as the relationships of LBs with other line agencies,
both at the centre and at the grass root level. However, there seems to be a tendency towards
increased control and concentration of project activities at ministry level. Local Body chief
executives, namely, the LDO at the DDC, Chief Executive Officer (CEO) at the Municipality and
Secretary at the VDC are all deputed by the Ministry. The Ministry, with the support of Local
Body Fiscal Commission (LBFC) recommends to MoF the amount of annual conditional and
unconditional grants to LBs and also monitors their performances.

ii) Organizational Structure of MoLD

148. Organizationally, the Ministry has five divisions, one department, several commissions
and committees, and institutes through which it discharges programs, projects and activities at all
levels of governance. They include the Department of Local Infrastructure Development and
Agricultural Roads (DoLIDAR) and the LDTA with eight training centres consisting of five Village
Development Training Centres, two Women Development Training Centres and one Urban
Development Training Centre located in various regions of the country. The five divisions of the
Ministry consists of, namely, (i) General Administration, (ii) Self Governance Coordination, (iii)
Municipal Management, (iv) Planning and Foreign Aid Coordination, and (v) Legal Advisory
(MoLD Organogram is included in Annex 5.2 in the Annex Volume). LBFC, Remote Area

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Development Committee, Gumba22 Development Committee etc. are other important agencies
belonging to it.

149. The Ministry staff positions consist of 41 Gazetted positions including special class, 38
positions of Non-gazetted class and 48 clerical and menial staff. In addition, there are 76
positions in DOLIDAR represented by mostly engineers and agronomists.

iii) SWOT Analysis of MoLD

150. A SWOT analysis of the MoLD reveals that inspite of the mandate being given and a
number of institutions created under its umbrella for better coordination and implementation of
decentralization/devolution, still there are large number of impediments, such as, the still
prevailing laws and regulations in conflict with LSGA, unclear and confusioning/duplicating
function and responsibility among different levels of LBs and that of the sectoral line agencies,
heavy dependence of LBs on central resources and weak capacity at the LBs level due to lack of
trained human resources etc.

Table 5.1: SWOT of MoLD

Strengths Weaknesses
• A large organization structure with arms extended to • Duplication of function and power of LBs
all LBs. with sectoral agencies
• Long and strong experience of planning and • Unclear function and mandates at different
implementing decentralization and local development levels of LBs
• Large pool of manpower with experiences in • Prevailing of large number of conflicting
decentralization and local development. laws and regulations
• Mandate of formation, implementation and monitoring • A tendency towards Ministry-led projects/
• Establishment of Institutions such as, LBFC and programs rather than local demand led
LDTA under its umbrella • Inadequate information and
• Good network with other Government agencies, communication capacity within and outside
donor and NGOs of the Ministry

Opportunities Threats
• Increased opportunities for • Long transition caused by fluid political
decentralization/devolution of governance from the situation may threaten restructuring and
State having become a federal democratic republic reforms of MoLD
• Opportunity to represent to the Constitutional • Risk of continued dependence of MoLD on
Committee of the CA for strong provision of donor assistance for decentralization
decentralization/devolution principles and policies. planning and implementation
• Prospect of increased donor support to • Attitudes of reluctance to decentralize
decentralization and devolution of public services

B. Decentralization Implementation and Monitoring Committee (DIMC)

151. Following enactment of the LSGA and as provided by clause 241, a Decentralization
Implementation and Monitoring Committee (DIMC) was constituted. DIMC is mandated with the
authority to monitor government (central and local) performance in decentralization in conformity
with the objectives, policies, procedures and plans as provided for in the LSGA and to take
corrective measures to ensure performance in the spirit of the LSGA. The Prime Minister heads

22
Monastery
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the DIMC, with other members including Leader of Opposition in the Parliament, Ministers and
Secretaries of the Government, Chairman of the Development Committee of the Parliament,
Vice-chairman of NPC, representatives of main political parties and Chairpersons of the LBAs.
The high-powered DIMC was and is expected to drive the process and accelerate the pace of
decentralization implementation in Nepal.

C. Local Bodies Fiscal Commission (LBFC)

152. Following the promulgation of LSGA, Local Authorities Fiscal Commission (LAFC) was
constituted in 2000 AD under clause 237 of the law. The LAFC is mandated to conduct study
and research on tax sources assigned to LBs, allocate revenue between the centre and LBs; and
to recommend policy for timely restructuring of the fiscal and financial management of LBs.

153. The LAFC conducted studies in 2000 and recommended a number of measures for
effective fiscal decentralization including assignment of responsibilities and revenue sources to
the LBs. Later in 2003, GON renamed LAFC as Local Body Fiscal Commission (LBFC) and
constituted a 9 member permanent body under the convenership of the Vice Chairman of NPC.
The other members of the Commission include Secretary of MoLD; Secretary of MoF;
representatives of ADDCN, MuAN, NAVIN, and FNCCI; a fiscal expert and a member secretary.
A detailed road map with eleven major activities were prepared and adopted in 2003 for
implementation by the LBFC in a phased manner.

154. Contrary to the views expressed time and again by the LBAs and other professional
experts, the LBFC is functioning as a virtual division under the MoLD. Not only it is housed within
the MoLD premises, but also the staffs are deputed by the MoLD. A Joint Secretary of the MoLD
acts as a part time Member Secretary of the Commission. This has considerably affected the
workings of the Commission as an independent entity. The recent decision of the government
appointing Minister of MoLD in place of the Vice-chairman of NPC as Chairman of LBFC is a
further setback to its independence – causing loss in whatever credibility it had as an
autonomous institution meant for supporting LBs.

D. Local Development Training Academy (LDTA)

155. LDTA has been the key institution for training manpower required by the LBs. LDTA Act
of 2049 (1994 AD) mandated it as an autonomous body to provide training on administrative
management to personnel of local development bodies. Chaired by the Minister of Local
Developmen, LDTA, however, seem to function as a wing of MoLD. LDTA has its associate
institutes in five development regions of the country. The Urban Development Training Centre
(UDTC), located in Pokhara, is mandated to meet the training needs of Municipalities. The
Women Development Training Centre (WDTC) and the Village Development Training Centre
(VDTC) are located in other regions. LDTA and its associates have huge assets, in terms of
prime land and buildings, but are wholly dependent on government grants for operations.

156. The Academy has lost much of its position since its inception. The growth in private
sector training institutes, donor agencies and INGOs' preference to use their own training outfits
posed big competition to the LDTA. Poor Institutional leadership and absence of demand for
training owing to local elections not held has driven the LDTA, its regional branches, and UDTC
to a critical stage; whereas, given the vastly changed political environment of Nepal as a federal
democratic republic, a huge demand for training in the area of local development and local
governance is a certainty.
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5.1.2 Local Level Organizations/Local Bodies (LBs)

A. Mandates and Functions of LBs
157. LSGA has mandated DDC and Municipality/VDC as LBs or Body Corporate rather than
as Local Self Governance Organizations. LSGA has assigned 16 different tasks to DDC, 10 to
Municipality and 11 to VDC as indicated below.

Table 5.2: Tasks and Responsibilities of LBs

S.No. Tasks and Responsibilities of LBs
DDC Municipality VDC
1 Agriculture Fiscal matters – Prepare annual Agriculture
plan and get endorsed from
Municipality Council
2 Rural Drinking water Physical Development Rural Drinking water
3 Works and Transport Hydro-power, environment and Works and Transport
sanitation
4 Education and sports Education and sports development Education and sports
5 Irrigation, and River Bed Preservation of cultural heritage Irrigation, Soil Erosion
control and River Bed
6 Physical Development Construction and maintenance Physical Development
7 Health Services Health Services Health Services
8 Forest and environment Social Welfare Forest and environment
9 Language and culture Industry and Tourism promotion Language and culture
10 Tourism and cottage Industry Building permit Industry and Tourism
promotion

11 Hydroelectricity 11 different optional task assigned

12 Land reform and land
management system
13 Women development and
underprivileged population
14 Work related to wage of the
labor
15 Information and
communication
16 Miscellaneous task assigned Miscellaneous – 15
different task assigned

158. The LSGA empowers LBs to raise internal resources from various tax and non-tax
revenue. VDCs and Municipalities have authority to levy house and land tax, vehicle tax,
advertisement tax, business enterprise tax, service charge and various kinds of service fees. The
law also authorizes VDCs to levy tax on the utilization of natural resources and the Municipalities
to impose rental tax on land and building. The Act also authorise municipalities to borrow from
financial institutions upon prior approval from the government.

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159. LSGA however assigned little own-source revenue to DDC. They can impose tax on the
use of roads and bridges constructed from own source or those formally handed over to them,
export tax on local raw materials and wastes, sale of sand, soil, stone in its jurisdiction. They are
also empowered to collect different types of service fees and charges, and to borrow from
financial institutions.

160. Fiscal powers of LBs to raise revenue, however, suffer from problems of overlapping and
duplication within LBs as well as within government. Some revenues are shared by the centre
with DDC while others are shared between LBs.

B. Institutional Structure and Administrative set-up of Local Bodies (LBs)

161. Institutional structure of the LBs (DDCs, Municipalities and VDCs) as provided for by the
LSGA is depicted below.

Fig. 5.1: Institutional Structure of LBs (LSGA - 2056)

162. Analytical review of the institutional/organizational framework of local self governance

mandated by the LSGA including key issues, gaps and challenges identified had been
reasonably clearly outlined in the forgoing Chapter II above. One point of anomaly in the
institutional structure is that - although by law Municipalities and VDCs are LBs below the DDC
tier; Municipalities, in particular the Metropolitan and Sub-Metropolitan ones, operate almost
independent of the DDCs because of their economic standing.

163. LBs are free to decide on their internal organizational/administrative structure to suit their
needs and means. With certain exceptions, VDCs are operating virtually without a formal
administrative structure; they operate virtually as a one-person (VDC Secretary) office, actually
as a mobile one in the days of the armed insurgency. Municipalities' organization structure vary
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depending on the class -- whether a Municipal Town or a Metropolitan/Sub-Metropolitan City.
The DDC organization structures seem to be in-between, with most following MoLD-
recommended structure whilst some have designed their own.

164. Among certain organizational features built in to address good local governance issues
are mandatory requirement for LBs (i) to include women and socially disadvantaged peoples,
representations in the LBs' governing councils and executive boards, and (ii) to hold open
meetings to present their plans and progress of development and service activities to the local
citizens. This is besides the LBs being required to involve, (i) citizens groups, NGOs, CLAs and
the private sector in their periodic and annual planning process, and (ii) UCs in basic
infrastructure service realization and delivery.

C. SWOT Analysis of LBs

165. A SWOT analysis of DDC, Municipality and VDCs was prepared based on the review of
previous studies as well as the direct interaction by the study team members with the officials of
the surveyed LBs (details included in Annex – 5.3 in the Annex Volume). The analysis showed
that although a lot had been done in terms of strenthening the capacity of the LBs in planning,
programming and monitoring etc; they have not yet fully internalized the business process. Most
of the DDCs do not update plan documents and most of the Municipalities and VDCs have either
not tried to prepare one or not bothered to relate their annual plan and budget with the periodic
plan. They continue to be heavily dependendent on government grants because of very little
efforts to mobilize own resources. Lack of human resources and technology (e.g. ICT) make their
service delivery very poor. Dominance of central government in DDCs' planning and
programming has eroded and hindered institutional development of DDCs. Long absence of
elected officials created vacuums in LBs and affected service delivery badly. Local party politics
have also adversely affected institutional development of and service delivery by LBs.

166. There has, however, been considerable support from local communities to the LBs as
they consider LBs their own institutions for the development of their areas. LBs, however, have
failed to capitalize on this public sentiment.

5.1.3 Meso Level Organizations/Local Bodies Association (LBAs)

167. Meso level organisations, namely, ADDCN, MuAN and NAVIN have been established as
membership organizations of LBs with a mission of advocating and lobbying in favour of
decentralization and devolution to LBs and of their capability building. Since their inception, they
have been playing crucial role in decentralization and devolution, including in the formulation of
DIAP and recommending to Government modalities for devolution and formula based
distribution of Central Government conditional and unconditional grants as well as revenue
sharing.

168. A SWOT analysis of these organizations was carried out based on review of previous
studies, MuAN’s Strategy Paper, as well as direct interaction of the study team members with the
officials of these associations (details included in Annex 5.4 in the Annex Volume). The analysis
indicate that, although the organisations have been a strong force in lobbying for and helping
prepare important laws, bylaws and regulations necessary for implementation of decentralization
and devolution in the country, they have not yet been able to emerge as distinctly politically
neutral and innovative membership associations of LBs growing as self-sustaining organisation

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and demonstratively helping members deliver services to citizens economically, efficiently and
effectively.

5.2 Business Processes

5.2.1 Participatory Planning Process

169. LSGA through clauses 43, 111, and 195 under Articles titled "Plan Preparation and
Implementation Process" provides policy and procedural guidance with respect to priorities,
subject matters, participatory processes to involve UCs/CBOs/NGOs/private sector bodies etc.
Further NPC and MoLD have prescribed a 14-steps matrix (details presented in Annex 5.5) of
participatory district development planning process with time line and responsible agencies
designated.

170. However, in practice, "the participatory planning process has become just a ritual without
much real participation of people, thereby raising issues and doubts about the actual reflection of
demands in the annual plans". Coordination between and among line agencies and DDC in the
planning process and implementation is not effective. Planning process and timing of the CLAs
and LBs are not synchronized, with quite often the CLAs completing their planning well before
the LBs council meeting takes place.

171. The DDCs do not receive their budget ceiling, guidelines and directives from MoLD and
CLAs in time specified by the Regulation. As a result the DDCs are rendered unable to prepare
their budget projections and send directives to VDCs on time.

5.2.2 Fund Flow Mechanism/Process

172. Fund flow has remained a key issue of high significance to decentralization and local
governance. A mechanism introduced since 2003 provides for a District Development Fund
(DDF) in all DDCs as a non-operating account. The budget for the four devolved sectors (health,
education, agriculture, and rural-infrastructure) now flows through DDF. DDF designated budget
flows directly from MoF to DDCs. CLAs under devolution implementation plan now draw their
funds from DDC and not directly from the District Treasury Controllers Office (DTCO). Besides,
regular conditional and unconditional grants, MoLD tops grant, as an incentive, to those DDCs
who fulfil minimum conditions set by the MoLD.

173. LBFAR 2007 has provided for budget release of unconditional grants directly from MoF to
LBs. Government provides block grants to VDCs to carryout development work within the VDC
territory. Rule 228 has prescribed a procedure which states “In the case of VDCs, until other
arrangements are made, the grant amount to be made available by GoN will be made available
in the VDF by MoF through DDC”. With the LBFAR 2007 enforced, now MoF directly sends
authorization to Local Development Officer (LDO) for the release of the block grants to VDC. The
current fund flow process is depicted in the following figure.

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Fig 5.2: Fund Flow from MoF to LBs

174.

175. Despite improvements made through the LBFAR 2007 and the MoF budgetary release
procedure of conditional grants, the present fund flow system has gaps that needs to be
addressed. They are briefly outlined below:
a) Budgeted amounts are released in three trimester instalments in a fiscal year. District
Treasury Controller's Office (DTCO) releases funds to VDC based on the submission of the
documents by the later as per the VDC Block Grant Implementation Procedure 2063 (2006
AD). The Procedure requires submission of complex supporting documents for each trimester
release resulting in avoidable undue delays in releasing the allocated funds;
b) Budget release requisition from the VDCs often gets accumulated in the DDC until it reaches
a certain number for DDCs to forward the requests to the DTCO. This practice discourages
those VDCs who really perform well and ought to have been rewarded;
c) The II and III tranche budgetary release often gets delayed due to the time taken to meet the
requirement of statement of expenditures, which in turn, depends on timely visit of the
technical staffs from DDC to clear these statements of VDC. The technical staffs take unduly
long time to visit the site to prepare the report, thereby resulting in delay in disbursement; and
d) Other minor-looking but very troubling gaps and hurdles to efficient fund flow include: (i) too
many directives along with the authorization letter of fund release, which further depends on
the nature of the work, (ii) too many bank accounts, as high as 18 different accounts, in DDC
causing delay in financial transactions, (iii) delay in appointment of auditors by the DDC
causing hardship to VDC in timely audit.

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176. Discussions held with the officials of the DTCO during the piloting phase revealed that the
present system of budgetary release thorough DDC not only delays budget release to VDC but
also discourages the performing VDCs, as DDC sends statement of expenditures (most of the
times only a letter confirming the statement of expenditure by DDC and not the actual statement)
only after collecting a sizable number of statements from the VDCs. Moreover, the non-reciept of
VDC statements from DDC make DTCO completely uninformed as to how the budget has been
used by the VDCs. In view of these problems, DTCO agreed the study team’s arguement on the
merits of releasing the fund directly to VDF as it is easier for them to administer (keep track of
fund use by VDC) and also saves time of VDC secretary getting approved funds.

5.2.3 Procurement and Supply Chain Management

177. Procurement policy, procedure and practice play important role in service realization and
delivery. Procurement delays caused by conflicting rules and regulations, anti-competitive
provisions and non-transparent procurement procedures have constrained implementation of
development projects heavily. Government of Nepal has promulgated a separate Public
Procurement Act (PPA), 2063 (2007 AD) and Public Procurement Regulations (PPR), 2064
(2007 AD) to fill the many gaps and correct flaws in the prevailing procurement provisions and
practices.

178. Earlier public procurement used to be governed by Financial Administration Rules (FAR),
2056 (1999 AD) because there was not any separate procurement law. FAR 2056, because of
being a rule and not an enactment, tended to be changed frequently by government. Nepal
Country Procurement Assessment Report, 2002 found that the procurement rules and
regulations were “poorly organized and substantially problematic” and pointed 14 different
problematic clauses in the FAR. Some of the clauses about “public bidding” (clauses 75 through
77), were termed as "unclear rules"; some were considered as “anti-competitive provisions”
(clause 58(4), 66(2)), while some were termed "serious disincentive to foreign bidders".

Salient Features of the PPA 2063 (2007 AD)

• Public procurement process, procedures and decisions made more open, transparent, objective and
predictable;
• CEO of the public agency made the responsible officer for procurement;
• Procurement planning, specifying, estimating, bid/proposal inviting, pre or post qualifying of
suppliers, evaluation of bid/proposals etc. made mandatory for procurement of goods, consulting
services and construction works;
• Provision made for direct procurement or through bidding process;
• Provision for optional negotiations and purchase agreement, termination of agreement, dispute
settlement, blacklisting and clearing suppliers;
• Provision for establishing a Public Procurement Monitoring Office to supervise monitor and regulate
all public purchases and ensure uniformity of procurement procedures;
• Provision for purchase under special circumstances;
• Provision made to declare null and void any purchase made in contravention of procedures
specified by this Law;
• Provision made for exceptional purchases (such as of security and defense) without having to follow
the procurement processes specified.

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Some Salient Regulatory Provisions Concerning Procurement
• Ten percent price preference to local over foreign goods;
• Insurance provision of constructions works exceeding Rs. 1 million;
• Access to all information pertaining to bid in the Monitoring Committee web-site;
• Provision of electronic bidding (e-submission) system;
• Sole sourcing of consulting services and purchase of capital goods worth Rs. 150,000 directly from
the market;
• Mandatory provision to purchase goods/services amounting to more than Rs. 5,000.00 from firms
having PAN number and VAT registration;
• Relaxation of pre-qualification in the procurement of construction work amounting to less than Rs 6
million;
• Mandatory requirement of Master Procurement Plan for project running over 1 year or procurement
worth over Rs. 100 million;
• Non discrimination based on nationality of bidders;
• Mandatory provisions to provide the reasons for non selection of the bids, if the bidders sought
explanation within 30 days of the award notice;
• Provision of 3 men Appeal Committee headed by judge of the Appellate Court or retired government
special class officer to review the appeal made by the bidders;
• Provision of 3 men Dispute Settlement Committee;
• Provision of bid evaluation reports preparation containing all essential information.

179. PPA addressed major defects in the public procurement procedures existing in the FAR.
The PPA seems to be a comprehensive, fair and transparent law. It corrects the gaps in FAR
2056 and simplified the bid evaluation and contract award process. Enabled by the improved
provisions in the PPA, 2063 (2007 AD), Government recently promulgated the LBFAR, 2064
(2007 AD) in place of LBFAR 2056 (1999 AD).

180. LBFAR, 2064 (2007 AD) is a comprehensive document of rules covering, besides
procurement by LBs, also rules of financial procedures of the VDCs, Municipalities and DDCs;
and contracting out revenue collection and other financial matters such as deposits, advances,
accounting, auditing and records of assets. LBFAR, 2064 (2007 AD), however, still suffers from
gaps in addressing key aspects of supply chain management, such as in-bound and out-bound
logistics and inventory management.

5.3 Ensuring Marginalized and Disadvantaged Groups' Access

to Public Services
181. Mainstreaming the marginalized and socially disadvantaged groups such as the several
indigenous communities in the service network is an important and urgent issue of inclusive
development in Nepal. Some segments of the population in various pockets, areas and regions
of the country are still either outside the purview of service delivery or are getting only namesake
services, owing to many reasons such as seclusion and exclusion from the mainstream, caste,
class or religious beliefs etc. These marginalized and disadvantaged indigenous communities
and groups need to be mainstreamed in the development process by enabling their access to
public service delivery. This requires social mobilization and empowerment in a large scale,
raising awareness of rights to basic services, their benefits in well being, available services,
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service providing agencies and ways and, means to access services. At the same time, service
providing agencies, the LBs and of course, CLAs will need to devise special measures in
bringing these communities and groups in the “service provisioning and delivery network”. The
following briefly highlights this socio-economic-technical situation and issues observed and the
case studies carried out of selected marginalized indigenous groups as part of the GRDCP TA.

Chepang
182. Land-lessness is one of the cause factors for under-development of the Chepang
community. They are thinly spread as isolated settlements in the forest land. Services relating to
agriculture crop production have no direct impact on their economic condition. Livestock and
fisheries seem to be areas that can improve their livelihood. Skill development and engagement
in cottage industries are likely to positively impact their living conditions. Social mobilization to
encourage and persuade them to live as a settlement, engage in agriculture and cottage
industry and send their children to school is necessary. Imparting legitimacy to their settlement
seems to be the issue for special decisions by the government to ensure mainstreaming this very
disadvantaged community in social upliftment.

Muslims
183. In spite of their contrasting differences in religion, custom, social values etc. the Muslim
community in Nepal are seen embedded in other non-Muslim community in the villages they live
in.They share many of the cultural events, festivities, information, opportunity and service with
different communities they live with. Constraints and gaps in public service delivery are also
shared by both Muslims and non-Muslims. However, as members of minority community, they
experience a certain additional constraint in their access to these services. Service provisioning
and delivery program in the community will need to take into account such social and traditional
factors to assure and ensure these communities' access to public services equitably.

184. In the Muslim communities in the case study VDCs, school type and teacher has been
observed to be an issue. Preference for a Madarsha type of school and/or the choice for only
Muslim teachers put a virtual culturally binding constraint in the school education of this
community's children. Such a traditional culture is hindering Muslim schools from accessing
otherwise more qualified and experienced teachers.

Tharus
185. The Tharu community is a very closely built, clean and cohesive community characterized
by highly developed resilience in their social conduct. They possess a culture of respecting
leadership within their community and skills to live harmoniously with other community groups --
big or small. Community organization is their strength. They display innovation and tolerance in
developing and managing schooling system in their villages. Service provisioning and delivery
for agriculture and livestock development related activities need special attention for Tharu
communities. Fragmented land holdings of Tharu communities are one of the issues that need
constructive interventions. The community is highly receptive to social engineering and
mobilization and this can be used as a very potent entry point to developing and expanding the
access of this community to public services.

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Gurungs
186. Gurungs are a very much organized community who prefer to live in high hill areas in
small and cohesive settlements. Their means of living is well balanced between arable and
pastor based farming. Therefore, agriculture and livestock related services are of high
importance to this community. Specially tailored service meeting their special nature of the
services on animal husbandry can be very valuable to this community. The community has
strong matriarchal character, therefore, the service realization and provisions can be effectively
managed through community organizations run by their women groups.

187. The community require small and efficient service providing agencies. Many of the
agriculture and livestock services can be effectively delivered through the local organization
established by the communities themselves. This community has not been able to benefit much
from their participation in the local government system in village. The VDC should encourage and
motivate their local community organizations to play active role in demand articulation and
project/program formulation to ensure that the community have enhanced opportunities to
access public services.

Rajbansi
188. Literacy among the Rajbansi is comparatively better than other indigenous population.
However, wide-spread poverty in this community and their compulsion to engage in livelihood
functions deprive them from access to education of higher than primary level. Very few Rajbansis
are engaged in teaching occupation. People of this community seem to perceive poverty, lack of
motivation for vocational education for gainful employment and problem of the medium of
instruction in their children's education as some of the constraints to their development. Besides,
those who live in the far flung villages cannot access health facilities because of wide-spread
traditional beliefs and shamanist and local healers. Not much efforts have been made to
eradicate wide spread superstitions among this community.

189. Rajbansis are good farmers skilled in jute farming. However, because of decline in the
jute farming in the recent years, they are forced to switch over to other agriculture farming and to
work as wage labour in the nearby towns. Because of lack of knowledge & information, and
absence of community development programs targeted to these communities, they have not
been able to benefit much from public services. Rajbansis have very little participation in the local
government agencies. Land for cultivation is no longer a big asset of Rajbansis communities.
Therefore, livestock and fishery services could be areas for their economic and social
development. Jute carpet making and twining rope can be other important vocational trade which
the Rajbansis can be engaged in comfortably and gainfully.

Dalits
190. Dalits are more concerned about their exclusion in the communities rather than in the
decision process at the local government level. This calls for their problem to be addressed and
tackled at the community level first. Although Dalit children in recent years have considerable
access to the general schooling, yet they are still subject to social segregation in the schools and
treated unfairly in the communities. Dalit children are discriminated in the school with most of
them almost always forced to sit in the last bench in the classroom. The social stigma of being
looked upon as “untouchables” has adversely affected the mental development of the children
with most of them suffering from inferiority complex in the school/classroom. The situation of
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educated unemployment in the village and problems of livelihood discourage the Dalits from
sending their children to schools. Many Dalit parents are so poor that they cannot afford even
admission fee charged by the schools.

191. All Dalit children do not receive the scholarship as provisioned by the government.
Although the Nepal Education for All (NEFA) primary education program has made provision of
scholarships for all Dalit children, study has shown that only 65 percent of the Dalit students
attending primary school receive scholarships because of insufficient funds allocated by the
government. They expect government to make provision of school dress up to primary grade and
free text book up to class 8 students.

192. Although planning guidelines provide for specific program for Dalits, VDCs plans lack
such programs. They feel constrained to approach officials in government offices including even
in VDC offices to obtain public services. They are not aware of and are not engaged in the plan
formulation processes of the VDCs. Since most of the Dalits are landless labourers, the
utilization of agricultural extension services by them has been negligible. Also, in the formation of
UC, their representation is almost totally ignored.

193. In this way the socially marginalized and disadvantaged communities in rural Nepal
continue to remain largely outside the formal network of public service delivery. This calls for
specifically targeted or specific community-centered and community-involved development
programs to mainstream them in the development process at the grass-roots level by VDCs and
DDCs.

5.4 Reforming Policies, Institutions and Business Process for

Better Service Delivery
194. Based on the findings of the review in Chapter II and in foregoing sections of this chapter,
certain key reforms recommendations have been made as outlined in the Reform Action Plan on
Governance / Decentralization below. In doing so, attempts have been made to present the
review and the recommendation in a framework based on a systems and process approach to
decentralized governance and public service delivery.

195. The recommendations are based also on the feedbacks received in the course of
interactions with various stakeholder groups during the GRDCP TA field work as well as several
rounds of discussions held in the thematic group meetings and, particularly in this case, also the
knowledge and experience resources of the present TA Consulting firm and its strategic partners.

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Reform Action Plan: Governance/Decentralization

Area of Reform Problem/Issue Action/Measure Responsibility Expected output

Action
1. Constitutional 1. High floweriness and less a) Specify, in the Constitution of Nepal being formulated by Subjects Committees as The Subjects Committees
Commitments precision and balance in the the Constituent Assembly (CA), constitutional follows of the CA's and the Constitutional
and statement of constitutional commitments adequately and appropriately with due Constitutional Committee: Council heard consulted
Delegations commitments and constitutional respect to the generally recognized vision and values of • State Restructuring & considered and duly
delegation to Central good governance. State Power Sharing diligently incorporated
Government b) Re-design constitutional delegation of government provisions addressing all
• Determination of the
business, with due respect to the fundamental principles three recommended actions
States Governance
of balance in power or authority with responsibility and Structure
accountability at all levels of State governance.
• Determination of the
c) Write, in the new constitution being formulated, adequate Constitutional Bodies'
and appropriate devolution of power to Local Structure
Government Bodies (LGB).
• Natural Resources,
Economic Rights and
Revenue Sharing
2. Enabling Laws/ Policies/ Plans /Procedures

2.1 Enabling Laws
a) Inappropriate and inadequate a) Re-design and re-construct GON ABR based on a Ministry of Law, Justice & GABR is re-designed and
structural design and systems approach to structuring and specifying Parliamentary Affairs re-constructed
specifications of government government business allocation. (MLJPA)
business allocation in the GABR
2064.
b) Unsatisfactory state of continued b) Review, rationalize, and amend the LAA truly or take Ministry of Home Affairs Review and
central/local governance alternative restructure action to give effect to the (MoHA) MoLD, OPMCM, recommendations
structural anomaly in the LAA progressive principles and unified approach to balancing MLJPA considered and duly acted
2028. central and local-self governance in the changed political upon
context.
c) Gaps in the legal, institutional and c) Review, rationalize and amend the LSGA framework, in MoLD, MoH, MLJPA, and Review considered and
regulatory framework of LSGA particular the terms under Part 5 Article-1 of the Act, by other Concerned Line action taken on
and inadequacies in taking into account recommendations of this GRDCP TA Agencies and LBAs recommendations to amend
decentralization and service Report based on due understanding/ownership of new LSGA or follow any other
delivery vision, values and strategy of local self-governance in the better alternative
changed political context.
d) Issue of the 23 sector Act & in d) Resolve the pending issue of 22 of the 23 Acts in conflict MoLD, Line Ministries, Bills prepared and tabled at
conflict with LSGA still remaining with the LSGA (only the conflict in education sector MLJPA, LBAs the Parliament
to be resolved reportedly has been resolved)

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Area of Reform Problem/Issue
Action
2.2 Policy Procedures/ Plans
a1. Absence of a Strategic
Decentralization Plan, unlike the
pretty good but not strategic 5-
year Decentralization
Implementation Work Plan (DIWP
- 2058-63)
a2. Gaps and needs for truly "user-
centered & user-involved
A. Planning & approach" to local governance
Plans (Vision, and community development
Values,
Strategies,
Goals,
Programs of a3. Lack of well documented service
Activities) quality standard specifications
a4. Absence of a clear enough
documented criteria to define
central vis-à-vis local level
projects.
a5. Planning cycle of CLAs, district
level programs is not in tandem
with that of LBs
b1. Decentralization Implementation
and governance service delivery
B. Institutional problems arising from
Structure & inadequate/unclear definition of
Capacity the structure and system of LBs
and of the relation between
Central Govt. and & LBs.
b2. Weak "overall" organizational,
human and infrastructure
capacity of LBs
b3. Continued problems in the
performance and delivery by
DIMC and MoLD, despite the
initial good work by DIMC and
Action/Measure Responsibility Expected output
a1. Formulate and Implement a "Strategic Decentralized NPC, DIMC, MoLD, Other Task Forces formed to
Governance Plan", preferably with a 3-year vision, 3- CLAs, LBAs prepare ToR and to review
year strategic goals and corresponding annual operating and prepare the strategic
goals, based on top government review of the DIAP - plan.
2058-63.
a2. Formulate and implement on top-priority basis, "an MoLD, NPC, other LGCDP formulated, funded
action cum training oriented Local Governance and concerned Line Ministries and implementation started
Community Development Program (LGCDP)" that and Donor Agencies,
focuses on decentralized governance/service delivery LBAs etc.
based on an approach of "user-centered & user-
involved local governance and community
development"
a3. Plan and implement a documented as well as MoLD, Concerned CLAs, Task Forces formed in all
document-controlled system of service quality standard LBAs service sectors
specifications.
a4. Establish a clear documented policy procedure for MoLD, Concern CLAs, MoLD taking action to take
planning and budgeting of central, CLA district office, LBAs corrective steps
DDC, Municipal and VDC level projects and programs.
a5. Review and implement process to synchronize CLAs MoLD, Concern CLAs, MoLD taking action to take
and LBs planning cycle LBAs corrective steps
b1. a) Clearly re-define the institutional structure and system MoLD, CLAs, MLJPA, Issue recognized and steps
of relationship between the central Government and LBs LBAs initiated to address the gaps.
as well as between the tiers of LBs (DDC vis-à-vis
Municipality and VDC)
b) Rationalize size and number of LBs under the
changed political context as well as improved physical
infrastructure connectivity situation of the Country
b2. Strengthen "overall" organization, staffing, human MoLD, LBs, LBAs Visible improvements in
resource capacity and infrastructure facilities of LBs service delivery by LBs in
the eyes of citizens
b3. Review and restructure role responsibility and Prime Minister, Minster for Issue recognized and steps
organization of MoLD as the Central Government Line Local initiated to address the gaps.
Agency responsible (response + able) and accountable Development/Governance
for decentralization/decentralized service delivery , MoLD, LBAs
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Area of Reform Problem/Issue
Action
continued efforts by top
appointed officials of the MoLD
b4. Continuing anomaly of divided
loyalty and accountability in LB
Chiefs and key staffs positions
filled by secondment from MoLD.
b5. Problems of apparently minor but
very troubling administrative
bottlenecks/hurdles
b6. Inadequate institutional capacity
of LBAs to provide advocacy
support to LBs to act assertively
as LSGBs
b7. LDTA's and UDTC's continued
disfunctionality vis-à-vis huge
potential demand/needs for local
and urban development/
governance training
c1. Lack of LB's financial leadership
and management in terms of not
C. Financial/Fund only innovative financial
Flow mobilization but also pro-active
Mechanism mobilization of known/assigned
sources of revenue.
c2. Weak financial accounting,
auditing and record management
by the LBs
c3. Risk of financial misuse/abuse
because of absence of financial
auditing requirements with regard
to Municipality and VDC
Action/Measure Responsibility Expected output
b4. Expedite formation, operation and institutions of LBs MoLD, CLAs, LBs, LBAs Trouble-shooting action
Service Commission (LBSC) taken to resolve wherever
the trouble may be in the
process of forming the
LBSC.
b5. Simplify personnel and administrative facilitation MoLD, CLAs, LBs Citizens not having to
procedure such as timely reporting, deputation of suffer/complain about
personnel. service delivery and LB
staffs not, having to face
citizens' complaints.
b6. Strengthen institutional capacity of LBAs to research LBAs, LBs, MoLD, other LBAs and LBs seen working
plan, lobby and support/secure capability of LBs to CLAs together pro-actively, and
assert LB's authority and responsibility as LSGBs to LBs, implementing service
deliver LSG services efficiently and effectively delivery assertively,
responsibly and effectively
as LSGBs
b7. Study feasibility of (UDTC) a unified (LDTA) MoLD, LBAs, FNCCI, Conceptual proposal for
autonomous Local and Urban Governance RUPSON, PAAN, MAN study prepared and
Development Institute (LUGDI) owned by the positively decided by
Government (MoLD), LBAs, Business sector, and Government to move
professional associations like RUPSON, PAAN, MAN forward
etc.
c1. Encourage and help LDCs financial resources LBFC/MoLD/MoF/LBAs LB officials' recognition/
mobilization and management through providing them appreciation of Government
necessary mandates and protocols as well as clearing support and demonstration
existing gaps such as in the implementation of revenue of performance in the
sharing from electricity, tourism, forest resources etc. financial statements of LBs
and realities in the field.
c2. Implement a program of training LB financial staffs on MoF, MoLD, LBFC, LBAs Training program packages
the financial staffs on the financial procedures of the developed and implemented
VDCs, Municipalities and DDCs as per LBFAR 2064
provision
c3. Make provision in LBFAR making LBs accountable to Auditor General Local people being informed
local people by requiring them to get expenditures of Office/MoLD/MoF and aware of the facts.
Municipalities & VDCs' own sources funds also audited
externally by AGO.
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Area of Reform Problem/Issue Action/Measure Responsibility Expected output

Action
expenditures from own sources. Make provision for such audit report of LBs to be made
a part of the Auditor General's Annual Report.
c4. Bottlenecks in fund flows posed c4. Facilitate implementation of LBFAR by MoF/FCGO LBs freed of such troubles in
by ad-hoc extra-rule-specified curbing/preventing ad-hoc extra-rule-specified reality.
requirements requirements through a prior documented
policy/procedure requirement to this effect.
c5. Problem of virtual disparity c5. Name and make "conditional grants" a tool of "incentive MoLD/MOF/LBFC Weak VDCs provided with
among VDCs in resource grant", while also providing for "special grants" to lift up special alleviation support
endowment/mobilization capacity resource-poor or weakly-placed VDCs.
c6. Problems of apparently minor but c6. Simplify financing/fund flow and related administrative LBFC/MoF/MoLD/LBAs Citizens not having to
very troubling financial work procedures e.g. i) supporting documents for fund suffer/complain about
administrative release, ii) timely deputation of auditors. service delivery and LB
bottlenecks/hurdles staffs not, having to face
citizens' complaints.
d1. Lack of supply chain d1. Review existing PPA and LBFAR and improve them by MoF, MoLD, LBAs Gap recognized and
management perspectives in the adding supply chain management perspectives of corrections
PPA and LBFAR inventory management and inbound/outbound logistics represented/lobbied by
D. Procurement & management LBAs and initiated by MoF
Supply Chain and MoLD
Management d2. Ignorance and confusion in LBs d2. Develop a plan to implement LBFAR in LBs and a MoF, MoLD, LBAs and Plans prepared programs of
(specially in VDC level) about training program to train concerned LB personnel LBs activities scheduled and
their implementing the provision implemented
of LBFAR
e1. Absence of documented e2. Introduce a modicum of documented procedures of MoLD/CLAs/LBs/LBAs Documented Procedures of
procedure of internal and external information and communication between CLAs/LBs as Information &
information and communication service providers and other stakeholders eg. service Communication developed
E. Information, between and among CLAs, LBs consumers and service delivery partners and introduced by MoLD
Communicatio and key stakeholders other CLAs and LBs
n& e2. Absence of oven a modicum of e2. Design, Install and initiate a modicum of MIS within MoLD/CLAs/LBs/LBAs Modicum of IT-enabled MIS
Documentation Management Information System MoLD and LBs, including IT-enabled service delivery i.e. developed and introduced in
(MIS) within MoLD and LBs and practical use of ICT in local governance service MoLD, CLA District Officer
little or no use of ICT by CLAs realization and delivery and LB Secretariats
and LBs including in LBAs.
F. Monitoring f1. Poor internal and external f1. Develop and implement adequate and appropriate LBs, MoLD, CLAs, LBAs Systems and procedures
Service monitoring & supervision of LBs system and procedures of internal and external developed and implemented
Realization & performances monitoring & supervision of LBs performances.
Delivery

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Area of Reform Problem/Issue Action/Measure Responsibility Expected output

Action
g1. Serious gap in terms of review, g1. Plan and convene an earliest meeting of DIMC to decide OPMCM (The Prime DIMC Meeting convened
G. Top
evaluation and follow-through of and carry out urgently a truly professionally independent Minister), MoLD (The urgently to decide on
Government
DIAP 2058-63 not yet done by evaluation of the implementation of the DIAP (2058-63) Minister) Independent evaluation
Review &
the DIMC for due consideration and decision on a new strategic commissioned
Continual
DIAP as well as for review and re-engineering of the
Improvement/R
LSGA and national framework for decentralized
eform
governance and capacity building.

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CHAPTER VI: PILOT TESTING SERVICE DELIVERY

IMPROVEMENTS

6.1 Baseline Public Perception Survey & Approach to Pilot-

Testing

6.1.1 Baseline Public Perception Survey

196. For an idea of public perception about service delivery by LBs and CLAs' district offices at
local level and of constraints to service delivery in local governance, agriculture and education,
as originally intended, a baseline perception survey was carried out in one thousand households
from eight districts (2 Mountain, 3 Hill and 3 Terai districts). There were interesting findings about
the local people's perceptions on these service deliveries at the grass roots level. The findings in
summary were as follows:
a) Over 90% people were aware of types of services available and visited the
VDCs/Municipalities for registration, certification, and recommendation services including
setting their disputes, whereas less than 25% visit VDCs for vital registration. (Details are
presented in Annex 6.1 in Annex Volume)
b) Only about 20% households experienced problems in getting services from LBs and CLAs
offices, however, large variation across districts exist e.g. higher proportion of service
recipients were satisfied in Morang and Kanchanpur districts.
c) Lack of knowledge about rules, locations of service outlets, delay in service delivery,
unfriendly attitude and discriminatory behaviours of the service providers, and absence of
officials in duty were some of the common problems experienced by people (Details are
presented in Annex 6.1 in Annex Volume)
d) The participation of the people in the VDC/Municipalities activities such as fund collection,
monitoring and supervision and UC meeting, plan formulation meeting etc. have been quite
low. Only 11 percent of the respondents were aware about the income and expenditure of
LBs. While social audit as a source of information has been popular in some districts, Citizen
Charter has been popular in other. Annual report is the least frequently cited sources of
information (Details are presented in Annex 6.2 in Annex Volume)
e) Two-thirds of the respondents considered service delivery by CBO as "appropriate". Private
agencies are perceived equally important source of service provision for agriculture and
educational services.
f) Regular and timely provision of services, regular presence of VDC Secretary in duty,
cooperative attitude by officials, non-discrimination and special programs for Dalits and
marginalized people, transparency in income and expenditures, skill development training for
rural communities, corruption-free services, rehabilitating conflict destroyed VDC/Municipality
buildings, affordable service fee, training to LBs staff, implementation of the Council's
decision in time, proper waste disposal in urban area, use of ICT in service delivery, strict
adherence to participatory planning process, and availability of JT/JTAs and ASC/LSC
services etc. are some of the suggestions the surveyed households made.
g) ASC, LSC and LSSC in the survey districts showed pathetic situation of most office building
destroyed during insurgency and their operating from a single room with little or no furniture,
equipments and chemicals for testing and diagnosis, veterinary medicine, transport and
communication equipment and, above all, no budget for any kind of program, or travel

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allowances to visit far flung households. Most ASC/LSC/LSSC were manned by a single JTA
serving farmer families scattered as many as in 7 to 15 VDCs.
(Details of perceived level of satisfaction and dissatisfaction and reasons are presented in Annex
6.3 in Annex Volume)

6.1.2 Approach to Pilot-testing

197. Based on the results of the house hold survey23 and the visits/consultations at the grass
root level offices – both VDC/municipality/DDC and the line agencies; intervention areas at the
grass root level were identified, new ideas in improving service delivery were discussed and a
program of pilot testing was designed and carried out in the selected VDCs and Municipalities.
Flow chart below depicts the approach taken for piloting.
Fig. 6.1: Flow Chart of Approach to Pilot Testing

198. Altogether five VDCs and three municipalities, as follows, were selected for piloting.
Selections were made from the eight districts, where both LBs (DDCs, VDCs/Municipalities) and
CLA district level services ASCs/LSCs/LSSCs/SMCs etc. existed. Household surveys were
carried out along with in-depth interactions with other stakeholders. Selection criteria included
geographical representation, concentration of a cross section of population and poverty etc.
(Details of resource and social mapping of the pilot VDCs/Municipalies are presented in Annex
6.4 in Annex Volume)

23
A comprehensive household Survey, ALSCs and Educational Survey plus interaction with the respective personnel
were carried out in 8 districts representing mountain, hill and Terai region.
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Table 6.1: Selection of VDC and Municipality for Piloting
S. N VDC Municipality District
1 Parroha Siddharthanagar Rupandehi
2 Dullu Dailekh
3 Nele Solu
4 Hemja thLekhna Kaski
5 Jhalari Mahendranagar Kanchanpur

199. Pilot tests were done in areas selected from among the neglected fringe areas of
VDCs/Municipalities, where the poor and marginalized communities live. This strategy worked
very well in roping in and actively involving the poor and marginalized communities in the pilot
tests. The methodological steps followed in piloting are as follows:
1: Sensitization meetings with DDC/Municipal officials, district line agencies and leaders
of political parties;
2: Discussions about the area selection and the piloting activities in DDCs and
Municipalities;
3: Reconnaissance visit of village/municipal wards for cluster and program identification
4: Finalization of pilot program consisting of ideas/initiatives in service delivery and the
implementation modality with VDC/Municipal officials;
5: Formation of an inclusive Program Coordination Committee;
6: Selection, recruitment and training of Technical Social Mobilizers for community
mobilization;
7: Introduction of Citizen Report Card system for assessing the status of service delivery
before pilot program intervention;
8: Community mobilization and identification of infrastructure and income generating
activities;
9: Monitoring and Supervision;
10: Evaluation of Pilot program through Citizen Report Card system to assess the
improvement in the service delivery provision of municipality; and
11: Draw lessons from pilot-tests and recommend replication nation-wide in other VDCs
and Municipalities.
A. Formation of VDC and Municipality Program Coordination Committee
(PCC)
200. A VDC and Municipality Coordination Committee for overseeing the piloting activities etc.,
was constituted in each pilot area as follows. The Committee was made inclusive by ensuring
representatives from women, indigenous and Dalit population.
Executive Officer, Municipality/VDC Secretary Chairman
Active Political Parties’ Representatives Member
Agriculture Service Center Representative Member
Livestock Service Center Representative Member
Women Representative Member
Indigenous and Dalits Community Representative Member
NGO Representative Member

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B. Upgrading of VDC Secretary
201. As an element of the pilot test, it was proposed to depute Non-gazetted Class I staff as
VDC Secretary. Upgrading of VDC Secretary to non-gazetted class I level was felt necessary to
suit their responsibility as a CEO of the DDC heading all development matters in the VDC and
coordinating with CLA officials. This upgradation was made by decision of the GRDCP TA
steering committee.

C. Recruitment of Technical Social Mobilizer

202. Another idea tested was technical strengthening at the VDC/Municipal level, though
provision of two additional socio- technical staffs as Technical Social Mobilizers (TSM),
supporting VDC and Municipality poverty and social inclusion programs. TSM job responsibilities
were defined to include identification and community mobilization and overseeing the
implementation of the pilot activities within the selected clusters.

203. Based on the suggestions from the VDC and Municipality officials, the services of TSMs
was outsourced on contract with local NGO. A qualification of School Leaving Certificate (SLC)
pass and training in agriculture and livestock services from the pilot VDC/Municipality itself was
set for TSMs, with preference given to women candidates. The TSMs were given short training to
orient them about their role in GRDCP TA piloting and to build their skills in social mobilization.

D. Fund Flow
204. During the baseline survey/interactions with VDC representatives and other stakeholders,
three things were distinctly observed. First, the present procedure of budgetary release to VDC is
most time consuming because the VDC secretary has to waste time in visiting DDC repeatedly
for it. Secondly, DTCO releases budget to VDCs only after getting statement of expenditure
(SoE) of previous trimester from DDC. But, in most cases it is released on the basis of just a
letter from DDC vouching that it has recieved SOEs from VDC. Third, CLAs receive very little or
no budget for programs at the grass root level and they function independently with little or no
coordination with the VDCs.

205. To improve on these issues, the TA team requested respective DDC and District
Treasury Office, in the pilot districts, to channel funds meant for ASC/LSC and VDC directly to
the Village Development Fund (VDF), suggeting that it will be later distributed to the agencies
based on the program approval by the VDC program coordination committee. Given the distinct
advantage in direct fund release to VDC, GRDCP TA took initiatives and got approval from the
Steering Committee headed by the Chief Secretary, at the OPMCM and based on that
approached the MoLD and the MoF for so release in the pilot VDCs. The Fund was operated
through joint signature of the Chief of the ASC and the VDC Secretary/Chairman.

E. Poverty Alleviation and Social Upliftment Fund (PASUF)

206. This was another idea tested, the target being "social inclusion" of the marginalized
communities. Within the VDF, a Poverty Alleviation and Social Upliftment Fund (PASUF) was
established, initially with a matching grant from GRDCP TA and pilot VDC, with a commitment to
continue with allocating VDC resources to the Fund. The fund was used to finance the
PCC/Village council-approved income-generating and infrastructure related development
activities in the poverty afflicted areas in the VDC.

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207. Three financing windows were designed within the Fund: (i) Interest-free loan window, (ii)
Grants window, and (iii) Technical support window. In all piloted VDCs and Municipalities,
resources for piloting programs relating to poverty were focused on infrastructures and other
poverty alleviation and social inclusion programs.

F. Preparation of Guideline and Training of Personnel

208. A guideline was prepared for the management of the Fund and TSMs were oriented on
that guideline. A management committee was formed under the chairmanship of the VDC
secretary to manage the fund.

G. Program Monitoring
209. Supervision and monitoring format was developed and TSMs trained on using it. TSMs
were required to complete the format every month and submit to GRDCP TA office. TA team
members also monitored the piloting activities once in two months.

H. Evaluating Service Delivery Improvement--Citizen's Report Card

210. Citizen’s report card (CRC) system was used as the main tool to evaluate the
performance improvement in service delivery in the pilot areas. Based on the success of the pilot
program, Municipalities/VDCs were expected to integrate the program together with providing for
the support staff (TSMs) in their regular program with effect from the fiscal year 2008/09.

I. Preparation of GIS-based Piloting VDC / Municipality Profile

211. A GIS based profile of the pilot VDCs and Municipalities was prepared showing
population distribution, land use pattern, and distribution of service providers. This was prepared
to demonstrate to VDCs and Municipalities advantageous use of GIS for better planning and
targeting of services. (Details are presented in Annex 6.4 of Annex Volume).

6.2 Pilot-testing New Ideas for Improvements in Service Delivery

6.2.1 Governance Services

212. With a view of bringing improvements in specific service delivery at grass-roots VDC
level, following ideas were pilot tested in the selected VDCs and Municipalities.

A. Establishment of Help Desk / Public Relation Desk

213. A help desk/public relation desk was established, especially in Municipality, and needed
support from the project was provided. This provision is designed and definitely expected to
enable citizens to exercise their right to and benefit from a basic information service provided by
their VDCs/Municipalities through a Public Information Help Desk.

B. Updating and Posting of Citizen's Charter

214. Hoarding board with basic information of citizens' charter, such as types of services
available, fees for such services, expected time taken and the contact person have been posted
in front of VDCs and Municipalities. With the placement of Citizen’s Charter on the walls of
VDCs, the service users get to know the requirements and formalities involved in obtaining
services. This helps bring in transparency, accountability and predictability in access to and
delivery of services.

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C. Establishment of NGO Desk
215. With an idea to improve coordination and relations with COs and NGOs in planning and
program implementation, GRDCP TA pilot-tested a NGO-desk in VDC/Municipality for
registration, documentation, coordination and monitoring of NGOs/COs activities to create an
environment favourable for strategic relationships between VDCs and local NGOs/CBOs for their
village development. NGO/CO representatives are also included in the VDC coordination
committee for the purpose.

D. Citizen’s Report Card (CRC)

216. In order to assess the current knowledge, attitude and perceptions of the service recipient
on varieties of services provided use of this tool was pilot tested and findings were shared with
the VDC/Municipality officials and other service providers.

E. Administration of Social Security Allowances

217. For better management and distribution of social security allowances, a provision of three
distinct types of identification cards was introduced. The goal was easy identification of and
service delivery to all types of allowances recipients.

F. Computerization of Vital Registration and Certification System

218. In order to improve database and records management in as well as service delivery to
users of vital registration in the VDC, VDC/Municipality offices were provided with a computer
along with software program for registering data and printing certificates. This made dramatic
impact on service delivery. In response to beneficiaries' desire, the GRDCP TA also developed
and provided software that helps to printout certificates in both Nepali and English.

219. In addition, TA support was also extended for preparation of VDC profile – a
Geographical Information System (GIS) based VDC profile illustrating VDC boundary, road
networks, population distribution, natural resources and main economic activities etc. for
maintaining and updating database in the VDCs.

G. Training for Capacity Building

220. Training on accountancy, computer operation, public relations and resource planning
were provided to the VDC staff as an item of pilot-tests. These trainings were designed to test
enhancement in the capacity of the staff to address increased volume, complexity and
technicality based challenges faced by the piloted VDCs. Trainings were targeted also: (i) to
User’s Committees (UCs), (ii) to Municipality Ward Secretaries and (iii) to farmers group in "off-
season-vegetable farming" and livestock rearing. For such training programs expertise resources
of ASC/LSC, JT/JTAs and officials from District Treasury Office (DTO) were also used and they
were remunerated with token allowances.

H. Office Infrastructure Support to VDCs

221. Because of many office buildings destroyed during insurgency, VDC secretary in most of
the districts were found operating from the district headquarters. Similarly, ASC and LSC were
providing services in cramped rooms, adversely telling on services delivery to people. The pilot
program supported/encouraged VDC Secretary and LDO at the DDC to re-establish offices at the
VDC itself. Support was provided to renovate Dullu VDC office in Dullu bazar, to rent rooms for
establishing Nele VDC office, and to renovate and furnish Jhalari VDC office. The TA also
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supported a minimum salary to TSMs for the piloting period as well as some token support with
furniture, stationeries, printings etc.

6.2.2 Agriculture and Livestock Services

222. During household survey and intensive interactions with the officials at the ASC and
LSC/LSSC, key issues in service delivery improvements were identified and pilot-tests designed
accordingly. Poor office setup, meagre staff compared to work burden, lack of testing equipment
and chemicals, lack of program budget, and lack of travel allowances to extension workers were
the critical constraints. Further, these service out-lets were also found lacking in office
infrastructure facilities like telephone, transport and furniture. The situation was that these
otherwise so valuable service centers were almost totally dysfunctional with very low trusts by
the farmers. The pilot-tests sought to improve service delivery to and restore the trust and
confidence of farmers on ASC/LSC by supporting these centers with meeting the critical gaps for
the purpose.

A. Projecting ASC/LSC as the Resource Centre for Agriculture Activities

223. Attempts were made to project ASC/LSC offices as the technical test and information
resource centre on agricultural and livestock activities, at least at the Ilaka level. For this, the TA
provided support for installing telephone line, some office furnitures and stationaries, minimum
testing equipment along with necessary chemicals and veterinary drugs, training on income
generating activities and travel allowances for providing training to the socially excluded groups
identified by STMs.

B. Twenty Four / Seven Veterinary Drug Scheme

224. A twentyfour hour and seven-days a week veterinary drug availability program was
designed as a joint initiative of the district livestock office, VDC and the GRDCP TA, with the TA
providing seed fund for its start-up and initial operation. The JT/JTAs recommended the essential
drugs in the area for supply at cost. LSC office assistant was assigned to operate it. The
veterinary drug fund was managed by a committee comprised of VDC and livestock farmer
representatives and LSC official. An operational guideline on purchase of drugs, replenishment
of stocks, pricing etc, was prepared and implemented in the pilot VDCs.

C. Supporting Training of Livestock Extension Service Worker

225. A livestock training program supported jointly by GRDCP TA and District livestock office
was prepared to support livestock extension service. The total cost for the program was
estimated at Rs. 25,000, with the District Livestock Office contributing Rs.18,000 and GRDCP TA
topping with Rs. 7,000 per person. Provision was made to support up to two SLC pass persons
per VDC depending on need.

D. Extending Extension Services through Farmer’s Group and Lead

Farmer
226. As noted earlier, a crucial problem for Nepali farming families and extension workers has
been the high farm family to extension worker ratio and low professional-to-assistant ratio of
extension workers. An extension approach of farmers group and lead farmer could possibly be
the most suitable approach for such Nepali situations. Pilot-test program trained a group of

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farmers to upgrade their knowledge about developments in agriculture farming, specially those in
relation to high value crops and off-season vegetables.

E. Formation of Agriculture and Livestock Groups

227. With the support of TSMs, 3 to 4 groups of agriculture/livestock farmers, each comprising
20 to 25 households, were formed and trained in high value/off-season vegetables farming and
livestock rearing in each VDC. Such groups (mixed male/female and exclusively female) were
formed from among the marginal and socially excluded poor family households. A token amount
was allocated in each VDC for training and supervision/technical support of these groups.
JT/JTAs, supported by the TSMs were encouraged to train and supervise the programs. High
Yielding Variety (HYV) seed kits were also distributed to the trained farmers for encouraging
them to undertake off-season vegetable farming. In case of livestock rearing, support from the
Poverty Alleviation and Social Upliftment Fund (PASUF) were provided to five of the livestock
farmers group. A mechanism was developed to cover the rest in less than three years period
through making available new born pigs/goats to new farmers in the group.

F. Monitoring of the Programs

228. An intensive monitoring of the pilot-tested initiatives/approaches in the pilot VDCs and a
feedback system was designed to ensure smooth implementation of the program. A monthly
reporting format was designed for the TSMs to report monthly to the GRDCP TA study team in
Kathmandu. The consultants visited each of the pilot VDC/Municipality every two months to
observe and give "on the spot" decision/instruction for smooth functioning of the initiatives.
Program implementation was regularly monitored (except in the case of Nele, Solukhumbhu) by
the project experts in collaboration with ASC/LSC technicians and VDC officials. Feedback from
the beneficiaries about the services was obtained through structured questionnaires.

6.2.3 Rural Infrastructure Services

229. Piloting of rural infrastructure was targeted at alleviating poverty and improving livelihood
of the poor and backward communities. As such, test intiatives focussed on support to
construction/renovation and maintenance of small irrigation system, small community drinking
water system and sanitation, specially construction of the household toilet facility.

A. Matching Grant for Deep Tube-well Irrigation

230. Support from infrastructure and capacity enhancement fund in the VDC was provided to
two off-season vegetable farming groups who pooled their land to form a sizable land suitable for
a unit of deep tubewell irrigation scheme. The deep tube well was supported on the basis of a
50:50 matching grants and the scheme was used for both irrigation and drinking water purpose.
The land pooling groups -- each with 40-42 household members with a total land of about 3
hectares -- were supported under this scheme. The farmers group outsourced the construction of
tube well. TSMs helped in forming the group and supported JT/JTA in providing training on off
season vegetable farming and the marketing of the product. The groups also carried out monthly
meetings and made mandatory savings from which they could borrow money for investments in
their farming.

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B. Grant Support for Participatory Drinking Water and Toilet/Sanitation
Programs
231. The program was targeted to the poor and marginalized people of the piloted municipality
and VDC. This was done on a participatory basis with the beneficiary of the services providing
labor and some construction materials etc. The scheme was lauched in two wards of
Mahendranagar and one ward in Siddharthnagar Municipality and Parroha VDC as a pilot case.
The program was very successful and demand for such program was overwhelming.

C. One-shot Maintenance Support Existing Irrigation Tube-well and

Drinking Water Facility
232. Maintenance of existing deep tubewell irrigation was carried out in Jhalari VDC of
Kanchanpur district and that of drinking water scheme in ward number nine of Mahendranagar.
The one-shot support was on participatory basis with respective VDC and Municipality
contributing cash and the benefiaries contributing labor and materials. GRDCP TA pilot program
supported with some amount for purchasing spareparts. The irrigation support program was
confined to offseason vegetable growing group formed by TSMs and trained by VDC based JT/
JTAs.

6.3 Evaluating Pilot Test Results: Citizen’s Report Card

233. Citizen’s Report Card (CRC) is a simple but powerful tool to provide public agencies with
systematic feedback from users of public services (ADB/ADBI, 2007). It addresses critical theme
in the delivery of public services such as: (i) access to services, (ii) quality and reliability of
services, (iii) problems encountered by users of services and responsiveness of service
providers in addressing these problems, and (iv) transparency in service provisions. CRC has
been commonly used as: (i) a diagnostic tool; (ii) an accountability tool; (iii) a benchmark tool and
(iv) to reveal hidden cost of improving services.

234. The GRDCP TA pilot program used CRC to assess the perceptions of the service
recipients with regard to service delivery improvements felt in the pilot VDCs. An exit interview
was carried out in the respective service outlets (i.e. VDC office, ASC and LSC).

235. Four types of service recipients were identified and interviewed to understand their
perceptions on service delivery: (i) visitors to VDCs for services; (ii) visitors to ASC and LSC for
services; (iii) Social security services recipients and (iv) users committee members. The
response in the CRC is presented inTable 6.2

Table 6.2: Service Recipient Household by Type of Service Providers

Service Providers Method of HHsVDC (Rural) HHsMunicipality
Interview (Urban)
Total
Siddhartha

Mahendra
Lekhnath
Parroha
Hyamja

Jhallari

Nagar

Nagar
Dullu
Nele

VDC/Municipality Exit Interview 29 15 15 20 12 15 15 14 133

Agri. Service Center(ASC) Exit Interview 15 15 15 15 12 15 15 14 114

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Livestock Service Center Exit Interview 15 15 15 15 12 15 15 14 114
(LSC)

Social Security Beneficiaries Beneficiaries 15 15 15 15 12 15 15 14 114

Interview

User’s Group Members Individual 15 15 15 15 11 15 15 13 113

Interview

Total 89 75 75 80 59 75 75 60 588

Source: Field Survey, December 2007-January 2008

236. The findings were shared in the coordination committee meeting. It was an eye opener to
the service providers (VDC, ASC, and ALC) as the findings showed how the service recepients
perceived the value of the services and transparency and openness in service delivery. The
members took the findings positively and initiated steps to make the service delivery more user
friendly.

6.3.1 Beneficiary Perceptions on Governance Services Delivery by

VDC/Municipality
A. Perception on General Services
237. Service beneficiaries’ knowledge about service availability and perceptions on satisfaction
with services delivered by the VDC/Municipality is presented in detail in Annex 6.4 in the Annex
Volume. Key findings in brief are as follows:

Key Findings
238. Knowledge of the people about the types of services available from the VDC is quite
good. From as high as 97% respondents of Hyamja VDC to 81% of Parroha VDC were aware of
the services provided by the VDC. Knowledge about the documents required for obtaining the
services was high and uniform across all pilot areas except in Parroha VDC where this was quite
low (46%). Similarly, knowledge about the fees payable for services is also reasonably
satisfactory except in Parroha where it was 22% only. Findings about the ease or difficulty in
receiving services were mixed across the pilot areas. 82% of Jhallari VDC recipients perceived it
easy, while in Hyamja VDC about two-thirds perceived it difficult.

239. Service satisfaction perception varied largely across the pilot areas (Table 6.3). The
proportion reporting “not satisfied” varied from as low as 4.2 % in Jhallari VDC to highest of 40 %
in Lekhnath Municipality (Details presented in Annex-6.5 in the Annex Volume.). Proportion
reporting “not satisfied” was higher in urban areas compared to rural areas. Every two in five in
urban area and two in ten service users in rural area reported “not satisfied”. Service users in
rural areas were four times more likely to be satisfied with the services of VDCs than their urban
counterpart (Odds ratio = 4.48).

Table 6.3: Service Satisfaction Perception by Type of Residence

Pilot Area Satisfied Not Satisfied
Rural 80 11
Urban 26 16
Odds Ratio 4.48

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240. Lack of sincerity and cordiality of the officials, lack of adherence to rules and regulations,
lack of transparency in the books of accounts, partisan politics in service delivery and absence of
citizen’s desk etc. were some of the points of dissatisfaction expressed.

B. Perception on Social Security Services Delivery

241. Social security benefit programs targeted for the senior citizens (old age pension),
widows and disabled were not functioning smoothly. One in five old-age pension recipients found
it “difficult” to receive allowance. The reasons cited were - cumbersome paper work, delays in
budget release from the center, delay in providing social security benefits by VDC staff, and most
commonly absence of the staff on duty (about 50% in Jhallari and Nele). Among disabled people
receiving allowances, 46 % of the respondents reported difficulties from complications in
documentary evidence, negligence by the staff in paying the allowance and most commonly,
absence of VDC staff on duty.

C. Perception on Corruption
242. Interestingly, the level of perceived corruption in distributing these allowances were
reported as low as 5% and below. Most of the recepients suggested to increase the allowance
and arrange for distributing in their own home or atleast in the respective ward.

6.3.2 Beneficiary Perception on Services Provided by ALSCs

Key Findings
243. Interestingly, more than 50% of the respondents reported "unaware" of the program of
ASC/LSC. It was highest in Nele (67%) and lowest in Jhallari (33%). More than half of the
respondent reported "not satisfied" with the services of the ASC/LSC. Those reporting
“unsatisfied” were highest in Hyamja (69%) and lowest in Dullu (37 %). Interestingly, as high as
77% respondents expressed their concerns about ASC /LSC program in the VDC.

244. Perceptions about the role of JTAs were mixed across the pilot area. Three-fourths of the
respondents from Nele observed that JTA in their village never communicated about the
program. However, in Dullu three-fourths of the respondents were positive about the service
rendered by JTAs. Majority of the respondents (51%) reported that ASC/LSC have not been able
to contribute significantly in agriculture and livestock promotion, while one in every six service
users stated that ASC/LSC provided no service at all. There was, however, significant variation
across the VDCs with Jhallari and Dullu VDCs reporting a more positive perception of “good
service”.

245. When asked about the reasons for “not so good” or “no service”, the prime reason
mentioned was “lack of required equipments” in the service centre. Other reasons stated were:
“unavailability of technician at the service centre” and JTA’s “lack of adequate knowledge”.
Consistently, large majority of respondents from all the VDC and Municipalities stressed that
JTAs should be fully trained and Service Centres should be adequately equipped to ensure
quality in services. Other commonly suggested improvement were, more frequent visits to
communities by extension workers and timely diagnosis and remedy of livestock diseases.

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6.3.3 Beneficiary Perception on Rural Infrastructure Services Provided

by UCs
246. CRC results on the perceptions of the community on the role of UCs in rural infrastructure
development service activities are presented in Annex 6.6 in the Annex Volume.

Key findings
247. Larger proportions of the urban residents were found satisfied with local development
work by User’s Committee (UC) while more than half of the respondents of Dullu and Nele VDCs
were not satisfied. Contrary to the common belief on project selection process by the UC,
majority of the respondents (32% against 9% urban respondents and 50% against 21% rural
respondents) reported happy with the project selection procedure except in Hyamja VDC, where
about three-fourths (72%) of the respondents reported "not satisfied".

248. Quality of works, both in rural and urban areas, is reported having serious problems. With
few exceptions, such as, in Lekhnath and Jhalari VDCs, all others expressed concerns over the
quality of works. In Hyamja, 80% of the respondents were not satisfied with the quality of works
done. Similarly, maintenance and supervision of the works by UCs were reported as quite poor.

249. Value of UCs in rural infrastructure development work has been greatly appreciated by
beneficiaries as well as secondary/support stakeholders e.g. LB staffs, CBOs/NGOs in all pilot
areas. Majority of the people expressed satisfaction in the UCs formation process and in carrying
out the development works through UCs.

250. Rural respondents were less likely to be “satisfied” with the UCs formation process than
the urban respondents (Odds ratio of 0.67). Similarly, rural respondents were less likely to be
having “positive attitude” towards development work (odds ratio of 0.59) through UCs than the
urban respondents (Table 6.4).

Table 6.4: UCs Formation & People’s Perception

UCs Formation Process
Pilot area Satisfied Not satisfied
Rural 50 21
Urban 32 9
Odds Ratio 0.67
Opinion about development work through UCs
Pilot area Positive Negative
Rural 51 21
Urban 33 8
Odds Ratio 0.59

251. Lack of democratic election process in UCs formation, absence of women and
marginalized groups of people in the UC, excessive influence of political parties and non-
transparency in the budget allocation and expenditures as well as weak monitoring were some
points cited by the respondents as reasons for their dissatisfaction on UCs. The appointment of
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contractors by the UCs for the UC works was reported as the most objectionable activity of UCs.
The respondents strongly suggested a mandatory provision of basic project management and
accounting training for UC members and also to form UCs mainly from among the actual
beneficiary group.

6.4 Lessons of Pilot-testing and Recommendation for

Replication
252. Though the duration of just about six month for pilot-testing is not enough to draw firm
lessons and make definitive impact in the pilot areas, the study team gathered valuable initial
lessons from the field even during the short duration. Encouraged by the pilot-test results and the
success in resuming the long pending village and town council meetings in the pilot VDCs and
Municipalities, the concerned officials and the coordination committee members in the VDCs
expressed firm committment to continue the pilot-tested initiatives in the years ahead. Similarly,
NGOs and COs found the piloted approach, especially the role of coordination committee in VDC
program selection and implementation, very much positive and encouraging, as it gave them a
platform to work and share their development experience confidently with government agencies
and political party members at the grass root level. The initial experiences from pilot testing and
recommedation of lessons learned for replication in the three subject areas of public services are
presented below;

Experiences from Pilot-testing Recommendation for Replication

A. Governance Services

1. Experience of pilot VDCs in Hemja and Parroha has shown 1. Promote VDC as focal point for all
improved working relationship developed among VDC, CLAs, development activities and service
NGOs and CBOs, by pulling resources, experiences and delivery, as far as practicable.
avoiding duplication of work. This positive behavioral change
from the earlier culture of working in isolation has improved the
working relationship among actors and improved service
delivery.
2. The upgradation of VDC secretary to non-gazetted 1st class not 2. Upgrade VDC secretary position to
only improved protocol of the secretary but also boosted at least non-gazetted class I.
confidence in coordinating activities.
3. Fund flow of line agency budget through Village Development 3. Channelise all fund flows, including
Fund (VDF) actually improves coordination in planning and that of CLA, to VDF for saving
programming. Moreover, such practices put pressure on the collection time, better reporting
VDC to realize its responsibility in the overall development of the (SOPs), programming and
VDC and giving priority to basic service needs e.g. education, budgetary discipline.
health, and social inclusion and poverty programs.

4. Arrangement of Coordination Committee with the representation 4. Provide for a coordinating

of different stakeholders, including local representative of committee at the VDC/Municipality
political parties; disadvantaged groups – women, dalits and level with VDC chairman chairing
Janajati etc.; as well as the NGOs / CBOs in decision making and drawing members
help in consensus building in planning and program execution; representatives from political
and balancing/targeting sectoral programs. This also minimized parties, CLAs, NGOs/CBOs’
dominance of influential political parties in program selection and women and marginalised
prioritization. communities etc. to ensure
participatory/ inclusive planning at

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Experiences from Pilot-testing Recommendation for Replication

grass root.
5. Many NGOs and CBOs offer/carry out ad hoc programs in VDC 5. Establish NGO / CBO desk in VDC
and, therefore, more often duplicative and of questionable and Municipality and document
sustainability or replicability. In the piloting VDC/Municipality, their activities and programs as
NGOs and CBOs were involved in decision making and this well as the budget to be spent in
resulted in creation of NGO/CBO desk, sharing of information, VDCs / Municipality.
NGOs/CBOs networking and involvement in programming and
prioritization exercise.
6. Activating existing community organizations, before creating the 6. Activate existing CBOs and
new one, brings sense of unity in the community. The pilot promote/involve local people
approach to activate and mobilize existing CBOs before creating through CBOs for planning and
the new one has shown positive results in terms of better implementing community
program design, management and supervision within a short programs.
span of time.
7. VDCs are seen understaffed as compared to the tasks assigned 7. Provide for a minimum of 4 VDC
to them. They need at least a technical person, office assistant staff – (i) office assistant, (ii) TSM,
and a helper for its smooth running. The experience in the (iii) overseer/sub-overseer and a
piloting VDCs shows the importance of Technical Social helper, for smooth functioning of
Mobilizers (TSMs) in awareness raising of people, specially the VDC. Although in most VDCs,
marginalized communities, (i) on ways to access basic services there is a position for technical
provided by VDCs and CLAs; (ii) mobilizing poor and assistant, is occupied by politically
marginalized communities in forming UCs / UGs; c) encouraging appointed people with virtually no
income generating and savings activities; (iii) establishing technical knowledge. These
linkages between the services provided by CLAs and persons need either to be trained
COs/NGOs with VDC; and (iv) monitoring activities at the VDC or replaced suitably.
level. Besides, TSMs play very supportive role in providing
technical support to these groups and linking with the public and
private service providers.
8. Installation of computers with a software for Vital registration 8. Promote time / cost-effective ICT
(birth, death, marriage, divorce and migration) and issuance of enabled service delivery at the
certificates in three pilot VDCs and three Municipalities showed VDC and Municipality.
drastic improvements in service delivery (quick and fine printing
of Vital registration certificates and the automatic creation of
data base for future use) to great delights of the service
recipients.
9. Posting of Citizen's Charter at the office premise provide 9. Make posting of Citizen’s charter
necessary information to the people about the types of services mandatory in VDC and
provided by the VDC/ Municipality, fees to be charged each municipality premises, besides
service, time taken for the services, documents required and the liberally disseminating printed
person to be contacted etc. This information saved time of the leaflets. This promotes
VDC staffs and eased service recipients. This also helps to transparency and predictability in
improve transparency leading to containment in corruption. service delivery.
10.Most of the staffs working in the pilot VDC and Municipality lack 10.Allocate fund for training staff on
training in basic services such as, computer application, basic computer courses,
accounting and office management. Besides, they are not accounting and office
properly aware of the changes in government rules and management. Promote regular and
regulations including the new PPA 2064 (2007 AD) and LBFAR timely updating on changes in
2064 (2007 AD). Training in such basic services and timely government rules and regulations
orientation in the rules and regulations enhances service and ensure participation by
delivery at the local level. VDC/Municipality staff.
11.Small support to VDC infrastructure has improved working 11.Allocate fund for infrastructural
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Experiences from Pilot-testing Recommendation for Replication

environment easing work of VDC staffs. Besides, in the case of facilities in VDC/Municipality.
Nele and Dullu piloting VDCs, it encouraged VDC secretary to Restore damaged VDC buildings
return from district headquarters and resume office at the VDC at the earliest and resume services
itself. from its premises in the VDC
instead of from district
headquarter).
12.Citizen's report card puts pressure on service provisioning and 12 Promote use of Citizen’s Report
delivering agencies to improve service quality as well as the Card to track and further upgrade/
timeliness of services. This was observed in Hemja and Parroha maintain quality of services in VDC
VDCs, where such report card was prepared and findings were and Municipalities areas.
shared with the VDC and line agencies.
B. Agriculture and Livestock Services
1. The Support from the piloting program, in equipping ASC/LSC 1. Make ASC/LSC effective service
with necessary testing equipments, chemicals, telephones and center for technical and
establishment of 24/7 veterinary services; and tying it up with the information services on agriculture
poverty and social inclusion programs not only improved the and livestock. Strengthen them
quality of services these agencies provides, but also encouraged with necessary testing equipments,
JT/JTAs in these offices to provide better technical support chemicals and telephone
ensuring the success of the poverty and social inclusion connectivity, possibly making them
programs. 24/ 7 service providers.
2. As the centers were not receiving any program budget or 2. Make ASC/LSC as a budgetary
allowances for travel to deliver extension services in distant unit to ensure budgetary allocation
areas, a token support from the TA pilot encouraged JT/JTAs in for their services.
the centre to provide training to groups on livestock, off season
vegetables etc. besides encouraging them to travel for extension
services.
3. Small support for the short term training/ upgradation of JT/JTAs 3. Arrange for regular training to
in new farming technology was found to enhance the capability upgrade and update knowledge
of these extension workers to train farmers on the subject and and capacity of extension workers
supervise their work at the field. to respond qualitatively to the
changing needs of changing
farmers.
4. DDC and VDCs in the pilot districts were giving very little priority 4. Encourage VDC/DDC to contribute
to agriculture and livestock programs even though these are the some fund from their side in the
main source of livelihood of the majority of people in their devolved services to build sense of
jurisdiction. The responsibility of VDC as a coordinating agency ownership and responsibility.
in the pilot VDCs put pressure for them to allocate some fund
from the VDC budget to agriculture and livestock programs.
5. NGOs and CBOs are playing important role in awareness 5. Develop and implement smart
creation and service delivery including in agricultural services in policies and procedures of building
the areas away from the Village / town centers. The coordinated partnership with NGOs/CBOs for
approach used in the piloting VDCs encouraged these the extension services and
organizations to share their experiences in agriculture extension introduce a practice of recognizing
and support in collaborative approach for such services. good performers.
C. Improving Service Delivery in Rural Infrastructure
1. UCs are the main implementing vehicle in all local level 1. Make UCs aware of government
construction activities. However, they lack knowledge about rules and regulations relating to
government rules and regulations as well as financial reporting construction activities and
etc. A provision for training UC members on these areas accounting/reporting. Make
enhanced their capacity to carry out development activities arrangements to train UC
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Experiences from Pilot-testing Recommendation for Replication

more smoothly in some pilot Municipality/VDC. Encouraged by members in these areas.
the results, NAVIN is now expanding the training programs in
all VDCs.
2. In some cases, UCs are sub-contracting activities to local 2. Make UCs more beneficiary-
contractors at the VDC level. This calls for a review of the types centered and beneficiary-involved
of local activities to be discharged through UCs. without the need to sub-contract
their works to visible or invisible
sub-contractors.
3. Construction works in VDCs are constrained by lack of 3. Make provision for overseer / sub
technical personnel at the VDC. Government-appointed overseer level technical assistant
technical assistants are more often politically appointed without in VDC.
technical background.
Current arrangement of DTO overseers supervising VDCs’
capital works cause delays in implementation as VDC has to
wait for inspection and approval by DTO overseers for
inspection and payment release.
4. Pilot- test support from the VDC level "Infrastructure and 4. Develop and utilize " Community
Capacity Enhancement Fund" to two poor farming groups in the Infrastructure and Capacity
Parroha VDC helped them to significantly increase their income Development Fund" at VDC /
by jointly pooling their lands and growing off-season vegetables Municipality level as a tool to
as a cooperative micro enterprise. promote community centered and
community involved micro agri-
enterprise development among the
poor socially disadvantaged
indigenous communities.
5. Small financial support to rehabilitate and maintain existing 5. Design and utilize the "Community
deep tube well irrigation facilities in the Jhalari VDC of Infrastructure and Capacity
Kanchanpur and drinking water facility at ward no. 9 of Development Fund" to act also as
Mahendranagar municipality, coupled with training by TSM to a "micro enterprise development
user groups of the facilities helped the groups dramatically fund" or alternatively create such a
generate income though enhanced off-season vegetable fund at VDC / Municipality level to
farming. enable marginalized /
disadvantaged indigenous
community groups to socio-
economically uplift and mainstream
themselves within the State.
6. Small grants, to families of the poor and marginalized 6. Utilize the tool of nominal
communities, of as little as Rs. 3,000 per household for government financial support
construction of toilet facilities in Ward No. 5 of Mahendranagar through VDC / Municipality level
Municipality and Ward no. 3 of Sidarthanagar Municipality and "Poverty Alleviation and Social
in the Parroha VCD demonstrated a highly encouraging Upliftment Fund" (PASUF) to very
awareness raising of communities to improve their basic water poor families among the
and sanitation situation. marginalized / socially
disadvantaged groups to enable
them enjoy their human rights to
basic minimum water and
sanitation facilities.

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GRDCP TA Consultation Workshop 

Dullu ‐ Interaction with local people  Nele ‐ Meeting with Stakeholders

Consultation with Political Parties 
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Vegetable Farming  Tailoring Training ‐ Dullu VDC, Dailekh 

Toilet Construction ‐Siddharthanagar Municipality  Training on Awareness Campaign for Women ‐ 
Siddharthanagar Municipality 

Study Tour to Andra Pradesh, India 

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