The federal government has started choosing projects to be funded under the Indian government’s Small Development Project fund, after a hiatus of six years.

According to bilateral arrangements, the Small Development Project Scheme, which was launched in 2003, had to be renewed every three years. But after its renewal in 2014, no project under the scheme had been implemented.

“Two school projects in two local levels in Darchula and Dhanusa went into implementation two weeks ago,” said Bishnu Dutta Gautam, joint secretary at the Ministry of Federal Affairs. “We are awaiting approval from Indian embassy for 67 other projects.”

The scheme was on hold until this month because the new constitution promulgated in 2015 bars donors from providing funds directly to the local governments.

The scheme was again renewed in 2017, but the government only finalised the working procedure for it in December.

According to the ministry, the projects under implementation were selected by local governments to receive potential funding from the Indian embassy over the last three years.

On Thursday the ministry, which received a request from the embassy about listing potential projects for the scheme, asked local governments to submit detailed documents regarding the projects they had proposed.

The projects are related to building of schools and colleges, auditoriums, libraries, bridges, hospitals, solar systems, and roads among others.

The focus areas of the scheme are: infrastructure development and capacity Building in the areas of education, health and community development.

Various local governments have filed proposals to receive assistance from India. Pariwartan Rural Municipality has sought assistance in constructing a school building in Rangshi while Dhulikhel Municipality has sought Indian aid for constructing an auditorium. Bharatpur Metropolitan City has sought funding from India to build an e-library. Kathmandu Metropolitan City has sought assistance to build a library for Nepal Academy. Hangsapur Municipality in Siraha has proposed a solar plant project.

“We have received additional 34 projects from the local governments seeking funding from the Indian embassy,” said Ramesh Kadel, under secretary at the Ministry of Federal Affairs. “But, we have not yet sent the list to the finance ministry which is responsible for forwarding it to the Indian embassy.”

Under the scheme, Indian embassy provides up to Rs 5 million per project. In order to implement the project, the local government should chip in with 20 percent of the estimated cost, the Indian embassy covers 80 percent, according to Kadel.

After the Ministry of Federal Affairs, the local government and the Indian embassy sign a tripartite agreement, the project goes into implementation.

The scheme had courted controversy in the past as the embassy would fund projects without using the government’s budgetary system. Politically, it had been dubbed as an ‘instrument’ to wield Indian influence over local communities in Nepal.

The working procedure introduced last year envisioned a new modality under which Indian grants under the scheme will be brought under the budgetary system of the central government and the budget is allocated to the local governments as conditional grants provided to implement a specific project.

Although the embassy’s funding is reflected in the budgetary system, the Indian embassy makes direct payments to the contractor, according to officials.

Tek Bahadur Khatri, under secretary at the finance ministry had told the Post in December last year that the government could allocate the funds under “Indian aid” after the fiscal 2020-21 budget is presented in May.

So, the local governments which signed tripartite agreements to receive Indian funding, will not get the fund this fiscal. “Concerned local governments can issue a tender this year, but work will begin next fiscal year and payment from Indian embassy will also be made from next fiscal year,” said Kadel.