Kathmandu, Nov. 18
A government-appointed
task force has suggested an immediate and comprehensive overhaul of the salary
and service benefits structure across Nepal’s state-owned enterprises,
regulatory bodies, and academies.
The report of the task
force formed to provide suggestions on establishing uniformity in the remuneration
and service benefits of officials and employees of an expansive network of
public institutions recommended grouping the institutions into eight separate
groups and developing a package of perks and benefits for them.
The report, published
on Tuesday by the Ministry of Finance (MoF), made an assessment of the regulatory
bodies, academies, boards, committees, and public enterprises, and other entities
financed by the state treasury.
According to it, the
eight packages can include - regulatory bodies, institutions operating
competitively and for profit, monopoly organisations, public finance institutions,
institutions majority-owned by public entities, institutions operating at a
loss, institutions fully dependent on government grants, and institutions
operating from self-earned revenue in addition to grants.
The findings of the
task force expose widespread financial indiscipline and a profound lack of
uniformity, highlighting a system riddled with disparity and excessive
discretionary power that is creating an enormous fiscal liability for the state
treasury.
The task force was commissioned
to address the escalating administrative costs and continuous financial burden
placed on the public exchequer by these institutions, which are officially
considered the ‘Extended Arms of the Government’.
According to the
report, the task force analysed over 60 public institutions and found several
pervasive weaknesses.
Disparity in
benefits
The most pressing
issue identified is the extensive benefit disparity and the resulting legal
chaos. The current regime sees 39 institutions setting salary and allowances
solely through their governing boards, with employee benefits being managed
under a complicated patchwork of 20 different legal provisions.
“This has resulted in
striking differences in remuneration for similar roles across the public sector,”
read the report. For instance, allowances for board meetings can vary, ranging
from Rs. 2,000 to Rs. 9,000. The Nepal Rastra Bank (NRB) and the Nepal
Electricity Authority (NEA) provide Rs. 9000 as meeting allowance.
Similarly, the monthly
salary for an officer-level (sixth-level) employee can differ significantly. The
NRB currently pays the highest amount of salary to the officers at Rs. 115,410,
while top executives of the Rastriya Banijya Bank can get their monthly
remuneration up to Rs. 450,000.
Furthermore, the task
force cited instances of opaque benefits being provided, including free
services, telephone and fuel allowances, and excessive leave accumulation
provisions for officials.
The task force found a
massive unfunded retirement liability exceeding Rs. 78.5 billion across several
key corporations, including major entities like the NEA and Nepal Telecom.
Meanwhile, many
institutions are reporting substantial profits on their financial statements
without setting aside mandatory funds via proper actuarial valuation, which the
report terms ‘a dangerous financial practice’ that might risk future
insolvency.
This mirrors past
failures, such as those at Hetauda Cement, which could not settle billions in
long-term liabilities due to the lack of dedicated funds, according to the
report.
Poor link to
performance and reward
The task force stated
that the poor linkage between performance and reward is another challenge.
Despite the high benefits offered, public sector performance is not
consistently improving, with 36 out of 52 institutions showing fluctuating
annual income.
According to it, incentive
allowances and productivity are not related in public institutions, and many
bodies provide a uniform percentage allowance to all staff rather than a
genuine performance-based incentive system. Public institutions have ignored
the directives on financial discipline from the Auditor General and the Public
Accounts Committee of the Parliament.
To address these
maladies, the task force has offered a set of sweeping, radical reforms aimed
at establishing uniformity, transparency, and fiscal discipline.
It has called for
centralised financial control, mandating that the Finance Ministry be granted
mandatory approval authority over all financial liabilities, including salaries
and retirement benefits, for every regulatory body and public corporation.
‘Scrap 41-type of
allowances’
It suggested scrapping
the existing 41 types of allowances and replacing them with a single,
transparent, and capped performance-based incentive allowance, varying by
institutional category, for example, up to 100 per cent of the annual salary
for a Category A institution, declining to 25 per cent for a Category D body.
“Only a single,
transparent Employee Welfare Fund should be retained, with all others abolished,”
noted the report.
The task force urged
the government to establish an Institutional Transition Management Fund to
address the staggering Rs. 78.5 billion unfunded liability through asset
monetisation and phased budget allocation, ensuring all future retirement funds
are established after proper actuarial valuation.
Similarly, for the ‘sick’
corporations that are perpetually dependent on government grants and running
losses for three consecutive years, benefits must not exceed those offered to
the civil servants. The task force also recommended a voluntary retirement
scheme and transferring operational responsibility to the private sector for
specific bodies to stem further losses.
The implementation of
these suggestions, which centre on integrated law, scientific classification,
performance-linked remuneration, and full transparency, is positioned as
essential to safeguard the state treasury, ensure justice among employees, and
enhance the overall efficiency of Nepal’s public sector.
Published in The Rising Nepal daily on 19 November 2025.
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