COUNTRY BACKGROUND - Gross National Happiness Commission

Economic Outlook
projects. The Ferro-Silicon Project is expected to begin production in 1993/94 and a revenue of approximately Nu.
20m per year has been included in the forecast. A new power tariff was negotiated with the Government of India at
the end of the 6FYP, which took effect in 1991, increasing from Nu.0.16 to Nu.0.27 per unit. The tariff will be
negotiated again in 1994/5 and thus it is likely that power revenues will increase further. Revenues have been
estimated to increase from Nu. 384m in the first 2 years of 7FYP to Nu 513m from 1994/95 onwards as a result of
increase in tariff rate from Nu. 0.27 to Nu 0.37 per unit. The tariff rate is assumed to remain at that level until the
end of 7FYP. In addition, the forecast made by the Department of Revenue and Customs was revised to include the
planned commissioning of 2 minor power generating projects:
the Chhukha Tail Race and Bunakha Reservoir Scheme. The Chhukha Tail Race is expected to be commissioned in
1994/95 bringing in additional revenue of Nu 24m per year and the Bunakha Reservoir Scheme is expected to be
commissioned in 1995/96 generating an additional revenue of Nu. 50m per year. The Dungsum Cement Project is
assumed to start production in 1996/97 contributing Nu 40m in that year. By taking account of these additional
revenues, total domestic revenue is projected at Nu. 5306m for the 7FYP in nominal prices.
High Revenue scenarioHigh Revenue scenario
7.23 There are two main differences between the scenarios. Firstly, the high revenue scenario assumes that the
revenue in 1992/93 will be higher by Nu. 162m compared to the amount for that year shown in low revenue
scenario. The increase is expected to come about through greater effort in tax collection, revision of rates,
introduction of new taxes, increases in user charges as well as revenue from new industrial projects. Secondly, the
1992/93 revenue of Nu 1,060 is projected to keep pace with inflation, at 10% per annum. The additional revenue
arising from revision of the Chhukha power tariff and revenue generated by the Ferro-Silicon Project, Chhukha Tail
Race, Bunakha Reservoir Scheme and Dungsum Cement Project are also included in this projection. The 7FYP
total revenue according to this more optimistic forecast is Nu. 6730m in nominal terms, ( Nu.5489m in real terms).
The two revenue scenarios are shown in Figure 7.5, which also include a revenue forecast for 1991/92, as the
actual receipt figures were not available. The revenue forecast was made in 1989 and is the basis for the low
scenario for the 7FYP. Figure 7.5 shows that in the first scenario domestic revenues will remain at approximately
the same level during the 7FYP, and will decline in real terms in the last year of the Plan. Under the second
scenario, domestic revenues will increase over the period in real terms.
VI. Projected Government DeficitsVI. Projected Government Deficits
7.24 As indicated in Table 7.3, recurrent expenditure is estimated at Nu. 8611m, thus the low revenue forecast
would mean a recurrent funding gap of Nu. 3305m and Nu. 1881m in the `high revenue scenario', in nominal
prices. In the low revenue scenario, the average growth rate of revenue in nominal prices is 8.1% whereas recurrent
expenditure, also in nominal prices grows at annual average of 10.8%. In this scenario, revenue will cover 62% of
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Figure 7.5