The Nepali Cabinet has tightened the norms for inflow of Indian grants for Small Development Projects (SDPs) in the Himalayan country, the media reported on Tuesday.
According to the Cabinet, projects will not start unless India signs financing agreements with Nepal's Finance Ministry, the Kathmandu Post reported. It also said "India must route the grant through the central government account".
The decision abrogates the power of the Indian Embassy in Kathmandu to fund projects anywhere in Nepal at its own volition.
India disburses grants up to Rs 50 million for each SDP. The Cabinet decision is to ensure greater scrutiny and paper trail of Indian grants to small projects in Nepal, the report said.
Currently, the Indian Embassy gives grants to various projects at the local level including schools, colleges and hospitals under the SDP.
According to the report, experts in Nepal oppose "the unrestricted power" enjoyed by the Indian Embassy in Kathmandu, saying "this is inviting unnecessary Indian influence in the country".
Speaking to the Post, Minister for Law, Justice and Parliamentary Affairs Sher Bahadur Tamang said: "Only after the Indian grant comes into the central government's account, would that amount be allocated to specific projects in various districts."
Nepal's Finance Ministry would vet projects listed by provincial and local governments and then forward them to India for potential funding, the report said. After India approves the selected projects, it must sign financing agreements with the Finance Ministry to fund them.
"This would give Nepal government greater control over where and how the funds are spent, keep track of the projects and maintain financial transparency," said a senior official of the Finance Ministry. The official said both local and provincial governments would be the agencies to implement the SDPs.
Earlier, only local bodies could utilise the Indian grants.
The Indian grant will not be part of budget for the fiscal year 2018-19 since the Lower House has already endorsed the budget. It will come under the federal government's budgetary system from the fiscal year 2019-20," said Tamang.
The Sher Bahadur Deuba-led government on November 30, 2017 had approved the extension of SDP scheme with the caveat that funds pass through Nepal's national system and the country's government decides which agency implements the project.
The Cabinet decision ensures Indian grants under SDP would come under the national system for the first time since its launch in November 2003.