Everything you need to know about the controversial Constituency Development Fund

Supporters of the CPN UML campaign for the party candidate in Bhaktapur-2 constituency on Nov 12, 2022. Photo: NepalCheck.Org

NL Today

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The Constituency Development Fund (CDF) is a government scheme to provide members of the federal parliament and provincial assemblies with a set amount of budget to be used at their discretion for carrying out small- and medium-scale development projects in their constituencies.

Since the scheme started in 1994, the CDF has gone by various names even as it has been mired in controversies about its transparency and accountability. The CDF is once again a topic of public debate in the run-up to the elections for the federal and provincial assemblies. One of the most outspoken opponents of the CDF is Rabindra Mishra, a candidate for the Kathmandu-1 seat in the federal parliament. He has accused parties of abusing the state coffers and encouraging institutional corruption to woo their supporters.

The controversy

The CDF enables the lawmakers to determine community needs and spend CDF funds through a committee of lawmakers and local government officials. There are allegations that members of parliament (MPs) channel funds to the so-called “users’ groups,” which are made up of party members, loyalists, and supporters in their constituencies.

Moreover, spending public money is primarily the prerogative of the government. Holding the executive to account for public expenditures is an MP’s responsibility. However, nobody can hold MPs accountable when they spend taxpayers’ money on their own. Since they lack the moral power to hold the executive responsible, parliamentarians cannot carry out their duties efficiently.

Studies have shown this contributes to institutional corruption.

Additionally, MPs are known to give money to modest development initiatives in an opaque manner. According to the Auditor General’s annual reports, the CDF has frequently been used to fund infrastructures that do not exist.

The big picture

The amount spent on CDF is steadily rising, especially since provincial assemblies began allocating funds to their members. While the provincial assemblies started distributing CDF in FY 2018/19, House of Representatives (HoR) members elected via the First Past the Post (FPTP) system have received it since 1994. The CDF allocated to each HoR member had a starting value of Rs 250,000, and it reached Rs 60 million when it was discontinued in FY 2021/22. According to a study by Nepal Check, provincial assemblies allocated a total of Rs 29398.22 million under CDF to their members in the past five years.

The scheme, which allows lawmakers to spend large amounts at their discretion, is said to promote institutional corruption and make it difficult for new candidates to compete with the incumbent lawmakers in the election.

In this explainer, let’s dive deep into the evolution and implementation of the controversial fund.

The evolution

The Constituency Infrastructure Development Fund, more commonly known as the Constituency Development Fund (CDF), is a funding scheme that allocates funds from the federal or provincial governments to electoral constituencies for small-scale infrastructure or development projects. 

It began in 1994 under Prime Minister Manmohan Adhikari of the Communist Party of Nepal (UML). Except in two instances—after the automatic dissolution of the Constituent Assembly in 2012 and after the dissolution of the House of Representatives in September 2002—the program ran until 2021. For the first time, Finance Minister Bharat Mohan Adhikari allotted Rs 250,000 to each of the 205 House of Representatives (HoR) constituencies in the budget presented on December 26, 1994.

Minister Adhikari maintained that the budget was allocated to carry out development work on the prerogative of the respective Member of Parliament (MP). This initiative, known as the Local Development Program, was in keeping with the UML government’s campaign motto, “Aaphno Gaun Aphain Banaun,” or “develop your village yourself.”

It aimed at making it easier for the legislators to provide their constituents with essential services such as clean water and medicines and to carry out small-scale development projects. After the political changes in 2006, the National Assembly (NA) and the HoR members elected under the PR electoral system were not allocated the CDF. Earlier, a modest amount of CDF was given to them until King Gyanendra Shah dissolved parliament in 2002. 

Before the KP Sharma Oli administration ended the scheme in 2021, the fund underwent numerous nomenclatures, including MP Development Fund, Electoral Constituency Special Program, Electoral Constituency Development Program, Constituency Development Program and Local Infrastructure Development Partnership Program. Despite frequent name changes, the goal of allocating a separate budget that the candidates for Parliament elected under the FPTP electoral system could spend at their discretion remained the same.

Finance Minister Bishnu Poudel did not allocate funds for the program in the FY 2021/2022 budget because his government had dissolved the House of Representatives at the time of announcing the budget. 

The rise and rise of CDF

In 1994, a member of the HoR received Rs 250,000 compared to Rs 200,000 for a National Assembly member. 

The government led by the Nepali Congress (NC) increased the amount to Rs 400,000 in FY 1996/1997. For the HoR MP, the amount was raised to Rs 500,000 in FY 1998/1999, then to Rs 1 million in FY 1999/2000. It stayed unchanged for the next 13 years, with breaks occurring in the fiscal years 2003/2004, 2005/2006, 2008/2009, 2012/2013, and 2013/2014. The government led by the NC started allocating Rs 1 million for the improvement of local infrastructures and an extra Rs 1.5 million for constituency development in 2014/15. The funds designated under various headings were intended to be used under the control of the relevant legislators from each of the 205 constituencies. In FY 2015/2016, the funds were further raised to Rs 15 million for Local Infrastructure Development and Rs 2 million for Constituency Development.

The amount has steadily increased due to persistent pressure from lawmakers on successive governments, as shown in the table below. It was raised to Rs 35 million per constituency in FY 2016/17, Rs 40 million in 2017/18, and Rs 60 million in 2019/20, together with the budget designated for Local Infrastructure Development and Constituency Development. However, in FY 2020/21, the sum was decreased to Rs 40 million per constituency.

An overview of funds allocated for the Constituency Development Fund for federal lawmakers:

Provincial governments follow suit

Provincial governments, formed after the first-ever provincial assembly elections in 2017, have imitated the CDF scheme. All six provincial governments, except for the Lumbini Province, have implemented such schemes due to severe pressure from assembly members. The provinces have developed regulations following the federal Parliament to implement the “Constituency Infrastructure Development Project” under different names.

An overview of regulations that manage the Constituency Infrastructure Development Program in six provinces:

Province 1 has 93 members, including 37 elected under the PR electoral system. The province allocated Rs 10 million each to 56 lawmakers elected under the FPTP electoral system in FY 2018/2019. The lawmakers elected under the PR electoral system were denied this amount. In FY 2019/20, the provincial government provided Rs 10 million to the FPTP members and Rs 5 million to the lawmakers elected under the PR electoral system as CDF. However, due to the COVID-19 pandemic outbreak, the CDF was not given to lawmakers in FY 2021/21. 

In FY 2021/22, the provincial government allocated Rs 10 million each to the members elected under the FPTP electoral system and Rs 5 million each to the members elected under the PR electoral system. In the annual budget of FY 2022/23, all 93 lawmakers elected both under the FPTP and PR electoral system were allocated Rs 10 million each as CDF. Legislators are not permitted to spend money from the budget because the election for the provincial assembly is on November 20, according to Ambika Thapa, a member of the Province 1 assembly.

There are 64 constituencies in Madhesh Province, meaning there are as many as FPTP assembly members. An additional 43 members are elected via the PR system, which makes it a total of 107 assembly members. 

The Madhes Province government allocated Rs 10 million each to candidates elected under FPTP and PR electoral system in FY 2018/19, according to Parmeshwar Sah, a lawmaker of the Loktantrik Samajwadi Party. The Madhes Province government gave Rs 15 million to the members elected under the FPTP electoral system and Rs 10 million to those elected under the PR electoral system in FY 2019/20. Since FY 2020/21, each FPTP candidate in Madhesh Province received Rs 30 million and the PR candidate Rs 10 million as CDF.

The Bagmati Province Assembly has 110 members, out of whom 66 were elected under the FPTP voting system. Shashi Jung Thapa, a CPN-UML member of the provincial assembly, said in the first year following the CDF’s inception, the provincial government failed to provide funding for the CDF, which was formerly known as the Infrastructure Partnership Development Program. However, in the three FYs that followed, the provincial government gave each representative elected via the FPTP electoral system Rs 30 million and each lawmaker under the PR electoral system Rs 10 million. Since the election had already been called, the provincial government did not provide a budget for the fifth year of its tenure.

Gandaki Province has 60 Province Assembly members, including 24 elected under the PR electoral system. Gandaki introduced a program to execute the Electoral Constituency Infrastructure Development Program to make the role of the provincial MPs in project selection, execution and implementation more effective and to ensure the balanced development of the province. 

In the first year of its tenure, the provincial administration did not provide CDF to its members, and in light of the election, the sum allotted for the fifth year of that term has also been postponed. For four fiscal years, the Gandaki Province government provided Rs 20 million annually to each of the 36 constituencies with a provision to mobilize the budget jointly by the FPTP and PR candidates from their constituencies.

Lumbini Province has 87 members, including 35 elected under the PR electoral system. According to Lumbini Province Assembly member Indra Mani Kharel, the Lumbini Province government did not allocate a CDF budget to be disbursed by individual lawmakers. “We were asked to suggest projects related to drinking water and schools. Those projects were included in the budget of the provincial government. Legislators played no direct part in raising the money designated for such initiatives. The projects suggested by the MPs were carried out through the government’s already-existing processes,” he said. 

Lawmakers elected under the FPTP were eligible to recommend projects worth Rs 30 million a year, while those elected under the PR electoral system were allowed to recommend projects worth Rs 15 million. “Although the budget was allocated for the projects we recommended even during the COVID-19 pandemic, our projects were not implemented that year,” Kharel said. 

Karnali Province has 40 assembly members, including 16 elected under the PR electoral system. The Karnali province government allocated Rs 10 million each to 24 assembly members elected under the FPTP electoral system in FY 2018/19. In FY 2019/20, it allocated Rs 15 million each to 24 FPTP members and Rs 10 million each to 16 PR members. In FY 2020/21, FY 2021/22 and FY 2022/23, the provincial government gave continuity to the same amount to both FPTP and PR members as CDF. 

The provincial assembly members were barred from spending the CDF allocated in the name of the Province Election Constituency Infrastructure Development Program in FY 2022/23 as the date for the election to the members of the Province Assembly was already announced. In FY 2021/22, the number of Province Assembly members came down to 36, as six members were sacked by their respective parties for shifting to other parties. However, the provincial government did not reduce the budget. 

Sudur Pashchim Province has 53 assembly members, including 21 elected under the PR electoral system. The assembly started allocating Rs 30 million for each member elected under the FPTP electoral system from FY 2018/19. The CDF amount remained the same for the next three years. In FY 2021/22, the provincial government allocated Rs 30 million for the 32 FPTP members and Rs 11.82 million for 21 PR members. Although the CDF was allocated for FY 2022/23 as well, the Election Commission has directed the provincial governments to put on hold the spending until the November 20 election.

What made CDF so controversial?

The CDF has been a controversial program since its inception in Nepal. At the federal level, the directly elected MP identifies community needs through a committee of representatives from local governments and PR MPs but ultimately controls the disbursement of the fund. This creates a conflict of interest. An MP’s role is to hold the executive who spends money to account. But if the MP is the one who spends the money, there is no one to hold them to account. 

There have been allegations that MPs channel funds to the so-called “users’ groups” with party workers, loyalists, and supporters in the constituency. Studies have shown that the MPs often distribute the funds to small projects in an opaque manner. Funds have been used to create trusts, and build temples, statues and memorial structures in the names of leaders, including those who have been declared martyrs, belonging to the MP’s party. There is a practice of recruiting party cadres for CDF-funded projects and awarding contracts to organizations run by loyalists. Annual reports of the Auditor General have shown that, in many cases, the CDF money has been spent on infrastructures that do not exist. The expenditure details of such spending remain only on paper. Critics of the CDF argue that the MPs are not interested in vital issues such as environmental conservation, renewable energy, mini-hydro, biodiversity, and forest conservation, which are listed in the Local Infrastructures Development Partnership (Operation Procedures) Regulation

In 2014, the Federation of Good Governance – Nepal conducted a study to assess the efficacy of the 54 infrastructure projects funded by CDF in 18 constituencies of six districts (Sunsari, Kaski, Sindhupalchok, Lalitpur, Kailali and Surkhet). The report states that the CDF has been used to benefit cadres and cater to the voters. The report points out that vote bank politics, political influence in the selection and implementation of the projects, and a lack of technical human resources at the district development committee offices have added to the challenge of fair and equal distribution of the projects. Such challenges lead to the misuse of funds, duplication of projects, and weakening of the very objective of good governance. The report also says that the collusion of local political leaders, users’ committees and district development committees have affected the monitoring and inspection of the projects. 

In a separate analysis published in 2015, the Citizens’ Campaign for the Right to Information found irregularities in the constituency development program and constituency infrastructure special program–known as the Constituency Development Fund. According to the study, the primary purposes of both programs were to win over the cadres and sway the electorate.

Studies have shown that the allocated budget for the CDF scheme has become a reliable source to feed the cadres and spend on them. Instead of helping develop the infrastructure of their constituencies, the scheme appears to have promoted corruption and irregularities, making the election process much more expensive. The MPs might have used it to maintain their support base. Local user groups and monitoring committees are formed to oversee the projects implemented under these projects. The MPs concerned have a direct role in the project selection, and the money is spent through the Users’ Committee, where mostly the political cadres are appointed as the members. Where all-party leaders and cadres are appointed as members of such Users’ Committees, the cases of irregularities are even higher.

Critics say the CDF will likely make MPs authoritarian as they will be distributing money– something other politicians will not be able to do to compete with those MPs in the elections. This will make the developed and prosperous constituencies richer and the poor and underdeveloped constituencies even poorer, weaken democracy and promote corruption and embezzlement of funds to benefit political cadres. As the CDF is denied to the HoR members elected under the Proportional Representation (PR) category, there are concerns that this may invite conflicts between the directly elected MPs and those nominated under the PR system. Opponents also argue that this arrangement creates parallel committees at the local level and pose challenges to the governance mechanisms of development and many other policy questions. They also say the primary duty of the MPs is to form the government, formulate laws and amend them and they should uphold their duty and do the jobs of the executive. 

CDF in other countries

Nepal is not the only country using the CDF scheme for parliamentarians. The CDF was put into place by several democratic nations worldwide to aid in the decentralization drive. Although some nations created programs of this nature as early as the 1970s, many others adopted them after the 1990s. Papua New Guinea launched a similar scheme in the 1970s through an executive order. The program is known as Electoral Development Funds (Rural Development Program). The EDF primarily funds public transportation, healthcare, education, clean water, and effective government.

In December 1993, India, Nepal’s close neighbor, launched the Member of Parliament Local Area Development Scheme. This was addressed via regulations created in 1994 and revised in 1997, 1999, 2002, and 2005. Under this plan, each MP is allocated INR 50 million. The Lok Sabha members’ funds may be used in their respective districts. The Rajya Sabha’s elected MPs can use the money in their home regions. The nominated MPs from the Lower and Upper Houses may recommend using that funding for projects anywhere in the nation. Spending from the budget goes toward infrastructure, health, drinking water and sanitation, and emergency aid. The program was suspended in 2020 due to Covid-19, but it has been resumed now.

Pakistan has also been running this kind of program since 1985. It’s interesting that Pakistan devotes far more than five percent of its overall development budget to such an initiative. The Constituency Development Grant was introduced in Bhutan in 2009 due to an executive order by the Finance Minister. Ten million Bhutanese ngultrum were allotted under this initiative for five years to each constituency. Roads and education are expected to receive funding from the budget. However, doling out this money on the projects of local governments and donations has been prohibited.


Since its first implementation in Nepal in 1994, the CDF has generated a great deal of controversy. The program itself is a good idea, but the lack of strong oversight to determine how funds are being spent and whether or not they are being used appropriately for the intended objective has created serious concerns about the effectiveness and justification of the CDF. 

The tendency of MPs to spend the money for their personal and partisan interests in a very opaque manner has contributed to making things worse. Both national and international experience shows that it is essential to ensure broader participation to make such programs effective.

{This story was prepared by NepalCheck.Org}