National Natural Resources and Finance Commission Recommends Over NPR 151 Billion in Fiscal Equalization Grants for Provinces and Local Levels

Kathmandu. The National Natural Resources and Finance Commission has recommended to the government to allocate grants amounting to NPR 151.7078 billion under the Fiscal Equalization Grant heading for the upcoming fiscal year to the provincial and local levels.

The Commission recommended allocating NPR 61.5032 billion for provincial governments and NPR 90.2046 billion for local governments as fiscal equalization grants.

The Commission makes recommendations for the fiscal equalization grants that the Federal Government provides to provincial and local governments in accordance with the provisions of Article 60 of the Constitution of Nepal 2072, the National Natural Resources and Finance Commission Act 2074, and the Intergovernmental Fiscal Management Act, 2074.

In recommending grants for fiscal equalization, the Commission categorizes them into minimum grant, formula-based grant, and performance evaluation-based grant. For the upcoming fiscal year, the minimum fiscal equalization grant to be received by provincial governments has been set at NPR 15.3758 billion.

This amount constitutes 25 percent of the total fiscal equalization grant that provincial governments receive. The Commission stated that the share of the minimum grant to be received by the provinces is determined by giving equal weightage of 50/50 percent to population and area.

For the upcoming fiscal year, the recommended minimum grant amounts are NPR 2.8264 billion for Koshi Province, NPR 1.9060 billion for Madhesh Province, NPR 2.7542 billion for Bagmati Province, and NPR 1.8227 billion for Gandaki Province.

Similarly, NPR 2.4657 billion was recommended for Lumbini, NPR 1.7874 billion for Karnali, and NPR 1.8134 billion for Sudurpaschim Province.

The Commission also announced that the minimum equalization grant to be received by local levels for the upcoming fiscal year has been set at NPR 30.83 billion. This accounts for 34.18 percent of the total fiscal equalization grant that local governments receive.

The Commission's recommendation mentions that various criteria and indicators have been prepared and weighted for the formula-based fiscal equalization grant. The weightage allocated is 10 percent for the Human Development Index, 5 percent for economic and social inequality, 15 percent for the state of infrastructure development, and 70 percent for expenditure needs and revenue collection capacity.

The total fiscal equalization grant has been determined by separately calculating the minimum grant, formula-based grant, and performance evaluation-based grant. The Commission also recommended increasing the grant amount for local governments whose total grant from these three categories is less than NPR 70 million, by deducting from the formula-based amount allocated to Metropolitan Cities.

"It appears that forty local governments will receive less than NPR 70 million from the minimum grant and formula-based grant. Considering that the grant amount is insufficient to minimally fulfill the responsibilities mandated by the Constitution for local governments, the amount received by each local government should be at least NPR 70 million from the minimum grant and formula-based grant combined. Based on the internal revenue status of those local governments, approximately 10.80 percent of the formula-based amount allocated to Metropolitan Cities should be deducted and added to the grants of those 40 local governments," the Commission's recommendation stated.