Concerns Raised Over Inadequate Fiscal Grants to Local Levels in Nuwakot

Nuwakot. Concerns have been raised regarding the legal and practical challenges that result in local levels receiving less than their entitled grants, despite clear constitutional provisions for revenue sharing between the federal, provincial, and local governments.

In an interaction organized by Shivapuri Rural Municipality in Nuwakot, in collaboration with the National Natural Resources and Fiscal Commission, discussions were held on national revenue sharing, the current status of grants, budget insufficiency, and development projects. Participants, including commission members and elected representatives, noted that the ineffective implementation of fiscal federalism has hindered the proper exercise of constitutional powers granted to local levels.

Commission member Bipinraj Niraula acknowledged that discrepancies between the constitution and existing laws have prevented the distribution of grants based on objective recommendations. He admitted that while the constitution defines the basis for revenue sharing, the mandatory compliance with the Intergovernmental Fiscal Management Act, 2074, has limited the ability to provide higher equalization grants to municipalities with lower revenue collection.

Shivapuri Rural Municipality Chairman Govinda Prasad Thapalia emphasized that the economic rights of local levels must not be curtailed, noting that the National Association of Rural Municipalities has repeatedly urged for this. He stated that the failure to receive the legally mandated fiscal equalization grants has negatively impacted planned programs.

Chief Administrative Officer Badrinath Lamsal reported that an outstanding liability of Rs 50.6 million from the previous fiscal year has affected current programs. He added that restrictions on reallocating conditional grants have led to public misconceptions that funds are being withheld despite availability.

Article 60, Clause 2 of the Constitution empowers the commission to distribute revenue collected by the federal government equitably among the three tiers of government. Chapter 3, Section 6 of the Intergovernmental Fiscal Management Act stipulates that 15 percent of VAT and excise duties on domestic products must be shared with provinces and local levels based on a framework prepared by the commission.

The Act mandates that revenue sharing be based on population, geography, human development index, infrastructure, expenditure needs, revenue collection efforts, and special circumstances. Provisions are also in place to ensure provinces and local levels receive a fair share of benefits derived from natural resources.