KATHMANDU: The National Natural Resources and Fiscal Commission has recommended allocating Rs 151.70 billion as fiscal equalisation grants to provincial and local governments for the upcoming fiscal year.
According to the commission’s recommendation, Rs 61.50 billion has been proposed for provincial governments and Rs 90.20 billion for local governments under the fiscal equalisation grant.
The commission makes such recommendations in accordance with provisions of the Constitution of Nepal 2015, the National Natural Resources and Fiscal Commission Act 2017 and the Intergovernmental Fiscal Arrangement Act 2017.
Fiscal equalisation grants are categorised into minimum grants, formula-based grants and performance-based grants.
For the next fiscal year, the minimum fiscal equalisation grant for provincial governments has been set at Rs 15.37 billion, which accounts for 25 percent of the total allocation to provinces. The minimum grant share has been determined by giving equal weight, 50 percent each, to population and geographical area.
Under the minimum grant category, the commission has recommended Rs 2.82 billion for Koshi Province, Rs 1.90 billion for Madhesh Province, Rs 2.75 billion for Bagmati Province and Rs 1.82 billion for Gandaki Province.
Similarly, Rs 2.46 billion has been recommended for Lumbini Province, Rs 1.78 billion for Karnali Province and Rs 1.81 billion for Sudurpashchim Province.
The commission has also set the minimum fiscal equalisation grant for local governments at Rs 30.83 billion, which represents 34.18 percent of the total allocation for local levels.
According to the recommendation, formula-based grants are calculated based on several indicators including the Human Development Index (10 percent), socio-economic inequality (5 percent), infrastructure development status (15 percent), and expenditure needs and revenue-raising capacity (70 percent).
The total fiscal equalisation grant has been determined by combining minimum grants, formula-based grants and performance-based grants.
The commission noted that 40 local governments would receive less than Rs 70 million through minimum and formula-based grants. It therefore recommended increasing their allocations to ensure each receives at least Rs 70 million.
To achieve this, approximately 10.8 percent of the formula-based grant allocated to metropolitan cities will be deducted and redistributed among those 40 local governments, taking into account their internal revenue capacity.
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