Kathmandu, Feb 28: The National Natural Resources and Fiscal Commission has drawn the federal government’s attention regarding latter’s decision to cut grants to provinces and local levels.
The government had earlier decided to slash fiscal equalization grants to province and local governments, citing that revenue collection in the first six months of the current fiscal year failed to meet targets. A Commission meeting held on February 23 made it clear that the constitutional authority to determine fiscal equalization grants lies with the Commission.
Following the government’s decision, the Financial Comptroller General Office, on February 4, issued a circular to all District Treasury Comptroller Offices to lower the third installment of the grants. The Commission stated that the volume of fiscal equalization grants to provinces and local levels from the Federal Consolidated Fund was recommended by the Commission, and the Government of Nepal is constitutionally mandated to implement such recommendations. It has drawn the government’s attention to the need to implement these recommendations accordingly.
In accordance with Article 60 (3) of the Constitution, the amount of fiscal transfer to be received by provincial and local level entities shall be as recommended by the National Natural Resources and Fiscal Commission.
“Determine the basis and modalities for the distribution of revenue from the Federal Consolidated Fund among the federal, provincial, and local level governments in accordance with the Constitution and law” is one of the functions, duties, and powers granted to the National Natural Resources and Fiscal Commission under Article 251 (1) of the Constitution.
However, the government has stated that revenue collection until mid-January of the current fiscal year reached only 81.75 percent of the target, necessitating a cut in the third installment of equalization grants. It has reduced the grants by 20. 43 percent of the allocated 25 percent installment, ensuring that the reduction does not exceed 20.42 percent of the total approved annual budget.
Last fiscal year as well, the distribution of equalization grants to provinces and local levels was reduced, prompting dissatisfaction among the recipients. In the previous fiscal year, grants were also reduced. At that time, province and local governments expressed dissatisfaction. Following protests, the Financial Comptroller General Office amended its decision regarding the third installment and released some funds. However, with reductions also made to the fourth installment, provinces and local levels ultimately received only 91.76 percent of the total approved annual budget.
