The existing system of distribution of royalties from natural resources to the Government of Nepal (Union), respective provinces and local levels has been amended. The National Natural Resources and Finance Commission has recommended to the government through the Ministry of Finance to revise the limits of royalty distribution and implement it. The recommendation will be implemented after it is approved by the Council of Ministers and published in the gazette.

According to the new arrangement, among the royalties received from natural resources, the royalties received by the Union and the provinces have been reduced, while the royalties received by the provinces have been increased. Currently, the government of Nepal has to share 50% of royalties received from natural resources, 25% by provinces and 25% by local levels. In the National Natural Resources and Finance Commission Act 2074, there is a provision that the government can modify the ratio of royalty distribution on the recommendation of the commission every five years. According to the same arrangement, the Commission has modified this arrangement and established a new distribution ratio. 

In the Inter-Governmental Finance Management Act 2074, it has been classified into five types, namely, mountain climbing, electricity, forest, mining and minerals, and water and other natural resources. 50 percent of the royalties received from all natural resources are provided by the government of Nepal, 25 percent by the respective provinces and 25 percent by the local level. The commission has recommended the government to amend the provision and implement it. According to this, the center will have to share 49 percent, the state 24 percent and the local level 27 percent of the royalties received from mountain climbing. The local level will have 100 percent rights to the royalty (20 percent of electricity royalty) towards transmission line impact management under electricity. However, apart from the transmission line, the center will have to share 46 percent, the state 24 percent, and the local level 30 percent for impact management (80 percent of the electricity royalty).

forest is also divided into two parts, national forest and protected area. 23 percent of the royalties received from the national forest, 48 percent of the state, and 29 percent of the local level will have to be shared. Under the protected area, the center will have to share 48 percent, the state 22 percent and the local level 30 percent.

The Center will share 41 percent of the royalties received from mining and minerals, the provinces 27 percent and the local level 32 percent. Water and other natural resources are also divided into radio frequency and others (in the case of natural resources other than those mentioned above). According to this, out of the royalties received from radio frequencies, the center will have to share 55 percent, the provinces 21 percent and the local level 24 percent. Among other resources, the center will have to share 50 percent, the provinces 25 percent and the local level 25 percent. Balanand Paudel, chairman of the National Natural Resources and Finance Commission, said that the limit of royalty distribution received from national natural resources has been reviewed and sent for implementation by using the rights according to the provisions of the

Act. He said that it is also necessary to make the three levels of government responsible and accountable for the sustainable protection and management of natural resources, not only as a means of obtaining royalties, but also to minimize the negative effects that may occur through its environment-friendly use. For this, he said, a system has been developed and used to formulate the equitable distribution of benefits and opportunities on certain bases and indicators, making the level governments interrelated within the scope of constitutional and legal responsibilities.  Based on the study conducted by the

commission, discussion, interaction and consultation with the stakeholders of the association, state and local level, the purpose of royalty distribution of natural resources, international theory, practice, recognition and the practice of the existing structure have been taken as basis for the modification of the existing structure. Based on the lessons learned, the following five indicators have been identified and determined by adopting the dimensions of rights and responsibilities at the level (federal, state and local levels) and corresponding role and expenditure responsibilities as the main criteria in the mobilization of natural resources, royalty collection and use, said Chairman Paudel.