The government has said that it should be in accordance with the recommendations made by the commission after it asked to provide only 20.4 percent of the 25 percent of the third-quarter installment as fiscal equalization grant.
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The National Natural Resources and Finance Commission has drawn the attention of the federal government to the fact that the recommended fiscal equalization grant to be given to provinces and municipalities should not be reduced. The government has said that it should be as per the recommendation made by the commission after it asked to give only 20.4 percent of the 25 percent of the third-quarter installment as fiscal equalization grant.
The Ministry of Finance, Fiscal Federalism Coordination Division, had written to the Office of the Comptroller and Auditor General on 26th Magh to transfer only 81.75 percent of the annual revenue collection by mid-December of the fiscal year 2082/83 and to transfer the fiscal equalization grant to the provinces and local levels in the same proportion.
The Accountant General also decided on 27th Magh to transfer 20.43 percent of the 25 percent of the third-quarter installment (i.e., not exceeding 70.43 percent of the total approved annual budget up to the third installment) as fiscal equalization grant to the provinces and local levels.
‘As per the letter from the Ministry of Finance, Fiscal Federalism Coordination Division, only 81.75 percent of the annual target was collected by the middle of Poush for the fiscal year 2082/83 and as per the letter to transfer the fiscal equalization grant to the provinces and local levels in the same proportion, 20.43 percent out of 25 for the third quarter installment (i.e. not exceeding 70.43 of the total approved annual budget up to the third installment) should be transferred to the provinces and local levels as fiscal equalization grant,’ the circular issued by the Accountant General states. In the context of the same letter, the Finance Commission meeting on 11 Falgun decided not to cut the grant.
The provision for recommending the amount of fiscal transfer to be received by the provinces and local levels as per Article 60 (3) of the Constitution of Nepal is vested in the National Natural Resources and Finance Commission. The Finance Commission has the authority to recommend the financial equalization grant to be provided to the provincial and local governments from the Federal Consolidated Fund under clause (b) of Article 251 of the Constitution.
The Commission, acting within the authority vested in the said constitutional provision, has determined and recommended the amount of financial equalization grant to be transferred from the Federal Consolidated Fund to the provincial and local governments for the fiscal year 2082/83 and the Commission has stated that the Government of Nepal must implement the recommendation made by the Commission subject to the said constitutional provision.
The Commission has decided to draw the attention of the Government (Council of Ministers) through the Ministry of Finance to make arrangements to transfer the amount in accordance with the recommendation made by the Commission for the fiscal year 2082/83 and the budget passed by the Federal Parliament. However, point 13 of the Ministry of Finance's budget implementation guidelines for the fiscal year 2082/83 states that the Office of the Comptroller and Auditor General will transfer one-fourth of the financial equalization grant to the consolidated funds of the respective provinces and local levels in four installments on 2 Bhadra 2082, 2 Kartik 2082, 2 Magh 2082 and 2 Baisakh 2083.
Similarly, point 14 states that while transferring the equalization grant, the first and second installments will be transferred as per the initial estimate, the third installment will be recalculated based on the revenue target and collection ratio as of mid-December, and the fourth installment will be transferred as half of the revenue target and collection ratio as of mid-December.
Out of the estimated revenue collection of Rs 711.2 billion 7.8 million for the period up to the month of December, Rs 581.4 billion 7.2 million has been raised. The third installment will be given based on the revenue target and collection ratio for the month of Poush, and accordingly, the Ministry of Finance has stated that the correspondence has been sent accordingly.
In the first six months of the current fiscal year, 39.14 percent of the allocated grant to the province and 47.60 percent to the local level have been transferred. According to the semi-annual review of the budget for the current fiscal year made public by the Ministry of Finance, the federal government has transferred Rs 38.18 billion 72 million to the province government and Rs 152.46 billion 46 million to the local level.
The federal government has allocated a total of Rs 417.82 billion 50 million to the province and local level through the budget for the current fiscal year. This allocation is 21.27 percent of the federal budget.
The government has allocated Rs 60.66 billion to the province as equalization grant, of which Rs 28.39 billion 95 million has been transferred by the month of Poush. Similarly, out of the Rs 88.96 billion allocated to the local level, Rs 42.75 billion 89 million has already been transferred as equalization grant.
In the fiscal year 2081/82, it was also asked to transfer 13.24 percent out of 25 percent of the third installment of the financial equalization grant (i.e. not exceeding 63.24 percent of the annual budget). After widespread opposition, it was amended and 21.08 percent out of 25 percent of the third installment of the financial equalization grant (i.e. not exceeding 71.08 percent of the annual budget) was sent to the provincial and local levels. In that fiscal year too, the grant was not sent as recommended by the commission.
