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 for fiscal equalization grants.
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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 provinces and municipalities should not be reduced. The government has said that it should be in accordance with the recommendation made by the commission after the government asked to provide only 20.4 percent of the 25 percent of the third-quarter installment as fiscal equalization grant.
On 26th Magh, the Ministry of Finance, Fiscal Federalism Coordination Division, had written to the Office of the Comptroller and Auditor General to transfer fiscal equalization grant to provinces and municipalities in the same proportion by the end of the fiscal year 2082/83.
The Accountant General also decided on 27th Magh to transfer fiscal equalization grant to provinces and municipalities by 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 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 of 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 the 25 that will be received for the third quarterly 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,’ the circular issued by the Accountant General states.
The provision for recommending the amount of financial 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 fiscal equalization grant to be provided to the provinces and local governments from the Federal Consolidated Fund under Article 251 (1) of the Constitution.
In the exercise of its powers vested in this constitutional provision, the Commission 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 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. 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 the amount that will constitute one-fourth of the financial equalization grant to the provincial and local level consolidated funds in four installments on 2 Bhadra 2082, 2 Kartik 2082, 2 Magh 2082 and 2 Baisakh 2083.
Similarly, in point number 14, it is mentioned that while transferring the equalization grant, the first and second installments will be transferred as per the initial estimate, the third installment will be transferred based on the revenue target and collection ratio for mid-December, and the fourth installment will be transferred based on half of the revenue target and collection ratio for mid-April.
Out of the estimated revenue collection of Rs 711.2 billion 7.8 million for the period up to mid-December of the current fiscal year, Rs 581.4 billion 7.2 million has been raised. The Ministry of Finance has stated that the correspondence has been sent accordingly since the third installment will be given based on the revenue target and collection ratio for mid-December.
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 half-yearly 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 7.2 million to the province government and Rs 152.46 billion 4 million to the local level.
The federal government has allocated a total of Rs 417.825 billion for all four grants (equalization, conditional, complementary and special) for the provinces and local levels 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 in equalization grants to the provinces, of which Rs 28.3995 billion has been transferred by mid-Poush. Similarly, out of Rs 88.968 billion allocated to the local levels, Rs 42.7589 billion has been transferred in equalization grants.
In the fiscal year 2081/82, it was asked to transfer 13.24 percent out of 25 in 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 to send 21.08 percent of the 25 percent of the third installment (i.e., not exceeding 71.08 percent of the annual budget) to the provincial and local levels as fiscal equalization grants. That fiscal year, too, the grants were not sent as recommended by the commission.
