The financial equalization grant received by the state and local levels increased

The National Natural Resources and Finance Commission has determined and recommended the financial equalization grant to be provided to the provincial and local governments from the federal reserve fund for the coming financial year in accordance with the Constitution of Nepal and prevailing laws.

'The share of the minimum financial equalization grant received by the state and local governments has been determined to be 25 percent and 30.32 percent of the total financial equalization grant respectively,' the commission's recommendation says, 'Thus, when recommending the minimum financial equalization grant, the population And the share of the minimum subsidy to be received by each province has been determined by giving 50/50 percent weight to the area.

According to this, the federal government will have to provide financial equalization subsidies equal to 60 billion to seven provinces and 88 billion to 753 local levels. This year, 58 billion 66 billion 75 million rupees have been provided to the state and 87 billion 15 billion 29 million rupees to the local level. There is a constitutional provision that the government must distribute financial equalization grants from the federal reserve fund to the provinces and local levels based on their expenditure needs and revenue capacity. The work of determining and recommending such grants is done by the National Natural Resources and Finance Commission. The

commission has recommended financial equalization grants by dividing them into three headings: minimum, formula-based and performance-based grants. According to this, out of the total 60 billion financial equalization grants recommended for the province in the next fiscal year, 15 billion is equivalent to minimum equalization, 42.6 billion to formula-based and 2.44 billion to performance-based, according to the Commission.

Among the mentioned financial equalization grants, Karnali province will receive the highest amount of Rs. It is mentioned in the recommendation of the commission that Koshi will receive 8 billion 940 million 32 million, Madhesh 7 billion 79 million 92 million, Wagmati 8 billion 24 million 34 million, Lumbini 8 billion 28 million 64 million and Sudurpaschim 8 billion 72 million 27 million.

Out of the total 88 billion that the federal government has to provide to the local level in the next financial year, 26.685 billion rupees is equivalent to the minimum equalization subsidy, 57.795 billion rupees to the formula-based equalization subsidy and 3.52 billion rupees to the performance. In the case of the local level, the commission said that the population is the main basis when recommending the minimum subsidy. "While recommending the minimum subsidy, the amount of subsidy has been increased by 2.5 million for every 10 thousand population growth for local governments with a population of less than 10,000 and 2.75 million for local governments with a population of more than 10,000 but less than 2 million," the commission said in the recommendation. A minimum equalization grant of 77.75 million rupees has been determined for local governments with higher population.'' The conclusion of the commission is that it is not enough for the governments to fulfill their constitutionally mandated responsibilities. Therefore, each local government will receive a minimum subsidy and formula-based subsidy of at least 65 million, based on the internal revenue situation of the local governments, and the financial equalization subsidy has been determined by deducting about 16 percent from the formula amount of the metropolitan municipalities and adding the said amount to the subsidy of the 36 local governments, according to the commission. . According to the

commission, the minimum financial equalization subsidy received by the state and local levels is 15 billion and 26 billion 685 million, respectively, and a total of 41 billion 685 million has been determined. The share of the minimum financial equalization grant in the total financial equalization grant is 28.17 percent. According to the commission, while determining the financial equalization grant based on the formula, the human development index of the respective provinces and local levels, economic-social inequality, the condition of infrastructure, the condition of revenue and the need for expenditure and the ability to raise revenue were evaluated. Based on the

formula, the amount of financial equalization subsidy has been fixed at 42.60 billion rupees for the province and 57.795 million rupees for the local level, a total of 1.295 billion rupees. The share of formula-based equalization grants in total equalization grants is 67.83 percent. The commission has also given various suggestions regarding the use of the grant funds received by the state and local levels.

Similarly, in the performance analysis done by the commission, Koshi is the strongest and Lumbini province is the weakest.

What is Equalization Financial Grant?

Provisions to provide grants to the government are in the Inter-Governmental Finance Management Act, 074. According to this, the federal government provides equalization, conditional, supplementary and special grants to the provinces and local governments and the provincial government to the local governments. Based on the revenue capacity and workload, the amount to be provided by the Government of Nepal to the provincial and local levels is the financial equalization grant. There is provision to provide such subsidy as per the recommendation of the National Natural Resources and Finance Commission. The provincial government also has to provide subsidies to the local government as per the law as per the recommendation of the finance commission.