Injustice to provinces and municipalities in the budget

However, despite having a place in the budget, it did not move forward in practice. When Deputy Prime Minister and Foreign Minister Narayankaji Shrestha was the Home Minister, when I was asked if I had any suggestions, I said that I had no other suggestions except to adjust the police force in the province. I had the same suggestion to Balkrishna Khan, the home minister before him.

Although the topic of police adjustment was mentioned in the previous budget (2080/81), it has not been implemented yet. Ministry budget allocation includes plans and programs of the ministry and it can be estimated in which direction the ministry is going. I also brought the attention of the then Home Minister Shrestha after not seeing the police adjustment in the ministry allocation. This year, the policy and program, budget statement and ministerial allocation have not been included anywhere. If it is kept under miscellaneous or any other title of the Ministry of Finance, it is a separate matter.

Every year after the presentation of the policies and programs of the Government of Nepal, or in the budget statement. The opinion of the chief minister of the state came in the media. Is the policy and program and budget favorable to federalism? The province's questions have been addressed or not? Did the policy and program and budget statement come to violate the rights of the province? Their answer was harsh. In this regard, I always remember the then Chief Minister Prithvisubba Gurung.

I am surprised to see that the provinces are anonymous because the issue of police adjustment, which the provinces have been losing for 7 years, is not included in the policy and program and budget. There is another matter that is surprising. That is the reduction in grants to the provinces and the silence of the provinces. As mentioned in the budget speech, the provinces did not speak much even though the financial equalization subsidy was cut by 26 percent at the time of implementation and payment of plans and programs. This is a matter related to the budget for the financial year 2080/81. In 2081/82, the province's subsidy is being cut due to the huge amount.

After the budget speech, representatives of local governments from all over the country came to the Ministry of Finance to hold a sit-in on why the subsidies received by the local level including equalization were cut. In 2080/81, the local level received 87.35 billion financial equalization grants. However, according to the decision of the government on January 10, 2080, it was decided to release only 22 billion 61 crores by reducing this amount by 25.89 percent. The head/vice head of the municipality drew the attention of the government to correct this decision. Equalization grant cuts were made not only to the local but also to the state. 38 billion has been cut including the provinces. This equalization grant is only a deduction figure. The graph goes much higher when the details are taken out with other grants and revenue sharing. The graph of 2079/80 has been taken out by the Office of the Auditor General. The details of 2080/81 will be released by the Accounts General.

A few weeks ago, the 61st annual report of the Public Auditor General stated that in 2079/80, the total financial transfer amount of the state and local level was reduced by 74 billion. According to the constitution, financial transfer is the main financial source of state and local level. This is taken as a natural right of the state and local level by the constitution. Moreover, the equalization grant is an unconditional grant. It also has the generally accepted principle that it should not be done from the bottom up. However, the biggest hit of the federal government is in this subsidy. Federal Ministries have been randomly allocated budget. When this grant is discussed, it is done to avoid raising revenue.

As the government changes, the provinces themselves become innocent. In a year and a half after the election, the news was printed in this daily that the Chief Minister changed 21 times in 7 provinces and had to take a vote of confidence 23 times. This has made the province more vulnerable. It has forced the province to suppress its fundamental problems. The federal government has taken advantage of the constraints of the state. Due to the lack of stability in the state government, they have not been able to speak against the federal government. On the contrary, they are worried about how to protect their power.

When discussing financial transfers, provinces and local levels receive four grants (equalization, conditional, special and supplementary) from the Government of Nepal. Provincial and local levels also receive financial resources from revenue sharing (value added tax and excise duty). In 2080/81, the total budget of 7 provinces is 2 trillion 79 billion. It has a subsidy burden of 39 percent. The burden of revenue sharing is 26 percent. The burden of financial transfer on the total budget of the province including revenue sharing is 65 percent. According to the report of the Office of the Auditor General, it is more than this at the local level. As a whole, the burden of financial transfer on state and local level financial resources is more than two-thirds. This happened because of the constitutional arrangement. According to the constitution, there are many responsibilities at the provincial and local levels. But revenue rights are more in the Union. In order to bridge the gap between accountability and revenue, the Constitution itself has ensured the intergovernmental financial transfer. Financial transfer is a constitutional right of the provincial and local levels.

In 2075/76, the financial transfer received by the state and local levels was 33.62 percent compared to the budget of the Government of Nepal. In 2080/81 it was 32.78 percent. 30.48 percent in 2081/82. Similarly, when discussing the financial equalization grant, it is 10.27 percent, 8.34 percent and 7.96 percent respectively in these financial years. The general principle is that overall fiscal transfers including equalization grants should also increase along with the budget. But it has not been followed. Like – the financial transfer proposed for the provinces in the 2081/82 budget is shameful. In the first year of implementation of federalism, in 2075/76, the budget of the government was 13 trillion 15 billion, but the subsidy for the provinces was 1 trillion 23 billion. This grant was 9.39 percent of the total budget. The total budget size for 2081/82 is 18 trillion 60 billion. During this period, the budget has increased by 5 trillion 45 billion. Ironically, when the size of the budget has increased by so much, the province's subsidy is only 96 billion less than in 2075/76. Which is only 5.18 percent of the total budget. What could be more important for the province?

The situation at the local level is also similar. In 2075/76, the conditional grant was 54 percent of the total grant at the local level. It increased every year to reach 65 percent in 2080/81 and 67 percent in the 2081/82 budget. Compared to the budget, the percentage of equalization grant was 6.4 percent in 2075/76 and 4.7 percent in 2081/82. In 2075/76, the equalization subsidy of the local level was 85 billion. 88 billion in 2081/82. In 2075/76, the conditional grant was 1 trillion 10 billion. 2 trillion 8 billion in 2081/82. The burden of the subsidy has been carried only on condition that the equalization subsidy should be increased in proportion to the budget. In fact, the state and local levels have not been judged when it comes to financial devolution. Looking at the nature of the plans and programs and the budget of the ministries, the federal government has eroded the jurisdiction of the state and local levels. The federal government has come down to the wards of the provinces and municipalities. In many places of the budget, there is a wording that says by coordinating with the state and local levels. However, when presenting plans and programs, there is no coordination with the province, let alone consultation with the local level.

Budget point No. 81 states that Koshi will be developed as industry, Madhesh as agriculture, Wagmati as information technology, Gandaki as tourism, Lumbini as small and medium, Karnali as herbs and Far West as religious tourism economic hub. However, there is no coordination with the province. It has been announced in its own way without consultation with the state. Similarly, the Gandaki Economic Triangle project is being discussed. But there is no coordination with the respective provinces. Should we consult with the province regarding policies and programs and potential plans or not? What would go wrong in discussions with local associations/confederations? The Constitution of Switzerland itself states that the federal government must consult with the provinces and other stakeholders before introducing any new bill or plan and program. Then neither Switzerland became Switzerland. We have a centralized mentality that states and local levels are also the government. The ruling party should also understand that, in the Giribandhu Tea Estate judgment, the Supreme Court has written that when any bill is brought within the jurisdiction of the province, it must be discussed with the province as well. One day the Supreme Court has decided on plans and programs and financial transfer, so it should not be considered otherwise.

Constitutionally, the responsibilities of Finance, Defense, Foreign Affairs and the Prime Minister's Office are central in nature. Apart from these, the responsibility of the ministries is somehow at the state and local level. Some ministries' budgetary allocations (in the form of conditional grants) are completely centralized. Most of the budget of the Ministry of Labor and Education is at the local level. Despite criticism, the Prime Minister's employment program is focused on the municipality. Likewise, the Ministry of Education is seen as decentralized as the facilities such as salaries and allowances of school teachers are channeled through the Ministry of Education. However, looking at it from another side, this ministry is also oriented in a centralized direction. About 50 percent of the budget of the Ministry of Health is for local and provincial governments.

Apart from these, the budget distribution process of the ministries is centralized. The Ministry of Law, Communication, Land, Physical Infrastructure and Ministry of Youth and Sports have not allocated even one rupee of budget for the state and local levels. The Ministry of Home Affairs has allocated a total of 370 million (0.2 percent of the total ministry budget) for the local level. The Ministry of Energy, Water Resources and Irrigation has allocated only 580 million (0.7 percent of the total ministry budget) for the province. According to the constitution, more than two-thirds of the work area is for the local and provincial levels, but the Ministry of Agriculture has allocated only about 8 percent of the total budget for the provincial and local levels. The situation is similar with the Ministry of Water Supply. Even if only a thorough analysis of the ministerial budget allocation from the first budget of federalism implementation (2075/76) to 2081/82 is done, it can be concluded that except for 8 to 10 ministries, all the remaining ministries have merged the jurisdiction of the provincial and local levels. Why many ministries/ministers are needed in Singha Darbar when the work is at state and local level? In Switzerland, including the president, there are only 7 ministers in the union.

According to the Economic Survey 080/81, the weight of the federal government's expenditure is 68.34 percent of the total expenditure of the three levels of government. Local level is 21.82 percent. The total of the state is 9.84 percent. Whatever it portrays, the federal government is still centralized. The federal government is not interested in decentralizing the powers of the states and localities under the constitution. The federal ministry has violated the rights of the state and local levels under various pretexts including projects. According to the constitution, more than 60 percent of the work responsibility is at the provincial and local level, but the nature of the expenditure is the opposite. The budget did not do justice to the state and local levels. None of the budgets so far are in favor of federalism. They have not been able to ensure the rights of the state and local levels.