In accordance with the constitutional provision, on May 15, the federal government has brought the annual budget for the next fiscal year 2082/83. In the economic survey-2081/82 which came before the budget, the overall socio-economic progress and main problems have been discussed. While discussing the data and figures of this time's budget and economic survey, two different questions came up.

First, are the provinces and municipalities financially burdened? Province and local level have some justification, is there no merit? no Expensive, burdensome or costly can be understood in two ways. One is, what share of national income – revenue and other receipts – is added to the liability by the federal units. And, even if these expenditure obligations are added, does it promote any economic productivity, such as physical and social development, or not? If given, even if financial liability is added, the justification of such public expenditure is confirmed, it should be considered positive. 

Looking at point 12 of the executive summary of the economic survey, the share of union, state and municipality in the total national expenditure of the last financial year 2080/81 is 64, 10 and 26 percent respectively. The intention of the Jamaat that 'federalism has become expensive' is directly or indirectly with the provincial structure, there is no opposition regarding the local government. 10 per 100 rupees, that too when the collective expenses of all the seven provinces became expensive, how did federalism become expensive? This is not only the government data of the last financial year, There is almost a similar trend since 2075/76. In any financial year, the collective expenditure of all the seven provinces is not more than 10 percent of the total national expenditure, instead, the expenditure at the local level, which is usually around 25-26 percent, reached one third of the national expenditure in the years 2078 and 2079 affected by the Covid epidemic. 

The anti-federalists, who understand the importance of service delivery and decentralization of development, should understand another very important thing that what is the share of Madhesh province in the expenses of the province? According to the economic survey, in the current fiscal year, Madhesh Province, which has a population of about 21 percent of the national population, is less than Karnali Province, which has a population of only 6 percent, while the expenditure burden of Bagmati Province is the highest among the provinces. Here, why is the comparative fact of Madhesh kept, because the Jamaat, which opposes federalism and presents it as a very expensive system, considers Madhesh and Madheshi to be the cause of the 'unaffordable expensive system' as a secondary form.

Now let's talk - has spending responsibility increased any economic productivity or not? An important basis of productivity measurement can be understood from the share of capital expenditure. What proportion of total expenditure does a government unit spend on capital expenditure? More capital expenditure means boosting the productive sector. To build economic productivity and growth. However, the challenge has always been how to make public expenditure, especially capital expenditure, which directly contributes to development, effective. However, in this context, the role of the state-municipalities is significant compared to the federal government's economic survey has also made it clear, according to which the capital expenditure of the federal government has been less than 40 percent of the allocated amount, while the state-municipality's average has been 55 to 60 percent. All the problems with the province-municipalities - lack of staff, despite the legal and institutional problems, the development expenditure is still significant compared to the union, do you think that the justification of the federal system is clarified or not? Isn't it economically efficient and productive to have 760 additional units of public expenditure functioning instead of the only centralized spending unit within the enclosure of the Singha Durbar? Opponents of the

have also argued that, as public debt increases, federalism adds more debt obligations. Whereas, Nepal's public debt is low compared to some comparable countries in South Asia. As of February 2081, Nepal's public debt to GDP ratio is about 44 percent, which is considered safe according to some studies. Again, this ratio is much higher than ours in countries like India, Pakistan, Bangladesh and Sri Lanka, according to the belief that if such public loans are invested in productive sectors, economic returns will be good. Also, as mentioned in point no. 2.16 of the economic survey. The data shows that in the years after the implementation of federalism compared to 2071-72, the capital expenditure as a proportion of the gross domestic product has almost doubled. Especially with the improvement in the primary and service sectors, In 2080/81, the economic survey has shown that there has been an increase of more than 10 percent in the revenue reserve fund of all three levels - union, state and local. 

Then where is the problem? The problem is on all three levels. Not all are perfect. The problem is that there is a centralized financial and administrative behavior in the union, while the provinces and municipalities still tend to depend on the center in terms of resources. Politically and administratively, how much power the provinces and municipalities got, is a separate analysis. Here, let's discuss a little about how the provinces and municipalities depended on the association financially. 

In 2080/81, the total national revenue collection was around 11 trillion 51 billion, and the union's share in the collected revenue was 92 percent. In general terms, if the total national income is 100 rupees, then 92 rupees will be received by the Union and only 8 rupees will be collected jointly by the state and municipality. However, as mentioned above, the responsibility of the expenses to be borne by the provinces and municipalities has been more than one-third of the total national expenses.

If so, what are the other sources of income for the province and municipality? Naturally, federal revenue sharing and various federal grants. Provinces and municipalities also share some taxes with each other and there is a legal provision for provinces to subsidize their municipalities. However, federal financial transfer is the focus of our discussion here. Unions share a fixed share of excise duty, VAT and royalties on natural resources with the respective provinces and municipalities. The share of such common revenue is one of the main sources of income of the provinces and municipalities. However, this revenue allocation is estimated at 1 trillion 65 billion for the next fiscal year, which is only 8 percent of the total federal budget.

is seen around 9-10 percent in other years as well. Apart from that, the main financial source of the province and municipality has been the federal grant. For the next financial year 2082-83, it is projected to give 4 trillion 17 billion 83 crores of subsidy. This is about 21 percent of the federal budget. In this way, the total financial transfer (including revenue sharing and federal subsidy) received by provinces and municipalities for the next fiscal year is 30 percent of the federal budget. It is clear from this that the federal government has captured about 70 percent of the revenue. Also, the share of these federal financial transfers in their annual expenditure of provinces and municipalities will indicate their financial dependence. The budgets of the provinces for the coming year are yet to come. But looking at the trends of the past years, the internal revenue mobilization capacity of the provinces other than Bagmati is weak, while apart from urban areas, rural municipalities also depend on financial transfer. 

How much of the federal grant from the main income of the province and municipality can be spent autonomously? For example, in the coming fiscal year, conditional grants are estimated to be 58 percent of the total federal grants, while the unconditional equalization grants that provinces and municipalities can make are only 36 percent. This conditional grant has increased by one percent over the current financial year. In particular, in different financial years, the conditional grants for the provinces are gradually decreasing, while the unconditional grants are increasing, but in the case of municipalities, this trend is reversed. 

Looking at the whole, it can be understood that the provinces are slowly improving the internal revenue mobilization, reducing the financial dependence, but the union is making the program implementation to the local levels through its conditional grants and developing it as a service provider unit. For reforms, it seems that the federal structure, which is still in control of the main financial resources, needs to be tightened and the expenses cut. Unions need to be limited to the role of distribution, redistribution, stabilization and regulation of economic resources. Making the provinces and municipalities responsible for development and service delivery will be effective and result-oriented. The understanding that the necessary resources, means, capacity development is the responsibility of the union will determine the success and stability of the federal system.