According to the constitution, the budget comes on Jestha 15. Before that, the President presents the government's policies and programs to both houses of parliament. Based on the policies and programs, the Finance Minister presents the principles and priorities of the Appropriation Bill (pre-budget). After this, the budget is presented. The Economic Procedures and Fiscal Responsibility Act and the Intergovernmental Financial Management Act mention budget formulation and implementation. The Finance Minister basically presents the budget based on these laws.

Regardless of which party leads the government, the foundation of the budget is the constitution. The constitution has made provision for a three-tier state structure. More than 60 percent of the responsibilities of the previous unitary system are now at the provincial and local levels. However, the budgets so far have not assimilated the responsibilities of the provincial and local levels.

According to the constitution, more than half of the work is at the provincial and local levels. However, more than 80 percent of the revenue is in the union. When writing the constitution, the work was sent to the provinces and local levels. However, the revenue (revenue authority) was kept in the union. Due to customs-based revenue and other reasons, it is also a compelling situation to keep it in the union. There is a general principle that work should be followed by the revenue and institutional structure. Article 60 of the constitution says that centralized revenue should be decentralized by making laws to meet the expenditure needs (work burden) of the provinces and local levels. For this, there is a provision for four grants and revenue sharing, including the financial equalization grant, as a financial transfer.

Constitutionally, this is the right of the provinces and local levels. Furthermore, there is a constitutional provision that the distribution of equalization grants should be based on the expenditure needs and revenue capacity. The constitution says that the equalization grant should be distributed based on the expenditure of the 21 and 22 thematic areas within the single jurisdiction given to the provinces and local levels. But its proper implementation has not been possible. The state has not been able to provide details of how much financial resources are needed to fulfill the expenditure responsibilities provided by the constitution to the provinces and local levels.

The National Natural Resources and Finance Commission, which is constitutional, has conducted a study in this regard, but has not made the report public. Finance Minister Swarnim Wagle should look into this aspect while formulating the budget. There is a discussion in the Intergovernmental Financial Management and National Natural Resources and Finance Commission Act for financial transfers. However, these acts are narrow. They have not assimilated the spirit of fiscal federalism.

According to the constitution, the main source of income of the provinces and local levels is financial transfers. There is a principle that financial transfers should also increase in proportion to the increase in gross domestic product or budget. However, this principle has not been followed. For example, in the first federal budget, the four grants received by the provinces and local levels were about 25 percent of the total budget. This amount has been gradually decreasing and is 21.27 percent in the fiscal year 2082/83. There is a problem in the distribution of equalization grants.

Equalization grants are unconditional grants. The federal government's approach is to grant conditional grants, special and complementary grants. Whatever it says, whatever it asks for, it should be spent. There is no autonomy of the provincial and local levels in this. However, the provincial and local levels have the autonomy to spend on plans and programs approved by the village assembly/municipal assembly and the provincial assembly. However, ironically, the ratio of this grant is also gradually decreasing. For example, in the fiscal year 2075/76, the provincial and local levels received 10.27 percent of the total budget. It has decreased to 7.62 percent in the fiscal year 2082/83.

Not only this, the third and fourth installments of equalization grants have been cut on the pretext of not raising revenue for a few years. No changes are made to conditional grants that the provincial and local levels do not want/have not asked for. The budget of ministries/bodies that have taken root in Singha Durbar by encroaching on the jurisdiction of the provinces and local levels does not matter because of the decrease in revenue, but the equalization grant is cut. According to the principle of equalization grant distribution and international practice, the ratio of this grant should be increased with the increase in the budget, and there is no discussion of cuts. It has been suggested in the appropriation bill that the equalization grant can be cut.

Constitutionally, more than half of the work is at the provincial and local levels. However, more than 80 percent of the revenue is at the union. When the constitution was written, as much work was sent to the provincial and local levels. However, the revenue (revenue rights) were kept at the union. The biggest problem in the budget is piling up plans and programs in the constituencies of ministers and leaders and keeping plans at a level smaller than that of the provinces and municipalities. This problem is not only in the unitary state system, but it still exists today. Transfers including equalization grants to the provincial and local levels should be increased, so that state resources reach all provinces and municipalities. Three crore people will benefit. Taking the plan only to the constituencies of ministers and leaders means that only a few people will benefit.

Constitutionally, the federal government is to operate only plans of national pride and strategic importance. This issue falls under the principles and priorities of each year's budget. However, it is not being implemented. The Federalism Implementation Monitoring Parliamentary Special Committee of the National Assembly had determined the limits of the plans and recommended them to the government for implementation. For example, in road plans, the federal government was not to implement those smaller than 150 million.

The then Prime Minister Pushpa Kamal Dahal had also spoken in the meetings of the House of Representatives and the National Assembly that the recommendation would be implemented. However, it was not implemented. Instead, plans worth thousands/hundreds of millions were put forward. After widespread opposition in the media, including social media, the basis and criteria for project classification 2080 were issued. A limit of Rs 30 million was set in the criteria. However, it was not implemented. Last year, Finance Minister Bishnu Poudel promised to implement it literally, but he did not implement it. Kantipur Daily and The Kathmandu Post have also expressed doubts in their editorials a few days ago whether the same will happen in the next budget.

It is stated in the report of the Auditor General's Office and others that most of the ministries of Singha Durbar have encroached on the jurisdiction of the provincial and local levels in the name of various projects and programs. Similarly, various study reports have mentioned that projects linked to the name of the President and the Prime Minister, such as President Chure, President Education, Prime Minister Agriculture Modernization, are outside the boundaries of the constitution. Now their names have been changed. However, the jurisdiction is of a nature that will inconvenience the same provincial and local levels. These projects should be scrapped.

Thematic ministries do not work according to their respective areas of responsibility but encroach on the areas of responsibility of the provinces and local levels in the name of road infrastructure and other things. For example, according to the Government of Nepal Division of Work Regulations 2074, the scope of responsibility of the Ministry of Physical Infrastructure is the policy, law, standards, implementation and regulation related to national highways and the identification, study, construction, maintenance, maintenance, tolls and management of projects under national highways. This ministry cannot go below the national highway. Not only this, the Cabinet meeting of the Government of Nepal on 6 Jestha 2076 had decided that the national highways would be constructed and maintained by the federal government, provincial highways by the provincial government and local roads by the local government.

It was also decided to keep 80 highways across the country under the jurisdiction of the federal government and hand over the rest to the provincial and local levels. The government did not implement this decision either. This ministry did not put forward more than a thousand plans, not 80 highways. But none of the plans were completed.

According to the division of labor regulations, the work of the Ministry of Urban Development is urban development policies, laws and standards, national urban development infrastructure and settlement development, urban development and housing development policies, laws, standards and regulations. It has no scope outside national urban development. However, there is no area that this ministry has not touched at present.

Last year, when Prakash Man Singh was the Urban Development Minister, he allocated a budget even for the office of his youth organization. Taking the names of Finance Minister Bishnu Poudel and Prakash Man Singh, the then Ramechhap MP Kanchharam Tamang criticized them and said that they should not be seen in this parliament again. This is also evidence of the ministers' bad intentions.

The constitution considers the provinces as the carriers of development. In fact, if the country is to develop rapidly and balancedly, there is no alternative to trusting the provinces. The provinces should have sufficient budget, manpower, laws, etc. If the federal government monitors and the provinces implement, the country can make rapid progress. Even in the current situation, the trend of provincial spending is good. According to the integrated financial statement of the Comptroller and Auditor General's Office for the fiscal year 2081/82, the remuneration and benefits expenditure of officials and employees of all three levels was Rs. 310 billion, while the provincial expenditure is only Rs. 14.54 billion (4.69 percent). The provincial expenditure is 9.8 percent of the total expenditure of the three levels, including current and development, according to the recently released financial status report from the Ministry of Finance. This fact shows that the provincial expenditure is low even in the current structure. In the integrated financial report, capital expenditure is 60.86 percent of the total expenditure of the province.

Capital expenditure is 14.80 percent and 34.67 percent of the total expenditure of the federal and local levels, respectively. The World Bank's Fiscal Federalism Update publications for 2023 and 2024 also mention that the province's development expenditure is in the right direction. These facts confirm that the province's expenditure structure is correct. It is development-oriented. For example, the total expenditure of Karnali Province in seven years is 135 billion. In the field of road construction alone, this province has built 3896 km of roads by the fiscal year 2081/82. Similarly, 104 suspension bridges have been built. 4,362 houses have been built for poor families in places such as Raskot in Kalikot, Junichande and Barekot in Jajarkot, Mudkechula in Dolpa, Khatyad in Mugu, Tanjakot in Humla, etc.

In fact, there is no need to be afraid of the province. For one thing, the province's financial purse is small. Even those with small resources do not have to be disappointed in the expenditure system. Talking about the financial purse, the total expenditure of all 7 provinces from fiscal year 2075/76 to fiscal year 2081/82 is 1232 billion. Which is even less than the expenditure of the federal government in one fiscal year (total 1513 billion in 2081/82). Especially, the leaders of the Rashtriya Swayamsevak Sangh seem to be afraid of the provinces. But the above-mentioned facts do not show a situation where there is a need to be afraid. Again, the budget of some ministries of Singha Durbar is more than the overall budget of the seven provinces.

The sources of the ministries of Singha Durbar include the salaries and allowances of a few ministers and leaders. There is no such exemption in the provinces. The total expenditure of officials and employees of all three levels, including Rs. 100, does not even include 5 rupees of the province. If there are many ministries/ministers in a province, it is said that the province is a spendthrift. But when the statistics of the Government of Nepal confirm that there is no much expenditure, there is no need to distrust the provinces. However, there is no alternative to reforming the provincial structure. The National Assembly's Federalism Implementation Monitoring Parliamentary Special Committee has recommended that the number of ministers should be reduced from the current 20 percent of the provincial assembly to 10 percent, with no fewer than 5 members.

The budget discusses the country's overall economic, financial, administrative, and political reforms. The federal government should support the construction of structures in the provincial capital. The Gen-G rebellion has caused great damage to the structures of the provinces, except for a few. Some municipalities have also suffered from it.

When it comes to personnel administration, it requires extensive reform. More than half of the employees in Singha Durbar are unemployed. There are unnecessarily many structures. There should be no delay in abolishing structures and removing or sending down ineffective employees. The federal civil service law, which has not been introduced for 10 years, should be brought by assimilating the rights of the provinces and local levels. In fact, the provinces have become competent in the employee appointment process. It is not necessary to include in the civil service bill that the federal government will send the municipality and the provincial secretary for five years. If it is to be kept, it can be kept for a maximum of two years. Article 227 of the Constitution gives the province the right to manage employees at the local level. This should be followed.

The federal government should help in building the structures of the provincial capital. The Gen-G rebellion has caused great damage to the structures of the provinces, except for a few. Some municipalities have also been affected by it. The federal government's help is needed in rebuilding them. Many structures, including provincial ministries, are not owned by the provincial government. Ownership should be transferred.

There is a big gap between the rights granted by the constitution and their implementation in practice. Even though laws, structures and systems have been established in the provinces and municipalities, the absence of essential federal laws and the continued ambiguity in common rights hinder effective work performance. The complaint of the provincial and local levels is that ‘the power has come, but the key to implementation remains with the union’. The problem lies in implementation, coordination and political will rather than in the structure.