Fiscal equalization grant to provincial, local levels recommended

KATHMANDU, MARCH 24: The National Natural Resources and Fiscal Commission has proposed the fiscal equalization grant to be provided to the provinces and local governments in the upcoming fiscal year 2081-82 BS (2024-25) and recommended its implementation to the federal government.

The grant is to be sourced from the Federal Consolidated Fund. According to the Commission, it has recommended allocating Rs 60 billion to the provinces and Rs 88 billion to the local levels for the upcoming fiscal year, by the Constitution and prevailing laws. The Constitutional provision mandates that the necessity of expenditures and revenue capacity of provincial governments and local levels be assessed while allocating fiscal equalization grants from the Federal Consolidated Fund.

The recommendations are based on the provisions of minimum grants, formula-based grants, and performance-based grants. According to the Commission, out of the total financial equalization grant of Rs 60 billion proposed for the provinces, Rs 15 billion is allocated as the minimum equalization grant, Rs 42.6 billion is allocated based on the formula, and Rs 2.40 billion is allocated towards performance-based grants.

Of the total Rs 60 billion of the fiscal equalization grant that has been recommended for the provinces in the coming fiscal year, the minimum equalization grant is equivalent to Rs 15 billion, the formula-based equalization grant to Rs 42 billion and 600 million and the grant given based on performance to Rs 2.40 billion.

Accordingly, towards the fiscal equalization grant, the Commission has recommended providing Rs 8 billion 943 million and 200 thousand to Koshi province, Rs 7 billion 799 million and 200 thousand to the Madhesh province, Rs 8 billion 243 million and 400 thousand to Bagmati province and Rs 7 billion 638 million and 800 thousand to Gandaki province. Similarly, Rs 8 billion 286 million and 400 thousand has been recommended for Lumbini province, Rs 10 billion 366 million and 300 thousand to Karnali province and Rs 8 billion 722 million and 700 thousand to the Sudurpaschim province as the fiscal equalization grant.

Likewise, a recommendation has been made to provide Rs 88 billion as the fiscal equalization grant to the local levels in the next fiscal year. The recommended minimum equalization grant to the local levels for the next fiscal year is Rs 26 billion and 685 million, the formula-based equalization grant is Rs 57 billion and 795 million and the grant to be provided based on performance is Rs 3 billion and 520 million.