Each province to get Rs 19b in fed grant

May 09, 2018

Prithvi Man Shrestha, The Kathmandu Post, 09 May 2018

As provincial governments seek larger pies of resources from the federal government, the National Planning Commission has said that each province is expected to get a grant of Rs19 billion on average in the upcoming fiscal year.


As per the NPC estimate, the seven provinces are estimated to get a total of Rs135 billion from the Centre under four types of grants—fiscal equalisation, conditional, matching and special.

Additional resources will be available for the provinces through internal resource generation and transfer of taxes from the Federal Revenue Sharing Mechanism.


With the provinces expected to collect just Rs15 billion on their own, additional Rs55 billion will be made available through the revenue sharing mechanism. This means the provinces are expected to have Rs205 billion at their disposal, according to the NPC. Joint-secretary Khomraj Koirala of the commission said the estimate was made based on the constitutional authorities of the provinces.


But the provinces have complained that the estimated transfer of resources is low compared to the responsibilities they have to shoulder. At a meeting of the Inter-governmental Fiscal Commission on Monday, chief ministers and finance ministers of the provinces complained that the centre had sought to keep most of the resources with itself while delegating only the responsibilities.


“We had given the ceiling of Rs13-15 billion for each province under two headings—fiscal equalisation and revenue sharing. The provincial finance ministers complained that the bar was low for them,” said Hari Basyal, joint-secretary at the Finance Ministry.


As most of the taxes under provincial jurisdiction will be shared among federal, provincial and local governments, provincial officials said it would limit their capacity to generate their own resources for development projects there.

The constitution authorises provincial governments to levy taxes on land registration, vehicles, entertainment, advertisement and income on agriculture, besides collection of service charges and penalties. But all the revenues excepting income tax on agriculture are shared with the local federal units and some with the Centre.


On the other hand, local units are estimated to receive Rs195 billion from the centre as different types of grants, according to the NPC. Combining the resources shared by the centre and their internal revenues, total resources available for the 753 local units are expected to hit Rs285 billion.


According to the NPC, 15 percent of the federal budget is expected to go to the local level as conditional grant on top of special grants and complementary budget. Eleven percent of the total federal budget is expected to reach the provinces and the local units in the form of fiscal equalisation grant. An estimated 18 percent of national revenue would be transferred to the provinces and local units, according to the NPC.