Kathmandu. KATHMANDU: The National Natural Resources and Fiscal Commission (NNRFC) has drawn the attention of the central government not to cut the financial equalization grants to the provinces and local levels. The decision was taken at a meeting of the commission held on February 24.

In the first six months of the current fiscal year, the government had decided to cut the grant under the head of financial equalization to the provinces and local levels after failing to collect revenue as per the target. The Office of Financial Comptroller General had issued a circular to all the Treasury and Financial Comptroller Offices on February 12 directing them to reduce the amount of the third installment of the financial equalization grant. Likewise, the Commission has made it clear that it has the right to determine the quantum of financial equalization grant as per the constitution.

“The Commission has recommended determining the quantity of financial equalization grants to be transferred to the province and local governments from the federal consolidated fund for the fiscal year 2082÷83 by exercising the powers vested in the constitutional provision. “Therefore, the attention of the Government of Nepal is drawn through the Ministry of Finance to hand over the amount as per the recommendation made by the Commission for the fiscal year 2082÷83 and the budget approved by the Federal Parliament,” he said. ”

According to Article 60 (3) of the Constitution of Nepal, the National Natural Resources and Fiscal Commission has a provision to recommend the quantum of financial transfer to be received by the provinces and local levels. Clause (b) of sub-clause (1) of Article 251 also empowers the commission to recommend financial equalization grants to be provided to the provincial and local governments from the federal consolidated fund. According to these constitutional provisions, the commission has come to the conclusion that the grant should be provided as per the recommendation of the commission.

The government, on the other hand, has said that it had to cut the grant as it could not collect the targeted revenue. “Only 81.75 per cent of the revenue has been collected as compared to the target till mid-January and the Ministry of Finance has written to hand over the financial equalization grant to the provinces and local levels in this proportion,” reads the circular issued by the Financial Comptroller General. Accordingly, out of the 25 percent installment to be received in the third quarter, 20.43 percent or 70.43 percent of the total approved annual budget has been directed to be handed over.

The 95-point guidance issued by the Ministry of Finance for the implementation of the budget for the current fiscal year states that the first and second installments will be determined as per the initial estimate and the third and fourth installments will be determined on the basis of the situation of revenue collection. According to the Ministry of Finance, the government has collected only Rs 588.51 billion or 38.38 per cent of the total income till mid-January against the target of Rs 1,533.44 billion this year.

In the last fiscal year, the grant was also reduced. At that time, the provincial and local governments had expressed dissatisfaction over the reduction in the budget of the projects and programs that had been awarded the contract and were in implementation. Following the protest, the Office of Financial Comptroller General had released some amount by amending the decision regarding the third installment. The provinces and local levels received only 91.76 per cent of the total approved annual budget when the fourth tranche was cut.