Fiscal equalization grant to province, local levels recommended

The National Natural Resources and Fiscal Commission has put forth a proposal for the fiscal equalization grant to be allocated to provinces and local governments in the upcoming fiscal year 2081-82 BS (2024-25) and suggested its implementation to the federal government.

The proposed grant is set to be drawn from the Federal Consolidated Fund.

As per the Commission’s proposal, Rs 60 billion is recommended for allocation to provinces and Rs 88 billion to local levels for the upcoming fiscal year, in compliance with the Constitution and existing laws.

The Constitutional directive stipulates the evaluation of expenditure requirements and revenue capacities of provincial governments and local levels when distributing fiscal equalization grants from the Federal Consolidated Fund.

The recommendations are structured around minimum grants, formula-based grants, and performance-based grants.

Of the total fiscal equalization grant of Rs 60 billion proposed for provinces, Rs 15 billion is earmarked as the minimum equalization grant, Rs 42.6 billion is allocated based on a formula, and Rs 2.40 billion is designated for performance-based grants.

For instance, out of the total recommended fiscal equalization grant of Rs 60 billion for provinces in the forthcoming fiscal year, Rs 15 billion is dedicated to the minimum equalization grant, Rs 42.6 billion to formula-based grants, and Rs 2.40 billion to performance-based grants.

Consequently, the Commission has suggested allocating Rs 8.943 billion to Koshi province, Rs 7.799 billion to Madhesh province, Rs 8.243 billion to Bagmati province, and Rs 7.638 billion to Gandaki province as fiscal equalization grants.

Similarly, Rs 8.286 billion has been proposed for Lumbini province, Rs 10.366 billion for Karnali province, and Rs 8.722 billion for Sudurpaschim province as fiscal equalization grants.

Moreover, a recommendation has been put forth to allocate Rs 88 billion as the fiscal equalization grant to local levels in the next fiscal year.

For the local levels, the recommended minimum equalization grant for the next fiscal year stands at Rs 26.685 billion, formula-based equalization grant at Rs 57.795 billion, and performance-based grant at Rs 3.520 billion.