Nepal | April 10, 2020

Centre owes local levels Rs 56bn royalty

Lack of coordination between govt agencies proving costly

Umesh Poudel

Kathmandu, November 12

Due to lack of coordination between government agencies and the lengthy paper work involved in taking any decision, provincial and local bodies across the country have been deprived of nearly Rs 56 billion that they should have received as royalty on the use of natural resources.

Even though the National Natural Resources and Fiscal Commission had recommended the royalty distribution formula for all three levels of government in May, the Ministry of Finance and its line agency Financial Comptroller General Office have not yet distributed the funds to the respective provincial and local bodies.

As per the Intergovernmental Fiscal Transfer Act, the government can collect and distribute the royalties through mountaineering, electricity, forests, mines, minerals, water and other natural resources.

Namgyal Zhangbu Sherpa, mayor of Solududhkunda Municipality of Solukhumbu district, said they had not been able to execute development works as they still had not received royalty money collected through mountaineering, forests and water resources.

“We should have received royalty money from fiscal 2017-18 onwards, but the central government said they would be unable to provide it since then,” he said. “In the last fiscal, we received Rs 20 million but in the ongoing fiscal year (which began in mid-July), we are yet to receive any funds.” As per the formula, local bodies have to be provided the royalty money every three months.

Sherpa added that they had expected to receive Rs 50 million in the last fiscal and had planned their budget accordingly. “However, since the money allotted was well below our expectations, we could not execute many development projects due to lack of funds.”

“The commission needs to change its formula and provide more money as per the royalty collected by each local body,” he said.

According to the act, provincial and local bodies are provided with four types of financial support from the central government — equalisation grant, conditional grant, revenue and royalty.

Dhani Ram Sharma, head of Revenue Management Division at the finance ministry, said the ministry had already forwarded a letter to FCGO to distribute the funds after the Cabinet meeting on November 4 approved the distribution of the royalty amount to the three layers of government. “The FCGO will make necessary calculations and distribute the royalty.”

As per the act, the central government will receive 50 per cent of the royalty and provincial and local bodies will get 25 per cent each.

Ramesh Prasad Siwakoti, joint financial comptroller general at FCGO, said they faced difficulties while calculating the formula provided by NNRFC. “We have been able to finally centralise the data and are in the final stage of releasing royalties to the provincial and local bodies.”

Siwakoti clarified that the amount provided by the finance ministry was below the minimum threshold set according to the formula forwarded by NNRFC, leading to delay.

Meanwhile, the amount generated through revenue collection is being transferred to each provincial and local government’s account every month on a regular basis.


A version of this article appears in print on November 13, 2019 of The Himalayan Times.

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