Local governments must improve their spending capacity and administrative skills so that all the local units can generate more resources for themselves

It’s taken quite some time, but the fruit of federalism is starting to trickle down to the local levels, namely the rural and urban municipalities. For the first time, the government has distributed royalty collected last fiscal from the use of four natural resources – mountains, rives, forests and mines – at the local level. Although the government should have disbursed the royalty a month after the end of the last fiscal, or mid-August, it was able to do so only last week because of the confusion over how to do it. The biggest beneficiary has been Khumbu Pasang Lhamu Rural Municipality, home to the world’s tallest peak, Mt. Everest. It raked in Rs 115 million, which is understandable, given that the 8,848-m peak commands a royalty of $11,000 from each foreign climber. Other major recipients generated royalty mostly from the use of their rivers for the construction of hydropower projects. The government distributed Rs 1.4 billion in royalty to 576 of the 753 local units, or 76.5 per cent.

In line with the federal set up, the central government keeps half of the total royalty generated at the local level, while distributing 25 per cent to the seven provinces and the remaining 25 per cent to the local units. Thus the federal government retained Rs 2.9 billion in royalty collected from the use of natural resources. The way the local levels generate resources shows that not all are equally advantaged. Some local units have more natural resources than others, or even if one is naturally endowed, it might not be in a position to exploit them. So how will those local levels that received no royalty or received very little be compensated by the federal government? The disparity in royalty income could invite conflict among the local units and with the centre.

Of course, the local governments also enjoy four types of fiscal transfers. The equalisation grants are transfers of resources to the provincial and local governments based on population and development status. The conditional grants are funds meant for implementing projects related to national policies and standards. Matching grants are transfer of funds to complement the resources of the local level for a project while special grants support a special project related to the supply of services, emergency needs and activities of national priority. Add to these VAT and internal excise tax revenues as well as royalty that are shared among the federal, provincial and local governments. On top of these, the local governments will also collect local taxes on property and rent, and vehicle registration fees where feasible. So even without the royalty, the funds that are transferred to the local levels are quite substantial. The spending responsibilities now lie with the local governments, allowing them to plan the expenditure as per the needs of the locals. But they have shown limited implementation capacity to fully utilise their resources. Hence, the local governments will need to improve their spending capacity and administrative skills so that all the local units can generate more resources for themselves, including royalty, so as to lessen their dependence on the central government’s largesse.

A welcome move

In a major development, the Ministry of Home Affairs (MoHA) on Tuesday issued a three-point circular to all the District Administration Offices (DAOs) of Karnali and Sudurpaschim provinces directing them to take strong legal action against those forcing or practising chhaupadi. The DAOs were told to form a mechanism to act tough against the worst form of gender-based violence. Chhaupadi, which is widely practised in the provinces, is a punishable crime.

The ministry’s circular is a welcome move, which will help eliminate the superstition and taboos associated with menstruation, which is a normal biological process that also helps purify women’s blood. The circular says those who practise and encourage chhaupadi will be deprived of social security allowances and facility of subsidised loans, while members of a family who banish girls and women during their period will be deprived of senior citizen allowance and other social security schemes. The MoHA has also told the DAOs to destroy the chhau sheds. If these measures are well implemented at the grass-roots level, the age-old practice in the provinces will come to an end. Though the Supreme Court ruled that chhaupadi was illegal in 2005, it is still widely prevalent there.