Kathmandu — In order to make equality and fiscal federalism more effective, the federal government is now providing complementary and special grants to the provinces and local levels based on the level of revenue capacity, prosperity, and physical infrastructure.

The new provisions in the ‘Complementary Grant Procedure 2081’ were announced at a press conference organized by the National Planning Commission. In the new procedure, which was introduced by scrapping the old procedure, the government has reduced the maximum limit of complementary grants, while the provinces and local levels have made arrangements to receive grants from the federation based on their previous revenue capacity. Accordingly, the total cost of projects/programs to be implemented by rural municipalities and municipalities for complementary grants was previously between Rs 10 million and Rs 100 million. Now, this limit has been set at Rs 10 million and Rs 70 million.

‘The total cost of projects and programs to be implemented by sub-metropolitan cities and metropolitan cities has been reduced to 30 million to 150 million,’ the working procedure states. ‘In the case of provincial governments, projects costing 200 million to 1 billion rupees could be proposed earlier, but now complementary grants can be proposed only for projects costing 100 million to 300 million rupees.’

The working procedure also mentions a provision that while proposing the total cost of a project or program, such a project or program should be proposed in a manner that it should be completed within a maximum of three years. The Planning Commission has also made a provision to seek proposals for projects or programs to be operated under complementary grants from the provincial or local levels in the coming fiscal year by publishing a notice by mid-Mangsir every year.

Since the previous arrangement regarding complementary grants was discriminatory, it has been changed and now it is said that the weaker local levels will get more and the stronger ones will get less. The National Planning Commission has stated that an equality system has been implemented in the distribution of resources through complementary grants and special grants to make equality and fiscal federalism more effective.

‘According to the new system, municipalities and provinces have been ranked based on their level of revenue capacity, prosperity and physical infrastructure. This ranking is considered the basis for resource distribution, so that relatively resource-poor municipalities receive more complementary grants from the central government. From the perspective of fiscal federalism, the level of independence of local governments based on resource mobilization is presented through this index.’

The commission has made arrangements that a maximum of 10 projects or programs can be proposed in the case of provinces and a maximum of three projects or programs in the case of municipalities.

When constructing the index of 753 municipalities, it is seen that it ranges from close to zero to 29. The commission has stated that after ranking in this way, seven changing points have been identified through statistical methods. Based on these changing points, local levels have been divided into seven parts ‘KA to CHA’.

Accordingly, the federal government has a cost-sharing arrangement of a maximum of 80 percent for local levels in category ‘A’, 70 percent for ‘B’, 60 percent for ‘C’, 50 percent for ‘D’, 40 percent for ‘E’, 30 percent for ‘F’, and 20 percent for ‘G’ local levels. In the division, there are 155 in category ‘A’, 150 in ‘B’, 125 in ‘C’, 147 in ‘D’, 118 in ‘E’, 39 in ‘F’, and 19 in ‘G’.