Holding the purse stringsIt is ludicrous that projects worth Rs1,000 have been sent to the sub-national levels.
Parliament routinely holds discussions on the government's annual budget, but nobody ever listens to the suggestions made by its honourable members. The lawmakers can change nothing, and so all their talks are pointless. Even then, this article attempts to analyse the budget from a federal standpoint with a particular focus on sub-national government perspectives.
Four key aspects emerge. One, there has been a reduction in fiscal transfers. Two, the Constituency Infrastructure Development Programme has been reinstated. Three, the allocation of resources within a majority of line ministries has been centralised. Four, small projects are being given to the sub-national levels as conditional grants.
More than 60 percent of the federal government's functions have been handed over to the sub-national levels, but it retains more than 80 percent of the revenue rights. The constitution clearly states that the expenditures of the sub-national level should be covered through fiscal transfers including fiscal equalisation grants (unconditional grants). All budgets since 2017 have been driven by a centralised mindset with regard to fiscal transfers. The federal government perceives itself as the owner (donor), while the sub-national levels are regarded as servants (beggars), causing an imbalance.
In the fiscal year 2018-19, approximately 25 percent of the total budget was allocated to the sub-national levels in the form of grants, including fiscal equalisation. However, a significant portion, or 53 percent, were conditional grants. Although these grants are intended for projects assigned by the central government, there is no autonomy to carry out work based on local needs. There should have been a gradual reduction in such grants, but instead they have increased to 57 percent in the fiscal year 2023-24.
The sub-national levels have also experienced a decrease in fiscal equalisation grants. In comparison to the fiscal year 2022-23, the budget allocation for fiscal equalisation grants for the sub-national levels has decreased by Rs15 billion. The budget for the fiscal year 2023-24 stands out for its increased centralisation compared to previous budgets. The overall budget size has decreased by 2.39 percent, but certain ministries have witnessed an increase in their budgets. The Ministry of Urban Development, for example, has received an extra Rs11 billion this year. The Public Expenditure Review Commission had recommended abolishing the ministry, but instead its budget has been increased, raising concerns about reduced funding for the sub-national levels.
The Constituency Infrastructure Development Programme has faced widespread criticism for not only undermining the autonomy of local governments but also disrupting local planning and budgeting systems. With both the ruling party and the opposition joining forces to support the programme, its removal is not currently possible. The only option is to seek legal recourse.
The responsibility of a Member of Parliament includes formulating policies, rules and laws, conducting oversight, and providing guidance to the government. However, certain ministers and influential leaders have caused issues by disregarding transparent and fair procedures in selecting plans. These ministers prioritise their own constituencies and neglect equitable distribution of resources. As a result, public trust in federalism is eroding.
The federal government should not retain control over matters that clearly fall within the scope of the sub-national levels.
However, when analysing the budget, we can see that most ministries retain control and allocate funds through their own organisational structures at the central level. It contradicts the constitution for ministries associated with local infrastructure development and service delivery to control the budget at the central level and operate through their own structures.
If the budget is centralised and spent accordingly, federalism loses its significance. Ironically, except for the Ministry of Labour, Employment and Social Security and the Ministry of Education, Science, and Technology, the budgets of other ministries remain centralised.
Another significant issue is the small-scale nature of the programmes and projects undertaken by the ministries. Despite the policy and budget speeches emphasising the avoidance of allocating funds to small projects, the opposite is occurring. Projects with budgets of Rs200,000 are being centralised. Moreover, the implementation of these projects is also being carried out by the centre. The Ministry of Physical Infrastructure has allocated Rs200,000 for various schemes, such as the construction of a bridge over the Sumari River in Saptari district. There are more than a dozen projects with similar budget allocations. Such meagre funding for projects is unprecedented, even in a unitary system. It undermines the essence of federalism itself, making a mockery of its principles. Not only this, the conditional grants provided by the Ministry of Finance to the sub-national levels are also of a very small scale.
For instance, a programme named Satighat Tawotar Ikhuwa River Corridor Dovane Fedi Salpa Sankhuwasabha Bhojpur and Solukhumbu Sagarmatha Road has been allocated a total amount of Rs500,000. Similarly, only Rs500,000 has been allocated to a programme named Marsyangdi Madi Tanahu Road. Furthermore, there are projects worth Rs10,000, such as the Kulekhani 1, 4, 5, 8, 9 drinking water projects in Indrasarobar Makwanpur district. There are dozens of similar programmes and projects.
What is even more ludicrous is that projects worth Rs1,000 have been sent to the sub-national levels. For instance, Patharkala Khapa A, Susata-3, Nawalparasi (West), Thabang Khapa A, Rolpa, and Libang Machhi Khapa A, Jhimruk-5 are drinking water projects. There are approximately two dozen similar projects proposed for Lumbini province. The budget allocated for each of these projects is only Rs1,000.
It's been six years since the implementation of federalism, but this budget is the most regressive yet when it comes to the sub-national levels.