Chief ministers and finance ministers of provinces and representatives of local governments have complained that the central government has sought to keep most of the resources with itself even as provincial and local governments shoulder most of the responsibilities on the ground. This goes against the spirit of federalism, they argue.

During the first meeting of the Inter-government Fiscal Commission held at the Finance Ministry on Monday, they criticised the current provision of revenue sharing in the Inter-governmental Fiscal Transfer Act.

They said that sharing of the value added tax between the two levels of government after the Centre retains 70 percent of it was unjustifiable. “They also complained about the lack of provision for sharing customs and income tax revenues,” said a participant of the meeting.

Shankar Pokharel, chief minister of Province 5, told the Post that they sought revenue sharing based on the responsibilities of each layer of government.

During the meeting, representatives of the lower federal units expressed displeasure at their share of the revenue collected as royalties from natural resource utilisation calling it “unjustifiably low”. The law entitles the central government to 50 percent share of such revenues.

According to a participant, the provincial finance ministers rued that the provinces had been made weakest in terms of ability to generate resources. “Their concern was that the province can take income tax wholly only from the agricultural sector which fetches little in revenue while all other sources of income have to be shared with the central and local governments,” said the participant.

They also raised questions over whether the Ministry of Drinking Water was required at the Centre since almost all water supply projects are handled by the lower governments. They criticised the Centre’s control over facilities and staffers overseen by the Education Ministry going against the constitutional mandate. Representatives of local governments had questioned the logic behind forest consumer groups enjoying revenue from the sales of forest resources at the cost of federal units.

According to Dinesh Thapaliya, secretary at the Ministry of Federal Affairs and General Administration, the representatives of provinces and local governments sought early operationalisation of the National Natural Resources and Fiscal Commission. “They had asked the central government to authorise provincial governments to transfer district offices to the provinces and local governments,” he said.

The representatives sought more resources for the provinces in the upcoming federal budget. Nara Bahadur Thapa, executive director of Nepal Rastra Bank, said that some of the representatives demanded resources enough for a provincial administration to devise budget of Rs40 to 50 billion in the upcoming fiscal year.