Gandaki Province

According to the constitution of Nepal, Nepal is divided into seven provinces. Out of these, Gandaki province consists of 11 districts including 4 districts of Dhaulagiri zone, 6 districts of Gandaki zone and Bardaghat Susta East of Nawalparasi district of Lumbini zone was formed. Geographically, this province includes mountains, hills and plains. The total area of ​​Gandaki province is 21,733 sq. Km which is 14.66% of the total land area of Nepal. It covers a total area of ​​5,819 sq. Km. as mountains, 14,604 sq. Km. as hills and the terai terrain covers 1,310 sq. Km. This province is located in the central part of Nepal. The border of this province is Rasuwa, Dhading and Chitwan districts of the Bagmati province, East Rukum, Rolpa, Pyuthan, Gulmi, Palpa and Nawalparasi (Susta Bardaghat West) of province no. 5 and Dolpa district of Karnali province. It shares its northern border with China’s autonomous region of Tibet in the north and province 5  and Bihar state of India in the south.

According to the census of 2011, out of the total population of Nepal, 2,64,94,504, the population of this state is 240,016 which is 9.06 percent of the total population. The annual population growth is negative around -0.33 percent. This shows that the population growth of this state is declining. The total number of households is 5,76,501. The total population density of this state is 110 people per square kilometer. The population living in the municipality is 14,52,186 (60.5%) and the population living in the village municipality is 9,43,652 (39.4%). Similarly, 50.1 percent of the total population of this province is economically active[1]. Around 15 percent of the population is below the poverty level. The province is mainly inhabited by Janajatis (42.27%), Khas – arya (37.24%), Dalit (17.44%), and tharu (1.82%). Nepali, Magar and Gurungs are major spoken languages in the province. The Human Development Index of the province is .59. The multi-dimensional poverty index of the province averaged  at 29.92%. Average life expectancy for the province is 71.4 years and an overall literacy rate is 55.6%[2].

Gandaki province contributes 8.93 % to the National GDP. The value of its GDP in the year 2075/76 remained at NPR 308.91 billion. Agriculture and forestry, real estate and education are the three major contributions to the province level GDP whole percentage contribution are 27%, 10% and 7% respectively.

Gandaki Province has 85 local levels including 1 metropolis, 26 municipalities and 58 village municipalities. Similarly, there are 18 constituencies for the election of members of the House of Representatives and 36 constituencies for the election of members of the province assembly. Pokhara is the capital city of the province. There is a constitutional provision that the province assembly can have a total of 60 members, including proportional representation. These 85 local level units are divided into 11 districts as shown below.

Table 1: Number of local levels and wards across all districts of Gandaki Province

Districts

Metropolitan

Urban Municipalities

Rural Municipalities

Total

Province Constituencies

Myagdi

0

1

5

6

2

Mustang

0

0

5

5

2

Parbat

0

2

5

7

2

Baglung

0

4

6

10

4

Manang

0

0

4

4

2

Syanjaa

0

5

6

11

4

Gorkha

0

2

9

11

4

Lamjung

0

4

4

8

2

Tanahu

0

4

6

10

4

Kaski

1

0

4

5

6

Nawalparasi (Susta- Bardaghat east)

 

4

4

8

4

Total

1

26

58

85

36

            (Source: https://ocmcm.gandaki.gov.np/pages/about-state)

Gandaki Province has also developed the first periodic development plan covering fiscal year 2076/77 to 2080/81. According to the periodic plan, the province planning commission has stated different development indicators which are given below:

 Table 2: Quantitative results of the First Periodic Plan of the Province

Indicators

Base year (2076/77)

End year (2080/81)

GDP growth rates (percentage)

7.1

10.2

Size of GDP (‘ Lakhs)

288206.6

468795

Contribution of agriculture sector in GDP

28.2

23.7

Contribution of non agriculture sector in GDP

71.8

76.3

Annual Budget as % of GDP

11.1

14.2

Share of Province revenues in Budget( %)

36

50

Labour force participation in economy

35.7

50

Population below absolute poverty level (percentage)

15.2

10

Multi Dimensional Poverty rates (percentage)

14.2

7.3

Per capita Income (US $)

1043

1946

Unemployment rates (percentage)

9

4

Life expectancy at birth (years)

71.4

77

Population density (people/sq. km)

109

130

Literacy rates above 15 years  (percentage)

74.8

95

Child Mortality rates (per 1000)

27

22

Enrollment rates at secondary level (percentage)

73.7

92

Human Development Index

.59

.65

Population access to high and standard drinking water (percentage)

20

50

Population access to electricity (percentage)

81.5

100

Province Blacktopped Roads (Kilometers)

937

3450

HHs with access to internet (percentage)

48

80

Local government with Periodic plans

19

85

Local governments prepared MTEF

2

85

Local government with online reporting

29

85

Share of Arrears in province  Government expenses

.18

0

Share of Arrears in Local Government expenses

2.7

1.00

      (Source: First periodic Plan 2076/77 – 2080/81, Province Planning Commission, Gandaki Province)

The Constitution of Nepal 2015 article 168 (9) provides formation of the provincial council of ministers by the Chief of the Province in recommendation of the Chief Minister. Gandaki province has created laws pertaining to the economic rights falling under its jurisdiction, produced annual budgets, and policies and plans  to implement them. Likewise Gandaki province imposes taxes in areas under its jurisdiction, collect revenues from such sources, and make fiscal transfers to the local governments. The business of the Gandaki province government is based on the Article 174 of the Constitution which provides for the division and functioning of duties of provincial governments according to the regulations approved by the Provincial Government (Allocation of Business) Regulation, 2018. All ministries promulgate policies, rules and programs pertaining to their jurisdiction in accordance with the Allocation of Business Regulation 2018. The total number of members of the council of ministers cannot exceed 20 percent of the total members in the provincial assembly. The Gandaki Province government is formed by province council of ministers as the executive head, province assembly as the legislative head of the province government. The members of the Gandaki Province assembly select amongst themselves, the executive head of the government known as the chief minister. The chief minister forms the council of ministers among the members of the provincial assembly.  There are 7 ministries in the province with various department and agencies. There are seven ministries in Gandaki Province according to the provision of the Constitution of Nepal 2015. The article has provisions for division of responsibilities among different ministries.

Current Council of Ministers

Currently, there are 7 ministers who lead 7 ministries in Gandaki Province. Portfolio of all ministers is given below:

Table 3: Porfolio held by Ministers in Gandaki Province

Name

Portfolio

Prithivi Subba Gurung

Chief Minister

Kiran Gurung

Ministry of Economic affairs and Planning

Hari Bahadur Chumaan

Ministry of Internal Affairs and law

Ram Sharan Basnet

Minstry of Physical Infrastructure Development

Bikash Lamsal

Ministry of Industry, Tourism, Forests and environment

Nardevi Pun Magar

Ministry of Social Development

Lekh Bahadur Thapa Magar

Ministry of Land Management, Agriculture and Cooperative

                  (Source: Office of Chief Minister and Council of Ministers, Gandaki Province, 2020)

Province Coordination Council

The division of state power among federal, province and local level government implies strong coordination among three tiers of governments. Without effective coordination mechanism, there will be conflict among governments. The constitution of Nepal 2015 also emphasizes importance of coordination and communication among three tiers such that citizens are provided with services which improve their quality of life. In this respect, the constitution foresees importance of coordination and collaboration among province and local level especially in areas of concurrent jurisdiction. Gandaki province has also constituted province coordination council based on the provisions laid out in the Local Government Operation Act 2074 article 105. According to the provision, the chief minister of Gandaki province is the coordinator of the council which meets at least in a year to resolve conflicts and problems between province and local level and between local level governments also. The officials of the province coordination councils are as follows.

Table 4: Members of the Province Coordination Council

Officials

Post

Chief Minister

Coordinator

Ministers of Province Council of Ministers

Members

Province Chief Secretary

Members

Province Secretary

Members

Chair and vice chair of all District coordination Committee in the province

Members

Mayor and vice mayor, chairperson and vice chairperson of Municipalities and village municipalities

Members

Secretary of the Province ministry which looks after local level

Member secretary

(Source: Local Government Operation Act 2074)

The council meet can also be used for developing shared understanding among political representatives about legal issues which may arise during the course of implementing legislations. The meeting of the council promotes policy coordination, partnership among tiers of governments and efficient sharing of natural and other resources while minimizing conflicts.

  1. Province Assembly

The assembly of Gandaki Province has been constituted according to provisions set out in the Part 14 of the Constitution of Nepal, following principle of unicameral legislature. Sixty percent of the members of the assembly were elected from the first-past-the-post system and forty percent from the proportional representation system. The number of constituencies in Gandaki province is 36. These 36 seats have been considered as 60% and rest 40% seats were allocated for members to be elected through proportional representation system. The number of elected representatives from First-Past-the-Post is 36 and proportional representation system is 24 making the total members 60. Proportional representation system has ensured that representatives from the Dalit, Indigenous Nationalities, Khas Arya, Madheshi, Tharu, Muslim, backward regions, and minority communities are represented in the assembly in proportion to their population. The province assembly also formed the province government, passed bills on state laws, government policies and programs and budgets, and conducted parliamentary oversight and control of government and government bodies. The province assembly is presided by the Speaker and Deputy Speaker in his/her absence. Similarly, the Provincial Assembly made the rules of procedure of the Provincial Assembly, 2074 BS to conduct its work, maintain the order of the meeting and regularize the formation, work, action and other matters related to the committees. The rules of procedure of the Provincial Assembly, 2074 BS provides for various thematic and special committees, and office bearers such as leader of opposition and ruling party, deputy leader, chief whip,  and whip etc. In addition to this, the rules of procedure of the meetings of the assembly has elaborate procedures for the question and answer, the procedure of floating bills/proposals, and arrangements for the dissolution of the government etc. Major works of province assembly are forming the government, pronounce legislations, monitoring province agencies, and discuss and approve budget. The first meeting of the province assembly of Gandaki Province was conducted on January 18 2018. 36 members of the provinces assembly are elected from these 36 constituencies in First-Past-the-Post system and another 24 members are elected on the basis of proportional system of election.

Table 5: Members according to electoral system and Gender

S N

Electoral system

Number

S N

Gender

Number

1

First-Past-the-Post system

36

1

Male

40

2

Proportional system of election

20

2

Female

20

 

Total

60

 

Total

60

            (Source: Province Assembly, Gandaki Province, 2020)

In the current province assembly, there are 40 members of Communist Party of Nepal, followed by 15 of Nepali Congress, 3 members from Rastriya Janamorcha Party, and 2 from Naya Shakti Party.  Following table shows the seats gained by political parties in the province assembly polls. The tenure of these members is 5 years from the election year of 2017/18.

Table 6: Members of Province Assembly based on Political Party

S N

Political Party

Total

1

Nepal Communist Party

40

2

Nepali Congress

15

3

Rastriya Janamorcha

3

4

Naya Shakti Party

2

 

Total

60

                                    (Source: Province Assembly, Gandaki Province, 2020)

Gandaki Province assembly has also created five committees from amongst its members which work as mini parliament. Although the province assembly had constituted two additional committees (special committees) it has been dissolved currently because these committees have completed their tasks. Following table shows the number of committees and their scope of work.

Table 7: Thematic committees of Province Assembly with Scope

Committees

Members

Scope

Legislation Committee

 

1 chairperson, 12 members

Internal affairs and Laws, Legislations, Attorney general

Business advisory committee

 1 chairperson, 10 members

 

Chief Minister and council of ministers, Province Civil Service commission, Governance Monitoring and planning

Economic and Development Committee

1 chairperson, 13 members

Economic Affairs and Planning, Bank, Insurance and  financial institution, revenue and expenses of the province, Monitor development activities with regard to financial discipline

Public Account Committees

1 chairperson, 121 members

 

Public accounts, Resource mobilizations, management issues, review Public assets, and monitor financial issues of the province

Province Affairs Committee

1 chairperson, 11 members

 

Inspect situation of Human rights, labor, Women, children and minority rights, Province Civil Service, Social Justice, Inter province coordination, Local government coordination, Province Police

(Source: Province Assembly, Gandaki Province, 2020)

Until current fiscal year, the Gandaki Province assembly has conducted 6 sessions of the parliament. The province assembly has registered 44 bills in total. It has passed 42 of these bills while 1 bill has been sent to the committee for detailed review. Province chief has authenticated 39 of these bills[3]. The parliament has promulgated laws to deliver services for the citizens. Following table details the information of various sessions:

Table 8: Information on various business of the Province assembly

Particulars

1st sessions

2nd sessions

3rd sessions

4th sessions

5th Session

Start date

 

 

 

 

 

End date

 

 

 

 

 

Hours spent

 

 

 

 

 

Meeting numbers

 

 

 

 

 

Acts

 

 

 

 

 

Regulations

 

 

 

 

 

Amendments

 

 

 

 

 

(Source: …………………………….., Gandaki Province Assembly Secretariat, 2020)

There are altogether 36 employees in the secretariat of the Province Assembly in Gandaki Province. The secretariat has Work Procedures Department with 3 branches; Laws and Legislation Department and Administration Department with 3 branches. The secretariat of province assembly is engaged in support speaker of the house to conduct business of the house by publishing agendas of meetings; provide administrative, legal, and logistics support for various committees of the parliament and conduct research and study on parliament administration.

The Province has already formulated many laws to dispense important functions. Some of the important Laws are:

Table 9: Laws prepared by the province assembly by date of authentication

Name of the Laws

Date of authentication

Link

Province Governance Act 2076

2076/10/13

http://moial.gandaki.gov.np/view-pdf/pdf-b-b-ai_1581920624

Lake Conservation and Development Corporation Act 2075

2075/12/25

http://moial.gandaki.gov.np/view-pdf/pdf-l-ai-ai-ai_1561961174

Lake Conservation and Development Corporation Regulations 2075

2076/10/2

http://moial.gandaki.gov.np/view-pdf/pdf-l-l_1579246833

Gandaki Province Appropriation Act 2076

2076/03/31

http://moial.gandaki.gov.np/view-pdf/pdf-ai-aa-ai_1564482865

Gandaki Province Economic Act 2076

2076/03/31

http://moial.gandaki.gov.np/view-pdf/pdf-ai-aa-ai_1564482865

Gandaki Province Appropriation Act 2077

2077/03/26

http://moial.gandaki.gov.np/view-pdf/pdf-ai-aa-ai_1594639125

Gandaki Province Economic Act 2077

2077/03/26

http://moial.gandaki.gov.np/view-pdf/pdf-ai-aa-ai_1594639125

An act to manage benefits, responsibilities and services of civil service commission members 2076

2076/06/26

http://moial.gandaki.gov.np/view-pdf/pdf-l-aa-a-b-b-ai_1566534505

An act to manage benefits, responsibilities and services of civil service commission members 2076

2077/03/31

http://moial.gandaki.gov.np/view-pdf/pdf-l-aa-b-b-ai_1595138480

Tobacco and related product control Act 2076

2076/01/19

http://moial.gandaki.gov.np/view-pdf/pdf-ai_1561961340

Province Environment Conservation Act 2076

2077/03/01

http://moial.gandaki.gov.np/view-pdf/pdf-l-ai-ai-ai_1593348779

Province gazette publication directive 2075

2076/5/14

http://moial.gandaki.gov.np/view-pdf/pdf-b_1536125203

Act to manage revenues from taxes and non taxes in Gandaki Province, 2075

2075/02/31

http://moial.gandaki.gov.np/view-pdf/pdf-aa-l-ai-b-ai-ai_1529056312

Province Dairy Development Board Act 2075

2075/4/30

http://moial.gandaki.gov.np/view-pdf/pdf-b-ai_1548999406

Province Administrative procedure Act 2075

2075/7/8

http://moial.gandaki.gov.np/view-pdf/pdf-ai_1561961597

Province Emergency Fund Act 2075

2075/3/27

http://moial.gandaki.gov.np/view-pdf/pdf-aa-ai-ai-aa-ai-b-ai-l-ai_1561961916

Act relating to manage process of law formulation in Local levels 2075

2075/3/27

http://moial.gandaki.gov.np/view-pdf/pdf-aa-ai-ai-aa-ai-b-ai-l-ai_1561961916

Vaccination Services Act 2075

2075/3/27

http://moial.gandaki.gov.np/view-pdf/pdf-aa-ai-ai-aa-ai-b-ai-l-ai_1561961916

Some Province Act Amendment Act 2075

2075/7/04

http://moial.gandaki.gov.np/view-pdf/pdf-lii-ai_1561961643

Province Pubic Procurement Regulations 2076

2076/09/24

http://moial.gandaki.gov.np/view-pdf/pdf-b-l_1578635454

Province technical education and vocational skill training and council Act 2075

2077/03/01

http://moial.gandaki.gov.np/view-pdf/pdf-l-ai-ai-ai_1593348779

Province 4 Allocation of Business Rules Regulations 2074

2074/11/4

http://moial.gandaki.gov.np/view-pdf/pdf-l_1527674827

Province Policy and Planning  Commission Order 2074

2074/12/21

http://moial.gandaki.gov.np/view-pdf/pdf-aa-l-aa_1527674917

Province Hospital Operation and management order 2075

2075/06/11

http://moial.gandaki.gov.np/view-pdf/pdf-al-aa_1538284542

Province Cooperative Act 2075

2075/10/27

http://moial.gandaki.gov.np/view-pdf/pdf-ai-b-l-ai_1596096666

Province Cooperative Regulations 2076

2076/6/9

http://moial.gandaki.gov.np/view-pdf/pdf-b-a-l-l_1569489329

Market Monitoring regulations 2076

2076/6/9

http://moial.gandaki.gov.np/view-pdf/pdf-b-a-l-l_1569489329

Province Chautari Conservation Act 2075

2075/10/27

http://moial.gandaki.gov.np/view-pdf/pdf-ai-b-l-ai_1596096666

Province Economic Act 2074

2075/01/05

http://moial.gandaki.gov.np/view-pdf/pdf-provincial-financial-procedures-act-2074-province-no4_1561960490

Gandaki province Science and Technology Corporation Act 2076

2077/3/01

http://moial.gandaki.gov.np/view-pdf/pdf-l-ai-ai-ai_1593348779

Act to manage remuneration of members of province assembly 2075

2075/01/24

http://moial.gandaki.gov.np/view-pdf/pdf-act-relating-to-facilities-of-province-minister-member-of-province-assembly-member-of-local-level_1561960757

Act to manage remuneration of chief ministers and council of ministers 2075

2075/01/24

http://moial.gandaki.gov.np/view-pdf/pdf-act-relating-to-facilities-of-province-minister-member-of-province-assembly-member-of-local-level_1561960757

Act related to manage duties, responsibilities and rights of Province Attorney General 2075

2075/05/14

http://moial.gandaki.gov.np/view-pdf/pdf-a-b-ai_1561961714

Province Disaster related search, relief and response Guideline 2075

2075/3/25

http://moial.gandaki.gov.np/list/act_and_rules/b-u_1595148892

Province Appropriation Act 2075

2075/3/27

http://moial.gandaki.gov.np/view-pdf/pdf-aa-ai-ai-aa-ai-b-ai-l-ai_1561961916

Province Economic Act 2075

2076/3/27

http://moial.gandaki.gov.np/view-pdf/pdf-aa-ai-ai-aa-ai-b-ai-l-ai_1561961916

Act to Amend Province Economic Act 2074

2075/2/31

http://moial.gandaki.gov.np/view-pdf/pdf-aa-l-ai-b-ai-ai_1529056312

Province Document protection Act 2074

2074/11/04

http://moial.gandaki.gov.np/view-pdf/pdf-l-l_1531047174

Province Industrial Enterprise Act 2076

2075/12/25

http://moial.gandaki.gov.np/view-pdf/pdf-l-ai-ai-ai_1561961174

Gandaki Province Training Staff College

2075/12/25

http://moial.gandaki.gov.np/view-pdf/pdf-l-ai-ai-ai_1561961174

Province vehicle and transportation management Act 2076

2076/7/1

http://moial.gandaki.gov.np/view-pdf/pdf-b-b-ai_1573624434

Gandaki Province University Establishment and Operation Act 2076

2076/6/27

http://moial.gandaki.gov.np/view-pdf/pdf-l-l-b-ai_1571737463

Act relating to remuneration and benefits of province assembly members 2074

2075/1/24

http://moial.gandaki.gov.np/view-pdf/pdf-act-relating-to-facilities-of-province-minister-member-of-province-assembly-member-of-local-level_1561960757

Act relating to remuneration and benefits of officials and members of Local levels 2075

2075/1/24

http://moial.gandaki.gov.np/view-pdf/pdf-act-relating-to-facilities-of-province-minister-member-of-province-assembly-member-of-local-level_1561960757

Act relating to remuneration and benefits of officials and members of Local levels 2076

2077/03/26

http://moial.gandaki.gov.np/view-pdf/pdf-u-ll-l-u-b-b-ai_1594547964

Act to amend certain laws on remuneration 2076

2076/5/13

http://moial.gandaki.gov.np/view-pdf/pdf-b-lii-b-ai_1567759676

Province fiscal transfer Act 2075

2075/2/31

http://moial.gandaki.gov.np/view-pdf/pdf-aa-l-ai-b-ai-ai_1529056312

Province Consolidated Fund Operation proceure 2075

2075/2/31

http://moial.gandaki.gov.np/view-pdf/pdf-l_1527675037

Village/Urban Municipality/District Assembly Operation (procedure) Act 2074

2075/1/230

http://moial.gandaki.gov.np/view-pdf/pdf-ai-l-ai_1561961088

Province Appropriation Act 2075

2075/1/30

http://moial.gandaki.gov.np/view-pdf/pdf-ai-l-ai_1561961088

(Source: Ministry of Internal Affairs and Laws, Gandaki Province, 2020)

3.1 Mid Term Expenditure Framework

Mid Term Expenditure Framework (MTEF) is an important tool for public finance management. It help matching development priorities with resources projection and tracking expenditure on mid term basis.  Based on the current year expenditure pattern, expected resource allocation and expenditure are projected for coming 2 years. The framework allows changes in the budgetary allocation based on development needs, implementation status of development projects, taxes and external financial supports. Realizing importance of efficient mobilization of public finances to achieve goals set in the periodic plans, sustainable development and vision paper, Gandaki Province has developed an expenditure framework for year 2077/78 to 2079/80 which is the third MTEF for Gandaki province. The Mid Term Expenditure Framework tracks expenditure giving due consideration to allocation efficiency, financial discipline and mobilization capacity. Achieving coordination among investment priorities as set in various vision paper and policy documents of the government is the objective of the mid term expenditure framework. To formulate MTEF, all tiers of government need to prioritize development projects and commit required fund allocation for three consecutive years along with justification of the expenditure in meeting goals of the projects. The Gandaki Province government has formulated MTEF based on the fifteenth Periodic Plan of Government of Nepal, 1st Province periodic Plan, and Sustainable Development goals. Gandaki Province has constituted a Director’s committee headed by Minister of Finance. The committee has members such as Vice chairperson and members of the Province Planning Commission, Chief Secretary, and Secretaries of province. The secretary of the province planning commission acts as the member secretary of the committee. There is also a provision for a Technical committee headed by member and secretary of the province planning commission and includes Departmetn heads from all major departments of each ministries. The Technical committee is supported by working committee established at each ministries and bodies to review expenditure patterns for the existing year to recommend upcoming budget limit for the upcoming fiscal year. The MTEF also develops indicators to help realize vision set in various policy documents and plans. Gandaki Province has developed indicators which are tabulated below:

Table 10: Indicators of the province according to the MTEF (2076/77- 2078/79)

SN

Indicators/Goals

Units

2076/77 status

                                   Mid Term Expenditure Framework

 

 

 

 

2077/78

2078/79

2079/80

1

Economic Growth rates  (yearwise)

percentage

2.68

7

9

10

2

GDP

‘lakhs

335257.6

358725.8

391011.2

430112.3

1.1

Share of Agriculture sector

percentage

27

26

25

24

1.2

Share of non agriculture sector

percentage

73

74

75

76

2

Contribution to National GDPs

percentage

8.3

8.3

8.3

8.3

3

Share of annual budget in comparison to GDP

percentage

11.1

11.5

12

13

4

Unemployment rates

percentage

11.2

10

9

8

5

Population below absolute majority

percentage

18.2

16.8

15.2

13.6

6

Multi Dimensional Poverty rate

percentage

14.2

12

10.5

8

7

Branches of Bank and finance Institutions

numbers

1954

2000

2100

2200

8

Transfers to local governments (grants only )

 

7.65

7.62

8

8

(Source: Province Planning Commission, Gandaki Province, 2020)

The development needs of the Gandaki Province as conceptualized in the MTEF projects that the province needs financial resources of NPR 115.32 billion. The current expenditure, capital expenditure and financial management expenditure for the province will be 41.27%, 57.55% and 1.44% respectively for the upcoming three years. The projection for total revenues for the same period is 35.82% of the total expenditure needs. Another 38.34% of the expenditure will be financed from grants federal government. The MTEF analyzed effects of budgetary allocation and expenditure projection based on strategic areas of Periodic Plans, Sustainable Development Goals and Gender sensitive budgeting practices and Climate adaptation practices.

3.2 Budgetary provisions for Gandaki Province

The constitution of Nepal 2015 has recognized National Natural Resources and Fiscal Commission (NNRFC) as the custodian of the fiscal federalism. Most important task of the commission is to recommend criteria and funds for inter governmental fiscal transfers to province and local level based on the principle of financial justice, objective assessment of needs and efforts of governments to raise revenues. The commission recommends basis/criteria for distribution of equalization grants, conditional grants, revenue sharing and internal loans. Two important legislations promulgated by federal government regarding implementation of the fiscal federalism are National Natural Resources and Fiscal Commission Act, 2017, and Inter- governmental fiscal management act 2017. The commission recommends basis for distribution of intergovernmental transfers for two consecutive years. The commission recommends basis of distribution of revenues, equalization grants, conditional grants and internal loans limits. Accordingly, the commission has recommended basis of distribution for two years 2075/76 and 2076/77 on the basis of different weightage assigned to factors such as Population distribution, Geography, Human Development Index, and Development indicators.

The distribution of benefits from the use of natural resources are also divided among different tiers of governments based on shares in investments in protecting natural resources and shares in benefits sharing by the respective level of governments.

The commission used indicators from variety of sources to determine the proportion of fiscal transfers. The commission conducted discussion programs with some province and local level governments to understand their projections on revenues, expenditures and resulting fiscal gaps. If indicators were not available, indicators of previous years was used as proxy. Following table shows the indicators and their sources.

Table 11: Sources of Indicators used by National Natural Resources and Fiscal Commission

SN

Indicators

Sources

1

Population  and Dependent population related index

National Population census 2011

2

Geographical areas related index

Local Level Restructuring Commission Report

3

Human Development Index

Nepal Human Development Report 2014

National Population census 2011

4

Human Poverty Index

Nepal Human Development Report 2014

National Population census 2011

Nepal Multi Dimensional Poverty Index report 2018

5

Infrastructure related Index

Road Density -80%, Electricity Access- 10%, Information Technology accessibility -10%. (Government of Nepal Publications )

6

Social economic discrimination related index

Economic discrimination – 50%, Social Discrimination- 45 %, Climate change related risks- 5%   ( Government of Nepal Publications)

7

Low Development Indicators related index

National Natural Resources and Fiscal Commission Report 2017

8

Costs of goods and services related index

Central Bureau of Statistics

Ministry of Federal Affairs and General Administration

9

Access to Information Technology related index

National Population Census 2011

10

Road related index

Local Infrastructure  and Road Department

(Source: Progress Report, Gandaki Province, National Natural Resources and Fiscal Commission, 2020)

The distribution of benefits from the use of natural resources are also divided among different tiers of governments based on shares in investments in protecting natural resources and shares in benefits sharing by the respective level of governments.

At the province level, following are the major sources of revenues for Gandaki Province as provisioned in the Inter-government Fiscal transfer Act 2074.

Table 12: Sources of revenues for Province Governments

Taxes

Non taxes

Vehicle tax

House and land registration fees

Entertainment tax

Tourism fees

Advertisement tax

Services sector fees

Agriculture tax

Fines

(Source: Progress Report, Gandaki Province, National Natural Resources and Fiscal Commission, 2020)

The commission has also recommended that province and local level can raise internal loans which do not exceed 10% of the funds resulting from addition of revenue from revenues sharing (with other level of government) and revenue from internal sources. The fund raised from internal loans can only be used for projects which can be capitalized in the future and provide long term benefits.  Following table give detail information about fiscal transfers from one government to other.

Table 13: Basis for Distribution of fiscal transfers among different tiers of government

Type of Transfers

From     To

Basis

Weightage in percentage

Revenue sharing

Federal to Province

Population and Dependent Population

70

Geography

15

Human Development Index

5

Low Development Indicators

10

Federal to Local

Population and Dependent Population

70

Geography

15

Human Development Index

5

Low Development Indicators

10

Equalization grants

Federal to Province

Indicators for Costs of delivering services

60

Multi Dimensional Poverty Indicators

15

Indicators of economic and social disparity

15

Infrastructure needs of the province

10

Federal to Local

Gap between expenditure needs and revenues

70

Human Poverty Index

15

Indicators of economic and social disparity

5

Infrastructure needs

10

Province to Local

Gap between expenditure needs and revenues

70

Human Poverty Index

15

Indicators of economic and social disparity

5

Infrastructure needs

10

(Source: Progress Report, Gandaki Province, National Natural Resources and Fiscal Commission, 2020)

3.2.1 Equalization grants

The commission recommends amounts for fiscal equalization grants from federal to province and local level based on National Natural resources and fiscal Commission Act 2017 and Inter- Governmental Fiscal management Act 2017. According to these acts, each province and local government receive a minimum grants amounts and fiscal equalization grants based on certain criteria. For distribution at the province level, 25% of the total equalization grant of the federal government is considered as 100%. This 100% is distributed among seven provinces based on their population (50%) weightage and geography (50%) weightage. The resulting amount for a province is considered as a minimum grant. After calculating minimum grant amount to a province, a formula based weightage system is used to fix the fiscal equalization grants. According to the formula, 60% weightage is assigned to costs of services to be delivered, 15% is assigned to Multi Dimensional Poverty Index, another 15% weightage is assigned to economic and social disparity indicators of the province and another 10% weightage is assigned to Infrastructures related indicators. The infrastructure related indicators include road density, Information and Technology Accessibility, and Electricity accessibility. These indicators are derived from various government sources by the commission. In the fiscal year 2075/76, 37.12% of all equalization grants from federal government was allocated to seven provinces. Based on above formula, Gandaki Province received NPR 6.77 billion as equalization grants while the corresponding figure for Gandaki Province in the fiscal year 2076/77 is NPR 7.11 billion.

At the local level fiscal equalization transfers from province to local level is determined by  minimum grants (equal to all local level), formula based weightage system and performance evaluation grants. All local level governments received 60 million as minimum amount of equalization grants for the year 2075/76 and 65 million for the fiscal year 2076/77. According to the formula, 70% weightage is assigned to the gap between expenditure needs and revenue capacity of the local level, 15% weightage is assigned for Human poverty Index of the local level, another 5% weightage is assigned to economic and social disparity indicators of the local level and another 10% weightage is assigned to Infrastructure related indicators of the respective local level. Additionally, the work performance evaluation measures are also accounted for in case of equalization grants to local level. The work performance measures is composed of 40% weightage assigned to financial progress of the previous year, another 40% assigned to whether budget was brought on Ashar 10 of the current fiscal year and another 20% weightage is assigned to whether incomes expenses projections of the local level was shared with Ministry of Finance within Poush of the current fiscal year. Gandaki Province has allocated NPR 1 billion as equalization for 85 local level units in 2075/76 while the corresponding figure for 2076/77 was NPR 1.5 billion.

3.2.2 Conditional Grants

Conditional grants are given from federal to province level and from province to local level to accomplish projects and programs which are of national importance and which produces returns in the long run. The conditional grants supports programs which come under the shared responsibility areas of province and local levels of governments or programs which fall under federal responsibility areas but lower tiers of government are executing those programs. Emphasis is also laid on national level sectoral policy of the state while developing basis for conditional grants. Programs which correspond to schedule 6 and 8 of the constitution of Nepal 2015 concerning rights of province and local level are also included as basis for distributing conditional grants. Conditional grants are also given to programs which correspond to schedule 5 of the constitution of Nepal where the rights falls under jurisdiction of federal level but the programs should be implemented with the help of province and local level. This pertains to those projects executed with the support of foreign funds also. Gandaki Province received NPR 6.50 billion as conditional grants in the fiscal year 2075/76 while it received NPR 5.35 billion in fiscal year 2076/77. The NNRFC has developed basis for the distribution of conditional grants among different tiers of governments from the fiscal year 2076/77. The broad basis for the distribution of conditional grants is as follows:

    • Support to implement national policies across country
    • Programs which address infrastructural needs of the province and local level
    • Programs which help realize commitments made at the national and international level

 

Much like the federal government, the province government can also develop basis of distributing conditional grants among local level governments ensuring that the conditional grants are directed towards implementation of province level sectoral policy, programs and meet development objectives and infrastructure needs of the province. The province government should analyze federal grants to local level before it provides conditional grants to local level. This way it can be ensured that none of the programs supported by conditional grants of the province overlap with programs supported by federal governments at the local level.

The basis for the division of conditional grants was suggested based on discussions with province governments and local level governments for the fiscal year 2075/76 and 2076/77[4]. The Gandaki province did no allocate any amount as conditional grants to local level for the fiscal year 2075/76  and allocated NPR 4.58 million for the fiscal year 2076/77[5].

3.2.3 Raising Internal Loans

 The NNRFC has recommended amount of internal loans which can be taken by federal, province and local level based on the assessment of existing financial settlements of the federal government, economic status of the country, and capacity to pay back loan by lower tiers of governments. The commission has also recommended that province and local level can raise internal loans which do not exceed 10% of the funds by adding amount received from revenues sharing and revenue from internal sources. The fund raised from internal loans can only be used for projects which can be capitalized in the future and provide long term benefits. Gandaki Province government has mobilized NPR 800 million and is expected to raise NPR 988 million as internal loans in the fiscal year 2075/76 and 2076/77 respectively. The NNRFC could not analyze internal loans capacity for local levels because of unavailability of the data.

Revenues

Two major sources of revenues for Gandaki Province are revenue from internal sources and revenue sharing from federal governments. For the fiscal year 2076/77, Gandaki province received NPR 7.70 billion as its share from revenues from internal excise duties and VAT from federal government while it received another 7.11 billion as equalization grants from federal level for the same year.

3.2.4 Vehicle tax sharing among province and local level

The vehicle tax falls under shared jurisdiction of province and local level. The rates of taxes and collection procedures fall under province government. Province uses 60% of the total vehicle taxes and distributes rest 40% among local governments. Local governments receive part of the vehicle tax based on its population (45%) weightage, length of roads (50%) weightage and forest and greenery cover (5%) weightage respectively. The weightage are assigned by the NNRFC. Gandaki Province collected NPR 751 million as vehicle tax in the fiscal year 2075/76 out of which it received 60% of the sum while it distributed rest 40% among local governments in the province. The estimated vehicle tax for fiscal year 2076/77 is NPR 875 million for Gandaki Province.

3.2.5 Revenue from royalties from Natural resources

The inter-governmental fiscal management act 2017 governs the distribution of royalties from natural resources among federal, province and local governments. The royalties from the mountaineering activities area shared among federal province and local level in the proportion of 50%, 25% and 25% respectively. This division ensures proportionate sharing of royalties. The division of royalties is concentrated among those province and local level governments whose population are affected by the presence or use of natural resources or the population contribute to the preservation of natural resources. For instance, incase of royalties from mountaineering, local government where the mountains exist are considered as core areas while local level which share boundary with core areas are considered as adjoining areas. The division of royalties from mountaineering activities is distributed among local governments based on weightage according to following table.

Table 14: weightage assigned to different factors to derive distribution of royalties from Mountaineering

Basis

Weightage

Topography

40%

Local Government with base camp

10%

Affected areas

25%

Affected population

25%

Total

100%

(Source: Progress Report, Gandaki Province, National Natural Resources and Fiscal Commission, 2020)

3.2.6 Royalties from Hydro power plants

The royalties from the hydro power plants are shared among federal, province and local level in the proportion of 50%, 25% and 25% respectively. This division ensures proportionate sharing of royalties. The division of royalties from hydro power plants is distributed among local governments based on weightage according to following table.

Table 15: weightage assigned to different factors to derive distribution of royalties from Hydro power 

Basis

Weightage

Topography

50%

Affected land areas

25%

Affected population size

25%

Total

100%

(Source: Progress Report, Gandaki Province, National Natural Resources and Fiscal Commission, 2020)

3.2.7 Royalties from forests and forests resources

The royalties from the forests and forests resources are shared among federal, province and local level in the proportion of 50%, 25% and 25% respectively. The basis of division of royalties from forests is contingent upon the affected local population and their role in preserving forests resources. Hence, the commission takes into account population in the catchment areas of the forests in addition to political boundaries of the local levels. This division ensures proportionate sharing of royalties. The division of royalties from national forests and conservation forest areas is distributed among affected local governments based on weightage according to following table.

Table 16: weightage assigned to different factors to derive distribution of royalties from Forests 

                              Royalties from National forests

Basis

Weightage

Local governments which has the forests

20%

Land areas of the forests

40%

Population size of local government which has forests areas

20%

Population dependent upon forests resources

10%

Participation in forest conservation

10%

Total

100%

Royalties from Conservation forests areas

Local level with bufferzone of the conservation forest areas

10%

Areas of bufferzone

40%

Population within the bufferzone

35%

Participation in conservation and sustainable management

15%

Total

100%

(Source: Progress Report, Gandaki Province, National Natural Resources and Fiscal Commission, 2020)

3.2.8 Royalties from mineral resources

The Inter-governmental fiscal management act 2017 governs the distribution of royalties from mineral resources among federal, province and local governments. The division of royalties is concentrated among those province and local level governments whose population is affected by the presence or use of such mineral resources or population affected by extraction activities. The royalties from the mineral resources are shared among federal province and local level in the proportion of 50%, 25% and 25% respectively. This division ensures proportionate sharing of royalties. The division of royalties from mineral resources is distributed among local governments based on weightage according to following table.

Table 17: weightage assigned to different factors to derive distribution of royalties from minerals

Basis

Weightage

Topography

50%

Affected areas

30%

Affected population

20%

Total

100%

(Source: Progress Report, Gandaki Province, National Natural Resources and Fiscal Commission, 2020)

3.3 Comparison of Annual Budget

The contribution of economic activities of Gandaki Province bears a sizeable impact in the overall economic life of Nepal. Its contribution to the national GDP ranges around 14.2%. The annual budget of the province for fiscal year 2018/19 was around NPR 28 billion which increased to more than NPR 36.41 billion in the fiscal year 2019/20 and it is estimated to be around NPR 36.35 billion in fiscal year 2020/21 largely due to contraction of economic activities because of covid 19 pandemic. As shown in the following tables, there is increase in the projected income from internal sources an cash in hands, while there is decrease in revenue sharing in 2020/21. The grants from central government are also decreasing yearly. The allocation of grants for local level is increasing yearly.  

Table 18: Comparison of annual budgets of Gandaki Province

Year

2018/19

2019/20

2020/21

Total Budget

                     24,023,300,000.00

              32,134,792,000.00

              34,842,160,000.00

Revenues from internal sourcess

                       1,699,500,000.00

                3,277,500,000.00

                 4,608,560,000.00

Revenue Sharing +Royalties

                       6,576,000,000.00

                8,105,100,000.00

                 7,873,700,000.00

Cash in hand

                           600,000,000.00

                4,800,000,000.00

                 7,000,000,000.00

Internal Loan

                           800,000,000.00

                    988,392,000.00

                 1,000,000,000.00

Loan from Federal Government

 

                1,000,000,000.00

                 1,000,000,000.00

Grants

                     14,347,841,000.00

              13,963,800,000.00

              13,359,900,000.00

Equalization Grants

                       6,776,741,000.00

                7,112,200,000.00

                 7,112,600,000.00

Supplementary Grants

                           714,200,000.00

                    750,000,000.00

                 1,498,900,000.00

Special Grants

                           355,000,000.00

                    750,000,000.00

                    540,000,000.00

Conditional Grants

                       6,501,900,000.00

                5,351,600,000.00

                 4,208,400,000.00

Inter governmental Fiscal Transfer

                       1,200,000,000.00

 NA

 NA

Source:

budget speech 75/76

budget speech 76/77

budget speech 77/78

Gandaki Province government has allocated funds according to its areas of priority. As is true for most province, physical infrastructure and achieving economic growth are two most prioritized areas in the budget for fiscal year 2019/20 and 2020/21 as own by following table. Information for the fiscal year 2018/19 was not available.

Table 19: Yearwise comparison of budgetary allocation in Priority areas by Gandaki Province

Areas

Percentage of total budget

2018/19

2019/20

2020/21

Economic Growth

NA

24.93

23.36

Health and education

NA

38.37

32.44

Urban Development and inter connectivity

NA

0.5

1.68

Production and Productivity increment

NA

21.92

27.3

Social Security and protection

NA

12.35

13.05

Natural resources

NA

1.93

1.92

General Administration

 

 

0.26

(Source: Budget Speech, Gandaki Province 2075/76, 2076/77 and 2077/78)

As shown above, Gandaki Province has emphasized more on agriculture and industry led economic growth, health and education and productivity increment. The province has also put emphasis social security and protection measures for citizens because of its emphasis on achieving improved quality of life for its citizens as prioritized in the Province periodic plans.

[1] https://ocmcm.gandaki.gov.np/pages/about-state

[2] Province Planning Commission, Gandaki Province

[3] http://pradeshsabha.gandaki.gov.np/bills/registered-bills

[4] Progress Report of National Natural Resources and Fiscal Commission 2019

[5] Ibid