Bagmati Province

Introduction: Bagmati Province

Bagmati province 3 is located between Tibet (China) in the north and province 2 in the south. It is the third smallest province of Nepal. Kathmandu, the capital city of Nepal lies in this province and thus is the highest populated province. Most of the part of this province is hilly and mountainous. The major trade centers of this province are Kathmandu valley, Hetauda, Chitwan, Banepa, Sindhuli Gadi, Kerung and Tatopani. The Chitwan National Park, Sindhuli Gadi, Bhaktapur, Patan, Bashantapur, Dhulikhel, Nagarkot and Jiri are some of the major tourist destinations of this province.

The total area of Bagmati province is 20,300 sq. Km. It is bordered by Province 1 to the east, Gandaki Province to the west, China to the north and Province 2 to the south, and India. It includes districts such as Nuwakot, Kavrepalanchok, three districts of the valley (Kathmandu, Lalitpur and Bhaktapur) and three districts of the inner Madhes (Sindhuli, Makwanpur and Chitwan). According to the population census of 2011, Bagmati Province is home to 55,42,452 people with 12,70,797 households with average household size of 4.35. The population density of the province is 754 per square kilometers. The province is mainly inhabited by Tamang (20.42 percent), Brahmins (18.28 percent), Kshetris (17.28 percent), Newar (16.92 percent) and there is presence of 104 castes whose share is less than 1 percent. 57.42 % of the population speaks Nepali language while another 18.32 % and 12.3% population speak Tamang and Newari language. The province shares 41.28% of total national GDP in Nepal. The value of its GDP in the year 2075/76 remained at NPR 1.257 trillion. Wholesale and trade, real estate and Agriculture and forestry, are the three major contributions to the province level GDP whole percentage contribution are 20%, 18% and 11% respectively. According to the Human Development Report 2014, the per capita income of the province is US $ 1917 in the fiscal year 2075/76 according to the Province Planning Commission. The Human Development Index of the province is .558. Average life expectancy for the province is 69.7 years and an overall literacy rate is 74.85%.

There are 119 local levels in 13 districts of the province including 3 metropolitan cities, 1 sub-metropolitan city, 41 municipalities and 74 village municipalities. Kathmandu, Lalitpur and Bharatpur are the three metropolitan cities within the province while Hetauda is the only sub-metropolitan city. The number of villages and municipalities in this state is 15.80 percent of the total number of villages and municipalities in Nepal. Kathmandu and Bhaktapur districts have no village municipality while Rasuwa district has no municipality. Out of the total population of villages and municipalities of Nepal, the population of villages and municipalities of this province occupies 20.74 percent. The local level of Kathmandu accounts for 31.22 percent of the total local level population of the province. Similarly, Makwanpur has the largest geography at 11.76 percent. There are 33 national level political constituencies and 66 province constituencies. These 119 local level units are divided into 13 districts as shown below.

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

              (Source: https://www.sthaniya.gov.np/gis/)

Bagmati Province has also developed a first periodic development plan covering fiscal year (2076/77 – 20780/81). 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 (2076/77 – 2080/81)

      (Source: First periodic Plan 2077/78 – 2079/80, Province Planning Commission, Bagmati Province)

1. Bagmati Province Government

Bagmati province has elected its executive head from amongst members of the province assembly. The total number of council of ministers cannot exceed 20 percent of the total members in the provincial assembly. The Bagmati 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 Bagmati 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. Besides the ministries, the province also has office of Attorney General, Province Finance Comptroller Office, and Province Planning Commission.

1. Institutional Profile (Ministries, departments, Units, service points, elected representatives, employees etc..)

There are seven ministries in Bagmati Province according to the provision of the Constitution of Nepal 2015. The article also provisions for division of responsibilities among different ministries. Following table give detail information about name, scope and department within each ministry of Bagmati Province. Currently, there are 7 ministers who lead 7 ministries in Bagmati Province. Mr. Shankar Pokhrel is the Chief Minister and he also manages Ministry of Economic affairs and Planning. Portfolio of other ministers are given below:

Table 3: Porfolio held by Ministers in Bagmati Province

                             (Source: Office of Chief Minister and Council of Ministers, Bagmati 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 coordination and collaboration among province and local level especially in areas of concurrent jurisdiction. Bagmati province has also constituted province coordination council based on the provisions laid out in the Local Government Operation Act 2074 article 105[1]. According to the provision, the chief minister of Bagmati province is the coordinator of the council which meets atleast 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 Bagmati Province

(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. The first meeting of the council for Bagmati province was held on Jestha 7-8, 2075 in Hetauda and second meeting was conducted on Jestha 29-30 in Hetauda[2]. The meeting has pronounced various declarations in following areas:

• Provide boost to the national vision and provisional vision of Happy Nepali and Prosperous Nepal
• Increase coordination and partnership with province governments in areas of laws formulation, development priorities and governance.
• Share laws drafted at the local level with office of chief minister and council of ministers to develop a common resources
• Communicate with ministry of internal affairs and planning so as to make effective planning and implementation of plans.
• Maintain coordination with respective ministries and agencies in improving security of life and government services.

Employee Management

Table 5: Number of staff in ministries/agencies in Bagmati province

 (Source: Paper Presented at the Province Coordination Council Meeting, 2076)

2. Province Assembly

The assembly of Bagmati Province has been constituted according to article 175 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 40 percent from the proportional representation system. The number of province level constituencies is 66. These 66 seats have been considered as 60% and rest 40% seats were allocated for members to be elected through proportional representation system. In total there are 110 members of the Bagmati province assembly. Proportional representation system has ensured that representatives from the Dalit, Indigenous nationalities, Khas Arya, Madheshi, backward regions, and minority communities are represented in the assembly in proportion to their population. The state 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, parliamentary party structures as well as committee chairpersons and office bearers such as Leader of Opposition and ruling party, Deputy Leader, Chief Whip, Whip. 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 form the government, pronounce legislations, monitoring province agencies, and discuss and approve budget.

The first meeting of the province assembly of Bagmati Province was conducted on February 01 2018. There are 66 members of the province assembly who comes from 13 districts. There are 66 province assembly constituencies. 66 members of the provinces assembly are elected from these 66 constituencies in First-Past-the-Post system and another 44 members are elected on the basis of proportional system of election.

Table 6: Members according to electoral system and Gender

              (Source: Province Assembly, Bagmati Province, 2020)

In the current province assembly, there are 81 members of Communist Party of Nepal, followed by 21 of Nepali Congress, 3 members from Nepal Majdoor Kisan Party, and two members from Rastriya Prajatantra Party  and one independent member. 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 7: Members of Province Assembly based on Political Party

                                           (Source: Province Assembly, Bagmati Province, 2020)

Geography and population were the two criteria for delimitation of the constituency with slightly higher weightage assigned to geography such that low population geography also has atleast sizeable representation in the province assembly. Bagmati Province assembly has also created five committees from amongst its members which work as mini parliament. Following table shows the number of committees and their scope of work.

Table 8: Thematic committees of Province Assembly with Scope

(Source: Province Assembly, Bagmati Province, 2020)

Until current fiscal year, the Bagmati Province assembly has conducted 6 sessions of the parliament. The parliament has promulgated laws to deliver services for the citizens. Following table details the information of various sessions:

Table 9: Information on various business of the Province assembly

(Source: ……………, Bagmati Province Assembly Secretariat, 2020)

There are altogether 29 employees in the secretariat of the Province Assembly in Bagmati Province. The secretariat has Work Procedures Department with 3 branches; Laws and Legislation Department with 1 branches and Administration Department with 4 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.

Legal Profile (Laws prepared, plans and policies etc..)

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

Table 10: Laws prepared by the province assembly

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

• Fiscal Profile

3.1 Mid Term Expenditure Framework

3.2 Budgetary provisions for Bagmati 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 12: Sources of Indicators used by National Natural Resources and Fiscal Commission

(Source: Progress Report, Bagmati 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 Bagmati Province as provisioned in the Inter-government Fiscal transfer Act 2074.

Table 13: Sources of revenues for Province Governments

(Source: Progress Report, Bagmati 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 14: Basis for Distribution of fiscal transfers among different tiers of government

(Source: Progress Report, Bagmati 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, Bagmati Province received NPR 5.96 billion as equalization grants in the fiscal year 2075/76 while the corresponding figure for Bagmati Province in the fiscal year 2076/77 is NPR 7.59 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. In the fiscal year 2075/76, 62.88% of all equalization grants from federal government was allocated to local level. Bagmati Province has allocated NPR 1 billion as equalization for 119 local level units in 2075/76 while the corresponding figure for 2076/77 was NPR 1.25 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. Bagmati Province received NPR 10.61 billion as conditional grants in the fiscal year 2075/76 while it received NPR 7.46 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[3]. The amount of conditional grants allocated for the fiscal year 2075/76  and 2076/77 are NPR 3.63 billion and NPR 1.83 billion respectively[4].

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. Bagmati Province government has not mobilized internal loans in the fiscal year 2075/76 and 2076/77 while information regarding internal loans mobilized by local governments of Bagmati province was not available.

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. Bagmati Province collected NPR 6 billion 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 total vehicle tax for fiscal year 2076/77 is NPR 7.5 billion for Bagmati Province out of which it is expected to keep 60% (4.5 billion) in its consolidated fund and distribute arounf NPR 3 billion among its 119 local levels.

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

(Source: Progress Report, Bagmati 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 16: weightage assigned to different factors to derive distribution of royalties from Hydro power 

(Source: Progress Report, Bagmati 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 17: weightage assigned to different factors to derive distribution of royalties from Forests 

(Source: Progress Report, Bagmati 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 18: weightage assigned to different factors to derive distribution of royalties from minerals

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

3.3 Comparison of Annual Budget

The contribution of economic activities of Bagmati Province bears a sizeable impact in the overall economic life of Nepal. Its contribution to the national GDP ranges around 41%. The annual budget of the province for fiscal year 2018/19 was around NPR 35 billion which increased to more than NPR 47 billion in the fiscal year 2019/20 and it is estimated to be around NPR 51 billion in fiscal year 2020/21 despite contraction of economic activities amidst covid 19 pandemic. As shown in the following tables, there is increase in the projected income from internal sources, while there is decrease in revenue sharing in 2020/21. The grants from central government are also decreasing yearly but the yearly grants to local level are increasing.

Table 19: Comparison of annual budgets of Bagmati Province

Bagmati 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 prioreitized areas in the budget for fiscal year 2019/20 and 2020/21 as hown by following table. Information for the fiscal year 2018/19 was not available. The province ran on budget deficits for fiscal year 2075/76 and 2076/77 while the projection for fiscal year 2077/78 show null budget deficits.

Table 20: Yearwise comparison of budgetary allocation in Priority areas by Bagmati Province

(Source: Budget Speech, 2075/76, 76/77, and 77/78, Ministry of economic affairs and Planning, Bagmati province)

As shown above, Bagmati Province has emphasized more on economic growth, urbanization and connectivity and general administration while decreasing allocation to health and education and governance. It is noteworthy that investment in general administration has increased substantially in the budget.

[1] Program Report Second Province Coordination Council Meeting, Bagmati province 2019/20

[2] Ibid

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

[4] Ibid