Karnali Province

Introduction: Karnali province

Karnali province is one of the seven federal provinces in Nepal. It is the largest province in Nepal by land mass and comprises ten districts. It shares boarders with the Tibet Autonomous Region of China in the north, Sudur Paschim province in the west, Gandaki province in the east and Province no 5 in the south. The province extends across diversified ecological regions including four high hill Himalayan districts (Dolpa, Humla, Jumla and Mugu ), five mountain/mid hill districts (Kalikot, Dailekh, Jajarkot, Salyan and Rukum West), one  district in the  inner terai Valley (Surkhet).

The total area of this province is 24,453 square kilometers. It is one of the least developed province of Nepal with human development index (HDI) 0.469 and literacy rate of 62.77%. The province occupies higher mountain land of north and mid hills of Nepal. Karnali River after which the province was named is the biggest and longest river. Karnali province is considered as an old civilization in Nepal. Archaeological sites found in Jumla, Surkhet and Dailekh assume that the area was a part of Khas kingdom situated in present Jumla district established during 11^th century[1]. Birendranagar is the provincial capital of the province.

Karnali province is one of the least populated provinces among seven provinces of Nepal. The total population of the province is 15,70,418, which constitutes 8,02,495 female and 7, 67,923 male with  population density of 56.33 per square km in according to the population census of 2011. Major  ethnic dwelling in the province  are Brahman, Chhetri, Magar, Kami, Gurung, Damai, Thakuri, Badi, Muslim, Sarki, Sanyasi (Dashanami), Rai, Lohar, Gaine, Raji, Newar, Majhi, Kumal,Tamang, Dolpo, Bhote, and Bantaba etc. Likewise other languages that are spoken in the province are Magar, Gurung, Urdu, Kham, Tamang, Newari, Maitheli, Tharu,   Abadhi, Sherpa, Dolpali, Kaike, Bhote, and Bantaba etc. These languages are commonly spoken within the each ethnicity.

Total number of the agricultural holding in Karnali province is 2,61,770 and area under the holdings is  1, 41,695 ha. The average size of the holdings is 0.54 per holdings. The data available on irrigation for Karnali province vary based on the reporting sources.

Only 21.8 % of population are using electricity for lighting against the national average of 67.3%. More than 61% of populations have access to tap piped and safe drinking water against national average of 47.8%. More than 94% of the households are using fire wood for cooking fuel. Only 3.9% of the population has access to LPG as against of national average of 21%.  The agriculture, forestry and fishing sector comprises more than 35% of the contribution to the provincial gross domestic products (GDP)[2].

Administratively, the province is divided into 54 rural municipalities, and 24 urban municipalities. These 79 local level units are divided into 10 districts as shown below.

Table 1: Number of local levels and wards across all districts of Karnali province

1. Karnali Province Government

The Karnali 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 Karnali 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.

1.1 Institutional Profile

There are seven ministries in Karnali province according to the provision of the Constitution of Nepal 2015 article 168. 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 Karnali province.

Table 2: Ministries and their Departments

• Karnali Province Assembly

The first meeting of the province assembly of Karnali province was established and its first meeting was conducted in February 08, 2018. There are 93 members of the province assembly who comes from 14 districts. There are 56 province assembly constituencies. 56 members of the provinces assembly are elected from these 56 constituencies in First-Past-the-Post system and another 37 members are elected on the basis of proportional system of election. In the current province assembly, there are 67 members of Communist Party of Nepal, followed by 21 of Nepali Congress, 3 members from Samajwadi Party, and one member each from Sanghiya Loktantrik Rastriya Manch and Rastriya Prajatantra Party.

Table 3: Members according to electoral system and Gender

Following table shows the seats gained by political parties in the province assembly polls. The tenure of these members are 5 years from the election year of 2017/18.

Table 4: Members of Province Assembly based on Political Party

As shown from following table, the districts have different number of constituencies for province assembly. 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 have atleast sizeable representation in the province assembly.

Table 5: Number of elected representatives according to district

Karnali province assembly has also created four committees from amongst its members which work as mini parliament. Following table shows the number of committees and their scope of work.

Table 6: Thematic committees of Province Assembly with Scope

Until current fiscal year, the Karnali province assembly has conducted 5 sessions of the parliament. The parliament has promulgated laws to deliver services for the citizens. Following table details the information of various sessions:

Table 7: Information on various business of the Province assembly

There are altogether 27 employees in the secretariat of the Province Assembly in Karnali province. The secretariat has Administration and Meeting Department with 6 branches and Laws and Legislation Department with 2 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. Until Ashar 2077, the total number of bills registered is 46. Out of which the province assembly has passed 33 of these bills and 29 of these passed bills have been promulgated as acts and published in the province gazette.

1.3 Legal profile

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

Table 8: Laws prepared by the province assembly by date of authentication

1.4 Fiscal Profile

Budgetary provisions for Karnali 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 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 9: Sources of Indicators used by National Natural Resources and Finance Commission

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 Karnali province as provisioned in the Inter- government fiscal transfer act 2074.

Table 10: Sources of revenues for Province Governments

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 11: Basis for Distribution of fiscal transfers among different tiers of government

1.4.1 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. Equalization grants are allocated to a government based on its expenditure needs and revenues capacity by a higher level of government. 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 were allocated to seven provinces. Based on above formula, Karnali province received NPR 9.131 billion as equalization grants while the corresponding figure for Karnali province in the fiscal year 2076/77 is NPR 9.86 billion. Likewise transfers from province government to local levels equaled to NPR 4 million in fiscal year 2075/76 and it increased to NPR 8 Million in the fiscal year 2076/77.

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. 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 were allocated to local level.

1.4.2 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. In the fiscal year 2075/76, 36.49% of all conditional grants were allocated for provinces. 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. Karnali Province received NPR 7.56 billion as conditional grants in the fiscal year 2075/76 while it received NPR 5.27 billions 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 172 billion and NPR 168 billion respectively[4].

1.4.3 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. Karnali Province government has mobilized NPR 1 billion  and 7.5 million as internal loans in the fiscal year 2075/76 and 2076/77 respectively.

Revenues

In the fiscal year 2076/77, the Karnali Province received 11.6% of total allocation for revenues to be distributed. It received 7444300000 from total revenues from excise and VAT in the same year.

1.4.4 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. Karnali Province collected NPR 75 million as vehicle tax 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 125 million for Karnali province.

1.4.5 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 12: weightage assigned to different factors to derive distribution of royalties from Mountaineering

1.4.6 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 13: weightage assigned to different factors to derive distribution of royalties from Hydro power

1.4.7 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 14: weightage assigned to different factors to derive distribution of royalties from Forests

1.4.8 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 15: weightage assigned to different factors to derive distribution of royalties from minerals

[1] http://ocmcm.karnali.gov.np/about, ‘Karnali Pradesh Ek Chinari’

[2] CBS, (May 2020), Composition of Gross Domestics Product by Industrial Division at province (2075/2076), Table 3.

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

[4] Ibid