KATHMANDU: Local-level representatives are united against the federal government's decision to cut the fiscal equalization grant by 25 percent for the last installment of the current fiscal year (FY) 2080/81.

After the federal government reduced the fiscal equalization grant due to low revenue collection and resource crunch, local-level representatives staged a protest in front of the Ministry of Finance on Sunday. The Council of Ministers meeting on February 8 had decided to reduce the fiscal equalization grant for the last installment of the current year by 25.89 percent.

Local representatives stated that the reduction of the equalization grant has affected development and construction work in the rural municipalities as they have limited resources. Most of the municipalities rely heavily on resources provided by the central government for their budgets.

Local representatives demanded the federal government to reverse the grant cut, calling it unconstitutional, and correct this decision within one week. Representatives from the National Association of Rural Municipalities in Nepal and the Municipal Association of Nepal, who participated in the demonstration outside the Ministry of Finance, warned that if they do not receive the grant within the specified period, they will shut down the local governments across the country.

According to them, projects have been affected due to the lack of disbursement of Rs 24.48 billion under equalization grant this year. On May 20, a joint meeting of both the associations decided to meet with the Prime Minister, Minister of Finance, and Chief Whips of all political parties to demand the immediate disbursement of the stalled equalization grant. Consequently, the local level united in protest.

Bhim Prasad Dhungana, president of the Municipal Association of Nepal, said that the federal government has not sent the full amount of the fiscal equalization grant due for the last installment and has made further cuts in the new budget. "We feel that the government has cheated us," he told New Business Age. "We want to have a meaningful conversation with the federal government. Now we will not stay silent."

Despite calling for the correction of the decision made some months ago, Dhungana stated that they had to resort to protest as they did not receive any response from the federal government. Last year, the federal government also cut the subsidy but had to back down after strong protests. Dhungana noted that the same unconstitutional attitude is being displayed by the central government now, and they will not back down.

Laxmi Devi Pandey, president of the National Association of Rural Municipalities in Nepal, said that since the grant supposed to be sent to the villages was not sent, she had to come to Kathmandu. "We are meeting the finance minister and the prime minister," she said. "The federal government's decision to cut the grant amount is not acceptable."

The federal government sends four types of grants to the local levels: Equalization, Conditional, Special, and Supplementary. People's representatives said that most municipalities rely on subsidies, so cutting the budget will affect municipal operations. The Ministry of Finance stated that the fiscal equalization grant has been reduced due to resource crunch resulting from low revenue collection this year.

Despite pressure from local-level representatives, Uttar Kumar Khatri, Joint Secretary and Head of the Planning Division at the Ministry of Finance, stated that resources cannot be provided as demanded. "The government was unable to raise resources according to the target, so it had to cut the fiscal equalization grant to the local level," Khatri said.

The federal government has allocated Rs 567 billion for the upcoming fiscal year to the state and local levels under various headings, which is less than the current year. The revenue to be transferred to state and local levels will be less next year compared to the current year.