BIJAY DAMASE

KATHMANDU: Most of the provinces have downsized their budgets due to the decision of the federal government to reduce grants. The state governments' ability to expand their budgets has been significantly affected after the federal government announced to reduce subsidies.

In the current fiscal year (FY) 2080/81, the federal government allocated Rs 105.6 billion in grants to all seven provinces. However, for the upcoming fiscal year 2081/82, the allocation has been reduced to Rs 96.45 billion. This reduction has impacted the provincial governments' budget allocations.

On Saturday, the state governments announced their budgets for the upcoming fiscal year 2081/82. Except for Bagmati and Sudurpaschim provinces, the budget size of the provincial governments for the next fiscal year has decreased compared to the current fiscal year.

Ram Bahadur Magar, Economic Affairs Minister of the Koshi Province government, stated that the federal government's grants has decreased and the state has not met its revenue collection target, leading to a reduced budget size.

"A significant grant from the center has decreased. We could not propose a large budget this time because our internal revenue is weak," he said in a conversation with New Business Age. The federal government provided Rs 16.11 billion rupees in grants to this province for the current year, but only Rs 14.54 billion have been allocated for the next year.

Madhesh Province has also reduced its budget size for the next year due to the grant cuts. The federal government has allocated Rs 11.35 billion for Madhesh Province this year.

Gandaki province faces a similar situation, with its budget affected by the decline in federal grants. Gandaki received Rs 13.6 billion in federal grants this year but will receive only Rs 12.58 billion next year.

Lumbini's subsidy allocation has decreased from Rs 15.38 billion this year to Rs 14.1 billion next year.

Karnali Province will also have a smaller budget next year due to federal grant cuts. It received Rs 16.27 billion this year but will receive only Rs 16.3 billion next year.

Despite the decrease in federal grants, Sudurpaschim and Bagmati provinces have increased their budget sizes. Sudurpaschim will receive a central grant of Rs 13.83 billion next year, down from Rs 14.42 billion this year. Bagmati, which received Rs 15.81 billion in federal grants this year, will get only Rs 14.7 billion next year.

The federal government distributes equalization, conditional, special, and supplementary grants to provinces and local levels. These sub-national governments also receive resources from revenue sharing. The resources from revenue distribution to state and local levels have also been reduced. The federal budget states that these two levels of government will receive Rs 159 billion from revenue distribution next year, down from Rs 173 billion allocated this year.

Binay Kumar Mishra, Assistant Professor of the Department of Public Policy at Kathmandu University, commented that the significant reduction in grants to provincial governments will impact the size of next year's budgets.

"The government made a mistake by cutting conditional and equalization grants. This will impact the socio-economic sectors of the provinces," he told New Business Age.

Provincial Budgets

Koshi

Koshi has announced a budget of Rs 35.27 billion for the upcoming year, down from Rs 36.24 billion this year. Economic Affairs Minister Ram Bahadur Magar attributed the reduction to decreased federal grants and lower-than-expected internal revenue. The province has prioritied infrastructure development, agriculture, and tourism, with Rs 10.41 billion allocated for road infrastructure and Rs 2.67 billion for industry, commerce, and cooperatives. The budget for free treatment services for children under 10, introduced by the previous government, has been cut. The province will celebrate 2082 as Tourism Year and has allocated funds for local income programs and various festivals.

Madhesh

Finance Minister Bharat Prasad Sah announced a budget of Rs 43.89 billion for the next year, slightly down from Rs 44.11 billion this year. The budget allocates Rs 16.07 billion for current expenses and Rs 27.89 billion for capital expenses. The province has also allocated significant funds to the Ministry of Physical Infrastructure.

Bagmati

Economic Affairs and Planning Minister Jagannath Thapalia presented a budget of Rs 67.54 billion for the upcoming year, up from Rs 62.77 billion this year. The budget focuses on roads, agriculture, and tourism, with significant allocations for road construction and agricultural modernization.

Gandaki

Economic Affairs Minister Dr Takaraj Gurung's budget includes provisions for branding domestic liquor and legalizing marijuana cultivation. The budget has also allocated funds to local governments and for tourism development, including bicycle lanes and homestay programs. The total budget for next year is Rs 32.97 billion, slightly down from Rs 33.42 billion this year.

Lumbini

Economic Affairs and Planning Minister Chet Narayan Acharya announced a budget of Rs 38.97 billion for the upcoming year, down from Rs 40.47 billion this year. The budget prioritizes infrastructure, technology and education and has allocated significant funds for Lumbini Technical University.

Karnali

Economic Affairs Minister Mahendra KC presented a budget of Rs 31.41 billion for the next year, down from Rs 33.37 billion this year. The budget focuses on economic prosperity, social justice, poverty alleviation, job creation, and entrepreneurship.

Sudurpaschim

Economic Affairs Minister Surendra Bahadur Pal announced a budget of Rs 31.62 billion, up from Rs 29.26 billion this year. The budget includes provisions for increasing state income through revised tax rates and formalizing private businesses.