The National Natural Resources and Fiscal Commission (NNRFC) has proposed a financial equalisation grant of Rs 151.707 billion for provincial and local governments in the upcoming fiscal year.
Out of the total amount, Rs 61.503 billion has been allocated for provincial governments, while Rs 90.204 billion has been set aside for local levels. The recommendation follows constitutional and legal provisions, including Article 60 of the Constitution of Nepal, the National Natural Resources and Fiscal Commission Act 2074, and the Intergovernmental Fiscal Management Act 2074.
The commission has structured the grant into three categories: minimum grants, formula-based grants, and performance-based grants. For provinces, the minimum grant has been fixed at Rs 15.375 billion, accounting for 25 percent of their total allocation. This minimum amount is determined by equally weighing population and geographical area.
Province-wise, the recommended minimum grants include Rs 2.826 billion for Koshi, Rs 1.906 billion for Madhesh, Rs 2.754 billion for Bagmati, and Rs 1.882 billion for Gandaki. Likewise, Lumbini is set to receive Rs 2.465 billion, Karnali Rs 1.787 billion, and Sudurpaschim Rs 1.813 billion.
For local governments, the minimum equalisation grant has been proposed at Rs 30.83 billion, making up 34.18 percent of their total share. Formula-based allocations consider multiple indicators, including human development index (10 percent), socio-economic inequality (5 percent), infrastructure development (15 percent), and expenditure needs along with revenue capacity (70 percent).
The total grant distribution will combine minimum, formula-based, and performance-based allocations. The commission has also suggested adjustments to ensure fairness, particularly for metropolitan cities, and noted that 40 local units would receive less than Rs 70 million under minimum and formula-based grants.
