Provinces, local levels to get Rs. 305bn revenue from federal govt in next FY

Kathmandu, Apr. 4: The provincial governments and local levels are set to receive around Rs. 305 billion through revenue sharing and fiscal equalisation grants in the upcoming fiscal year 2025/26.

The federal government has estimated that the provincial and local levels will receive about Rs. 156 billion in upcoming fiscal year 2025/26 through revenue sharing and about Rs. 149 billion through fiscal equalisation grants.

The meeting of Council of Ministers held on March 31 had approved the detailed basis and format for revenue sharing to be provided to the provincial and local levels for the period 2025/26 to 2029/30.

The same meeting also approved the estimated amount of revenue sharing to be provided to level governments for the upcoming fiscal year. It also approved the minimum, formula-based, and performance-based fiscal equalisation grant amounts to be provided to the provincial and local levels in the upcoming fiscal year.

According to the same approved limit, the federal government has estimated that in the coming fiscal year, the provincial government will receive Rs. 78.08 billion through revenue sharing, and local governments Rs. 78.85 billion, totaling Rs. 156.17 billion.

Of the revenue collected by the federal government, revenue collected from value-added tax (VAT) and excise duty on domestic products is distributed. 

The federal government keeps 70 per cent of the revenue collected in this way, and the remaining 30 per cent is distributed to the provincial and local levels at a rate of 15 per cent each.

Among the seven provincial governments, Koshi Province is expected to receive the most revenue from the revenue sharing of Rs. 12.39 billion. 

Similarly, Madhes Province will receive Rs. 12.358 billion, Lumbini Province Rs. 11.86 billion, Bagmati Province Rs. 11.52 billion, Karnali Province Rs. 10.27 billion, Sudurpashchim Province Rs. 9.87 billion and Gandaki Province Rs. 9.79 billion.

Likewise, federal government has estimated that provincial governments will receive Rs. 60.66 billion through fiscal equalisation grants and local governments will receive Rs. 88.96 billion , totaling Rs. 149 billion.  In the coming fiscal year, the Karnali provincial government will receive the most financial equalisation grant, while the Madhes province will receive the least.

The Karnali provincial government will receive a grant of Rs. 10.56 billion. Out of which, grant under the heading of minimum of Rs. 1.76 billion will be received, a formula-based grant of Rs. 8.43 billion and a performance-based grant of Rs. 365.2 million.

Similarly, Koshi Province will receive grant of Rs. 8.89 billion. Of this, grant under minimum of Rs. 2.78 billion will be received, a formula-based grant of Rs. 5.79 billion and performance-based grant of Rs. 396.3 million.

Likewise, the Madhes Province will receive fiscal equalisation grants of Rs. 7.72 billion, Bagmati Province Rs. 8.28 billion, Gandaki Province Rs. 7.73 billion, Lumbini Province Rs. 8.44 billion and Sudurpashchim Province Rs. 8.92 billion in the fiscal year 2025/26.