Democracy and Federalism

Natural Resource Sharing – A Bone of Contention

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Nepal’s governance system took a new formation and entered federal system after the promulgation of constitution in 2015. Nepal adopted 761 governments, one federal, seven provincial, and 753 local. As per as the constitutional mandate, the government formed the National Natural Resources and Fiscal Commission (NNRFC). The commission has been constituted with significant responsibility for the balanced development, budget, and natural resources management in the federal structure of the country.[1] However, even after one and half year of the formation of the NNRFC, various disputes remain unresolved.

In the commission’s recommendation, the government has set budget limits for local and provincial governments. But some local governments have complained that the NNRFC allocated less budget. The commission has to allocate the budget at any cost but it is creating disputes among the local governments on sharing natural resources. Due to the lack of act regarding the natural resources distribution, disputes in the natural resource is increasing day by day.

The federal government mainly collects value added tax (VAT), excise duty, customs duty and income tax. VAT and domestic excise are shared among three tiers of governments.[2] In this context, the federal government collects VAT. Out of the total collected VAT, the federal government keeps 70% and provincial and local government keeps 15% each.  Assuming 15% as 100%, it is distributed in all seven provinces and another 15% on the same formula is distributed to all 753 local governments.[3]

The NNRFC has also recommended the budget limit for all three tiers of government. It is also managing deficit budget through the internal loan that can fulfill the deficit budget. Reportedly, the deficit budget is increasing every year.[4]

Dispute among the local governments

The constitution of the Nepal has provided authority to the NNFRC for resolution of disputes among the natural resources available in the three tiers of government. There are a lot of controversies among the local governments. There are disputes in two rural municipalities of Dhangadhi, and Kailali about extracting sand and stones from rivers.[5] Similarly, dispute occurred in Mugu and Jumla districts on land and grazing area.[6]

Dispute among the provincial and federal governments

Province 2 filed a writ petition at the Supreme Court against the federal government on 1 August 2019 saying that the Sagarnath Forest Development Project (SFDP) was being used by the now defunct Timber Corporation of Nepal under Forest Corporation, a federal entity. Province 2 government challenged the federal government’s June 6 decision that authorized the merger of SFDP with Timber Corporation of Nepal, which was later put in the Forest Corporation.[7] Sagarnath Project was being managed under the guidance of the five-year Sustainable Forest Management Plan formulated since FY 2060/61.[8]

A similar dispute has surfaced between Gandaki Pradesh and Province 5. The government started Kaligandaki-Tinau diversion project and wants to divert the Kaligandaki River water in Tinau River for irrigation and electricity. But Gandaki Pradesh is objecting to it saying that the company was established mainly in the Tinau River. However Province 5 is pushing to implement the project at any cost.[9] In another like issue, a dispute has been seen between Karnali Pradesh and Province 5 over Bheri-Babai diversion. Locals of Karnali claim that only Province 5 is getting the benefit from the project.[10]

The disputes majorly are between federal with provincial, federal with local, and provincial with local governments. Maximum disputes have been seen regarding resources such as rivers, jungles, district borders, and irrigation projects. The federal and provincial governments want to distribute natural resources as VAT is being distributed across the country. However, the locals have put maximum effort and time to preserve the natural resources. In this case, there is lack of rule related to sharing of natural resources. The federal and provincial government also have claim on natural resources available in their provinces and localities. Likewise, the government should be provided ownership base of the natural resources. Most of users should be the ones who are nearest to the resources and who deserve it. But, problem is, how to divide the usability of the natural resources among the users. It is difficult. The better way could be giving the ownership to the people living near the resources.

Author: Phiroj Chaudhary


[1]https://www.lokaantar.com/samachar/35963

[2] https://thehimalayantimes.com/opinion/editorial-burden-of-taxes/

[3] https://www.khabarhub.com/2019/19/65688/

[4]https://thehimalayantimes.com/opinion/budget-review-2019-balanced-but-ambitious/

[5]https://www.kantipurdaily.com/pradesh-7/2019/02/07/15495115370446860.html

[6]https://ekantipur.com/national/2018/06/24/152980548112535248.html

[7]https://thehimalayantimes.com/nepal/province-2-sues-federal-government/

[8] http://fpdb.gov.np/eng/index.php/work-operation/2-pages/27-sagarnath-project-management

[9]https://www.nayapatrikadaily.com/news-details/23315/2019-08-22

[10]https://english.khabarhub.com/2019/20/38813/

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