Local bodies won’t be sustainable if they cannot generate revenue

  • Interview Khem Raj Nepal

Jan 9, 2017-Ten months after its formation, the Local Level Restructuring Commission (LLRC) has finally submitted its report to the prime minister on Friday. The commission, which was given a constitutional mandate to determine the number and borders of village and municipal councils, has proposed 719 village and municipal councils including four metropolitan and 12 sub-metropolitan cities. But the Madhes-based parties are dissatisfied with the report claiming that the proposed demarcation of the local boundaries is incomplete and biased against the Madhes. Mukul Humagain and Binod Ghimire spoke to Khem Raj Nepal, who has over four decades of experience in regional planning and who is a former secretary in the Ministry of Local Development, about the LLRC’s report, sustainability of local bodies, the Madhesi reservations and the transition to the new local level government. 

How have you assessed the report submitted by the LLRC?

It is a positive sign that the report has finally been submitted to the government. Earlier we always discussed the decentralisation of the local bodies. But that is not an issue anymore, as for the first time the constitution has turned the local bodies into a separate level of government and has clarified their rights and duties. But I see many conflicts in the future as we try to implement the constitutional provisions on local bodies.

Do you mean conflicts between the provincial and the local governments?

No, I mean conflicts while formulating the required laws for the local bodies as envisaged in the constitution. The provincial government is another issue altogether. It has been 50 years since we’ve had local bodies in place so we have an idea about how these bodies are to function. But we have never had a provincial government. So it does not really make sense to expect a new form of government to set the mandate for the local bodies. Thus, if the political parties accept the present report and agree to the number of local bodies, it will lay the foundation for the provincial government.

As such, the political parties do not have much option but to accept the report. However, as the constitution allocates more responsibilities to local bodies than earlier—from collecting local taxes to handling public services such as education, health, drinking water and road, among others—it is crucial to ensure that the proposed local bodies will have enough resources. As Nepal still does not have many industries, we only have natural resources to rely on at present. So the larger the area of a local unit, the more resources it will possess. And as local units are to preserve natural resources, they can plan better to best use the resources available to them.

What are your thoughts on the proposed 719 local units?

Earlier I had never heard the argument that Nepal could not develop because of the number of local bodies or their boundaries. I do not know why we started the debate on this issue in the first place. For me the number of local bodies is not important and I am fine with the proposed number. The only concern for me is about connectivity among local units. For instance, now that Nawalparasi and Rukum have been placed in different provinces, will the local body at the district level be divided into two bodies? If we are going to have separate offices, either we will have 77 districts, or we need to allow the local bodies to extend beyond provincial boundaries.

But if adequate resources will be required for local units to sustain themselves, how can their number be inconsequential? Shouldn’t revenue generation and administration costs be a concern while creating local units?

Well, yes they should be of concern. But when we talk about increasing the number of local units, we are implying that their revenue generation will also be prioritised through various means. In no way does it mean that the centre will finance them. And given the resources the local units possess, it is very unlikely that they will be able to sustain themselves for even a decade. But then again we do not even know the actual amount of natural resources they have, as we do not have a resource inventory for local bodies till now.

The proposed local units are not sustainable at all. The constitution has envisaged that the work which was being done by the VDCs will now be carried out by the wards so that the state is closer to the people. But to make the wards perform the functions of the VDCs, they will require more human resources, and therefore, more financial resources. This does not seem feasible now. Moreover, as the local bodies are to handle public services like education, the financial burden on them is going to be massive. Then again we have the issue of taxation. Currently, our local bodies have an indirect taxation system in place, which is wrong. We need a direct tax system if we are to increase revenue. But none of our political leaders want to propose that as they fear a public backlash. However, if we fail to apply direct taxation at the local level, we will not be able to sustain the local bodies and the centre will have to fund them.

If the local bodies cannot sustain themselves, will they not be defunct with time?

There will be a lot of confusion in the coming days. First the government needs to prepare a resource inventory for the local bodies, as it is imperative to explore the natural resources within the local units. With regard to resources, the immediate areas about which there might be conflicts are forest, water and land. The government will have to clarify which level of government will have the first right over these resources. The issue of logistics for government offices and employees at the local level will have to be handled as well. So the government needs to act swiftly in finishing the requirements to establish the local bodies including the Local Bodies Act.  If it fails to do so, there is a huge possibility that the local bodies will become defunct.

Is the commission’s report legally binding for the political parties?

No, it is not. Even though the LLRC is a constitutional body, its report is only a recommendation. The political parties will need to go over it and they can even make changes as long as they can justify them. Only then will it be endorsed by the Cabinet.

The Madhesi parties have been opposing the local bodies as provisioned in the constitution, and they have been critical of the recent report as well. They argue that power has been transferred from the provincial government to the local government. What is your take on this?

The Tarai districts had the most VDCs. For instance, Saptari and Siraha had the highest numbers of VDCs. Now that the VDCs have been removed, it is a worry for the Madhesi parties because they will have fewer positions to give out to their cadres. So this is one of their concerns.

The other argument that I keep hearing from the Madhes is that the provincial government should get to decide the number local bodies as the local government should be under the supervision of the provincial government. But this is wrong because the local bodies will lose their autonomy then. The constitution has divided the country into three levels of government for a reason. 

The Madhesis have made it clear that they are protesting because of political reasons, but they need to realise that their remonstration will only hinder the growth of their region. Eventually they will have to be part of the local bodies if they are to maintain their political existence.

What is the international practice while forming the local level government?

The underdeveloped and developing countries do not have such provisions. And the developed countries have enough resources to fund their local bodies, which are of great importance. So if in the days ahead we can generate enough revenues to sustain our local bodies, then it will not be a problem.

How will the transition of the local bodies take place?

By the time the local bodies are formed, the senior-most officers of the wards will very likely be in charge of the offices. But more importantly, as we forming a new level of bureaucracy at the lowest level, we need to make sure they are effective. However, I doubt that this will happen. If the past is any indication, the new local bodies will also indulge only in providing contracts to build infrastructure as it is a lucrative business. So the new bodies need be instructed properly about their duties such as developing human resources and encouraging economic activities.

Published: 09-01-2017 09:14

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