Mount Everest is not only the highest peak in the world but also one of the highest sources of revenue from tourism in Nepal. Every year, aspiring climbers pay thousands of dollars to scale the mountain, generating much income for the country.

But Nepal’s new federal set-up has created confusion over how this income should be shared, leading to rifts between the local governments in Solukhumbu district, where the mountain is located. As per the Act for Intergovernmental Fiscal Arrangement, the federal government receives 50 percent of the royalty from Mount Everest while the provincial government gets 25 percent and local government(s) receive the remaining 25 percent.

Everest lies in the Khumbu Pasanglhamu Rural Municipality, which stakes its claim to all of the remaining 25 percent.

But the seven other municipalities and rural municipalities in the district disagree, demanding their share of the revenue, since Everest lies in their district.

“Of the 25 percent to be received by the local government, Pasanglhamu Rural Municipality wants the entire 25 percent because Everest lies in that rural municipality,” said Namaraj Ghimire, an information officer at the National Natural Resources and Fiscal Commission. “But the other local governments in the district say they too should benefit from the royalties.”

This spring climbing season, which concludes on Monday with the last batch of climbers waiting to scale the mountain, mountaineers paid the government Rs441.38 million in total to summit Everest, according to the Department of Tourism.

The National Natural Resources and Fiscal Commission has been holding consultations at the central, provincial and local levels to come up with a formula for the sharing of royalties from natural resources, he said.

The formula is expected to help provincial and local governments estimate the amount they will be receiving next fiscal year as royalties from natural resources and prepare their budget accordingly. In the absence of this formula, the commission has yet to recommend the sharing of royalties collected last fiscal year.

As per the law, royalties can be raised through mountaineering, electricity, forests, mines, minerals, water and other natural resources.

Officials at the commission, however, said that there is a lot of confusion over the definition of royalty, who should be the beneficiaries, how that should be determined, and how the different layers of government should invest in the development of natural resources.

“The local governments award contracts for extracting stones and sand but there is confusion over whether the amounts the contractors pay should be considered royalty,” said Gopikrishna Khanal, the commission’s spokesperson.

As the law does not clearly define who should be the beneficiaries of royalties from natural resources, competing claims from different quarters have emerged, said officials.

“For example, people living in the areas where hydropower projects are located may claim that they should be the only beneficiaries, but people from areas where transmission lines are constructed may also demand a share of the royalties,” said Khanal.

Given this confusion, the commission had recently conducted a study, with assistance from the World Bank, on how the beneficiaries should be determined.

According to Khanal, the study has recommended determining three layers of beneficiaries, based on people from the core area, the adjoining area and the surrounding area of the natural resources.

“As the study has not suggested how much of the royalties should be provided to people from the three layers, the commission needs to carry out more work,” said Khanal.

According to the Act on Intergovernmental Fiscal Transfer, both the local level and district coordination committees should be beneficiaries. However, commission officials said that there is still concern over whether local and provincial governments will be ready to accept the criteria for royalty distribution as determined by the commission.

Royalty could become a conflicting issue in the future, although open conflict has not yet appeared, said experts on federalism.

“There needs to be clarity on the modality of royalty distribution and this should be done by prioritising the local people as per the spirit of the constitution,” said Khim Lal Devkota, an expert on federal issues and vice-chairman of the Province 3 Policy Commission.