With the completion of the first phase of local elections and the presentation of the budget for the upcoming fiscal year, there is considerable interest in how the local government will function in the new federal set-up and how the people at the grassroots will benefit.

Mukul Humagain and Binod Ghimire spoke with Dinesh Thapaliya, secretary at the Ministry of Federal Affairs and Local Development, about the authority and capacity of the local government, the budget released to different provinces and the management of conflict among the three tiers of government. 

It has been widely claimed that with the local level elections, Singha Durbar’s authority has reached people’s doorsteps. What does that mean in concrete terms?

It means that the centre’s authority has been transferred to the local level. For example, in the past, the central government used to make decisions about and manage primary education.

It used to manage resources for Junior Technical Assistants. Even small local projects on drinking water, irrigation, etc were administered by the centre.

Now such authority lies on the local units. The executive as well as the legislative authority about various local issues is now vested in the local level.

Also all sorts of registration and certification—establishing a business or an NGO, for example—were done by the centre; now the local level can do these. 

But if certain benefits like elderly allowance are released by the centre, isn’t that the beginning of the reduction of local government’s authority?

Social security does not only mean distributing allowances. It also means construction of parks for the elderly’s benefits; it means reserving certain number of beds in hospitals for the elderly.

And it’s not that the local units cannot provide allowances. They can, but only from their own revenue collection.

The local level has been given the right to generate revenue under various headings and spend it as it sees fit. 

Social security lies mostly under the jurisdiction of the central and provincial governments.

The idea is to make the benefits in all local units more or less similar, so that people would not be encouraged to move to a unit that provides more allowances.

We want people to be attracted by investment-oriented policies, not distribution-oriented ones.

The idea is also to maintain fiscal discipline in the local units—now that they have been given a lot of authority and resources. 

Are our local units capable of managing the resources they have been given?

 We are currently conducting a capacity gap analysis. In short, there is a gap—in the elected representatives, in the bureaucrats and in the local institutions.

Complaining about what’s not going well from the outside is not the same as fixing things from the inside.

Earlier they were questioning; now they are the ones responsible for providing answers. We have developed a package to build their capacity. Many women, Dalits and minorities have been numerically represented, but we have ensure that their representation is meaningful.

And while we have managed the number of bureaucrats to serve in the local units, it’ll take a year or two to build their capacity.

Then there’s the issue of institutional capacity. The local units have been given the right to make laws. But what if the 744 units make different laws about the same issue?

The local units should be able to amend laws to suit their unique circumstances, but there has to be uniformity in fundamental law. Also, the local units’ ability to spend the money they get from the centre or collect on their own is certainly questionable.

We are in the process of addressing various challenges in the overall capacity building of the local units. 

How balanced is the amount of the budget that has been released to various provinces or local units?

To allocate resources to different units, we devised a formula that would be acceptable for all. We took into consideration various factors—like the population, the land area, the per unit cost of development, literacy rate, access to electricity, etc—and assigned them different weights. But this is a new formula used only for grant allocation.

We’ll have to see how useful it’ll be for other sectors like agriculture, health, education, infrastructure, etc.

There’s a constitutional provision for a commission to look into it—both how the resources are allocated as well as how they’re spent.

Our calculation shows that Province 6—where Karnali is—has received the lowest amount and Province 1 has received the highest. How do you account for the difference?

We spent a considerable amount of time on the formula and played with various permutations and combinations.

While I cannot claim that we have come up with a perfect formula, what I’ll say is that it is better than the previous ones. One simple way to understand the matter is that if a district has, for example, more schools, and hence more teachers to pay the salary for, it will get more funds.

What kind of qualitative difference on the development of local level do you think the restructuring of local units and the new system of fiscal federalism will bring about?

There are three sets of differences. Earlier, we didn’t give funds but imposed a ceiling, and the local units made plans accordingly. As such, the plans were based on estimation.

Now that the local units already have the budget, their plans will be fact-based. Earlier, the budget was distribution-oriented, as development plans were formulated by the centre.

Now, it will be investment-oriented. And finally, there used to be a lot of duplication. Funds used to be released from 10 different places for the construction of one community building.

In addition, the new system will ensure greater local accountability. There will be fewer problems like doctors not serving in places where they are appointed.

Also, the considerable increase in the budget for local units should produce better results—if there is will and if the culture of bhagbanda (politics of give and take) is not repeated. 

There were demands that the local level government should be under the provincial government. Amidst such demands, how will the coordination among the three tiers of government be managed?

Article 26 of the constitution mentions that in the federal system, no government will be under another government.

They are simply three different governments. The local government reports to the provincial government about its different activities, but without being under it.

Unlike bureaucrats, elected representatives cannot be considered to be under anyone. As far as building coordination is concerned, the local government generally establishes linkages with the central government via the provincial government.

But in some cases, the central government can be directly linked to the local government. For example, the central government releases budget to the seven provinces as well as to the 744 local units. 

We have conceptualised two structures to facilitate coordination and inter-relationships between different governments.

One is a constitutionally provisioned inter-provinces council under the chair of the prime minister.

Another is an inter-local level coordination council in each province under the chair of the provincial chief minister.   

What kinds of conflicts between the three governments do you foresee, especially after the provincial government is formed?

We will easily resolve ordinary conflicts. Conflicts arise due to the tendency to take on easy work and set aside difficult work.

There still hasn’t been a clear division of responsibilities among the three governments.

Worldwide, there are two sets of laws to manage conflict. One is about the governing mechanism of central, provincial and local governments and the division of responsibilities among them while, for example, building a road.

Another is about the handover of finances. We’re drafting these two laws. We have experienced that the centre tries to maintain control as much as possible. But if these two laws are drafted properly, conflict among the three governments will be reduced. 

There are very few countries in the world where the local level has been given so much authority.

There are some countries like Sweden where the local government gets as much as 38 to 40 percent of the resources; we are at 17 percent at present.

But among countries at our level of development, we are much ahead. We are starting a new practice that has presented us with immense opportunities.