Revenue Sharing Policy of Federal Nepal- Part I

By Chamatkaribaba

Nepal has since long plunged into a state of anarchy because of the failures of democratic institutions. These failures were because of mainly two reasons:

1) Because political leaders invested little time to save democratic institutions and;

2) There were targeted actions from autocratic and regressive forces, more particularly to blame is King and his coterie.

The second cause was lately realised by these political leaders and by that time, already, state of state was statelessness.
A lot of things happened after that mainly, People's Uprising in 2006, April and have put Democratic institutions back on track, if not democratic virtues. There are a lot of things those have to be done. The debate on political aspects of democracy; and state has received a lot of ink from various people from different walk of life. But, it seems that economic aspect of functioning of state has been completely shadowed.

This blog tries to provide a glimpse of what should happen on the economic aspects of New Nepal.
The recent news buzz is all about Federal State of Nepal. A lot of gangs and groups are fighting for that. People who belong to Terai Region, people from Janajatis, Dalits, Adivashis, Limbuwan people, Khumbuwan and people from Chure Bhawar area are fighting for federal democracy.
All seem to be agreeing on the need of federal state except its modalities how to form it. Some are voicing for Fully Proportional Election system and some are against it. Most of the Nepal's political debate is revolving around Constituent Assembly Election, its success.
Very few are debating on the issues of Fiscal Policy once Nepal becomes Federal State. This is very important for the sustenance of democracy, for the sustenance of state, for the sustenance of each federal province/county (by whatever name it is called) and for their progress.
This issue assumes significance because of Nepal's Geographical Location. All parts in Nepal do not earn same amount of revenue. The Terai, plain Region is more accessible by Roads and Transports. It is easier to do any kind of national and international business from that region. The Terai Region shares its boundary with India, with which Nepal has a maximum third country business. The goods made in Nepal are exported through Terai Region and goods imported in Nepal mostly come from this Terai Region.

Kakarbhitta, Biratnagar, Birgunj, Janakpur, Siraha, Bhairahawa, Butawal, and Mahendranagar are some of the towns in Nepal which has good Road Transport system with Indian Boarder Cities.

The Cereal, Paddy, Wheat, Oil and Gases, Salt, Clothes, Heavy Machinery, Transport related Gadgets, Clothes, and other stable food grains are mostly imported through this route and a little like Vanaspati Ghee, Noodles, Copper Wire are exported to India and via India to Bangladesh, Bhutan etc.
Because of these enormous economic activities, a lot of revenue will be collected in this region which substantially helps in development of the country.

Nepal's other parts are Himalayan Region and Hilly areas. They lack good Roads and Transport Systems. Very little economic Activity happens there. Some Hydroelectric Power plant located here and there, local textiles, local papers, and some food stuffs like Alainchi, Amriso are the major products of this area. Even those goods produced here are either marketed in Terai Region like in Nepalgunj, Birgunj, and Birtamod or through Terai Region; these products are sent to outside the country. So, because of lack of systematic markets in hilly and Mountainous areas, all trading activities happen in Terai and most of the revenues from these goods are received by Terai Region.

The Himalayan Region shares Border with China in Northern part but very little activity happens there because of lack of any good Transport Systems except in Tatopani Customs Office.
In this Scenario, we need to think what happens when Nepal is divided into a Federal State? How Economic Resources are collected and how they are distributed?
Who, either Center or Provincial Government, will have power, by Constitution, to collect and distribute such revenue and by what proportion?

This is a question that needs to be meticulously analysed and answers have to be found out. We need such answers that do not bring unequal distribution of wealth among regions. We emphasise that distribution of revenue should be made in such a way that does not hamper regional progress.

This author is trying to search some of the best possible answers in coming days, analysing the issues from Constitutional, Economical, and from Fiscal Policy view point.

Be with us!

(Reach to the author at Chamatkaribaba)