KATHMANDU: The government has decided to implement a new formula to increase the share of local governments in royalties generated from electricity, mountaineering, forests, and mines, on recommendations of the National Natural Resources and Fiscal Commission (NNRFC).

A meeting of the Inter-Government Fiscal Council held at the Ministry of Finance on Thursday made the decision to ensure a more equitable distribution of natural resource revenues among different tiers of government.

The meeting was attended by Minister for Finance Dr. Swarnim Wagle, provincial ministers for economic affairs, the chair of the NNRFC, the vice chairperson of the National Planning Commission (NPC), and other senior officials.

The council decided to strengthen coordination among federal, provincial, and local governments to curb revenue leakage. It has directed all three tiers of government to prepare and implement a “Revenue Collection and Leakage Control Improvement Action Plan” within the current fiscal year.

Likewise, to improve efficiency in public spending efficiency, the meeting reached a consensus to end the practice of dispersing budgets across small, fragmented projects. Instead, budget allocations will now follow minimum “project thresholds” to ensure meaningful impact.

The council also decided to implement the concept of “Project Bank” across all levels of government to improve the effectiveness of capital expenditure. The NPC has been tasked with overseeing integration of these project banks into a unified system.

Similarly, the government has decided to eliminate any taxes or fees imposed by local governments on goods transported from one jurisdiction to another. The council decided to direct the Ministry of Federal Affairs and General Administration to remove such charges immediately.

The meeting also decided to strictly enforce austerity measures across all levels to reduce rising recurrent expenditure. It also called for a review of organizational structures and staffing positions to enhance administrative efficiency.

Likewise, it directed sub-national governments to implement the contribution-based gratuity fund for permanent employees by the end of the current fiscal year.

To improve fiscal transparency, the council has decided to end the practice of keeping funds under unallocated headings and to scrap unviable or sick projects.

It also decided to develop a separate integrated financial transfer information system under the NPC.

To promote tourism, the meeting decided not to levy any provincial or local taxes on foreign tourist vehicles that enter the country after paying a temporary import fee at customs.

The council also urged the Office of the Prime Minister and Council of Ministers to help resolve legal and procedural hurdles in land acquisition for government projects, and address regulatory barriers in the sustainable use of forest and river-based resources to boost internal revenue.