The role of budget is crucial to strengthen the educational right regarding overseeing of the secondary education entrusted to local bodies by the constitution. The major source of the revenue is taxation in Nepal. Therefore, taxation plays a crucial role in ensuring quality education.  However, the overall education budget is steadily declining. Shreedhar Paudel, has talked with former finance secretary Krishnahari Banskota on the ways to address budget challenges for financing school level education.

Question: How do you look at the new structure implemented by the Nepali state?

Ans: We have departed from the unitary state and adopted a new state structure. The country is moving with new vibes and energy. Under the new setup, the federal or central government will look into foreign policy, financial policy, geostrategic issues and issues regarding national unity and nationality. The central government will not have a major role on developmental works. The annex 5 of the constitution states that mega projects will be implemented by the central government. In the long term, this may not be viable too.

The province appears to have a role of the coordinating body.  The province has a major role in the mobilisation of the resources. Its duty is to maintain uniformity in the role of the local bodies under its jurisdiction by developing a standard operation procedure. The work of the province is to insure quality in the works that are implemented.

The annex 8 of the constitution has stipulated roles for the local bodies. It includes development related activities, ensuring services required by citizens, supply of goods among others. The local bodies are already elected and the elected representatives have assumed their responsibility. Now the local government will receive certain percent of the revenue generated by the central government and a fiscal commission would be formed to look into resource allocation. The local government will receive money based on the formula defined by that commission. In provinces, there will be royalties from the natural resources available there. The local bodies will receive their share from that too.

The district coordination committee may also make certain income from their traditional sources. There will be unconditional and conditional grants available to the local governments. There will also be the provision of special funding.

Question: Do you mean that the government is now accessible at the local bodies?

Ans: Yes. It is because of that we had the slogan ‘Singhadurbar in every villages and localities.’  The state is not a centralised state now. Now, the role of the governance that was carried out by the state capital in Singhadurbar has reached to the villages and cities according to the constitution.

Question: With the change in governance structure, the educational right has also been transferred to local bodies. How do you see it?

Ans: We can say we have adopted a model similar to ancient Greek civilisations. Citizens used to run government in ancient Greece. Now, the elected local representatives will run the local government. Education is one of the major pillars of the state system. The constitution stipulates that the basic education would be free and compulsory for all. It has said the secondary education would be free of cost.

The local government will look after the basic and school education. The province will run a provincial university and the centre will run national level universities. The local bodies should make the arrangement for school level education through budget it receives from various sources or income it makes from various resources. It should ensure investment and should take all measures to ensure that no one will be deprived from education.

Not only children, the local bodies should provide special education to persons with disabilities, elderly citizens among others. It should also provide the opportunities of technical education and provide vocational courses.

Question: You have worked in Nepal’s bureaucracy for a long period of time.  You are currently the chief commissioner of the national information commission. Have you any experience of working in education related field?

Ans: I directly did not work in fields related to education. But while working for budget formulation for nearly a decade in finance ministry, we used to always accord priority to education. We had made commitment that we would not let education budget be below 17 percent of the total budget. Later, the finance ministers made commitment that they would ensure that educational budget would be around 20 percent of the total budget.

The education ministry and the finance ministry prepared some standard norms and I was also involved in the work. We tried to ensure that any children of the five years of age get the opportunity of education. We also tried to ensure children below 5 years of age get enrolled in kinder garden and I think we set up nearly 30 thousand early childhood development centres across the country. We have nearly 34 thousand community and government schools and nearly 250,000 teachers. Nearly 9 million students are receiving opportunity to education. I have not directly overseen education related responsibilities but while formulating budget I have always been committed to accord more priority to education and considered education as the major pillar of the national development.  Education is crucial to strengthen human resources. Therefore, when I was in any position I always firmly believed that there is no alternative to investment in education.

Question: Based on your experience, how do you think that the local bodies can effectively ensure budget and fulfil their education related roles enshrined in the constitution?

Ans: First of all, the newly elected local representatives should decide which areas they want to accord priorities. They should accord priorities to invest in education. They might have promised money for jobs, women empowerment and infrastructures like roads and bridges. But they should be very clear that education is the basis of all development.

Question: It requires money. How can local bodies ensure funds?

Ans: In my view, we should ensure approximately 20 percent of the total budget that will be unveiled by the central government in education.  Singhadurbar, the central administration should allocate 20 percent of its budget to education. This doesn’t mean that the any village or municipal councils will not have to allocate 20 percent of their total budget to education. All the local governments should prepare their own budget and should ensure that at least 20 percent of their budget will be spent in education. However, that amount may not be sufficient too.

Question: How can the local bodies ensure that they can allocate 20 percent of their total budget in education?

Ans: I want to stress that every local bodies should pay special attention to this while preparing their budget. For instance, if any rural municipality has the income of only Rs 10 million in a year, it should allocate at least Rs. 2 million in education. And, again if we conclude that it is not sufficient amount for bringing all the children under the purview of education, we should then look into alternatives.

There is also discussion on imposing taxation in education. We have private and public or government schools. The government school does not charge fees while the private ones charge fees. We can tax private schools and used that income for development of public schools.  But I don’t believe that we can provide free education in government schools by charging tax to private schools across the country.

The law also have given right to the local bodies for imposing taxes. They can charge household tax, revenues for birth and date certificates. They also know they can charge house rental tax. However, we are yet to implement property tax. At present all the tax we collect from cigarettes or tobaccos are being used on cancer hospitals. Similar to this, the local bodies can impose house rental taxation charging 2 or 5 percent and use all of the income as an investment in education. I think local bodies should use taxation as a resource to finance education.

Question: You are also an expert in the area of taxation. But how can citizens agree to pay additional tax without being assured that they will gain something in return?

Ans:  When I was in the finance ministry, I stood in favour of a unified tax regime. We should not feel complex. Our prime ministers, finance ministers and finance secretaries all need to correct themselves. We had made commitment in the past that we would reduce other taxation once there will be greater compliance on the value added tax. We cannot add burden to citizens by imposing tax on different topics. We talk about the welfare state but we should not establish ourselves as a state which just keeps on collecting revenues from its citizens. We should lower the tax rate as much as possible. While we agree that we should not add burden to citizens, we should also understand the importance of education. If we cannot make investment in education, the local bodies cannot make progress.

Question: In the one hand, the public are not assured of the tax return. In the other hand, there are limited resources available to local bodies. So, don’t you see the risk of further jeopardy in public education?

Ans: One of the most viable options is to utilise the revenue collected from VAT in education. We are now imposing 13 percent tax as VAT. We can keep 10 percent of that revenue at the centre and allocate 3 percent to the local bodies in the form of conditional grants.

There are prime locations near every public or government schools. We can carry out works related to public interests from those premises. If we focus on education, I think we can be self-dependent.  For example, we can rent land and buildings belonging to schools in a way that would not affect the education. We can set up cyber centres, fruits and vegetable market among others.  We can also establish parks, football grounds, cinema halls, local markets among others in such properties. We need to use the income from those sectors in education.

Question: We lack clear policy at the current stage. So, how can we ensure coordination in such a manner?

Ans: The local government can propose a budget that will cause them loss at present. They should not seek permission from the central or provincial government. Any local government can accept grant or investment from foreign entities. However, they should seek the approval of the provincial and central authorities towards that. But the local governments are not bound to look into the provincial or central governments for industrialisations, creating job opportunities, mobilising resources and attracting investments among others.

For example, we have 50 cement factories. If we are opening another one, the head of the local body can bring such a factory in his/her area. Other industries can be opened in a similar fashion. The elected representatives should also think that how can they enhance economic activities in their areas. It is their biggest challenge to ensure such an investment friendly climate.

Question: How can the central government distribute budget to the local bodies?

Ans: If we look at the annex 5 of the constitution, the central government will collect vat and customs tariffs in the border. The income tax will also be collected by the centre. If we look at the current estimates, the central government will earn Rs. 800 billion to Rs. 1000 billion.

Question: But, the work has not started. There are concerns for it.

Ans: We have got a new constitution. We have held elections for the local bodies. There are both good and bad sides of it. The elections of local bodies were held but there was no act that would govern the functioning of the local bodies. First, local representatives were elected and then the act came.  Finally, we have now an act that states how local bodies would function. But elected representatives have shown concern that some of the roles defined in the annex 8 and the shared rights of the centre, provinces and local bodies stipulated in annex 9 of the constitution could be curtailed.  Countries adopting federal form of governance, in general, have adopted the general competency model.  If we apply that model, we need to give local bodies the rights to pick up from the list of shared responsibilities.  Then the seven provinces should be given an opportunity to pick up the responsibilities from that list. We should not allow central government to pick up easier or viable tasks.  We should not let local bodies take up responsibilities that they cannot fulfil. We should not take a wrong approach. We should let fiscal commission conduct its work and derive a formula.

Question: The local government is already in existence but their representatives are in confused state. The commission is yet to be formed. There are concerns over future of education?

Ans: We are now in a transitional stage. In the current fiscal year, we have allocated 30 percent of our total budget for the local government. Most of the budget for education is given to the local bodies while some of it is still kept at education ministry. Because a fiscal commission was not formed, no formula was used to determine the allocation.

I am fully optimistic that a fiscal commission will be formed by next year and the government will make its allocation based on the recommendation of the commission. I think of the income made by the central government, 75 to 85 percent would be distributed in local bodies and 5 to 15 percent at provincial level and around 5 percent would be at the central bodies.

Currently, 25 to 30 percent of budget went to local bodies, around 5 percent have gone to the provincial level and 65 to 70 percent of the budget is at the central government. There are still 31 ministries at the centre. The constitution says that there should not be more than 25 ministries. Once we implement federalism, there will be a management approach. The functions would be carried out by local bodies, province will work as a supervisor and management and policy formulation related task would be carried out by the centre.

Question: You presented a three tier structure. Do you see the possibility of improvement in education?

Ans: Definitely, we have challenges. The central government too do not have major rights. The centre can make an umbrella act which all other lower units should abide. We need to have it to ensure quality education. The curriculum should be guided on this spirit. At least one years’ experience should be required for teaching. The central education ministry can fix such standards. Based on that law, the provincial government can unveil act regarding establishment of universities at province. And based on those two acts, local bodies can formulate their own laws. The local bodies can accord priority to mother tongue languages, to technical education, even English language from the lower grades among others.

Question: The constitution has stressed free and compulsory education. We have two types of education system and two types of education institutions. Recently, you had presented a concept paper on progressive tax regime in education. Resources are still a challenge. So, we are concerned how challenging it is to meet our aspirations of quality education?

Ans: In education, we have challenges in terms of both quality and resources. Therefore, the education ministry at the centre and the education ministry at the province should develop a mutual relation and they should set up a principle to guide the way forward.

Question: Do you have any final thoughts?

Ans: We need to spread the light of education. Sri Lanka went through nine years of fighting but it is one of the most progressive regions in South Asia with GDP growth rate of nearly 9 percent. The 99 percent literacy rate in the country is the main cause of its progress. We need to learn from them and make our people literate. The elected representatives should focus on increasing the investment in education.