International Conference on Federalism, Devolution of power and Inclusive Democracy (Nov 22-23, 2023)

This section of the Conference website is open to contributions from anyone interested in engaging with the conference themes through concise submissions. These contributions will be reviewed by the speakers, commentators, and participants of the conference, underscoring our commitment to diversity and inclusion in this effort. We extend our invitation to professors, research fellows, PhD scholars, policy analysts, senior students, as well as public policy or federalism practitioners at various levels to offer their inputs or feedback on the conference abstract or papers available on this website. It is crucial that the contributors identify themselves.

Furthermore, this platform provides an opportunity for those who were unable to participate in person, even if they were previously invited by the conference organizers. All submissions should be sent to us at Please note that the Conference Secretariat may edit submissions for clarity and reserves the right to reject those that are deemed irrelevant. All accepted submissions will be considered as part of the analysis of the conference’s outcomes. Join this forum for exceptional opportunity to engage in dialogue, share insights, and contribute to the advancement of federalism, devolution of power, and inclusive democracy.

Mr. Namit Wagley, legal expert, Kathmandu

In January, after months of uncertainty, political instability, and back-channel negotiations, Nepal announced that the next round of local elections will take place on May 13. It’s an historic moment for Nepal: having completed their first term, local governments created by the constitutional transition to federalism in 2017 will now be renewed by timely elections.

In many ways, this first term was a mixed bag. After two decades of political disarray, the arrival of newly elected representatives in 2017 was an unprecedented opportunity to chart a new course toward responsive and effective governance and to steer the country toward economic prosperity. On the one hand, the new federal system has gradually earned political legitimacy, and the country has avoided renewed, large-scale violence since 2017.  the other hand, issues of inefficiency, collusion, and corruption have persisted.

While it will probably take three or four election cycles, significant reform efforts, and much more effective intergovernmental coordination to make federalism fully functional at all levels, the coming round of local elections is a step in the right direction. So, let’s look at a few of the challenges and opportunities facing Nepal at this historic juncture.

First, for the next two or three years Nepal will continue to struggle with the long-term effects of the pandemic, including a deeply damaged economy, widespread job losses, deepening poverty, dwindling revenues and remittances, and growing demands on health and welfare services. Effective government will be extremely important, and timely local elections will stop the vicious cycle of uncertainty and political instability.

But these pandemic challenges are exacerbating some of Nepal’s preexisting struggles to operationalize the nation’s new federal system. The landmark 2015 constitution federalized the country with very little preparation. Elections in 2017 installed 753 newly created local governments, seven new provincial governments, and a newly configured national government, but without the nuts-and-bolts legal frameworks necessary to start governing. While the national government made efforts to patch these holes, it was quickly overwhelmed by the sheer scale of the roll-out effort and a rising tide of political contestation surrounding overlapping jurisdictions and the details and definitions of federalism. As local governments have become more organized and assertive, the need for cooperation between the federal, provincial, and local levels of government has only increased.

As the country now gears up for its second round of local elections, the mechanisms of intergovernmental coordination need to be strengthened. This is an important time to invest in evidence-based approaches that can provide concrete information about the realities on the ground and inform the discourse among the local, provincial, and national levels of government.

Second, the Covid-19 pandemic hit Nepal when the political transition was still quite young. As already noted, government revenues are down, and the demand for healthcare services is soaring. The coming elections will be costly, putting further pressure on government budgets and diverting resources from other critical governance needs such as building institutional capacity, strengthening the organs of accountability, and continuing the implementation of federalism.

At the same time, the challenge of pursuing gender, disability, and social inclusion in this time of crisis has become increasingly evident. Even a cursory analysis of the 2017 local election results shows that Nepali women’s participation in leadership and decision-making is littered with challenges. As a new crop of elected local leaders assume their responsibilities, there is a window of opportunity for governance-reform initiatives to renew Nepal’s commitment to gender equality and inclusive governance.

Third, the integrity of these elections will have national and regional security implications given the diverse geopolitical interests in Nepal. Although the local elections of 2017 were largely seen as free and fair, the Election Commission and international development partners noted some shortcomings such as frequent disregard of the election code of conduct, inconsistent adherence to campaign finance rules, some election violence, lack of voter education, widespread misinformation on social media, and preventive detention of journalists.

As in the past, Nepal will invite local and international development partners to help support the administration of free and fair elections. The 2017 elections highlighted areas in need of attention, but it will be important to maintain an approach of nonpartisan, impartial facilitation in Nepal’s shrinking civic space. The upcoming elections also present an opportunity to use new technology to permit voting by the estimated three million Nepalis living and working abroad. Remittances from these previously excluded voters, roughly 10 percent of the nation’s population, account for a quarter of Nepal’s annual GDP.

Fourth, the coming elections will usher in a new cohort of leaders with varying degrees of experience and competence. In 2017, a political vacuum of nearly two decades was filled by an influx of new local representatives who were often inexperienced, especially women and people from disadvantaged communities whose seats were reserved under provisions of the constitution. Along with the advent of an unfamiliar federal structure, this transition exposed radically disparate capabilities in the “how-to” of governing. While some elected representatives exhibited exceptional ability to negotiate, build institutions, and govern effectively, others struggled to understand their roles and responsibilities, tackle entrenched collusion, and set policy agendas.

After five years of coping with these practical realities, the government and its development partners now have both the experience and the opportunity to design a leadership development program that meets the differing needs of elected representatives based on factors such as their accrued political power, electoral experience, age, gender, literacy, and access to information.

Finally, Nepal’s newly formed local governments faced their biggest challenge with the onset of Covid-19 in March 2020. After the country imposed a nationwide lockdown, it fell to the subnational governments to institute welfare programs, set up quarantine facilities, regulate the movement of goods and vehicles, protect local businesses, fortify public healthcare services, and maintain local security. Many of the 753 local governments were unprepared to confront a crisis of this scale. Yet, despite the unprecedented circumstances, many performed quite well, exhibiting accountable, democratic behavior. Barely three years after their genesis, Nepal’s subnational governments, by and large, held steady during the crisis.

But Nepal’s long-term response to the massive earthquakes of 2015 is a cautionary tale of inept crisis management and planning that was too often reactive rather than forward looking. As the pandemic rages on in Nepal and around the world, the second round of local elections is a golden opportunity to consolidate the lessons of the federal experiment and take forward-looking action to protect the safety and integrity of the political process and better equip the nation’s elected representatives at every level to manage a crisis that may be far from over.

Ms. Padma Rijal, Lecturer of Law, Kathmandu University School of Law, Dhulikhel.

To read the submission [Click Here]

Dr. Khimlal Devkota, Member, National Assembly, Nepal

The government’s reluctance to implement federalism properly is proven by many examples. One prominent illustration is the failure to create a police force at the provincial level. The provincial governments still do not have their own police force. Another example is the government’s failure to enact federal civil service laws. Their absence has created significant challenges at the subnational levels. Lack of control over the security force and civil service personnel raises questions about the autonomy and effectiveness of the subnational governments. 

The government’s ability to promote good governance and ensure the success of the federal system is in question. 

The Inter-Province Council (IPC), comprising the prime minister and chief ministers, convened in December 2019 and endorsed an action plan to facilitate the implementation of federalism across 29 distinct thematic areas and 84 points. 

As per the timeline, most of the activities were to be completed by April 2019. However, the Prime Minister’s Office reports that many of these activities have not been executed. Several critical laws pertaining to education, agriculture, tourism and others, besides the criteria for the formation of local government services, were to be drafted by April 2019. That hasn’t happened either. 

Furthermore, it must be pointed out that no IPC meeting has taken place for four years. The government’s failure to implement the IPC decisions, and the prolonged postponement of its meetings, are clear evidence of its insincerity.

What the people want

The Nepali people have consistently fought for democracy, and the government system has been changed repeatedly due to unmet expectations. Over the past 75 years, Nepal has seen seven constitutions and experimented with various forms of government. These frequent constitutional and system alterations have disrupted the nation’s development and prosperity.

What the people truly desire is development, good governance, prosperity, peace and security, the rule of law, and other progressive improvements, rather than a specific government system. Therefore, in order to align with the people’s expectations, a 15-point resolution regarding the implementation of federalism was introduced in the National Assembly in June 2022. This resolution aims to enhance the overall government system, including reforms in intergovernmental relationships, and address the core concerns of the populace.

The Assembly unanimously approved the resolution, and instructed the government to implement it. On October 14, 2022, a cabinet meeting approved the action plan related to the resolution’s implementation. However, it appears that the government is unaware of its own action plan, let alone the Parliament’s instructions. According to the action plan, the IPC meeting should take place every year in March-April. Yet, as of today, there has been no progress in scheduling a meeting.

The action plan included a schedule to collaborate with the Policy Research Institute aiming to ensure consistency in policymaking and law formulation across all three tiers of government. Regrettably, this initiative has not commenced as of yet. Furthermore, a decision was made not to allocate small schemes and programmes under the name of conditional grants from the current fiscal year 2023-24. Even then, many small plans and programmes have been distributed through the budget statement. 

While the constitution grants the Fiscal Commission the authority to determine the overall pool of fiscal transfers, legislation has curtailed the commission’s rights. The action plan has outlined that corrections in the laws will be made within a year, but no progress has been made thus far. Likewise, the action plan outlined the adjustment of the provincial police force within a year, which has also not seen any progress. Additionally, the action plan promised to resolve the issues faced by subnational-level employees by the end of the second week of July 2023, but there has been no visible improvement in their situation. Considering these facts and evidence, it is apparent that the government may not be fully committed to the proper implementation of federalism.

The Federalism Implementation Study and Monitoring Parliamentary Special Committee, formed by the National Assembly in June 2022, presented a report in October 2022. This report encompasses recommendations that touch upon various aspects of governance, such as formulating and implementing laws to protect the rights of economically disadvantaged and marginalised groups. It also addresses issues raised by the Constitutional Commission and delves into administrative, fiscal, and political federalism.

The Assembly, in response to the committee’s report, instructed the government to execute these recommendations. Prime Minister Pushpa Kamal Dahal pledged to sincerely oversee its implementation. The report, if executed sincerely, has the potential to resolve citizen concerns and enhance the governance and federalism system. Recommendations include drafting laws to ensure inclusive representation in state organs and women’s participation in the electoral system, both at the federal and provincial levels. The creation of a joint Parliamentary Committee for Federalism, the development and implementation of an action plan based on parliamentary committee recommendations, and the establishment of a decentralisation plan to delegate responsibilities to subnational levels are highlighted.

Moreover, the report suggests organising training and public awareness programmes on federalism, democracy, and the rule of law from the central to the local levels. It also emphasises the need for equal and easy access to state services, the safeguarding of the rights of marginalised communities, and the creation of a trustworthy environment to combat violence, abuse and discrimination against vulnerable groups.

People’s disillusionment

Implementing fundamental rights, including social security, dignified living conditions for senior citizens, and the guarantee of human rights, is considered essential. To maintain consistency within the administrative system and the spirit of the federal democratic republican governance, the report suggests forming a high-level administration reform commission chaired by the prime minister. It advocates for a legal and policy framework to ensure that the chief executive officer of the local level is not below the under-secretary level. Discussing matters in sectoral thematic committees before presenting bills in Parliament is recommended to maintain consistency in laws across different government tiers.

While the report serves as a valuable foundation for comprehensive government reform, it is disheartening that the government’s implementation appears insincere. The leaders who spearheaded the movement for republic and federalism now hold power, but their commitment to implement federalism properly seems lacking. Currently, support has surged for the former king and new political parties, potentially due to the government’s underperformance and people’s disillusionment with the established political parties. Failure to meet the people’s expectations could lead to increased dissatisfaction with the system. To address this, the government and major political parties must align their actions with citizen expectations. It is a time for honest action rather than indulging in idle gossip or blaming others.

Prof. Vijay Prasad Jayshwal, Assistant Professor, Tribhuvan University Faculty of law, Kathmandu.

The smooth flow of intergovernmental fiscal transfers, whether horizontally or vertically, in the early phases of federalism is a well-established assertion in academic discourse. Early studies reveal that autonomy, revenue adequacy, equity, predictability, efficiency, simplicity, and incentives serve as critical thresholds for intergovernmental fiscal transfers. However, these norms are noticeably absent in the execution of fiscal federalism in Nepal. The fiscal transfers within or between government levels are inadequately executed, resulting in economic challenges for federal provinces that struggle with their planning and budgeting. The proper mobility of plans and policies is hindered by the lack of fiscal coordination between federal and provincial governments. Several initiatives are needed to rectify the deficit in intergovernmental fiscal transfers in Nepal.

Firstly, the legal framework for intergovernmental fiscal transfers lacks objective verification and transparent determination. The existing legal framework is insufficient and ineffective from multiple perspectives. The role of provincial governments in mobilizing and ensuring the allocated fiscal transfers is not clearly defined within the legal framework. The absence of a robust legal infrastructure is a significant reason for the poor execution of intergovernmental fiscal transfers in Nepal.

Secondly, there is a significant trade-off between the adoption and modification of rules and their practical implementation. The adoption of new rules in response to changing needs is lacking both in practice and in the behavior of individuals. Adequate support from the federal government is also lacking.

Thirdly, a substantial portion of transfers is conditionally approved in Nepal’s fiscal federal practices, leading to extended uncertainties and a sense of pessimism among political units. Regular conditional approval by the federal government poses a problem.

Fourth, issues related to equalization, inter-jurisdictional redistribution, spillover effects, streamlining bureaucracy, and administrative weaknesses persist.

Fifth, the comprehensive understanding and effective implementation of the intricacies of intergovernmental fiscal transfers are lacking in the federal practices of Nepal.

There are three fundamental questions concerning fiscal transfers in a federal structure: how to determine the total amount of resources to be distributed, how to allocate this resource pool among all eligible subnational governments, and whether and how to restrict the use of transfer funds. These questions remain unresolved in our fiscal practices. Intergovernmental fiscal transfers require in-depth study and a practical approach to implementation. Nepal’s federal practice faces deficits in both the theoretical framework and its practical execution.

Prof. Cheryl Saunders, Laureate Professor Emeritus, Melbourne Law School, The University of Melbourne, Victoria 3010 Australia

To read the submission [Click Here]

Dr. Yog Upadhyay, FHEA, Senior Lecturer, Liverpool John Moores University, Liverpool, U. K.

To read the submission [Click Here]

Md. Rizwanul Islam, Ph.D., Macquarie University; LL.M. (Intellectual Property & Information Technology Law), National University of Singapore; LL.B. (Honours), University of Dhaka; is a Professor of Law and Member, Center for Peace Studies, North South University.

As the least political (if not apolitical) of the three main organs of the state, often a lot of expectation is pinned on the role of the judiciary in protecting the rights and ameliorating the situation of the underprivileged sections of the community. Thus, the judiciary is often perceived as the bastion of protection of the rights of the underprivileged sections of the community. By exercising its power of judicial review, the highest courts in jurisdictions with constitutional supremacy may invalidate unconstitutional statutory laws and manifestly illegal actions of the executive and in rare cases, even pass quasi-legislative directives. By resorting to these tools at its disposal, a constitutional court can play a significantly positive role in protecting the rights of those who are left behind. Decisions such as the one in Brown v Board of Education of Topeka, 347 U.S. 483 (1954) may serve as but one prominent example.

This paper thoroughly analyses some of the leading reported cases decided by the Supreme Court of Bangladesh (SCB), dwelling on the rights of women, religious minorities, and indigenous people. It would first delve into how the SCB has applied a reasonable classification test for demarcating the fit cases for offering special, unequal treatment to groups which are left behind. It would then show that the SCB has often played its part in ameliorating the position of these underprivileged sections of the community. For instance, the SCB has issued detailed directives to the parliament and executive in cases of protecting women from sexual harassment in educational institutions and workplaces, eve-teasing, and fatwa (religious edicts)-induced violence etc. Reasonable minds may differ on the wisdom of some of the directives passed by the SCB or the scope of judicially determining compliance or otherwise with some of them. However, there is little doubt that they may contribute to protecting women’s rights. And even the government lawyers often were in support of many of these directives of the SCB.

However, when it comes to some more politically sensitive issues, such as the constitutionality of indirect election in the reserved seat for women in the parliament, the SCB has often taken a more restrained approach. Regarding the rights of the minority, particularly on the question of the constitutionality of having a state religion, the SCB has maintained the status quo. In a similar vein, when it comes to the constitutionality of the Chittagong Hill Tracts Peace Accord, the High Court Division of the SCB (the matter is pending before the Appellate Division of the SCB), while underscoring the importance of protecting indigenous rights, has ultimately held some amendments to the laws pursuant to the Peace Accord as colourable laws (i.e., laws intended to deceive) and thus, unconstitutional.

This paper argues that the experience of the promotion of rights of these underprivileged groups through the SCB is relatively mixed in Bangladesh. It also surmises that a more potent bulwark of protection of the rights and upliftment of the situation of these groups is the democratic culture within a state and an enlightened community. Any systemic and sustained change through the SCB is, possibly, modestly attainable. That being said, it does not posit that the constitutional courts may not play any role; it rather only argues that in and of itself, there is a limit to how much can be achieved through them. This is possibly, particularly true in states where democratic culture and institutions are yet to be firmly entrenched.

Mr. Jivesh Jha & Mr Rajendra Paudel, Judicial Officers, High Court, Janakpur, Rajbiraj Branch

Mr. Shahil Magar, BEc-LL.B student, Kathmandu University School of Law, Dhulikhel

The NNRFC is one of the thirteen constitutional bodies mandated by the Constitution of Nepal. This paper seeks to examine whether the statutory provisions have made the Commission potent enough to be able to fulfill its objective, as imagined by the Constitution, of maintaining fiscal and natural resources federalism.

A single committee of 44 members, headed by Amrita Thapa Magar, was established for both the Natural Resources, and the Economic Rights and Revenue Allocation, under the first Constituent Assembly (CA). It recommended the creation of two separate commissions, one for fiscal affairs and the other for natural resources. However, so as not to create ‘too many’ constitutional bodies, the second CA agreed to merge these ideas and establish the NNRFC in its current form. The NNRFC aims to ensure just and equitable distribution of natural and fiscal resources among federal, state and local governments. It was fully established in 2017 with a permanent secretariat and has been working for about five years till date. 73 posts have been established as permanent and contractual employees under the leadership of a gazetted special category secretary. Since it is a constitutional body, the Constitution itself has provisions regarding it in Part 26 (Articles 250 and 251). It needs to remain independent to diminish the centripetal bias and intervention from branches of the government, mainly the federal executive.

Article 250 in the Constitution delineates the structure, appointment, vacancy, qualification, renumeration, services and the bar from joining other governmental bodies just as same as for other constitutional bodies. Article 251 describes that NNRFC has to play three roles for the effective implementation of natural resources and fiscal federalism in Nepal; custodian, interlocutor and knowledge leadership. There is the need to guard provinces and local levels as the reserved power is in the Federal rather than the provinces. Thus, in the case of concurrent powers mentioned in Schedules 7 and 9, the Federation has the superseding authority. So, the NNRFC plays the role of custodian in the following manner. NNRFC determines the framework of division of tax and non-tax revenues such as, the bonds, profits of state-owned enterprises, fees, fines, royalties from natural resources, foreign aid, etc. collected in Federal Consolidated Fund between Federal, Provincial Governments and Local Levels as provided under clause(a) of sub-article (1). NNRFC makes recommendations and guidelines for fiscal transfers from the MoF to the provincial and local levels. These are equalization grants and conditional grants under clause (b) and (c). Furthermore, similar to the Federal Consolidated Fund mentioned earlier, NNRFC also determines the framework of division of tax and non-tax revenues collected in the Provincial Consolidated Fund between the Province and Local Governments as per (d).

Federal issues and controversies can quickly grow into federal disputes. To prevent such, NNRFC, conducts research on possible conflicts on fiscal and natural resources which are the two most important resources for a polity of any size and proposes solutions to concerned bodies. For instance, if there were no body such as NNRFC, it would be uncertain for the banks to determine to whom to pay taxes: the federation, the province, the local body, or the special structure for investing in a hydro project. This shows the interlocutor role of NNRFC. Sub-article (2) enlists that NNRFC shall carry out necessary study and research work about environmental impact assessment required in the course of distribution of natural resources. Detailed studies and analyses should be conducted because there is no formal national data as such. Since the advent of federalism, research has not been carried out with the perspective of the provinces and the local governments in mind. One GO may publish one set of data, while another GO may publish another, hinting at the mistrust among them. By publishing reliable data, NNRFC shows its knowledge leadership role. Even foreign and international organizations should be able to take NNRFC’s data as the accurate representation of Nepal.

Here we can see that the Constitution has envisioned NNRFC as the nexus of fiscal and natural resources federalism. These two aspects of federalism are the wheels of the federal vehicle as resources have to be shared between three levels of government. Although the Commission mainly “recommends”, it is obligatory. It is a constitutional norm that the constitutional body supersedes the government. Furthermore, it consists of experts in the related fields and not politicians which means that the decision is without any political bias.

There are mainly two statutes dealing with NNRFC. The NNRFC Act 2017 has only elaborated on the powers, functions and duties of NNRFC already given in the Constitution. It describes that along with seeking opinions and consultations from other governmental bodies, NNRFC can also obtain service of experts. NNRFC can frame necessary rules for the implementation of this Act and issue directives or procedures to conduct or cause to conduct the smooth operation of its functions. Although there are such powers enumerated, other provisions in the same Act hinder its autonomous function. The power to frame rule on the Federal is limited as approval from the Federal itself is necessary. Similarly, NNRFC can only communicate with other GOs through MoF as its liaison. Thus, the MoF can easily limit the movement of the NNRFC. This is clearly seen to be a violation of constitutionalism. If a constitutional body has to depend upon the executive for enforcing a constitutional mechanism i.e., federalism, it means that executive is exercising the supreme utmost power. The Intergovernmental Fiscal  Arrangement Act in contrast to the NNRFC Act is more specific and extensive. It has outlined the areas of taxation of the three different governments in Schedules 1,2 and 3. It has enumerated areas for non-tax revenues too. Section 7 of the Act talks about the distribution of total royalty obtained from natural resources. Here, the Act has gone on to specify the bases and even the numerical demarcations which is the responsibility of the NNRFC as mentioned in Art. 251 of the Constitution. Thus, the power of the NNRFC has been narrowed down by the statutes. These provisions have made the anchor of federalism loose subjecting it to despotism by the Federal. This is contrary to the essence emitted by the constitutional provisions of exclusivity of the functions of NNRFC. 

The constitutional provisions are limited and need to be elaborated. In elaborating such provisions by the Acts passed by the parliament, it is not certain that the legislators are looking out for the betterment of the Commission as the drafters of the Constitution imagined. It is evident by the fact that there are statutory provisions which hinder the autonomy of the NNRFC. Although it is an exclusive body to ensure federalism by its nature (as it has both implementing authority as well as rule-setting powers in matters of fiscal and natural resources federalism), it has not been able to neutralize the centripetal bias. The organizational structure is also such that the Secretariat is occupied by federal government employees. Similarly, the members of the NNRFC itself are also found to be former senior bureaucrats which may subject them to Federal’s influence. NNRFC also has to guard provinces and local levels as the reserved power is in the Federal rather than the provinces as practiced in federations such as the US. There has also not been a clear demarcation of power between NNRFC and MoF. This is the source of most of the conflicts and the opportunity for the MoF to encroach areas beyond its jurisdiction. Thus, the Constitution itself should have maximized the scope of NNRFC. 

The only way forward for NNRFC can be seen to be raising voices and taking a more proactive approach to exercising its responsibilities and powers. NNRFC should file writ petitions whenever the Federal is seen to infringe upon its rights. The SC is an ally of NNRFC on this matter as SC is the supreme guardian of the Constitution. Nevertheless, there has not been a single petition filed by NNRFC but only some notices of defiance. Other approaches can be seen to increase its presence in the media through commercials or interviews so it can create leverage against the Federal through public support. The current situation also shows that provincial and local bodies are not much responsive to recommendations of NNRFC. For this, the MoF should also help the NNRFC by realizing that the dilution of powers of NNRFC inevitably leads to breakdown of the federal Nepalese economy. In fact, Nepal is a very small country to practice fiscal federalism in three levels at all. So, policies and laws should be enacted keeping in mind the 3Cs for our model is cooperative rather than dual federalism. Moreover, resources of federal, state and local governments will be misspent on conflicts rather than development, while the MoF and NNRFC squander resources battling each other.

This paper shows that the legal regime fails to capture the constitutional status of the commission.

Ms. Smriti Pantha, Legal Department, Change Action Nepal, Kathmandu.

To read the submission [Click Here]

Dr. Rudra Sharma, Advocate, Transnational Law House, Kathmandu

According to the preamble of the Constitution, the form of governance of Nepal is  Federal Democratic Republic. According to Article 4 of the Constitution, Nepal  nation is defined as Federal Democratic Republic. According to Article 56 of the  Constitution, the basic structure of the nation (Nepal) is Federal Democratic  Republic and the whole state power is divided into three tiers of governments.  

Article 274 of the Constitution provides for amendment of the Constitution. Any  Article of the constitution can be amended or repealed. This Article 274 does not  make “Federal” or “Federalism” unamendable. Considering the present day  frustration of people about better delivery and function of federalism, a proposal  might be moved towards the parliament for amendment of the above mentioned  provision related to federalism. However, repeal of federalism from the  constitution is very difficult or almost impossible considering the present design of  the Constitution. If so done, the Constitution can be non-functional. 

However, there are ample scopes for amendment of the Constitution for better  function of federalism in Nepal so that the expectation of the people can be  addressed and the frustration of the people can be minimized. Broadly speaking,  the followings can be agenda for amendment of the constitution to meet the  purpose of better functioning of federalism.  

  • Amendment of Article 133 of the Constitution so that the High Courts can  order ultra vires of the laws made by provincial governments and local  governments. 
  • Review of Electoral system including the electoral system of the provinces.  – Review of representation system.  
  • Review of the number of elected representatives in the provincial and  federal parliament as well as the number of ministers in the provincial and  federal cabinet.  
  • Review of interstate coordination especially interstate commerce including  the role of local governments.
  • Review of the fiscal commission and fiscal federalism.  
  • Political parties may put forth constitution amendment proposal according  to their promise they made during the election.  

Therefore, amendment of the Constitution is necessary for better functioning  of federalism in Nepal. However, the process of constitution amendment is  rigorous. It requires two-third majority from the parliament plus conditional  endorsement from the provincial parliament.  

 Mr. Gaurav Mishra, BBM-LL.B, Advocate, Kalyan Law Firm, Maitidevi Kathmandu

To read the submission [Click Here]

Ms. Dolkar Ghale, BBM-LL.B, Kathmandu university School of Law, Nepal

Intergovernmental coordination in Nepal is a complex and critical aspect of the country’s governance system. With the adoption of federalism in 2015, Nepal restructured its administrative divisions, devolving power to three levels of government: federal, provincial, and local. While this transition aimed to bring governance closer to the people, it has been marred by several wrong practices in intergovernmental coordination.

1. Lack of Clarity in Roles and Responsibilities:
One of the primary wrong practices is the lack of clear demarcation of roles and responsibilities between different levels of government. This ambiguity often leads to conflicts, duplication of efforts, and inefficiencies in public service delivery.

2. Fiscal Imbalance:
There exists a significant fiscal imbalance between the levels of government, with local governments struggling to generate sufficient revenue to meet their responsibilities. This has resulted in a heavy reliance on federal and provincial grants, hindering their autonomy and efficiency.

3. Political Interference:
Interference from political parties and leaders at higher levels of government in the affairs of lower-level governments is a common problem. This undermines the principles of decentralization and local autonomy, hindering the effective functioning of local governments.

4. Weak Coordination Mechanisms:
Inadequate mechanisms for intergovernmental coordination and dispute resolution are prevalent. The absence of regular and structured dialogues often exacerbates conflicts and leads to suboptimal outcomes.

5. Inadequate Capacity Building:
Many local governments lack the capacity and resources needed to effectively perform their functions, resulting in service delivery gaps and slow development progress.

6. Ignoring Stakeholder Engagement:
Effective intergovernmental coordination requires engagement with civil society and other stakeholders. However, their participation is often neglected, which leads to decisions that may not reflect the actual needs and aspirations of the people.

7. Bureaucratic Hurdles:
The presence of bureaucratic hurdles and red tape in the functioning of government bodies at various levels can hinder efficient coordination and decision-making processes.

8. Slow Progress in Devolution:
The pace of devolution has been slow, leading to persistent centralization of power and resources. This is counterproductive to the principles of federalism.

Addressing these wrong practices in intergovernmental coordination is essential for Nepal’s successful transition to a federal system. Effective coordination mechanisms, clear roles and responsibilities, equitable fiscal arrangements, capacity building, and stakeholder engagement are some of the key steps that can improve the functioning of federal, provincial, and local governments in Nepal. This will ensure that the benefits of federalism reach the grassroots and contribute to the overall development of the nation.

Mr. Yatindra KC, Legal Researcher, Samriddhi Foundation, Kathmandu, Nepal

The practice of intergovernmental transfers with a special focus on horizontal and vertical fiscal equity is not new to Nepal. Previous efforts at decentralisation within the unitary setup were complemented with an intergovernmental transfer system that has been recognized as being on par with international practices. Needless to say, significant learnings from our past have been incorporated into our current design. Yet despite having a substantial amount of experience in intergovernmental transfers, Nepal’s current fiscal transfer system or more appropriately its fiscal architecture faces two challenges. First, sub-federal units have increasingly started to voice their dissatisfaction with the increase in conditional transfers. Secondly, the National Natural Resources and Fiscal commission’s allocation formula has been questioned by both sub-federal units and those that have a keen interest in fiscal federalism. Recent developments in the allocation methodology of the commission i.e., the incorporation of performance-based allocation itself suggests the need to incentivize performance of local governments on account of the narrative that paints the sub-federal units as lacking in capacity to effectively execute their assigned functional responsibility.

Within this context, our paper explores two subject matters that are crucial for Nepal to establish a robust transfer mechanism that aligns with the overarching goal of equity. By looking into the context of the commission’s work, the content of the policies that guide the commission and the processes through which the commission functions, we explore the degree to which the commission is independent and autonomous as enshrined in the Constitution of Nepal. The result of institutional analysis suggests that the commission is constrained by policies that guide it, to the extent that the commission’s independence in determining the bases of intergovernmental transfers does not align with the overarching context in which an independent constitutional commission was established. More specifically, our analysis suggests that bureaucratic influence in the formulation of the law-making process itself hinders the commission’s work. The determination of equalization payments cannot deviate from the bases present in both the NNRFC act and its regulations. Both the act and the regulation contain bases that were previously used in the unitary setup of Nepal when Nepal briefly practiced decentralization. Since the context of functional assignments have changed post the federal transition, the determination of equalization payments will suffer from unequitable allocations so long as the bases remain in effect. Our paper argues that constraints placed on the Commission’s independence will further compound any aspirations of equitable distribution that is missing in the current context. The commission’s recent focus on performance-based allocation and designing performance indicators to further their allocation strategy to that end is not surprising, since autonomy in the truest sense of the word is only granted in making allocation decisions based on performance.

Secondly, we explore the effectiveness of performance-based allocations in incentivizing performance and provide actionable recommendations. Our results suggest that there is no significant relationship between performance-based allocations and the incentive to perform better. We use a maximum likelihood estimator to calculate the probabilities of a particular local government climbing up a quartile ranking in the index values designed by the commission based on allocations made in the previous year. Controlling for other variables, we find that performance-based allocations offer no incentives for local governments to perform better. Based on the results, the paper identifies several possible reasons for this, chief among them being the negligible ratio of performance-based allocation in comparison to Local government’s own source of revenue.

A wider discussion on designing performance-based allocation is required to institutionalize a system of incentives, this however also needs to be complimented with a discussion on how Nepal can successfully establish the independence of its fiscal commission in line with the constitutional imagination of the commission and its roles.

Ms. Pratistha Yadav, BBM-LL.B, legal researcher, Kathmandu

Collaborative Governance is a joint effort that involves multiple federal entities working together to make decisions through consensus to create more public value than what these entities could achieve individually. It encourages innovation and boosts overall success. The concept of ‘collaborative federalism’ emphasizes shared intentions, goals, and responsibilities for delivering outcomes. In today’s world, governments in developed countries recognize the importance of collaboration, cooperation, and coordination. They acknowledge that their objectives can only be met through working together with others.

The Constitution of Nepal has delineated the functions, responsibilities, and powers of the three tiers of government to establish federalism and create a more inclusive, participatory, and accountable governance system. This division of powers aims to increase citizens’ trust in the government by granting functional autonomy to all levels of government – legislative, executive, and judicial. The goal is to establish power equality and intergovernmental relations, ensuring
equal access to services for people from all classes and regions. However, the challenging path to federalism in Nepal is complicated by political and bureaucratic challenges. There is a struggle between the executive, legislative, and judicial branches, creating difficulties in implementing federalism.

Despite constitutional provisions, sub-national governments have been limited to policy formulation, Acts creation, and revenue sharing, heavily relying on the federal government. Local governments face challenges such as capacity issues, managing expenditures, external influence, conflicting duties, and fiduciary risks. However, collaborative governance in a federal structure like Nepal can be complex due to various factors such as diverse cultural and ethnic groups, historical tensions, limited resources, and political challenges.

Policy harmonization is one of the crucial factors in maintaining collaborative governance. Inconsistencies and conflicts in policies and regulations across different levels of government can impede collaboration. The execution of concurrent powers that have been enlisted in the Constitution is one of the major problems. However, the federal, provincial, and local government does not have any mechanism to execute those power collaboratively. To resolve this problem, a collaborative mechanism should be established for policy coordination and harmonization between federal, provincial, and local governments. Ensure that policies are aligned with the overall national goals and objectives.

Political challenges in collaborative governance involve difficulties in getting political or ministerial support for complex initiatives. Ministers might lack interest, question why they should increase their accountabilities, and fear losing control over outcomes. Collaboration can be viewed as a threat to political control and can lead to increased risks for politicians compared to others in the system.

In addition to that, one significant problem in Nepal’s collaborative governance was observed when conflicts arose in naming the provinces. The journey of naming provinces in Nepal emerged as the most contentious issue. Even though it was just a matter of naming a province, the ethnic factors prevailed and conflicting opinions could be seen in the Provincial Assemblies. Identity politics became a substantial issue during the naming and could enter into the picture in
the future as well.

Similarly, when the House of Representatives was dissolved two times in a row, its wave disturbed the provincial assemblies and its functioning. When the federal parliament was dissolved by the central government, it created instability and mistrust among different levels of government. Provincial assemblies were struggling with the friction between the parties while it should have functioned independently of tensions surfacing at the federal level.

The implementation of localization policies by the local-level government could be a challenge with the potential for conflicts between majority and minority ethnic groups. For instance, in regions with multiple local languages, there can be disagreements over which languages should be officially recognized and supported. Moreover, it could lead to disputes and tensions between linguistic groups, particularly in cases where some languages are considered dominant, while
others are marginalized or underrepresented.

The three tiers of government should look forward to mediation and consensus building whenever there is conflict between the policies. Institutionalization should be adopted as a measure to implement the defined roles and responsibilities of the different levels of government. Similarly, interethnic and cultural dialogue is a must to avoid identity politics.

Dr. Narayan Baskota, financial analyst, Niti Foundation, Kathmandu, Nepal

In a democracy, the government is administered by representatives of the citizens, essentially making government officials the agents of the people. The national treasury holds an equal share on behalf of each citizen. Therefore, it is imperative that the allocation of the country’s financial resources to different regions is carried out in a fair and justifiable manner.

Nepal embraced federalism in 2015 with the enactment of a new constitution. The formal implementation of the federal system followed the elections for the three tiers of government in 2017. My research has scrutinized whether there has been an equitable and justifiable distribution of capital expenditures among the regions, based on reported expenditures from the last decade, spanning from fiscal year 2011/12 to 2021/22. The data reveals that the government’s administrative efficiency in utilizing the budget has been lacking. Capital expenditure has been overshadowed by financial expenditure, and the overall financial position of the government has been deteriorating. This is evident in the government’s allocation of a reduced budget for capital expenditure in the current fiscal year compared to the previous one.

The distribution of capital expenditure across regions is significantly imbalanced, with the Bagmati province consuming nearly half of the country’s total capital expenditures. In contrast, the Karnali province has only received a meager share, ranging from 4 to 6 percent, which is ironically equivalent to what the Lalitpur district in the Kathmandu Valley receives. What’s even more concerning is that the Kathmandu Valley, housing just three out of the 77 districts in the country, absorbs more than one-third (up to 45 percent) of the total capital expenditure. Astonishingly, the Kathmandu district alone accounts for around one-third of the country’s total capital expenditures. This situation has persisted, despite the implementation of federalism in the country. These findings raise serious questions about the practical implications of the federal republic system.

Mr. Pankaj Kumar Panjiyar, BBM-LL.B, Kathmandu University School of Law, Nepal

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Ms. Swikriti Thakur, BBM-LL.B, Kathmandu University School of Law, Nepal

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Mr. Nelson Mandal, BBM-LL.B, Kathmandu University School of Law, Nepal
Optimal Utilization of State Resources: State resources have been used as a means of legal plunder throughout history. Nepal has a history of nepotistic regimes that have centralized state resources around themselves. The federal democratic republic is the best socialist system around the world. It decentralizes resources and power which is against the elite classes’ interest. Nobody wants to distribute their wealth and lose their power which their ancestors have gathered. It doesn’t matter if that wealth and power has been accumulated through legal plunder or brute loot. The elites don’t want to give it away.  The elites had centralized power, now federalism is decentralizing it to seven centers, and local level is supposed to decentralize it further. Therefore the elites groups have opposed federalism, not because it is not economically burdensome, but because it is a burden to the centers of powers that be. When the elite don’t want something done due to a reason that depicts their own selfishness, they find an excuse instead of reason. This time the excuse is that federalism is too burdensome economically.

The optimal utilization of state resources is only possible if the state utilizes the resources it gathers through relentless taxation and distributes it to every province and district. When the resources are distributed, they will produce more resources. For example Rajashree Janak University has been established in the Madhesh province. Yes, it took resources to build but it will produce more skilled human resources every year. Was it a burden? In short term yes, but in the long run, it elevates the burden by providing resources every year. Federalism is economically unsustainable, is a lie fed to the masses, by the elite, through the media so that the masses oppose their own welfare and rights. This is how the elite class has manipulated the masses throughout history. They create a propaganda that teaches the public to oppose the greater good of their own. Sustainable development is only possible if the wealth and power in the control of the elites, their corruption and manipulation, is ended and federalism is a step towards true sustainable development.

For the efficient use of state resources via federalism some intellectuals have suggested that the number of representatives be reduced, the facilities that they have been provided be reduced. This strategy reduces the economic burden of running a federal system. However, the money that representatives get they spend in their own province. At first glance it appears as if money is being spent. That money would be spent anyway and if federalism was not there that money would all be spent by the central government and the local levels as the elite pleased.

The real strategy to reduce federal burden is counterintuitive. The answer is not less funding but rather more funding. The reason is that when more spending is done in developing infrastructure at seven centers, they also produce more economic benefit, taxation is only one of them, they produce skilled manpower, they produce products that help reduce fiscal deficit. The benefits is multifaceted. In stating all this, one may ask, so why don’t we experience the benefits? There are two reasons for that. Firstly, there is rampant corruption and secondly federal democratic republic is in its infant state. As the system develops it will produce better results.

Mr. Prabhat Kumar Singh, BBM-LL.B, Kathmandu University School of Law. Nepal

The Inter-Province Council is a mechanism designed to resolve conflicts and disputes among the various provinces, aiming to enhance the efficiency of both the federal and provincial governments. Article 234 of the Constitution of Nepal 2072 establishes the Inter-Province Council to address disputes between the provinces. The council comprises the Prime Minister, all Chief Ministers, and two ministers from the Federal government, with the Prime Minister serving as the council’s head and responsible for convening necessary meetings.

The first Inter-Province Council meeting took place in 2074. Since then, provincial governments have consistently requested the Prime Minister to convene meetings to settle disputes hindering proper functioning.

A few years ago, Chief Ministers from all provinces gathered in Pokhara and urged the Prime Minister to convene the Inter-Province Council meeting to resolve jurisdictional disputes. According to Schedule-7 of the Constitution of Nepal 2072, there are concurrent power to Federal government and Provincial government. To work on the concurrent power, Federal law should be formulated at first and then only province are allowed to formulate their own laws to exercise their power. But federal government has been seen so reluctant to formulate a law to transfer their power to Provinces.

Home ministers of the Provincial government held a meeting in Janakpur and concluded that the lack of a police force hindered maintaining peace and security within their territories. The current police hierarchy reports to the federal government. Subsequently, the ministers requested the federal government to enact the Provincial Police Act, which has already been passed by both the National Assembly and the Federal House.

On November 9, 2023, Madhesh Province issued an ultimatum to the federal government to implement their law, allowing the province to enact its own laws and recruit its own police for crime control and peacekeeping. The Provincial government frequently blames ruling and opposition parties for being unwilling to delegate or transfer power, despite the constitution providing a clear framework. The federal government should address these obstacles, empowering the provincial government and strengthening federalism.

Federalism, brought about by the people’s movement for the welfare of everyone, aims to devolve federal government power to provincial and local levels. The timely convening of Inter-Province Council meetings is crucial, and the Chair of the Council should not ignore the frequent requests of Chief Ministers. All tiers of government and political parties should be serious about implementing constitutional provisions and meeting people’s expectations.

Ms Rachana Bhattarai, BBM-LL.B, Kathmandu University School of Law, Nepal.

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Ms. Ayushma Kafle, BBM-LL.B, Kathmandu University School of Law, Nepal.

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Ms. Prakriti Sitoula, BBM-LL.B, Kathmandu University School of Law, Nepal

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Ms. Nandita Kharel, BBM-LL.B, Kathmandu University School of Law, Nepal

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Ms. Anjali Sharma Neupane, BBM-LL.B, Kathmandu University School of Law, Nepal

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Ms. Ubbie Shrestha, BBM-LL.B, Kathmandu University School of Law, Nepal

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