Navigating Nepal’s federalism, its transition and public perception

This article was originally published in Nepallivetoday on July 7, 2023 by Niyati Shrestha. Ms. Shrestha is a researcher at Samriddhi Foundation. Views expressed in this article are the author’s own, and do not reflect the views of the organization. She can be reached at [email protected]

In 2015, Nepal became a federal state with three tiers of government after the promulgation of the constitution. However, after six years, the initial enthusiasm for federalism has waned, particularly regarding the relevance of the second tier of government. Prominent political leaders have expressed negative views towards provincial governments, with some refusing to cast their votes in provincial elections while others vocally demanding for the provinces to be abolished. Many believe that these subnational units have failed to deliver the services they were meant to provide and instead have just increased administrative expenses. Furthermore, the general public is largely unaware of the government services provided by the provincial governments.

A survey conducted in 2022 reveals that only 24.8 percent of people are aware of the provincial government services while 54 percent of people are well aware of local government services. All this suggests that provincial governments have not made a visible impact on the general public’s life, leading to a prevailing notion that provincial governments might not be necessary at all.

In their defense, the officials at the provincial level blame the federal government for not handing over the constitutional rights to the provinces. This issue was also raised at an inter-provincial meeting held on June 30 where chief ministers expressed their disappointments over the federal government’s reluctance in transferring powers to the lower levels.

Also the overlapping of assigned exclusive and concurrent powers in the constitution has resulted in a lack of clarity regarding roles and responsibilities, leading to overall inefficiency. Moreover, during the fiscal year 2020/21, the provincial budget amounted to NPR 264.2 billion, with 37.8 percent funded by grants from the federal government and 14.5 percent generated from provincial levels’ own revenue. This indicates that provincial governments are still reliant on the federal government for resources. Looking at the trend of provincial budgets, the huge portion is usually covered by the fiscal transfers from the federal government. This fiscal dependency makes it difficult for them to be an effective tier of government.

If we look into the provisions in the Constitution 2015, Schedule 6 and Schedule 8 do grant provincial and local governments exclusive powers respectively. This shows that the federalism of Nepal has adhered to the principles of political decentralization signifying a reduction in the authority of a single central government over policy and lawmaking. However, there is a limitation since most of these exclusive powers have to be based on federal laws.

The law grants the federal government power to make decisions on matters that are not explicitly assigned to provinces or local governments making the federal government the facilitator to prepare an umbrella law for all tiers of government. This makes the other two levels of government dependent on the federal government to even exercise powers in their respective territory. For instance, the State Police Act and Civil Service Act are the laws which have not come into effect due to lack of federal laws on the same subjects.

Cause of problem

This raises a serious question: Despite the adoption of federalism, why has the federal government failed to transfer powers even after completion of the first tenure of provincial governments?

To answer this, we first have to understand how the concept of federalism was conceived in the context of Nepal.

Looking back at the time when the country was struggling to get through the last bits of ten-year-long civil war, major political parties’ focus was centered on abolishing the monarchy and re-defining power dynamics. Newly formed political party CPN-M that was about to enter mainstream politics somewhat had stressed on restructuring the governance system of the country. However, it was absent later in two major documents of that time–the Comprehensive Peace Accord and Interim Constitution of Nepal (2007).

The inception of federalism was actually endorsed by small parties especially from southern plains of Nepal and other marginalized groups, as it was the only means to shape their identity in the Kathmandu-centric governance system that would allow them to actively participate in the decision-making process which was previously dominated by few major political parties belonging to so-called high caste groups. It was in fact the Madhesh uprising led by the Madhesi alliance in the year 2008 that had ultimately put the unity of the country into risk that made other political parties give in and make federalism a reality in the context of Nepal. The secession risk imposed by the Madhesh uprising brought other major political parties together who had previously hated the idea of identity based federalism only to mitigate the possible threat and protect the unity of the country.

Hence, Nepal’s federalism is a result not from a shared goal agreed upon by major political parties, but rather as a response shaped by their party’s individual agendas. Because of this, the bargaining process got limited to the design of sub-national units based on their territorial demarcation while the question of policy responsibility was never part of their agenda. In reality, federalism has never been internalized by the major political parties. That is why the transition process has been very slow in the country.

Transition of federalism

Coming back to the public opinion that questions the efficiency and relevance of provincial governments, it is important to consider that Nepal’s federalism is still in a transition phase. As a result, the benefits of provincial governments cannot be immediately determined and must be observed over time. At present, some people view provincial governments as an irrelevant tier because the assignments under this level do not directly impact their everyday lives. The lack of visibility of services provided by the provincial governments contributes to this perception. However, it is essential not to underestimate the relevance of provincial governments.

Certain matters, such as housing and land registration fees, motor vehicle taxes, and more, directly fall under the jurisdiction of provincial governments, significantly influencing people’s daily lives. Access to these services becomes more convenient for individuals when they need to register their property or pay vehicle taxes. Devolving such responsibilities to sub-national units across the country saves people time and travel costs, as they no longer have to travel to central offices for these services.

It is also important to change the narrative and understand that the effectiveness of federalism depends on the transition process and actors involved in it. Currently, the main threat to federalism arises from resistance at the federal level, where bureaucratic actors are hesitant to delegate powers to lower levels of government. To ensure the successful implementation of federalism in Nepal, it is crucial to address this issue first and focus on strengthening the transition process.

Instead of considering the elimination of one tier of government, a more viable solution lies in enhancing the transfer of powers and responsibilities to lower levels. By promoting cooperation and accountability among all levels of government, federalism can thrive and better serve the diverse needs of Nepal’s population.