In 2015, Nepal adopted a federal democratic republic system of governance. This political and administrative restructuring, characterised by devolution of authority and responsibility among federal, provincial and local governments, generated hope and enthusiasm for improved governance and service delivery.
Nepal established 753 local government units across its seven provinces to bring democracy closer to citizens, as well as make local governments the focal point of service delivery and economic development. Proponents of federalism argue that the new constitution marks an era of transitioning to a more equitable society, accommodating the aspirations of historically marginalised communities. Yet critics argue that Nepal lacks the groundwork and thought processes to dissect the complexities of federalism to deliver such promises.
The evolution of the federalism discourse in Nepal and how it unfolded further proves this point. The State Restructuring Committee originally proposed five bases of identity — ethnic, linguistic, cultural, geographical and historical — and four bases of capability — economic inter-relationship and capability, infrastructure development and potential, availability of natural resources and administrative accessibility. These were later overlooked while implementing federalism. The discussion was more focused on names and numbers of provinces instead of the above mentioned criteria.
Amid this growing debate, understanding public perception towards the federal system warrants attention. The Asia Foundation Survey 2022 states that 70.4 per cent of Nepalis see their local areas improving. Growing awareness of services pertaining to health care, taxation and education provided by local governments is a testament to their popularity among the public. Conversely, public trust towards the federal and provincial governments is waning.
Notably, despite limited administrative and financial capabilities, local governments continue to garner public trust, primarily due to their proactive roles during crises like COVID-19 and the 2023 earthquake in Nepal. While the public didn’t feel the presence of the provincial government during these times of distress, local leadership efforts in rescue, relief and rehabilitation have been well-documented. Local governments’ performances proved that with the right intentions and willingness to serve, public trust and hope can be renewed.
Political parties’ failure to educate their party cadres about the federal governance structure and the necessary skills and mindsets to function effectively within it represents a key obstacle to institutionalising federalism. More importantly, the civil service administration — usually accustomed to centralising power and authority — needs more orientation to function under the decentralised system of governance. Kalyan Shrestha, former chief justice of the Supreme Court, remarked at the 2023 International Conference of Federalism, Devolution of Power and Inclusive Democracy in Nepal and Asia held in Kathmandu: ‘We ended up becoming a centralist federalism rather than becoming a federal federalism’.
Though Prime Minister Pushpa Kamal Dahal reiterated his commitment to strengthen the sub-national governments in his address to the nation in December 2023, the reality on the ground stands at odds with his pledges. A 2020 Democracy Resource Centre Nepal Report stated that overriding circulars from the federal government continue to infringe on the authority of local and provincial governments.
Expressing their dissatisfaction over the federal government’s actions, the National Association of Rural Municipalities in Nepal and the Municipal Association of Nepal issued a press release in 2019 stating that the local government’s ability to function independently on issues like education, health, forests and industries have been affected. On 9 November 2023, the Chief Minister of Madhesh province issued a 30 day ultimatum to the prime minister. The demands included rights to the deployment of civil servants, integration of police forces, control of forest areas and management of guthi (trust) land, as provided by the constitution.
While it might be too early to assess the effectiveness of federalism in Nepal, the early signs are not promising. A study report on federalism highlighted problems such as a lack of clarity in jurisdiction among federal, provincial and local governments, failure to ensure the rights of women and failure to implement the recommendations of constitutional bodies. Major recommendations included decentralising powers, implementing administrative federalism, building institutional structures, ensuring inter-provincial and inter-local government cooperation and coordination, and establishing fiscal federalism to effectively implement the federal system in Nepal.
One crucial aspect hindering federalism’s success is the lack of decentralisation of fiscal powers. For instance, revenue management is skewed towards the federal government, which retains control over major tax sources like customs and excise duties. But provinces and local governments have limited taxing powers.
The growing dependency of the sub-national governments on the federal budget to sustain their operations has also raised questions about the relevancy of federalism, particularly the provincial structure. For the fiscal year 2022–23, the total share of fiscal transfers, including revenue sharing, was 33.1 per cent of the federal budget, which is 12.3 per cent of the GDP of that fiscal year. The mismatch between spending responsibilities and revenue-generating power widens the fiscal gap.
Strengthening the administrative and financial capacities of the provincial and local governments to deliver and manage services and promote sustainable and inclusive development should be paramount. Setting up institutions like the Gandaki Province Training Academy at the provincial level, which has trained 16,000 elected people’s representatives and organised in-service training for civil servants, should be a top priority.
The Gandaki Province Training Academy’s success in improving local government capacity for planning, revenue reforms, and Gender Equality and Social Inclusion strategies have inspired others to follow suit. Bagmati and Sudurpashchim provinces are set to initiate the practice of inking a Memoranda of Understanding with local governments to strengthen their administrative and financial capacities.
No less significant will be creating platforms for the mutual exchange of ideas, experiences, learning and sharing of good practices across the federal, provincial and local governments.
Kushal Pokharel is Research Fellow at Southasia Institute of Advanced Studies (SIAS) and a science communicator based in Nepal. He serves as an Adjunct Faculty Member in local governance and social inclusion.
This blog article was first published at East Asia Forum (EAF) March 25, 2024.
“Views expressed here are personal and not associated with any affiliated organisations”
