Explainer: Nepal’s Rocky Road to Federalism Features
© Robert Smith
Explainer: Nepal’s Rocky Road to Federalism

Nepal is a least developed, land-locked Himalayan country wedged between India and China. After a long period of instability, it adopted a new constitution in 2015, creating a multi-party federal republic. Previously Nepal had been a unitary state, albeit with a long period of political instability and insurgency. The first election under the Constitution was held in 2017, and the most recent occurred on 20 November 2022, with elections being held simultaneously at all three levels of the federation. The newly elected government is optimistic about what it can achieve.

Since 2017, the country has struggled to implement federalism. The party that ruled until July 2021 was unstable. Politicians and public servants at the centre appeared not to understand the operation of a federal system fully. The then prime minister and most of the political and administrative elites were all Kathmandu-based and appeared to prefer a centralised rather than a federal system.

There are only 30 federations worldwide, yet they represent around 40 percent of the world’s population. A federal system must have at least two levels of government; processes and mechanisms must provide for the second level of government to be included in decision-making at the centre. Moreover, the powers and responsibilities of the different levels must be outlined in a constitution.

The Nepal Constitution

According to Article 14, section 1 of the Constitution, Nepal is “an independent, indivisible, sovereign, secular, inclusive, democratic, socialism-oriented, federal democratic republican state.” Nepal has a three-tiered system of governance consisting of the central government, seven states/provinces and 753 municipalities. Schedules to the Constitution detail which powers are vested exclusively in each of the three levels of the federation and a schedule is also devoted to concurrent powers. Any law enacted at a lower level must be consistent with that at a higher level. Non-compliant laws are invalid only to the extent of any inconsistency and any residual powers vest in the federation. A fundamental deficiency is that each schedule contains a list of transferred powers without any additional clarifications.

Any law inconsistent with the Constitution is “invalid to the extent of such inconsistency, after one year of the date on which the first session of the Federal Parliament set forth in this Constitution is held” (Article 304). Despite the constitutional requirements, it was not until July 2020 that the bill covering inter-governmental relations was passed by Parliament and entered into force.

A review in 2019 enumerated problems implementing the federation. There was a vague understanding of the role and function of each level of the federation. The result was poor-quality decision-making and limited development of technical capacity. In 2019 and early 2020, there was significant ambivalence towards devolution within the government and the bureaucracy, obtained by personal observations confirmed by widespread press reports.

Enabling Legislation

In 2018, many enabling acts passed by the national Parliament apparently conflicted with the Constitution. It is believed that these legislative conflicts indicate that the centre sought to maintain excessive legislative control over the states and local levels contrary to the Constitution. The preamble to the Intergovernmental Fiscal Arrangement Act states that the act was developed “to provide necessary provisions regarding revenue rights, revenue sharing, grants, loans, budget arrangements, public expenditures, and fiscal discipline of the Government of Nepal, the state and local levels”. The implication is that the government is only at the federal level. In contrast, the Constitution is quite explicit that the main structure of the Federal Democratic Republic of Nepal consists of three levels making up the federal, state and local levels. Each of these levels exercises “the power of [the] State of Nepal pursuant to this Constitution and law”. Schedule 4 of the act appears to allocate a role to the District Coordination Committee in allocating and distributing royalties. The Constitution clarifies that this is a role for each the federal, state and local levels. Nowhere is a District Coordination Committee given the constitutional right to make laws, operate a consolidated fund or allocate funds.

For whatever reason, there seems to be a continuing series of governance failures. While the Constitution envisions a high level of coordination between the three tiers of government, it was lacking during the COVID-19 pandemic. The provincial and local governments had Constitutional responsibility. Nevertheless, the central government gave responsibility to District Administration Offices which were part of the previous centralised state and were still accountable to the federal government and not to the provincial and local levels.

One of the key achievements, however, has been at the local level. Nepal is still recovering from the 2015 earthquake. At the ward level, local governments have become the first point of contact between citizens and the state officials responsible for building inspections and construction permits. Challenges of assessments and grant-beneficiary lists can be registered at the ward level where previously they were lodged at District headquarters.

Political Tensions

Former President KP Sharma Oli is on record saying that the state and local levels are units of the federal government. The bureaucracy had been chided for “rent-seeking behaviour, status-oriented outlook, undeniable loyalty to political parties and for sheltering themselves from control and accountability regime.”

On 21 December 2020, following leadership tensions within the ruling Nepal Communist Party, Prime Minister KP Sharma Oli recommended the dissolution of the House of Representatives. The president approved the recommendation under Article 76(1), Article 76(7) and Article 85 of the Constitution. Article 76(1) empowers the president “to appoint the leader of a parliamentary party that commands a majority in the House of Representatives as the Prime Minister.” Article 76(7) refers to when the prime minister fails to obtain a confidence vote or a prime minister cannot be appointed. Neither of these conditions applied in this case. It did, however, require an election to be held within six months of the House’s dissolution. Article 85 sets the term of the House of Representatives at five years unless dissolved earlier. On first reading, it appears that the president was in error in accepting the prime minister’s recommendation. On 23 February 2021, the Constitutional Court ruled that the House’s dissolution was unconstitutional and must reconvene.

The government became more dysfunctional as the prime minister sought to retain power. Around midnight on 21 May 2021, the prime minister held a cabinet meeting that recommended the dissolution of the House. The president acceded to the request immediately. On 12 April 2021, the Constitutional Bench overturned the decision and ordered the president to appoint the Nepali Congress Party President, Sher Bahadur Dueba, as the new prime minister as per Article 76 (5) of the Constitution. The prime minister remained in power until the 2022 election.

The Outcome of the 2022 Election

The coalition parties that came to power in April 2021 allied to contest the 2022 election. The alliance won the most number of seats whilst the Communist Party of Nepal, under the earlier Prime Minister KP Sharma Oli, won the second most number of seats. As often happens in Nepal politics, backroom deals resulted in Pushpa Kamal Dahal from the Communist Party of Nepal, a member of the earlier alliance, being offered (and accepting) the Prime Ministership in a Communist Party of Nepal-led government. It has been claimed that Pushpa Kamal Dahal continues to apply the skills acquired in the civil war to contemporary politics. On 10 January 2023, the prime minister received almost unanimous support in a vote of confidence to pass the floor test mandated in the Constitution.

Hopefully, the current political machinations are not a harbinger of instability over the term of the next government. In particular, the government must focus on completing the devolution of power as stipulated in the Constitution. The focus must be on the development of the country and not on political and administrative schemes.


Nepal’s road to a stable federation has been rocky and further compounded by the COVID-19 pandemic. Politicians, officials, and political parties appeared “to lack a clear understanding of federalism, the need for clear enabling legislation, and the degree of institutional strengthening required at the provincial and local levels to provide the foundations of a vibrant federal republic.” It is clear from the authors’ analysis that the drafters of the Constitution expected (hoped) that devolution would take around three to four years. With Nepal’s state of development, centralised bureaucracy, and inexperienced government, such a time frame would have been impossible to achieve from the beginning. In addition, the drafters of the Constitution had not understood the significant logistics associated with reallocating facilities and suitably trained staff.

Dr. Robert Smith is an international development consultant with a Ph.D. in Engineering and an MPhil in law and is currently a Ph.D. candidate in law at the University of New England, Australia. His research interests are social media law, especially fake news, international development, and intellectual property law. Robert spent most of 2019 based in Kathmandu and continues to follow Nepal politics.

Dr. Nucharee Smith is an Assistant Professor in law at Kasetsart University, Chalermphrakiat Sakon Nakhon Province Campus, Thailand. Her research interests are International Law, including International Trade Law.