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Nepal – Federation Challenges

Published Feb 20, 2019
Updated May 06, 2020

Nepal has adopted a three-tier structure of federal government (federal, province, and local). All three levels have the constitutional power to enact laws, prepare budgets, and mobilize their own resources.

However, the new constitution has assigned expenditure responsibilities and revenue sources to all three tiers of the government but most of the key revenue sources remain with the central government and expenditure responsibilities of the sub national (province and local) governments are relatively larger creating an imbalance.

The variation in the areas, population sizes, economic bases and availability of natural resources also creates an imbalance.

Given the limited revenue bases assigned to sub national governments (SNGs), and their weak revenue generation and administration capacity, the resultant gaps at the SNGs will have to be met primarily through fiscal transfers by the central government.

There is an apprehension that high fiscal dependence on the central government will adversely affect the quality of devolution and autonomy of SNGs.

The call for greater autonomy to the provinces was evident during the first Kantipur Conclave, the Kantipur Media Group’s global event in Kathmandu in February.

Six chief ministers who were in the Capita to participate in a panel discussion during the Conclave commented that the over centralisation of power was a hurdle for smooth administrative functioning.

 “The Centre must understand that the provinces were set up to implement their own vision and policies based on need rather than its prescriptions,” said Chief Minister Prithvi Subba Gurung of Gandaki Province. “That the Centre will decide the fate of the provinces is a major obstruction,”  as reported by Kantipur online.

Similarly, Province 1 Chief Minister Sher Dhan Rai  said, “While the provincial governments have been pushing for powers bestowed on them by the Constitution, the federal government, meanwhile is asking for our patience and taking us lightly,” he said. Importantly of the six provinces five are lead by chief ministers from the the Nepal Community Party (NCP), the party leading the federal government.

In Province 2 Sanghiya Samajbadi Forum-Nepal is leading the government and the party is represented in the federal administration by the deputy prime minister and health minister.