Nepal is a diverse country with more than a hundred ethnic and language communities. For a long time, its unitary and centralised system of governance was unable to address the concerns of these diverse communities. The monarchical system, unable to uphold the rights of the citizens, was eventually replaced by a federal democratic republic. These calls emanated forcefully from the "People’s War" initiated by the then Communist Party of Nepal (Maoist), the movement led by the Seven Party Alliance and the 2006 People’s Movement. As a result, the Interim Constitution of Nepal 2007 accepted the federal system. The constitution promulgated by the Constituent Assembly in 2015 with the primary objective of ending all forms of discrimination mandated a three-tier model of government—federal, province and local.

The 2017 elections elected 275 members to the House of Representatives. The National Assembly consisted of 59 members—56 elected by the provincial and local authorities and three nominated by the President. The seven Provincial Assemblies together contain 550 members. The House of Representatives, National Assembly and Provincial Assemblies have completed four years and have entered their fifth year. During this period, all provinces have designated their provincial capitals; and except for Province 1, the rest have chosen their names too. Following the completion of the first five-year cycle of the local level, the second local elections are slated to be held on May 13. At the 2017 local election, 35,041 representatives were elected, and this year's election is supposed to elect 35,221 office bearers. The constitution has been strengthened from the local level.

Constitutional provisions

According to Article 56 of the constitution, all three levels of government can exercise executive, legislative and judiciary powers. Article 57 has provisions for exclusive and concurrent powers for all three levels of government. The provincial and local governments are required to exercise their concurrent rights in a way that does not come into conflict with federal law. Article 59 deals with the exercise of financial powers, while Article 60 deals with the distribution of revenue sources. The federal, provincial and local governments can adopt financial legislation, allocate budgets, create policies and plans, and implement them. They can also levy taxes and collect revenue from various sources within the parameters of their financial powers. This is the start of an exercise in decentralised power within a federal structure, marking the end of centralised governance.

Fiscal federalism is moving forward too. The independent National Natural Resources and Fiscal Commission has been formed to ensure an equitable allocation and distribution of revenue among all three tiers of government. While the constitution was adopted in 2015, the formal implementation of federalism began only in 2018. Its implementation was realised after the formation of the provincial governments.

The foundations of federalism were laid when the Provincial Assemblies and governments started their work. However, the strength of this foundation depends on the performance of the provinces and the status of coordination with the federal government. In analysing this aspect, there are both strengths and weaknesses. After three and a half years, the provincial government structure too changed due to the dissolution of the House in 2021. Subsequently, the journey for the provinces also became difficult. The Provincial Assemblies have not been holding regular meetings. Like the federal Parliament, some of the Provincial Assemblies are also being obstructed.

As the implementation of federalism is a new exercise, it is not unusual for various challenges to appear. With provincial governments becoming operational, a few conflicts and problems have arisen between the federal and provincial governments on issues such as staffing, drafting laws, selecting and implementing programmes and projects, fiscal transfers and sharing, capacity building and land acquisition, among others.

In terms of institutional setup, the ministries, commissions and agencies required by the provinces have been formed. Long-term thinking for the development of the provinces has taken root alongside the current social, economic and infrastructure development. The first periodic plans have been made public. Structures such as the province development councils and provincial development action committees have also been formed. However, efforts to end discrimination based on caste, language, region, gender and religion as envisaged in the constitution have not been effectively initiated, nor has an environment been created to secure economic equality and social justice.

The provincial governments will require at least five years to work on several fronts, including developing legislation, managing staff and building physical and organisational structures. The first two years were mainly spent on establishing legislation and managing the workforce and administration; the third year focused on the outbreak of Covid-19, and in the fourth year, the structure of government changed. Confidence and mistrust arose between the political parties. Despite this, the provincial governments are making progress. The necessary legislation and organisational structures are being created, and they continue to manage their resources effectively.

Visible achievements

While the cumulative budget for all seven provinces was just Rs7.14 billion in their first year, it increased to Rs262 billion in the fiscal year 2021-22. The public service commissions have begun their work, roadmaps for provincial development have been prepared, and specific concrete programmes have been implemented. In addition, there have been some visible achievements. The provinces have also begun providing fiscal transfers to local governments. For example, in the fiscal year 2021-22, the federal government disbursed about 11 percent of the total budget in transfers to the provinces which, in turn, disbursed funds to the local level in the same proportion.

Provinces are synonymous with federalism. Federalism cannot be imagined without provinces. In order to strengthen federalism, it is necessary to pay attention to the solution of the problems that are currently seen on the surface regarding the operation of federalism. Finally, federalism does not automatically mean that all will be well. All seven provinces and their bodies need to work towards implementing the spirit of federalism resolutely. The first five-year cycle needs to be reviewed, and the citizens’ sense of ownership toward federalism should be developed.