The National Coordination Council meeting held in Pokhara in July resulted in several significant decisions. One of them is to lay out the constitutionally designated exclusive and concurrent rights of the federal units. This undertaking is called, in essence, the "unbundling of functions".

The unbundling task force is led by the secretary of the Office of the Prime Minister and the Council of Ministers. The constitution outlines both exclusive and concurrent powers of the federal units. These powers were further clarified in 2017 through an unbundling exercise that aimed to address potential disputes between the federal units. As a result of this effort, various laws, including the Inter-Governmental Fiscal Arrangement Law, Local Government Operation Law, Employee Adjustment Law and others were developed. These laws marked the initial legislative steps towards implementing federalism in Nepal.

A total of 1,795 functions were also identified, with 870 assigned to the federal government, 565 to the provincial governments and 360 to the local governments. In terms of policy laws, implementing federalism necessitated the creation of numerous laws. According to the Ministry of Law, Justice and Parliamentary Affairs, most of the basic laws, with the exception of the Civil Service and School Education laws, have been enacted since the inception of federalism. All the laws that have been enacted were developed as part of this unbundling exercise.

Stepping on toes

Despite the unbundling exercise, the provincial and local governments are still concerned. They feel that the federal government is not adhering to the constitutional delineation established through the unbundling process. Whether concerning planning and budgeting, law formulation, fiscal transfers, administrative management, or public order and safety, the federal government is being perceived as sidestepping the presence and authority of the provincial and local governments. The local governments also have complaints about the provincial governments. They say that the provincial government's actions are impeding effective local governance.

While unbundling exercises have been undertaken, it has come to light that higher levels of government are undermining the constitutional roles assigned to the lower levels. Additionally, numerous functional responsibilities delegated to the federal units have shown instances of overlap and duplication across different government tiers.

Following the "finance follows the function" principle, it is necessary to clarify the distinct roles associated with each function. Defining the essence of functional assignments, namely, who will do what is paramount. Building upon principles such as subsidiarity and aspects of policymaking, regulation, financing and the provision and production of goods and services, a detailed unbundling exercise is still warranted.

In light of this context, the National Assembly's Federalism Implementation Study and Monitoring Parliamentary Special Committee has prioritised the government's reconsideration of the unbundling exercise. The first recommendation underscores that uncertainties persist regarding functional responsibilities across government levels. Thus, it suggests revising the unbundling report to establish greater clarity, especially concerning the delineation of responsibilities among federal units.

Presently, the most prominent challenge in implementing federalism in Nepal lies in the fiscal and administrative realms. When examining the budgetary aspect of fiscal federalism, it becomes evident that nearly all federal ministries have exceeded their constitutional boundaries. The plans and programmes have been structured in a manner that contradicts the principles of federalism.

One significant issue has arisen concerning the proper constitutional functioning of nearly all federal ministries. Among the 22 federal ministries, a notable nine ministries, including the Ministry of Women, have neglected to allocate any funding to the provincial and local governments.

Moreover, a worrying pattern emerges when examining the distribution of resources within the total ministry budget. It becomes apparent that 20 ministries intend to conduct more than 50 percent of their operations through centrally deputed entities. Strikingly, only two ministries—- the Ministry of Education and the Ministry of Labour—-have chosen to devolve a portion of their budgets to the provincial and local governments.

The Business Allocation Rules of 2017 of the government of Nepal provides an extensive outline of the responsibilities assigned to federal ministries. These guidelines state that the ministries should focus on policy formulation, framework legislation, standard establishment and regulation enforcement. However, one recurring issue is that ministries consistently exceed their designated boundaries, directly encroaching upon the jurisdictions and mandates of the provincial and local governments. This overreach is evident in their allocation of small-scale projects with minimal financial implications.

Ministries or VDCs?

For instance, the Ministry of Physical Infrastructure, Ministry of Urban Development, Ministry of Water Supply and Ministry of Youth have allocated projects worth Rs200,000 or less. The Ministry of Physical Infrastructure alone accounts for 159 projects of this nature, while the remaining ministries account for 76, 156 and 11 projects, respectively.

Among the projects managed by the Ministry of Physical Infrastructure, 66 percent are worth up to Rs5 million. Such projects comprise 98 percent, 84 percent and 99 percent of the projects handled by the Ministry of Urban Development, Ministry of Water Supply and Ministry of Youth, respectively. This trend shows that the country is going backwards from the practices observed during the previous unitary system.

The federal government's practice of distributing small-scale programmes and projects to the provincial and local governments has generated a situation in which their autonomy and purpose have become obscured. Despite the federal government's declarations that it will handle national and strategic projects, the provincial governments will handle medium-scale projects, and the local governments will handle local-level plans and initiatives, things are very different in reality.

Considering these inconsistencies, questions emerge about the necessity of having federal ministries when they act no different than the Village Development Committees of the past. It is necessary to re-evaluate the role of all federal ministries, and the unbundling exercise task force should address this facet earnestly as part of its comprehensive review.