During my tenure in the National Assembly, I championed a resolution to protect the rights of provincial and local governments and to ensure the effective implementation of federalism. This resolution addressed 15 critical areas requiring the attention of the Government of Nepal, with the first point urging the activation of intergovernmental relations (IGR) entities, such as the National Coordination Council (NCC) and the Interprovince Council. On June 2, 2022, the Assembly discussed and unanimously endorsed this resolution, instructing the government to take action.

According to the Federation, Province and Local Level Coordination and Inter-Relation Act, 2020 (IGR Law), the NCC, chaired by the prime minister, chief ministers and local government representatives, serves as a vital platform for resolving intergovernmental issues. Despite this provision, the NCC had not convened even once since the law’s enactment. The resolution prioritised this, recognising the importance of activating these IGR entities to address federal issues.

Following the Assembly’s directive, the then Prime Minister Pushpa Kamal Dahal convened the NCC’s first meeting on July 1, 2023. This was a significant development, but the journey had just begun. Following this, the Assembly established a seven-member ‘Federalism Implementation Study and Monitoring Parliamentary Special Committee’. The Committee was tasked with examining all aspects of federalism implementation, including political, fiscal, administrative and structural challenges. In four months, it recommended 99 action points across 11 thematic areas, such as fiscal federalism, administrative federalism, intergovernmental relations and service delivery to strengthen federalism implementation.

The first recommendation called for revising the “Unbundling Exercise.” While the Constitution delineates functional responsibilities among federal, provincial and local governments, ambiguities in the initial unbundling exercise have led to overlapping and duplicated responsibilities. After five years of federalism, the committee noted the pressing need to re-evaluate the exercise to clarify responsibilities among all levels of government. Consequently, the committee instructed the Office of the Prime Minister and Council of Ministers (OPMCM) to initiate this task and complete it within six months. Dahal, attending the National Assembly session, assured that he would follow the Committee’s recommendations, including revising the unbundling exercise.

Following the repeated pressure from the National Assembly, the NCC’s meeting in July last year marked a turning point as it decided to amend the unbundling exercise. Among the six key decisions, the second was to form a nine-member committee led by the Secretary of Provincial Coordination at the OPMCM to clarify functional responsibilities across government levels. The committee was instructed to complete its work within six months.

In addition to this committee, the OPMCM, with approval at the prime minister’s level, created five specialised task forces in the economic, administrative, social, legal and infrastructure sectors. The relevant secretary headed each task force, including sectoral experts and federal ministry representatives. These committees conducted in-depth reviews in their assigned fields. Representatives from the Municipal Association of Nepal and the National Association of Rural Municipalities in Nepal participated and helped organise feedback and consultation programmes across provinces.

A significant meeting took place last year in Hetauda, where all seven provincial Chief Ministers and representatives from local government associations gathered to discuss the unbundling exercise. They later submitted their report to the OPMCM for further review. A high-level expert team, including specialists in federalism, administration, law, finance and infrastructure, was assembled to ensure a thorough analysis. The expert team prepared reports on five subject areas to analyse and recommend adjustments to the unbundling exercise, which the OPMCM compiled. But the approval from the NCC still remains pending.

The National Coordination Council meeting on July 1, 2023, originally mandated the completion and submission of the unbundling exercise within six months, with the understanding that a second meeting would convene for its review. After continued pressure from lawmakers and the Special Parliamentary Committee’s recommendations for federalism, the second Coordination Council meeting finally took place on February 7, 2024. The NCC reiterated its commitment to fulfilling decisions from its first meeting, with clear, time-bound directives to ensure progress.

However, these decisions, including the approval of the unbundling exercise, have yet to be executed. While the Council’s decision to revise the exercise was a major achievement, the lack of implementation limits its impact. Once approved, the report is expected to streamline intergovernmental functions, reduce conflicts and enhance the performance of all three governments.

Clarifying government responsibilities

The 2015 Constitution defines functional responsibilities for each level of government, establishing areas for ‘self-rule’ and ‘shared governance’. However, these responsibilities remain ambiguous and often overlap across federal, provincial and local governments. In 2017, Nepal conducted an initial unbundling exercise to clarify roles and avoid conflicts. Despite these efforts, provincial and local governments continue to raise concerns, citing that the federal government often disregards the delineated responsibilities established through unbundling. Issues have emerged in planning, budgeting, lawmaking, fiscal transfers, administrative management and public order, where the federal government seems to be encroaching upon the autonomy of provincial and local governments. Local governments also report grievances about provincial governments, noting interference that hinders effective local governance.

Sectoral overlap is evident in almost every domain—roads, drinking water, irrigation, education and agriculture. This leads to resource strains and service delivery inefficiencies. For instance, local road projects, which local authorities should ideally manage, often receive funding and direction from all government tiers. Federal agencies frequently allocate budgets for minor city roads, while provincial governments intervene in local infrastructure. Consequently, local governments manage projects shaped by federal and provincial funding or priorities, complicating planning, accountability and responsiveness to local needs.

These challenges have sparked a call from sub-federal governments for a comprehensive review of the 2017 unbundling exercise. Revisiting this exercise to eliminate overlaps, establish clear guidelines and empower each government level according to its constitutional roles could prevent redundancy, improve accountability and enhance service delivery. Ultimately, clearer boundaries and responsibilities would benefit the people by ensuring government actions are coordinated and responsive to local needs.

While the unbundling exercise has seen substantial progress, it remains unfinished and unapproved by the National Coordination Council. This delay raises critical questions: Where is the Unbundling Exercise? Why are local government associations and provincial leaders silent about its completion? The success of federalism hinges on clarifying and respecting each government level's roles and responsibilities. The delayed approval of the exercise continues to hinder the effective functioning of federalism in Nepal.