Federal Nepal recently completed its first 100 operational days. Even though the issue of federal Nepal dates from 1950, it remained a dormant and sluggish political idea. In the changed political context of multiparty democracy and freedom of expression, the issue got space in intellectual and political activism in the 1990s. However, the idea of federalism politically and constitutionally could only be established in post-2007 Nepal. Today, the power of the state is exercised by 761 governments. Therefore, it is desirable to reflect upon the constitutional and operational mechanism of federal Nepal as it has completed 100 days.

A miss-match

A review of the public comments made by a few chief ministers shows the kind of problems they are facing in conducting provincial affairs. On February 23, Dormani Poudel, the chief minister of Province 3, said that the provincial government was having difficulties in executing its decisions because top level bureaucrats were unwilling to work at the provincial level. He said that the bureaucrats’ desire to work out of the Singha Durbar complex was hindering the implementation of federalism.

Speaking at a roundtable programme organised by the Kantipur Media Group last March, the chief ministers of all provinces shared the view that the old mindset of top bureaucrats and leaders was the major factor impeding work. Lack of resources, infrastructure and the required laws along with the centre’s unwillingness to delegate power has compounded the problem of the provinces, they said. Similarly, on April 17, Trilochan Bhatta, the chief minister of Province 7, cited scarce resources as obstacles to speeding up development projects.

During the first meeting of the Inter-Government Fiscal Commission held at the Finance Ministry on May 7, the chief ministers and finance ministers of the provinces and representatives of local governments complained that the centre had retained a large chunk of the national resources for itself, and that the provincial and local governments had to shoulder most responsibilities disproportionately. The participants demanded with one voice a share of customs duty and income tax to match their expenditure. The chief minister of Province 5, Shankar Pokharel, demanded a share of the revenue based on the responsibilities of each tier of government. The participants criticised the revenue sharing provisions in the Inter-Governmental Fiscal Transfer Act, arguing that the existing arrangements were unjustifiably low.

An analysis of the comments shows that provincial governments see a revenue and expenditure assignment mismatch, local governments find the existing revenue sharing Inter-Governmental Fiscal Transfer Mechanism unjustified, provincial and local governments need technical support to formulate laws and policies and a centralised hangover persists among bureaucrats. Considering the power sharing arrangements, it can be said that the problems encountered by the provincial and local governments are a reflection of constitutional provisions. The responsibilities of the provinces include 21 items touching the life and welfare of the people such as peace and order, healthcare, electricity, irrigation, water supply, higher education, languages and culture.

Needless to say, these deliverables necessitate a substantive sharing of revenues to the provincial and local levels. However, the major sources of revenue, which account for almost 80 percent of the total tax revenue, are under federal jurisdiction. With the single exception of agro income tax, provincial governments have no exclusive taxing power. Entertainment and advertisement taxes and property registration charges are to be collected concurrently by the provincial and local governments. This obviously will result in problems.

Restrained autonomy

Vague laws have further aggravated the problem. As per the Ministry of Law and Justice, the federal design needs new acts or amendments to almost one-third of the existing 308 articles in the new constitution. Parliament has to promulgate 41 acts, the Provincial Assemblies have to endorse 22 acts and the local governments have to approve six acts. Further, even though the provincial governments have recently introduced the Financial Procedure Act for internal audits, Provinces 1, 5 and 7 have not yet stipulated the timeline. Provincial autonomy is restrained by lack of accountability among the existing district level agencies including the security agencies. Even the local governments lack policy coordination and accountability to their concerned provincial entity as they are beyond provincial purview under the existing framework.

Another set of problems emanates from the provisional establishment of provincial infrastructure. No provincial capital has been named yet, and official business is being conducted from provisional capitals. Lack of proper or scattered physical infrastructure further impedes the operation of the provincial secretariats. This stalemate hampers inter-departmental communication, coordination and smooth operation of administrative affairs.

These problems can be resolved by making the Inter-Governmental Fiscal Transfer Mechanism more justifiable with a necessity driven approach, holding cooperative inter-governmental negotiations via a participatory and inclusive institutional framework and conducting capacity building programmes for provincial and local governments to enhance their revenue raising power and infrastructural edifices. These measures will help to ensure ‘self-rule’ for the provincial and local governments in consonance with the spirit of federalism. Additionally, it will help Nepal to have inter-governmental relations based on the principles of cooperation, coexistence and coordination as envisioned by Article 232 (1) of the constitution.

Mishra is a lecturer at National College