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 consist- ed 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 at 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. 

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.