KATHMANDU: Since the promulgation of Nepal’s Constitution in 2015, two periodic elections have been held, resulting in the formation of both federal and provincial governments.
Together, they have introduced eight annual budgets. However, concerns are growing that the federal government continues to interfere in the jurisdiction of provincial and local governments.
Similarly, provincial governments are often seen encroaching on the responsibilities of local bodies, especially during budget formulation.
The lack of proper implementation of fiscal federalism and constitutionally aligned programs has made provincial governments less result-oriented.
As a result, political voices have emerged questioning the effectiveness—and even the relevance—of the current federal structure, particularly the existence of provincial governments.
The federal government presented its budget on Jestha 15, followed by all seven provincial governments on Asar 1. Local levels are now preparing to present their budgets on Asar 10.
However, many of the programs included in both federal and provincial budgets remain conventional, failing to reflect the transformative spirit of the federal system.
As dissatisfaction with the government and the federal structure continues to grow, the current coalition—led by the two major political parties—appears reluctant to address public discontent or to strengthen federalism through its policies and budgets.
Less than a decade after the constitution was enacted, the relevance and future of federalism have once again become subjects of national debate. Opinions are increasingly divided between supporters and critics of the federal system.
Bhawani Baral, a writer and long-time advocate of federalism based on ethnic identity, has contributed to this discourse through several publications, including ‘What Should the Structure of the State Be’ and ‘The Politics of Limbuwan’. He is a vocal supporter of renaming Koshi Province as Limbuwan and is recognized for his intellectual advocacy of identity-based federalism in Nepal.
At a time when questions surrounding federalism are intensifying, Khabarhub spoke with Bhawani Baral to explore the key lessons from nearly a decade of federal practice, what has gone wrong, and what needs to be corrected.
Here’s an edited and polished version of the interview transcript for clarity, coherence, and flow while preserving the original meaning:
After the promulgation of the Constitution, the federal and provincial governments formed through periodic elections have already presented their eighth annual budgets. How do you assess the practice of fiscal federalism reflected in these budgets?
Theoretically, the governments have not formulated budgets in line with fiscal federalism. The powers listed in the constitutional schedules overlap, and the State Restructuring High-Level Commission, which had previously allocated these powers, was never fully implemented as intended.
Because the powers were not properly assigned or respected, work proceeded accordingly.
Had the powers proposed by the State Restructuring and Power Sharing Committee been fully implemented as per the constitutional schedules, there would have been far more fiscal federalism practiced in support of federalism. If that had happened, we likely wouldn’t hear voices today questioning the need for provinces at all.
I have not reviewed the latest budget in detail, but the provinces are preparing budgets quite similar to those prepared by municipalities and rural municipalities. Even now, we cannot claim Nepal has achieved fiscal federalism, especially when something as fundamental as setting up a planning bank still requires federal government permission.
Looking at the budgets of the federal and provincial governments, a significant number of projects that should fall under local government responsibility are instead controlled by higher levels. This is not the intent of the constitution or the federal system—so why have the government and political parties not sought to correct this?
The reason is simple: they do not understand the essence of federalism and are not genuinely committed to it. In fact, they have introduced a programmatic framework that sets federalism up for failure.
If they had done their work properly, even figures like Durga Prasai would not be raising demands for monarchy restoration. Nor would the Rastriya Prajatantra Party and others be pushing that agenda. It seems they are deliberately weakening federalism with the objective of undermining it through poor governance.
When I looked closely, the Maoists themselves have backtracked. I even engaged with them during their underground days while writing my book.
At that time, they questioned the need for federalism altogether, insisting it should be limited to autonomous provinces only. Their version of federalism only appears nominally, and the eleven provinces they declared are effectively autonomous provinces.
Just recently, Prachanda attended a program in Jhapa and spoke only of autonomy, not federalism. He said that due to geopolitical realities, the right to self-determination cannot be fully addressed.
He declared support for autonomous provinces instead. I interpret this as the Maoists having also stepped back from federalism.
This federal system emerged especially from the balance of power among the major political parties. So, are they unwilling to strengthen the federal system and practice fiscal federalism?
Absolutely no.
If we look at provincial budgets over the past four years, internal revenue mobilization remains very weak. The provincial governments are not operating independently. So, can we say that the provincial governments have failed entirely?
Definitely. These provincial governments have become “island governments,” isolated and disconnected from their constituents. Local governments, in contrast, have performed better.
Municipalities and rural municipalities have effectively implemented their budgets and tried to exercise the rights granted in the constitutional schedule as much as possible.
What I said about Prachanda is very important. Why did he emphasize only autonomous provinces? Why did he reject the right to self-determination?
He reiterated this at a conference involving the Dhimal, Rajbanshi, Kochi, Santal, and Jhangad communities. With that statement, I feel the Maoists have retreated politically and are opposing the full implementation of federalism.
He invoked geopolitics, but geopolitics should have been a reason to strengthen federalism. Instead, he spoke of autonomy in a manner resembling the Chinese model of autonomous provinces, which is quite restrictive.
Political parties and leaders don’t want to admit the federal system has failed. Does this mean the supporters of federalism themselves must critically reconsider the system?
Yes, but the Madhes region will never accept the abolition of federalism. Federalism has deep roots there—going back to the Lichchhavis and the Janapath Republics. The population’s psychology is strongly in favor of federalism.
No matter how much Madhesi parties have struggled, they could not abolish federalism because the large population in Madhes supports it. They reluctantly accepted an eight-district Madhes Province.
I call this form of federalism “Varna Shankar” (disjointed federalism). Provinces have become isolated islands. When provinces and local levels were formed, the provinces were not granted real authority. The creation of local levels happened under the federal government’s control, without empowering the provinces.
Decisions about how many rural municipalities and municipalities each province needs should be up to the provinces themselves. But what happened instead? Provinces lack leadership and control.
Security agencies and administration remain under federal control, and provinces don’t even have authority over municipalities and rural municipalities. This is not federalism as practiced anywhere else in the world.
There is a need to debate revising the system, but there is also a fear that doing so might lead the republic to revert to a monarchy, or federalism to give way to a unitary system.
A strong opposition to the federal system and the provinces is growing in many households. After reaching this point of debate, it seems the system has already fallen into a trap.
Globally, there are examples of countries shifting from a federal system to a unitary one, as well as many moving from unitary to federal structures. Ultimately, federalism is an ad hoc arrangement, but we cannot simultaneously be both unitarians and federalists.
This system should be viewed as a flexible structure. With advancements in information technology, infrastructure, and decreasing diversity, it may become necessary in the future to transition from a federal system back to a unitary one. I believe such possibilities should also be seriously considered.
The opposition to the current system is becoming increasingly active in society, and public disappointment is growing. What can be done within the existing framework to send a positive message?
Just as political parties once united to establish the republic and this system, their political philosophies and ideas now need to be progressive. Having moved away from the monarchy to a republic and unitary system before, they must now take another bold step forward.
However, the talk of reforming the system is very confusing. Any change to the constitution requires a two-thirds majority to pass. When reform discussions are handled carelessly, it only creates more confusion.
Rights were distributed by placing them in the schedules. Now, all levels have the right to open television channels. Similar overlapping efforts can be seen in health and education, where rights could have been unified but were instead fragmented across schedules without clear explanations. This unclear distribution risks creating chaos when implemented. It seems that the problems we face now could escalate into widespread unrest.
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