Annual Analysis: Federal Affairs


Former PM KP Sharma Oli took an unconstitutional move in 2021, dissolving the House of Representatives two times in six months. This unconstitutional move by Oli resulted in him losing in six of seven provinces including in the federal government, except Province 2. Meanwhile, political parties were busy in power tussles, obstruction of parliament, and fractionalization at federal and provincial levels.

Timeline of Major Events in 2021

1 JanuaryProvince 2 government forms an Investigation Bureau
18 MarchThe Provincial Planning Commission of Karnali Pradesh develops the first five-year plan from 2076/77 to 080/81 BS.
30 MarchThe local government starts service through a digital cost system from the upcoming fiscal year 2087/89.
12 JuneNepali Congress leader Krishan Chandra Nepali replaces Prithivi Subba Gurung as the newly appointed CM of Gandaki Province.
8 AugustThe ruling alliance’s task force prepares a report entitled the ‘Common Minimum Program’ prioritizing COVID-19 control and vaccine program.
12 AugustKul Prasad KC from CPN-MC replaces Shankar Pokharel as the newly appointed CM of Lumbini Province.
18 August  Asta Laxmi Shakya from CPN-UML replaces Dormani Paudel from the same party to become the newly appointed CM of Bagmati Province.
26 August  Bhim Prasad Acharya from CPN-UML replaces Sherdhan Rai from the same party to become the newly appointed CM in Province 1.
29 SeptemberThe Commission for Investigation of Abuse of Authority (CIAA) raids the office of Province 2 Chief Minister.
26 OctoberProvince 2 agrees to establish two universities through an ordinance.
28 October  Rajendra Pandey from CPN-US replaces Asta Laxmi Shakya as the newly appointed CM in Bagmati Province.
2 November  Rajendra Rai from CPN-US replaces Bhim Prasad Acharya to become the newly appointed CM in Province 1.
2 NovemberJeevan Bahadur Shahi from Nepali Congress replaces Mahendra Bahadur Shahi in Karnali Province.


Federalization Process and Its Major Challenges

Six years have passed since the promulgation of the constitution and four years since the elections; yet the implementation of federalism is in crisis due to the lack of laws and weak implementation. Although, all the seven provinces have instituted important laws (like the Provincial Police Act, Provincial Public Service Commission, Provincial Civil Service, and Employees Adjustment Act), the centralized mindset and lack of accountability in the leaders and federal bureaucrats, pose a challenge. For example, Province 2 filed five writ petitions against the federal government accusing it of encroaching on the provincial government’s jurisdiction. Considerable evidence exists of the central government trying to interfere with the Sagarnath Forest Development Project, Forest Act, Employees Adjustment Act, and Provincial Police Act, even if, schedule 6 in the constitution affirms that the provincial government’s right to these areas.

The federal government also failed to endorse e provincial laws. Province 2 endorsed Provincial Police Act without waiting for the Federal Police Act, but the provincial government did not enact the existing laws, due to lack of consensus in the political parties. The federal raised difficulty in formulating the provincial bills, Provincial Police Act and Provincial Public Service Commission, and had to support the provincial government in forming the laws. As a consequence, the government has failed to implement their rights.

The meetings of the Inter-State Council were also held only twice, in December 2018 and April 2019 in the five-year tenure of the election. The government had to work as a bridge between the federal and provincial governments’ functions through the Council. But former PM Oli and PM Deuba did not create positive vibes through the Council meetings in 2021. The Council meeting has thus been affected due to lack of political consensus and the major political parties preoccupied with their general conventions.

Two of the seven provinces still don’t have their names and permanent capitals, although only six months remain of the electoral firm. Consensus among the political parties is yet to be reached in Provinces 1 and 2.

However, the Provincial Governments have somehow succeeded to form a member of laws in 2021. Province 2 set up an Investigation Bureau for investigation of criminal incidents. Province 2 inaugurated and Agriculture University focused on the induction of the Technical University.  Local Governments started an online payment system. Bagmati Province also announced a Common Minimum Program targeting COVID-19 control. But weak coordination of the bodies concerned hampers implementation of policies and laws. 

Frequent Changes of CMs and Governor

Chief Minister Krishna Chandra Nepali Pokharel responds to a question raised during the zero hour meeting of the state assembly held in Pokhara. Photo: RSS

In 2021, the implementation of federalism got delayed after Oli’s move to dissolve the parliament. Nepali Congress and other four parties, which form the main coalition party, were mainly responsible for filing a vote of no-confidence motion nine times against KP Oli’s government in Province 1 by Chief Ministers Sher Dhan Rai and Bhim Acharya; in Bagmati by Chief Minister Dormani Paudel and Asta Laxmi Shakya; in Gandaki by Chief Minister Prithvi Subba Gurung; and in Lumbini Chief Minister Shankar Pokharel between January 2 and September 26 and Oli lost his government one by one in the six provinces including at the federal level.

All provinces then also went through a vote of confidence motion after the party-split in 2021. The frequent changes of the chief ministers and votes of confidence affected the administration in the provinces. From June to November, the political parties were found playing a game for the distribution of power-sharing. This year, more than two chief ministers were appointed in Provinces 1 and Bagmati and the CM in Gandaki, Lumbini, and Karnali were changed twice. Such practices contribute to unstable governments.

Frequent changes in the role of provincial governors also impacted the provincial assemblies’ function. From February 19 to November 8, President Bhandari, on the recommendation of the government replaced new governors in all the seven provinces. The central government has been using the governors as a political weapon and some of them were changed more than twice abruptly.

Almost all the provinces took a long time in cabinet expansion after the government change. The coalition government led by PM Deuba could expand his cabinet after 87, days on October 8.

Split Provincial Ministries

Except for Province 1 and Sudhurpaschim, all provincial governments have split ministries for the distribution of power-sharing. However, the provincial governments are facing a lack of employees before increasing ministries, and now more difficult is its function after the increase. At present, there stands 69 provincial ministries across the country. According to the Ministry of Federal Affairs, the provincial governments have split the ministries without conducting an organization and management due to which they are not able to send the required number of employees. Such a split in the provincial ministries has continued to hamper the smooth functioning of provincial and local government, whilst also increasing the financial expense.

Poor Capital Budget Expenditure 

It is not new that the government has yet again failed to expend a proper share of the capital budget, most of which will get spent at the end of the fiscal year. In the fiscal year 2020-21, the government’s capital expenditure stood at just 65 percent, including a large capital budget was spent in a week.  Like every year, this year too, the government emphasized more upon the Asadhe Bikash (capital expenditure at the end of the fiscal year).

Similarly, in this current fiscal year 2021-22, the government spent just 6.46 capital budget in five months. This is the lowest capital expenditure compared to the last three fiscal years in the same time duration. While the government had announced to implement at least 10% by the first three months, and 10% each month following the capital budget at any cost. According to the government’s announcement, it should have been able to spend at least 40 percent of the capital budget. But due to the political and law barrier, the government has spent poor capital budget expenditure said the Finance Minister Janardhan Sharma, vice-chair of National Planning Commission Biswanath Paudel, and Finance Secretary Madhu Kumar Marasini. This is also a signal that the ruling alliance government tend to repeat the Asadhe Bikash.   

Similarly, according to the Ministry of Federal Affairs and General Administration (MOFAGA), eight local governments (5 municipalities and 3 rural municipalities) in Province 2 have not brought the budget so far of the current fiscal year 2020/21. Only two months have left for the fiscal year to end. However, compared to the previous years, the number of local bodies submitting and passing the budget on the time has been gradually increasing.

Almost all provinces including the federal government led by Oli brought the budget through an ordinance in the fiscal year 2021-22. Due to the political disagreement, the ruling government was obliged to unveil the budget through the ordinance. But the same thing happened when the coalition party’s administration in four provinces (Province 1, Bagmati, Lumbini, and Gandaki) including the federal government revised the budget through the Replacement bill in all seven provinces including federal. That means both governments – Oli and Deuba tried to manipulate the budget. This is the last tenure before the election, the Deuba government like Oli government seems to have unveiled the budget as with an election-orientation.

The constitution of Nepal has made several provisions for equitable distribution of resources among governments entities considering inter-governmental fiscal transfer as one of the significant components of fiscal federalism. For the same, The National Natural Resource and Fiscal Commission (NNRFC) was established. However, Dr. Rudra Sharma, an expert on fiscal federalism stated that the central government is intrinsically hegemonies over the province and local government, consequently, affecting the implementation of Fiscal Federalism. The Ministry of Finance has limited rights to the NNRFC. For effective implementation of the budget, the government has to revise the procurement laws, policies and budget expenditure system.

On September 29, the Commission for Investigation of Abuse of Authority (CIAA) has raided the office of the Chief Minister and Council of Ministers in Province 2. A team of CIAA has alleged that Province 2 has been involved in irregularities in bicycles purchases under the campaign ‘Beti Bachau-Beti Padhau’ (Educate Daughter, Save Daughter). Meanwhile, CM Raut has stated that the raiding of CIAA in the chief minister’s office discredits federalism and the provincial government. CM also said there are no irregularities and arrears-related activities from the office.

Moreover, the effective implementation of federalism is a critical lack of coordination among the governments. At present, several challenges appear such as coordination, law formation, and implementation, COVID-19 control, functioning of bodies. The people have hoped from the upcoming election for new candidates and effective functioning of the government bodies.   Federalism is still unsettled in the country; still, three tiers of government are struggling with the implementation of federalism for the formation of law and its practice. In the last year, the political parties were highly engaged in the power control, which affects the locals as well. Previously, CPN-UML had secured a comfortable majority in six of the seven provinces. At present, Nepali Congress, Maoist Center, and CPN-US had led in six provinces, with each party having two provinces, and Janata Samajbati Party ruling in the remaining Province 2. Now leaders are busy with the election-based work but lack the consensus between the Election Commission and the political parties, which is likely to affect the upcoming election.

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