February 2023 Analysis: Federalism

Posted by : Rasila Dhamala


Date : 2023-02-28

The power equation in both province and centre is bound to change with the newly formed eight party alliance and CPN-UML drawing out from the government. While this state of instability is now observed, the performance of Province governments in terms of economy and administration is very weak.  According to the recent performance evaluation of the National Natural Resources and Fiscal Commission, the performance of the Provincial government is weak and that of the local government is average.

Timeline of Major Event

Date Events
10 February Kamal Bahadur Shah, was appointed the Chief Minister of Sudurpaschim Province as the outgoing Chief Minister Rajendra Singh Rawal could not secure a vote of Confidence.
15 February Lumbini province completed five years of establishment.
16 February Gandaki Province completed five years of establishment.
26 February Four ministers of the Rastriya Prajatantra party resigned from the Bagmati provincial government.
27 February CPN-UML decided to withdraw support from the government.

Provincial Coalitions at Stake

The current ruling coalition which formed the government in both federal and provincial levels became more fragile with its failure of selecting the Chief Minister of Sudurpaschim with adequate vote of confidence. Nagarik Unmukti Party, one of the alliance partners of the ruling coalition, refused to vote for Rajkumar Rawal from CPN-UML in the vote of confidence, meanwhile Nepali Congress’s Kamal Bahadur Shah was appointed the Chief Minister. As he is set to take the vote of confidence in the first week of March, the situation seems in his favour following the new development of events.

The dynamic changed more with the formation of a new eight party alliance, which is bound to change the power equation in coming days. There was a shift of power as CPN (Maoist Center) decided to side with Nepali Congress and formed a new eight party alliance including the pre-election electoral coalition. The alliance consisted of Nepali Congress, CPN (Maoist Center), CPN (Unified Socialist), JSP, Janamat Party, LSP, Nagarik Unmukti Party and Rashtriya Janamorcha. CPN-UML, the main partner of the ruling alliance, decided to withdraw from the government, but yet to decide for the provinces, while the Rastriya Prajatantra Party (RPP), one of the major coalition partners, decided to withdraw its support from the Federal Government and provincial governments.

The government at Province 1 is now at stake as the Rastriya Prajatantra Party (RPP), one of the major coalition partners, decided to withdraw its support from the Federal Government. Showing the current drastic political shift in Nepalese Politics as the major reason for the withdrawal, RPP decided to quit the federal government and provincial governments. RPP has decided to quit the government of Bagmati Province whereas it has informed that it won’t be leaving the government of Province 1 immediately to avoid political instability given it is a special situation. The government of Gandaki and Lumbini province are also in danger as the new coalition of eight parties has a comfortable majority for the government formation and the chief ministers are from CPN-UML. Meanwhile, the governments of Madhesh, Bagmati, Karnali and Sudurpaschim Province are safe considering the new coalition partners, JSP, CPN (Maoist Center) and Now Nepali Congress are leading the governments.

Less expenditure, less work

Less capital expenditure has been a huge issue of our system for a very long time. While most of the provincial government prepared a budget to focus on post-pandemic recovery, agriculture, industry and tourism in total, they have still failed adequately spend on development projects. The total expenditure of the provincial government has stood at 16.21% of the total budget, i.e. the expenditure is only NRs 49.53 billion against the total allocation of NRs 305.5 billion in the budget. The report has shown that all the provinces lack in terms of expenditure and more on the side of capital expenditure. According to the review report of the fiscal year 2022/23, Province 1 has stood on top with 24.88% of expenditure out of the entire provincial budget, meanwhile Madhesh Province is on the bottom of the list with only 10.9% of spending.

One of the major reasons for the less expenditure is the lack of proper human resources. Another is the provincial government’s heavy dependence on the federal government for fiscal transfer and project funds. The local, provincial and federal elections throughout the six months of this fiscal year heavily affected the expenditure, especially on development projects. The report suggested fund management and called for focus on spending the budget efficiently. In addition, the Federal government has called on sub-national governments to cut their planned expenditure (except compulsory liabilities) by 20%, the major reason being fall in revenue collection.

Weak Performance of Provinces

The National Natural Resources and Finance Commission has evaluated the performance of all levels of government based on the performance index for the purpose of recommending financial equalisation grants for the financial year (FY) 2080/81. According to the performance evaluation report,  Provincial governments are seen weaker and local governments are average in case of Performance. The evaluation took place based on 11 different indicators for the provincial and local government according to the State and Local Level Performance Evaluation Procedure, 2078.

Among all the provinces, Province 1 topped the list with 44.3 points, whereas Madhesh Province remained at the bottom with 20.5 points. The average score of 32.25 points has shown weak performance. The Commission, following the report, has recommended that conditional grants should not be provided to piecemeal and single-rights projects. To avoid the duplication of projects and to help provincial and local governments to be more independent in revenue generation and development, the Commission has also suggested providing financial equalisation grants at once.