On April 16, Prime Minister Balen Shah held a meeting with chief ministers of all seven provinces. Reportedly, the meeting lasted three long hours, centred on resolving complexities surrounding the implementation of federalism. Given the issue has been stonewalled at the Singh Durbar Complex, PM Balendra Shah’s recent initiative signifies a shift through intergovernmental dialogue. Ever since the adoption of the new constitution in 2015, substantive federalisation has remained rhetoric. Typically, non-decentralisation has remained the only constant during the capricious regimes of KP Oli, Sher Bahadur Deuba, and Prachanda. For the last decade, they have displayed an unaltered discomfort with power sharing with sub-national entities. Manifested through resource control, administrative command, and central (ministries’) circulars, they have deemed sub-national governments (SNGs) as implementing handles of federal programmes rather than as development collaborators on par. In this regard, Balendra Shah's earlier utterances also contradict his present initiative. Given Balendra Shah’s earlier remarks about the provincial tier of governments when he was a mayor, his recent effort in the capacity of prime minister to resolve the complexities of implementing federalism only deserves cautious appreciation.
Deliberate Discord
Traditional political forces 'bit the bullet' of federalism in a compelling political context, following Maoist, Madhesi, and ethnic uprisings from 2006 to 2015. With changed political arithmetic in the post-2015 phase, it was treated like a discarded baby. Reluctant leaders' imposed impasse over the federal project has, in fact, cost the very glory of the system itself. Though the unitary system changed, the political and bureaucratic mindset remained unaltered. During PM Oli’s administration (2018–21), centralised policy overtures were propelled. The constitutionally designed apex forum, the Inter-State Council (Article 234), mandated to resolve centre-province disagreements and aimed at synergising layered policies, has become dormant, with such meetings made ritualistic and sporadic. Even decisions made after such meetings stalled without proper follow-up.
Book review: Analyzing political economy of federalism in Nepal
In addition, disenchanted with decentralisation, the bureaucracy became emboldened by the persistent centralist tendency of leaders ranked atop the party pyramids. Consequently, restructuring of administration, staff adjustment, and regulations for sectoral policies were all attempted unilaterally, without sub-national inputs. Further, provincial concerns over delayed fiscal transfers, earmarked federal grants, and the erosion of sub-national autonomy were allowed to evolve into a vertically imbalanced fiscal federalism. The incidence of overriding legislation between federal and provincial units is already known through the Provincial Police Act, once legislated by Madhesh. Discrepancies persist in the chain of command, as senior bureaucrats stationed in provincial and local units, who are accountable to federal ministries, act as federal agents. The preponderance of federal authority in forest management is also protested by provincial and local governments. School education is another contested subject where local competence outweighs local capacity.
Things did not get overhauled under Sher Bahadur Deuba’s regime either. Efforts, however, were made to improve fiscal transfers, but proved inconsistent. Federal dominance in sectoral policies was still palpable, characterised by the ironic absence of provincial authority. Like the Deuba regime, Prachanda's tenure also exhibited symbolism rather than substance. The claimed ideological leaning towards the cause of federalism led to re-engagement with provinces, but was overshadowed by coalition instability. Therefore, it seems the whole federal project was a political design by traditional parties and their leaders. By keeping the strings of power in the hands of the centre, the provinces were allowed to remain incapacitated. Legal ambiguity, overriding executive decisions, and administrative bottlenecks are features of that federal design.
Unconventional Tenacity
What has been missing are not provisions, but strong political will. Federalism is sustained not by clauses, but by multi-layered conversations—regular, structured, and meaningful. Therefore, PM Balendra Shah’s recent move has ‘hit the trail’, aiming to mark a departure. In fact, mechanisms for intergovernmental consultation and collaborative policy intention are common in every federation to lubricate multi-layered, complex governance. Through its premier conference in the Australian federation, issues of common and particular interest are deliberated between the states and the Commonwealth government, ranging from finance to constitutional reforms. Similarly, regular meetings between provincial premiers and the Canadian PM are inevitable to negotiate sectoral policies for regulation, setting standards, ensuring quality of services, and improving policy outcomes. These are not just political exchanges; they are platforms for real bargaining, where real compromises are forged.
In our neighbourhood, India's Goods and Services Tax Council offers a compelling case. Despite significant political differences between the Union and the states, tax policies across its vast and diverse federation are harmonised consensually. These instances signify that institutionalised dialogue is unavoidable to facilitate policy synergy and achieve durable governance outcomes. The lessons could not be clearer for Nepal.
The present centralised tendency has not been merely a political choice; it has also been an entrenched bureaucratic proclivity, augmented over decades. Federalism in Nepal was a response to calls for inclusion, representation, and dignity, not just an administrative reform. When sub-national governments are sidelined, those underlying aspirations are also undermined. Reviving intergovernmental dialogue, therefore, is also about restoring faith in the federal promise itself. If Nepal is to move beyond the inertia of its early federal years, it will need more than formal dialogue. A strong political will to engage with sub-national entities towards “reform, perform and transform”—a metaphor popularised by Indian PM Narendra Modi to bring structural changes, effective implementation and durable outcomes—could be relevant for Nepal’s federalisation project as well.
