Since the Constitution of Nepal 2072 (2015) made Nepal a federal republic, federalism and local government have become core topics in Lok Sewa administration and law papers. Questions ask about the three levels of government, the number of local levels, the schedules of powers, the judicial committee and the types of grants. This note explains these points with the Local Government Operation Act 2074 and the Intergovernmental Fiscal Arrangement Act 2074.
1. Three levels of government
Article 56 of the Constitution says that Nepal has three main levels of structure: federal, provincial and local. Each level exercises state power within the limits set by the Constitution and law. The relations among the three levels are based on cooperation, coexistence and coordination.
| Level | Units | Executive | Legislature |
|---|---|---|---|
| Federal | 1 | Council of Ministers headed by the Prime Minister | Federal Parliament (House of Representatives and National Assembly) |
| Provincial | 7 provinces | Council of Ministers headed by the Chief Minister; Province Head (Governor) represents the federation | Provincial Assembly |
| Local | 753 local levels | Village or Municipal Executive | Village or Municipal Assembly |
2. Number of local levels
| Type of local level | Number |
|---|---|
| Metropolitan cities (Mahanagarpalika) | 6 |
| Sub-metropolitan cities (Upamahanagarpalika) | 11 |
| Municipalities (Nagarpalika) | 276 |
| Rural municipalities (Gaunpalika) | 460 |
| Total local levels | 753 |
The local levels are divided into 6,743 wards. Nepal has 77 districts; in each district a District Assembly and a District Coordination Committee (DCC) coordinate the local levels (Article 220). Local elections under the new Constitution were held in 2074 (2017) and 2079 (2022). The term of local elected bodies is five years.
3. Distribution of powers: Schedules 5 to 9
Article 57 distributes state power through five schedules of the Constitution.
| Schedule | Powers of | Examples |
|---|---|---|
| Schedule 5 | Federal (exclusive) | Defence, foreign affairs, central bank, currency, citizenship |
| Schedule 6 | Provincial (exclusive) | Province police, provincial civil service, province statistics |
| Schedule 7 | Concurrent: federal and provincial | Matters shared by the two levels |
| Schedule 8 | Local (exclusive) | Town police, local taxes, basic and secondary education, basic health, local roads |
| Schedule 9 | Concurrent: federal, provincial and local | Matters shared by all three levels |
Powers not listed in any schedule are called residual powers, and they belong to the federation (Article 58).
At the provincial level, the Province Head is appointed by the President (Article 163), and the Chief Minister is the leader of the majority party in the Provincial Assembly (Article 168). Members of a Provincial Assembly are elected for five years, 60 percent by the first-past-the-post system and 40 percent by the proportional system (Article 176). Each province can make laws on the subjects in Schedules 6 and 7, but a provincial law that conflicts with a federal law is void to the extent of the conflict.
4. Local executive and ward committee
The executive power of the local level lies with the Village Executive or Municipal Executive (Article 214). It is headed by the Chairperson (rural municipality) or Mayor (municipality), with a Vice-Chairperson or Deputy Mayor, all ward chairpersons, and women and Dalit or minority members elected by the assembly.
| Body | Members elected by the assembly |
|---|---|
| Village Executive | 4 women members and 2 Dalit or minority members |
| Municipal Executive | 5 women members and 3 Dalit or minority members |
Each ward has a Ward Committee made up of the ward chairperson and four ward members, at least two of whom must be women (one of them a Dalit woman).
5. Local assembly and law-making
The legislative power of the local level lies with the Village Assembly or Municipal Assembly (Articles 221 to 227). The assembly consists of the chairperson or mayor, vice-chairperson or deputy mayor, ward chairpersons, ward members and the members of the executive elected from Dalit and minority communities. The assembly makes local laws, passes the annual budget and policies, and the chairperson or mayor chairs it.
6. Judicial committee
Under Article 217, each local level has a three-member judicial committee to settle certain disputes within its area. It is chaired by the Vice-Chairperson (rural municipality) or Deputy Mayor (municipality), with two members elected by the assembly from among its members. It settles small disputes such as boundary, water, wages, minor family and neighbour disputes, mainly through mediation, following the procedure in the Local Government Operation Act. An appeal against its decision goes to the District Court.
7. Local Government Operation Act 2074
The Local Government Operation Act, 2074 (2017) puts the constitutional provisions on local government into practice. It sets out:
- Detailed functions, duties and powers of the local executive, ward committee and assembly, based on Schedules 8 and 9.
- The procedure for making local laws and the annual plans and budget.
- The working procedure of the judicial committee, including mediation.
- Local revenue sources such as property tax, house rent tax, business tax and service charges.
- Rules on coordination with the province and the federation, and on the District Coordination Committee.
8. Fiscal federalism and grants
Fiscal relations among the three levels are governed by Article 60 and the Intergovernmental Fiscal Arrangement Act, 2074. The National Natural Resources and Fiscal Commission (Articles 250 and 251) recommends how revenue and grants are shared.
| Type of grant | Purpose |
|---|---|
| Fiscal equalisation grant | Fills the gap between expenditure need and revenue capacity |
| Conditional grant | Given for a specific programme or project, with conditions |
| Complementary (matching) grant | Supports projects partly funded by the receiving government |
| Special grant | For particular needs such as basic services or backward areas |
Revenue sharing: VAT and excise duty on domestic goods are shared 70 percent federal, 15 percent provincial and 15 percent local; royalty from natural resources is shared 50, 25 and 25 percent. The Inter-Provincial Council (Article 234), chaired by the Prime Minister, settles political disputes between the federation and provinces or among provinces.
📌 Key points to remember
- Article 56: three levels of government, federal, provincial and local.
- 7 provinces and 753 local levels: 6 metropolitan, 11 sub-metropolitan, 276 municipalities, 460 rural municipalities.
- 6,743 wards and 77 districts; DCC under Article 220.
- Schedule 5 federal, 6 provincial, 7 federal-provincial concurrent, 8 local, 9 concurrent of all three.
- Residual powers belong to the federation.
- Judicial committee (Article 217): three members, chaired by the Deputy Mayor or Vice-Chairperson.
- Ward committee: ward chairperson plus four ward members.
- Local Government Operation Act 2074 and Intergovernmental Fiscal Arrangement Act 2074.
- Four grants: fiscal equalisation, conditional, complementary and special.
Test yourself: Federalism and Local Government in Nepal
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