EXECUTIVE SUMMARY

Nepal's transition from a unitary state to a federal democratic republic under the 2015 Constitution represents a profound reordering of state power. The aim was to bring governance closer to citizens, rebalance authority between the centre and the periphery, and institutionalise inclusion as a pillar of national unity. A decade later, federalism is embedded across the country's seven provinces and 753 local governments, marking one of the most comprehensive devolution exercises in South Asia. The State of Federalism Report 2025 provides the first empirical baseline (See Annex 1 for the full baseline) for assessing this transformation, capturing the structures, performance, and perceptions that define the new system.

• Federalism is operational in all tiers, with elected governments functioning nationwide.
• The constitutional principles of self-rule, shared rule, and cooperation have been institutionalised through laws, policies, and digital governance systems.
• Citizen satisfaction exceeds 50 percent at the local level, and Nepal leads the region in political inclusion, with women holding 41 percent of local seats.
• Nepal's federalism has therefore Thoved beyond its formative stage. The coming decade must convert these institutional structures into stronger systems of performance, coherence, and accountability-ensuring that federalism delivers tangible, equitable results for citizens.

The findings of the 2025 Survey of the Nepali People broadly reinforce this overall picture of a functioning federal system. Citizens clearly recognise and interact with all three tiers of government, confirming that federalism is operational and visible nationwide. Trust remains strongest at the local level, where municipalities and ward offices are perceived as the most responsive and accessible state institutions, supporting the principle of self-rule in practice. While confidence in federal and provincial tiers is lower, citizens overwhelmingly associate improvements in roads, drinking water, health services, and electricity with local governance, aligning with the intent of devolved service delivery. The survey also highlights declining experiences of linguistic and caste-based exclusion, further validating Nepal's commitment to inclusion as a constitutional pillar. Although national optimism has fallen sharply, the public continues to reward local-level government performance, demonstrating that the foundations of federalism are not only established in law but are being experienced by citizens in meaningful, day-to-day ways (Kathmandu University 2025).

STATE OF FEDERALISM

The 2025 baseline confirms that Nepal's federal system is structurally solid but unevenly functional. Political institutions are mature and representative, fiscal systems are transparent yet still centralised, and administrative devolution remains incomplete. The federal structure is legally entrenched and democratically legitimate, but its coordination mechanisms and resource systems continue to evolve.

• Political Federalism: Elected institutions are functioning at all three levels; inclusion is strong; however, inter-governmental councils meet irregularly and legal gaps remain in education and civil service acts.
• Fiscal Federalism: Fiscal transfers are rule-based and digitised, but provinces and municipalities depend on federal grants for over 90 percent of their budgets.
• Administrative Federalism: Provincial and local structures are fully established; digital systems are in use, yet staffing and technical capacity are critically weak, with only 38 percent of sanctioned provincial posts filled.

In sum, Nepal’s federalism has taken deep institutional root but remains a work in progress. The country has built the architecture of a federal state; the next task is to refine its mechanics—clarifying roles, aligning fiscal and administrative authority, and ensuring that each tier of government can perform effectively within its constitutional domain.

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About the Book

The Standardized ICT Technical Handbook for Provincial and Local Government Offices (2026) is a landmark technical operational manual produced by the Office of the Chief Minister and Council of Ministers (OCMCM), Provincial and Local Governance Strengthening Programme (PLGSP), Gandaki Province, Pokhara, Nepal. Designed as a practical "how-to" guide ("के गर्ने, कसरी गर्ने"), the book equips Information and Communication Technology (ICT) officials, local authorities, and procurement officers with concrete workflows, standard operating procedures, standardized templates, and laminated Quick Reference Cards (QRCs) for daily public-sector IT management.

Primary Objectives

• Standardize and Systematize Operations: Transition government ICT management from ad-hoc administrative practices to uniform, international best practices across provincial and municipal entities.
• Ensure Regulatory & Anti-Corruption Compliance: Ensure alignment with Nepal's statutory frameworks—including the Public Procurement Act (PPA 2063), Individual Privacy Act (2075), Electronic Transactions Act (ETA 2063), GEA 2.0, and IT Norms 2082—to eliminate legal risks, procurement irregularities, and audit issues.
• Accelerate Digital Transformation: Operationalize citizen-centric, inclusive, and secure digital service delivery under Digital Nepal Framework 2.0 (DNF 2.0).

Short Breakdown of Included Modules

• Module 1: Foundational Concepts: Outlines the 7-stage ICT service delivery lifecycle, key distinctions (Digitization vs. Digital Transformation, IMS vs. MIS, e-Governance vs. Digital Governance), inclusive citizen-centered design (WCAG 2.1 AA), Digital One-Stop Service Delivery (OSSD), E-Governance Maturity indexing, data protection principles, and National AI Policy 2025 readiness.
• Module 2: International Standards and Best Practices: Translates five global technical frameworks—ISO/IEC 27001:2022 (Information Security), ISO/IEC 20000-1:2018 (IT Service Management), COBIT 2019 (IT Governance), ITIL 4 (Service Value System), and CMMI V2.0 (Process Maturity)—into practical, self-assessment checklists for government use.
• Module 3: National Legal and Policy Framework: Comprehensive legal reference (FAQs and Instrument Cards) covering 22 regulatory instruments, including cyber laws, data residency rules, mandatory open bidding/QCBS requirements, and proactive disclosure under the Right to Information Act.
• Module 4: ICT Operations, Security, and Business Continuity: Provides daily operational SOPs, IT Steering Committee governance structures, Incident and Change Management processes, server/physical security, backup routines, cyber incident response (VAPT), and staff handover protocols.
• Module 5: Procurement and Vendor Management: A step-by-step guide to anti-corruption ICT procurement—featuring Technical Concept Notes (TCN), brand-neutral Technical Specifications, IT Norms 2082 cost estimation models, non-disclosure agreements (NDAs), and red-flag checklists.
• Module 6: System Development and Maintenance: Governs the System Development Life Cycle (SDLC), mandatory GEA 2.0 technical artifacts, secure source code ownership, DevOps/QA testing, API governance, and go-live VAPT coordination.
• Module 7: Service Coordination and System Management: A strategic operational manual for coordinating with national bodies (DoIT, IDMC/GIDC, NCSC, OCC), integrating Nagarik App/NID, and executing the annual provincial ICT coordination calendar.
• Module 8: Annexes and Reference Materials: Master tool cross-references, laminated printable A5 Quick Reference Cards (QRCs), a Nepali-English ICT technical glossary, and official acronym registers.