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Part-5 Structure of State and Distribution of State Power

Structure of State and Distribution of State Power

56. Structure of State:

(1) The main structure of the Federal Democratic Republic of
Nepal shall be of three levels, namely the Federation, the State and the Local level.

(2) The Federation, State and Local levels shall exercise the power of
State of Nepal pursuant to this Constitution and law.

(3) There shall be States consisting of the Districts as mentioned in
Schedule-4 existing in Nepal at the time of commencement of this Constitution.

(4) There shall be Village Institutions, Municipalities and District
Assemblies under the Local level. The number of Wards in a Village Institution
and Municipality shall be as provided for in the Federal law.

(5) Any Special, Protected or Autonomous Region can be set by the
Federal law for social, cultural protection or economic development

(6) The Federation, State and Local levels shall protect Nepal’s freedom,
sovereignty, territorial integrity, independence, national interest, overall
development, multi-party, competitive, democratic, republican, federal system of
governance, human rights and fundamental rights, rule of law, separation of
powers and check and balance, egalitarian society based on pluralism and equality,
inclusive representation and identity.

57. Distribution of State power:

(1) The powers of the Federation shall be vested in
the matters enumerated in Schedule-5, and such powers shall be exercised
pursuant to this Constitution and the Federal law.

(2) The powers of a State shall be vested in the matters enumerated in
Schedule-6, and such powers shall be exercised pursuant to this Constitution and
the State law.

(3) The concurrent powers of the Federation and the State shall be
vested in the matters enumerated in Schedule-7, and such powers shall be
exercised pursuant to this Constitution, the Federal law and the State law.

(4) The powers of the Local level shall be vested in the matters
enumerated in Schedule-8, and such powers shall be exercised pursuant to this
Constitution and the law made by the Village Assembly or Municipal Assembly.

(5) The concurrent powers of the Federation, State and Local levels
shall be vested in the matters enumerated in Schedule-9, and such powers shall be
exercised pursuant to this Constitution, the Federal law, the State law and the law
made by the Village Assembly or Municipal Assembly.

(6) Any law to be made by the State Assembly, Village Assembly or
Municipal Assembly pursuant to clause (3) or (5) shall be so made as not to be
inconsistent with the Federal law, and any law made by the State Assembly,
Village Assembly or Municipal Assembly which is inconsistent with the Federal
law shall be invalid to the extent of such inconsistency.

(7) Any law to be made by the Village Assembly or Municipal
Assembly pursuant to clause (5) shall be so made as not to be inconsistent with the
State law, and any law made by the Village Assembly or Municipal Assembly
which is inconsistent with the State law shall be invalid to the extent of such
inconsistency.

58. Residual powers: The Federation shall have power on any matter not enumerated
in the Federal List, State List, List of Local level or Concurrent List or on any
matter which is not so specified in this Constitution as to be exercised by any
level.

59. Exercise of financial powers:

(1) The Federation, State and Local level shall
make laws, make annual budget, decisions, formulate and implement policies and
plans on any matters related to financial powers within their respective
jurisdictions.

(2) The Federation may so make necessary policies, standards and laws
on any of the matters enumerated in the Concurrent List and other areas of
financial powers as to be applicable also to the States.

(3) The Federation, State and Local level shall make budget of their
respective levels, and the time for submission of budget by the State and Local
level shall be as provided for in the Federal law.

(4) The Federation, State and Local level shall provide for the equitable
distribution of benefits derived from the use of natural resources or development.
Certain portions of such benefits shall be distributed, pursuant to law, in forms of
royalty, services or goods to the project affected regions and local communities.

(5) If, in utilising natural resources, the local community desires to
make investment therein, the Federation, State and Local level shall accord
priority to such investment in such portion as provided bylaw on the basis of the
nature and size of such investment.

(6) The Government of Nepal shall have power to obtain foreign
assistance and borrow loans. Such assistance or loans shall be so obtained or
borrowed as to have macro-economic stability of the country.

(7) Provisions relating to the management of budget deficits and other
fiscal discipline of the Federation, State and Local level shall be as provided for in
the Federal law.

60. Distribution of sources of revenue:

(1) The Federation, State and Local level
may impose taxes on matters falling within their respective jurisdiction and collect
revenue from these sources.
Provided that provisions relating to the imposition of taxes and collection
of revenue on matters that fall within the Concurrent List and on matters that are
not included in the List of any level shall be as determined by the Government of
Nepal.

(2) The Government of Nepal shall make provisions for the equitable
distribution of the collected revenue to the Federation, State and Local level.

(3) The amount of fiscal transfer receivable by the State and Local level
shall be as recommended by the National Natural Resources and Fiscal
Commission.

(4) The Government of Nepal shall, on the basis of the need of
expenditure and revenue capacity, distribute fiscal equalization grants to the State
and Local level.

(5) Each State shall, in accordance with the State law, distribute fiscal
equalization grants out of the grants received from the Government of Nepal and
revenues collected from its sources, on the basis of the need of expenditure and
revenue capacity of its subordinate Local level.

(6) Provisions relating to distribution of conditional grants,
complementary grants or special grants for other purposes to be provided by the
Government of Nepal from the Federal Consolidated Fund shall be as provided for
in the Federal law.

(7) Distribution of revenues between the Federal, State and Local level
shall be made in a balanced and transparent manner.

(8) A Federal Act on the distribution of revenues shall be made having
regard to the national policies, national requirements, autonomy of the State and
Local levels, services to be rendered by the State and the Local level to the people
and financial powers granted to them, capacity to collect revenues, potentiality and
use of revenues, assistance to be made in development works, reduction of
regional imbalances, poverty and inequality, end of deprivation, and assistance to
be made in the performance of contingent works and fulfilment of temporary
needs.

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