Senior Nepali Congress leader and former finance minister Ram Sharan Mahat is an advocate of fiscally strong federal units. He believes Nepal’s federal experiment has gone wrong because it became an emotive issue, and not one based on economic logic. So what does he make of the current disputes over the proposed break up of Province 5? And how do we break the current constitutional deadlock? Biswas Baral and Mahabir Paudyal met with the veteran Congress leader on Wednesday.
First of all, can you give us a clue of current state of negotiations and possible outlet to current crisis?
We are in an unfortunate situation. The political transition has been prolonged beyond our expectation. We have passed ten years since the peace process started and we are still occupied with constitutional and political issues. As for the present stalemate, the key issues are constitution amendment and holding of local elections. Now that the government has registered an amendment bill in parliament, it should be allowed to reach its logical end. There is no point of parliamentary obstruction to block the bill. If CPN-UML and other parties are not satisfied with the bill, they should persuade other parties in parliament to amend or reject the bill. If they cannot do that, they should allow it to pass. They should understand that registration does not ensure the passage of the bill. It can be changed, amended, refined or even rejected. But the parliamentary process must be allowed to operate. This is one way out.
Why is it so important, as you hint, to hold local elections soon?
For me, this is the real priority. We have had no elected representatives at the local level for over a decade and half. Elections of local bodies should therefore be our urgent priority. We should enact election-related laws as soon as possible and declare the election date at the earliest.
But how do you find an outlet when there is so much disagreement, especially over breaking up Province 5? Even Nepali Congress seems divided on this.
Changing or realignment of federal provinces should be based on popular will and aspirations of the people of the provinces concerned. At the moment there is a lot of resistance and resentment in Province 5 against separating its hilly districts from Tarai. In a way this resentment is valid because there are complementarities between hills and Tarai in that province. Economic integration and interdependence between hills and plains is strong. This is why the aspiration of people of that province should be honored while changing boundaries.
The constitution has had a provision to alter physical alignments of provinces, but only through provincial legislatures. But since we don’t yet have such legislatures, it is all the more important to take into account aspirations of people of the concerned provinces. Or, if that is not possible, the elected representatives of concerned provinces should be consulted while changing boundaries. This is not something that you can impose from Kathmandu.
Are you suggesting that final settlement of provincial boundaries should be put off for time being?
That is one option. The first and preferred solution is to allow the bill to be debated and discussed in the parliament so that other options can also be explored along the way in order to reach a final political agreement. Even deferral could be possible after deliberation. Or we can postpone boundary readjustment until we have provincial legislatures.
Some are of the view that the disputes over provincial boundaries will be impossible to resolve. They thus propose that new provinces be created in line with the old five development regions. Is this a viable option?
In fact, it is not easy to federate a country as old as Nepal. In fact, Nepal is too small for federalization to work. Federalization has worked in countries where federal set up has been created through process of aggregation. Under this small independent nations come together under a federal umbrella for economic or security considerations. But federalization through disaggregation of an old nation state is a tough job. It is complicated and also expensive.
When the nation opted for the federal set up, Girijababu himself was in favor of north-south alignment. This is because of resource complementarities between hill and Tarai and because of their economic interdependence. I still feel that would have been the best model. But there is a strong sentiment in Tarai plains that Madheshis have been excluded for too long from the decision making process. So they wanted a separate province comprising only Tarai districts. This feeling is particularly strong in what is Province 2 today, which is a Madhesh-only province. But even there, there is a strong feeling that some hill districts should have been incorporated in their province. Naturally, a province comprising hill and Tarai would be in a better position in terms of its sustainability and economic potential.
If it was a viable idea, why did political parties ignore it?
After the political change of 2007, there was a perception and feeling that everything that was done during Panchayat days was wrong. This is not true. The five development regions were conceived through rigorous studies. The best of the brains had been employed to formulate and implement this concept. But problem arose when the regional development framework came to be pointed by some political parties as a cause of marginalization and exclusion.
What will be the economic implications of separating hill districts from Province 5?
You have to understand that not all provinces would be economically viable. This is why you need a strong center with the power for financial redistribution in favor of poor provinces. There is a misconception that once you have autonomy you will be better off economically as well. But if full autonomy, including fiscal autonomy, is granted to all provinces, economic disparities between the provinces will get worse. Autonomy does not guarantee economic prosperity. Provinces 6 and 7 will lag behind economically unless they are financially supported by a strong center. At least the administrative and recurrent expenditure must be financed by mobilizing internal provincial resources. But these provinces won’t be able to do even that.
On Province 5, Rupandehi and Dang districts are much better off than hill districts in this province. If you separate hill districts from Province 5 and merge them with Province 4, it will naturally have huge revenue implications.
You don’t seem to be sold on federalism. Many of your party colleagues are also skeptical of the whole idea. If so why did the Nepali Congress-led government incorporate it into the Interim Constitution back in 2007?
Like I said, federalization through disaggregation is a complicated issue, even more so for a country with Nepal’s diversity. The federal project got even more complicated with the perception that federalism based on ethnicity was the best option in a country where no ethnic community is in majority anywhere. Back in 2007, federalism was an emotional issue. In fact, federalism at that stage had more emotional rather than economic logic. It emerged with the perception of exclusion, particularly in Madhesh. Thus was the need for federalism justified and it was made to appear as if federalism was the only solution to all kinds of marginalization and historical injustices. It was thought of as a cure-all for all social and economic ills, which it is not. This is why I had said back then that federalism could prove to be Lorelei’s song unless we handled it carefully and prudentially. Let us be more rational about federalism, I had said then. I say this even today.
Let us suppose that current disputes over federal boundaries are somehow resolved and we then start implementing the federal system. How can it be made financially viable?
At least for a decade or more, more resources will go into creating administrative and security infrastructures and managing recurrent and administrative costs. There will be less capital expenditure. We will be spending more for recurrent and administrative paraphernalia. More than half a dozen constitutional commissions and administrative infrastructure will have to be created in these provinces. So we will be spending less on development. Federalism is a very costly system, administrative wise. We have to generate our own resources to finance our recurrent and administrative costs, which will ultimately have to borne by taxpayers. Foreigners are not going to come to pay for our administrative costs.
Will it be right to say that the fiscal side of federalism was never considered in the federal debate?
Like I said, we never gave a serious thought to fiscal viability of federal system. Much of the debate was guided by emotions rather than economic logic. Even today we have not foreseen disputes that are likely to emerge during the division of natural and other resources.
Let’s return to disputes over the amendment bill. You have been in touch with Madheshi leaders as well. What in your reading is their bottom-line?
It’s difficult to say what their bottom-line is. Rajendra Mahato was saying the other day that all Madhesh districts should be separated from hills and that they will continue to fight for this even after they succeed in separating hill districts from Province 5. He is advocating hill-plain division from the east to the west. This is not acceptable to us. We should be pragmatic and should not stick to hard and fast rules on geography and ethnicity. This is because economically prosperous and fast-growing regions in Nepal are those with mixed settlements. Even in Madhesh, areas with Madheshi-Pahade mixed settlements are far better off in terms of economy and human development than the areas with mono-ethnic settlements. It is so in hills as well. This is why I am opposed to the idea of creating provinces comprising only Madheshi dominated or Pahade dominated districts.
Do your views reflect your party’s official stand on federalism?
We went to the election by saying that we will not accept federal divisions based only on ethnicity and ecology. We told the people that we are not in favor of ethnic federalism. Popular verdict was in favor of this idea. As for Province 5, there had been an agreement, including with UML, to separate hill districts from Tarai areas when the six-province model was conceived. Nepali Congress agreed to revive this concept now because this was something UML had also agreed to in the past. Much water has flown down the river since. UML has backed down from its earlier position.
What about UML argument that breaking up Province 5 and creation of a Madhesh-only province could, ultimately, lead to a total separation of Tarai-Madhesh from hill provinces?
That seems to be the intention of some Madheshi leaders who have been saying all along that separating Tarai districts from Province 5 is the first step towards completely separating Tarai districts from the hills. But let me tell you Nepali Congress will not accept this idea.
India is also said to be in favor of Madhesh-only provinces.
From the conversations I have had with some Indian leaders, I have gotten mixed messages. Some Indian leaders even question the rationale of federal system for Nepal. One of the prominent Indian leaders questioned me: ‘How can you create seven state capitals when even your country’s capital is not endowed with all the facilities?’ There is such a voice in India also. Some Madheshi leaders also tell me during informal conversations that Nepal can’t sustain the federal system. One factor that may be forcing the Madheshi leaders to take a strong stand on Tarai-only provinces could be the rising influence of extremist forces there.
From our conversation so far it is clear that there are no easy solutions. How do we go about solving our problems then?
We are in on a difficult journey. The road is bumpy. Our constitution is too aspirational and as such difficult to implement. But we cannot go back on it either. We cannot change our position every now and then. We cannot afford to make our country an experimental laboratory. So we must learn to manage our crisis. Neither Madhesh-centric leaders nor UML should try to enforce their agenda through coercion. We must resolve the crisis through constitutional and parliamentary process. There is no other option.