Table of Contents
The Local Government Operation Act 2074 (2017) is the foundational legislation governing local governments in Nepal under the federal democratic republic structure established by the Constitution of Nepal 2015. Enacted as per Article 296(1) of the Constitution, this Act institutionalizes the legislative, executive, and quasi-judicial practices of rural municipalities and municipalities, providing the legal framework for local governance, service delivery, and development across Nepal.
Introduction and Background
The Local Government Operation Act 2074 came into effect on 15 October 2017 (Ashwin 29, 2074 BS), marking a significant milestone in Nepal's transition to federalism. The Act was enacted to implement the provisions related to local level powers as per the Constitution of Nepal 2015, promote cooperativeness, co-existence, and coordination between the federation, province, and local level, and deliver efficient and quality services through people's participation, accountability, and transparency.
Objectives of the Act
The preamble of the Act outlines its key objectives:
- Implement constitutional provisions related to local level powers
- Promote cooperativeness and coordination between federation, province, and local level
- Deliver efficient and quality services through people's participation
- Consolidate socialism-oriented federal democratic republic governance from local level
- Ensure proportionally inclusive and just distribution of fruits of democracy
- Institutionalize legislative, executive, and judicial practice at local level
- Develop local leadership and consolidate local governance
Structure of Local Government
The Act establishes the framework for two types of local governments: Rural Municipalities (Gaunpalika) and Municipalities (Nagarpalika), including Sub-Metropolitan Cities and Metropolitan Cities.
Number and Demarcation
Under Section 3, the number and demarcation of rural municipalities and municipalities are determined as per Article 295(3) of the Constitution. The Government of Nepal may alter the number or demarcation based on:
- Population
- Geography and administrative accessibility
- Status of infrastructure development
- Economic capability
- Availability of natural resources
- Linguistic, cultural, and community composition
Any alteration requires a resolution endorsed by two-thirds majority of the existing members of the affected local governments, forwarded through the provincial government.
Ward Structure
| Local Government Type | Minimum Wards | Maximum Wards |
|---|---|---|
| Rural Municipality | 5 | 21 |
| Municipality | 9 | 35 |
Classification of Municipalities
Section 8 provides criteria for classifying municipalities into Municipality, Sub-Metropolitan City, and Metropolitan City:
| Classification | Population Requirement | Annual Internal Revenue | Key Infrastructure Requirements |
|---|---|---|---|
| Municipality | 10,000 (Himalayan) to 100,000 (Kathmandu Valley) | NPR 10-30 million (5-year average) | 25-bed hospital, bus park, drinking water, sewage management, urban master plan |
| Sub-Metropolitan City | At least 200,000 | NPR 250 million (5-year average) | 200-bed hospital facility, waste processing, stadium, higher education facilities |
| Metropolitan City | At least 500,000 | NPR 1 billion (5-year average) | 500-bed hospital, metro transport, 75% concrete roads, international facilities |
Population Requirements by Region
| Region | Minimum Population for Municipality |
|---|---|
| Himalayan Region (Mountain Districts) | 10,000 |
| Hilly Area of Mountain Districts and Hilly Districts | 40,000 |
| Inner Madhesh Districts | 50,000 |
| Tarai Districts | 75,000 |
| Kathmandu Valley Districts | 100,000 |
Functions, Duties, and Rights of Local Government
Section 11 establishes the comprehensive functions, duties, and rights of rural municipalities and municipalities. The exclusive rights are as mentioned in Schedule 8 of the Constitution, while concurrent rights exercised jointly with federation and province are under Schedule 9.
Exclusive Powers (Schedule 8)
| Subject Area | Key Functions |
|---|---|
| Municipal Police | Operation, management, regulation; protection of assets; market management; disaster management support; controlling unauthorized construction |
| Cooperatives | Policy and regulation; registration, licensing, cancellation; savings and credit standards; capacity building |
| FM Radio Operation | Permission, renewal, regulation of FM Radio stations up to 100 watts |
| Local Tax and Fees | Property tax, house rent tax, vehicle tax, service charges, tourism fees, advertisement tax, business tax, land tax |
| Local Service Management | Service conditions, organization development, human resource management, IT use in service delivery |
| Data and Records | Birth, death, marriage, divorce, migration registration; family data management |
| Development Plans | Periodic, annual, strategic plans; urban development; settlement development; building approval |
| Basic and Secondary Education | Policy formulation; school establishment, approval, regulation; teacher management; scholarship programs |
| Basic Health and Sanitation | Health policy; hospital operation; drinking water standards; waste management; family planning services |
| Local Market and Environment | Trade regulation; consumer protection; environmental protection; biodiversity conservation; waste management |
| Local Roads and Irrigation | Local, rural, agriculture roads; suspension bridges; irrigation systems; transport safety |
| Agriculture and Livestock | Agriculture policy; livestock health; market infrastructure; disaster and epidemic control |
| Drinking Water and Energy | Local drinking water; hydropower up to 1 MW; alternative energy; electricity distribution |
| Disaster Management | Local disaster preparedness; early warning; search and rescue; rehabilitation; disaster fund |
| Language and Culture | Protection of archaeological sites; museums; traditional festivals; social mobilization against ill-traditions |
Concurrent Powers (Schedule 9)
Powers exercised jointly with federation and province under Section 11(3) and (4) include:
- Sports and Newspapers: Infrastructure development, sports administration, local newspaper registration
- Health: Clinic registration, health insurance, medicine regulation, disease control
- Power, Drinking Water, Irrigation: Distribution system, tariff determination, service management
- Forest and Wildlife: Community forest management, afforestation, wildlife protection
- Social Security: Poverty alleviation programs, targeted group management
- Personal Events Registration: Birth, death, marriage, divorce registration
- Natural Resources: Royalty collection and sharing
- Vehicle Permits: Local transport route determination, permit issuance
Additional Powers
Section 11(5) provides additional functions including:
- Land Management: Land use policy, settlement development, unorganized settlement management
- Communications: Internet service permits, telecentre licensing, cable TV regulation
- Transport Service: Mass transit system, urban railway coordination within metropolitan areas
Ward Committee Functions
Section 12 establishes the functions, duties, and rights of ward committees, which serve as the grassroots level of local governance:
Plan Formulation and Implementation
- Adopt participatory project formulation at settlement/tole level
- Form and mobilize Tole Development Organizations
- Form and monitor users' committees for ward projects
- Protect and maintain ward-level infrastructure
Data Management
- Maintain records of private houses and households
- Record heritage sites, public buildings, unregistered land
- Maintain records of public spaces (chowks, ghats, temples, ponds, roads)
- Prepare updated maps with disaggregated data
Development Functions
- Manage child parks and early childhood development centers
- Operate libraries and community learning centers
- Manage ward-level health centers and vaccination programs
- Construct and manage public toilets and bathrooms
- Manage community water sources
- Solid waste collection and sanitation
- Agriculture extension and livestock development
- Cultural program organization
- Sports infrastructure development
- Road maintenance within the ward
- Personal events registration
- Social security allowance distribution
Recommendation and Certification Functions
Ward committees have authority to provide various recommendations and certifications:
- Kinship certification
- Citizenship recommendation
- Birth date certification
- Married/unmarried certification
- House certification
- Guardian recommendation
- Right holder/heir certification
- Land ownership recommendations
- Economic condition certification
- School-related recommendations
- Naturalized citizenship recommendation for marriage-based citizenship
Assembly Meeting and Working Procedures
Assembly Meeting (Section 19)
| Provision | Requirement |
|---|---|
| Frequency | At least twice a year |
| Called By | Chair or Mayor |
| Special Meeting | If one-third members make written request, must be called within 25 days |
| Notice Period | At least 7 days before the meeting |
| Quorum | One-fourth of total members |
| Presiding Officer | Chair/Mayor, or in absence Vice-Chair/Deputy Mayor |
| Decision | Majority vote; Chair gives casting vote in case of tie |
| Secretary | Chief Administrative Officer |
Executive Meeting (Section 17)
- Frequency: At least once a month
- Quorum: More than 50% of existing members
- Decision: Unanimously; if not possible, by majority
Legislative Process
Sections 20-23 establish the process for local law-making:
- Executive may present a bill before the assembly on matters under local jurisdiction
- Bill passed by majority of existing members
- Assembly Chair certifies within 15 days
- Certified bill becomes an Act
- Assembly may form Accounts Committee, Legislation Committee, Good Governance Committee
Judicial Committee
Chapter 8 (Sections 46-53) establishes the Judicial Committee as per Article 217 of the Constitution, providing quasi-judicial powers at the local level.
Composition
The Judicial Committee consists of three members:
- Vice-Chair or Deputy Mayor (Coordinator)
- Two members nominated by the Assembly
Jurisdiction for Decision (Section 47(1))
The Judicial Committee has the right to settle the following cases:
- Land boundary disputes, dams, ditches, water distribution
- Damage to crops
- Pasture land, fodder, firewood disputes
- Unpaid wages
- Lost or found domestic animals and birds
- Not caring for elderly citizens
- Not providing food, clothing, or education to minor children or spouse
- House rent disputes up to NPR 25 lakh annually
- Tree planting affecting neighbor's property
- Water drainage disputes
- Building setback violations
- Obstruction of public roads, water sources, religious sites
Mediation-Only Jurisdiction (Section 47(2))
The Committee has authority to settle through mediation only:
- Land encroachment (other than government/public land)
- Unauthorized construction on others' land
- Divorce between husband and wife
- Physical assault (up to 1 year imprisonment, excluding dismemberment)
- Defamation
- Looting and assault
- Stray cattle causing damage
- Unauthorized entry to residence
- Cultivation disputes
- Sound pollution and solid waste disputes
- Other civil disputes that can be mediated
Judicial Process (Section 49)
- Committee sends evidence to concerned party after registration
- Must encourage reconciliation as far as possible
- Mediation through enlisted mediators
- Mediation cases: Must settle within 3 months; if not, refer to court
- May issue interim protection orders in family disputes
- Defendant must appear within 15 days of notice
- May constitute mediation centers in every ward
Appeal and Enforcement
- Decision provided in writing within 35 days
- Appeal to District Court within 90 days
- Executive enforces mediation/decision
- Annual report submitted to Assembly
Financial Provisions
Taxation Powers (Sections 54-64)
Local governments have authority to impose various taxes:
| Tax Type | Description |
|---|---|
| Integrated Property Tax | Calculated on house and land under single ownership (effective from Shrawan 1, 2075) |
| Land Tax (Revenue) | Based on land utility (not applicable if integrated property tax levied) |
| House Rent Tax | On rented houses, shops, garages, godowns, factories, land |
| Business Tax | Based on capital investment and financial transaction |
| Rent/Tenancy Tax | On weekly bazaars, markets, municipal shops |
| Parking Fee | For parking services |
| Herbs and Wildlife Tax | On wool, herbs, scrap goods, commercial use of wildlife parts |
| Service Fee | Tourism, adventure sports, infrastructure use |
Revenue Sharing with Province (Section 64)
| Revenue Type | Rate Determination | Collection |
|---|---|---|
| Vehicle Tax | Province | Province (except horse cart, rickshaw, auto-rickshaw by local) |
| House/Land Registration | Province | Local Government |
| Advertisement Tax | Local Government | Local Government |
| Entertainment Tax | Province | Local Government |
| Natural Resources (stones, sand, etc.) | Province | Local Government |
Local Consolidated Fund (Section 69)
Every local government maintains a separate consolidated fund receiving:
- Inland revenue and income
- Revenue sharing funds
- Grants from Government of Nepal
- Grants from provincial government
- Donations from individuals/organizations
- Foreign assistance through government
- Grants from other local governments
- Domestic loans
Budget Process (Section 71)
- Presentation: Deputy Mayor/Vice-Chair presents budget by Asar 10
- Discussion: Assembly completes within 15 days
- Approval: By end of Asar
- Contents: Previous year actuals, current year amended estimates, next year plans and estimates
Financial Committees
Resource Estimation and Budget Ceiling Committee (Section 66):
- Chair/Mayor (Coordinator)
- Vice-Chair/Deputy Mayor
- Four designated members including women, Dalit, minorities
- Chief Administrative Officer (Member-Secretary)
- Completes work by Falgun each year
Budget and Programme Formulation Committee (Section 67):
- Vice-Chair/Deputy Mayor (Coordinator)
- Executive members overseeing thematic areas
- Chief Administrative Officer
- Chief of Planning Division
Loan Provisions (Section 68)
- May raise domestic loans for productive, employment-oriented, capital works
- Requires assembly approval
- Within limits recommended by Natural Resource and Fiscal Commission
- Maximum loan period: 25 years
- Government-guaranteed loans deducted from grants if not paid
Building Construction Regulations
Chapter 7 (Sections 27-45) establishes comprehensive building construction regulations:
Key Requirements
- Design approval required before construction
- Application with prescribed documents to rural municipality/municipality
- Chief Administrative Officer examines within 7 days
- Notice posted to neighbors for 15 days for objections
- Technical examination by engineer/sub-engineer
- Permit issued within 7-30 days depending on objections
Construction Timeline and Penalties
- Building must be constructed within 2 years of permit
- Extension possible for additional 2 years (5% additional fee)
- Fine of NPR 500,000 for construction without design approval
- Fine of NPR 200,000 for unauthorized changes to approved design
- Order to demolish unauthorized construction
- Appeal to District Court within 35 days
National Building Code
Local governments must enforce the national building code determined by the Government of Nepal and may enforce additional standards within that code.
Administrative Structure
Chief Administrative Officer (Section 84)
Functions, duties, and rights include:
- Secretary of Assembly and Executive
- Implement decisions of Assembly and Executive
- Formulate annual programme and budget
- Maintain financial records and conduct audits
- Protect movable and immovable property
- Summon meetings as directed by Chair/Mayor
- Certify executive decisions
- Maintain administrative and financial control
- Develop public procurement plans
Employee Provisions
- Organization structure based on workload and revenue capacity
- Municipal police recruited through open competition (max 5-year contracts)
- Drivers, office assistants, cleaning staff through service contracts only
- Temporary posts cannot be created
- Provincial Service Commission recommends permanent appointments
Retirement Fund (Section 91)
- 10% deducted from employee salary
- 12% contributed by local government
- Used for gratuity, pension, medical treatment upon retirement
District Coordination Committee
Chapter 12 (Sections 92-96) establishes the District Assembly and District Coordination Committee as per Article 220 of the Constitution.
Functions (Section 92)
- Coordinate development issues between local governments in the district
- Monitor development works and provide recommendations
- Capacity building coordination with province and federation
- Coordinate federal/provincial offices with local governments
- Facilitate dispute resolution among local governments
- Coordinate disaster management within the district
- Conduct annual review programs
Meeting Requirements
| Meeting Type | Frequency | Quorum |
|---|---|---|
| District Assembly | At least once a year | More than 50% of existing members |
| District Coordination Committee | At least once a month | More than 50% of existing members |
Office-Bearer Functions
Chair/Mayor (Section 14)
- Summon and chair assembly and executive meetings
- Table agenda and proposals
- Prepare and present annual programme and budget
- Summon and prorogue assembly sessions
- Enforce decisions of assembly and executive
- General observation and control of executive functioning
- Depute Vice-Chair, members, and Chief Administrative Officer
- Provide certifications and recommendations
- Oversee ward committee work
Vice-Chair/Deputy Mayor
- Serve as Judicial Committee Coordinator
- Assume portfolio in absence of Chair/Mayor
- Coordinate non-governmental organizations
- Consumer protection coordination
- Monitoring and supervision of plans and programmes
- Facilitate committee work
Ward Chair
- Chair of ward committee
- Coordinate ward committee members
- Prepare ward development plan and budget
- Implement ward plans and programs
- Provide recommendations and certifications
Provincial Coordination Council
Section 105 establishes the Provincial Coordination Council for coordination between province and local level on:
- Policy adjustment in provincial and local governance
- Strategic partnership in plan management
- Exercise of concurrent jurisdiction
- Utilization and sharing of natural resources
Composition:
- Chief Minister (Coordinator)
- Provincial government ministers
- Chief Secretary of Province
- Provincial secretaries
- District Coordination Committee Chiefs
- Rural Municipality Chairs and Municipality Mayors
The Council meets at least once a year.
Oath of Office
As per Section 109 and Schedule 2, office-bearers take oath before assuming office:
- Chair/Mayor: Before District Judge within 7 days of election
- Vice-Chair, Deputy Mayor, Ward Chair, Members: Before Chair/Mayor within 7 days
- District Coordination Committee Chief: Before District Judge within 7 days
Repeal and Transitional Provisions
Section 121 repealed the following acts:
- Local Self-Governance Act 2055 (1999)
- Act relating to determination of number of ward of rural municipality and municipality 2073 (2016)
Actions taken under repealed Acts are deemed to have been taken under this Act.
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Frequently Asked Questions
The Local Government Operation Act 2074 (2017) is the foundational legislation governing local governments in Nepal under the federal democratic republic structure. Enacted as per Article 296(1) of the Constitution of Nepal 2015, this Act came into effect on 15 October 2017 (Ashwin 29, 2074 BS). It institutionalizes the legislative, executive, and quasi-judicial practices of rural municipalities and municipalities, providing legal framework for local governance, service delivery, and development. The Act establishes provisions for local assembly meetings, executive functions, judicial committee jurisdiction, financial management, administrative structure, and coordination mechanisms.
The Act establishes two main types of local governments:
- Rural Municipality (Gaunpalika): With minimum 5 and maximum 21 wards
- Municipality (Nagarpalika): With minimum 9 and maximum 35 wards Municipalities are further classified into Municipality, Sub-Metropolitan City (minimum 200,000 population, NPR 250 million average revenue), and Metropolitan City (minimum 500,000 population, NPR 1 billion average revenue) based on population, revenue, and infrastructure criteria. Population requirements for municipality status vary by region from 10,000 in Himalayan areas to 100,000 in Kathmandu Valley.
Under Schedule 8 of the Constitution and Section 11 of the Act, exclusive powers include:
- Municipal police operation and management
- Cooperatives registration and regulation
- FM radio licensing up to 100 watts
- Local taxes (property, business, house rent, land revenue)
- Local service management and data records
- Basic and secondary education management
- Basic health and sanitation services
- Local market management and environment protection
- Local roads, rural roads, and irrigation
- Agriculture and livestock development
- Drinking water and small hydropower (up to 1 MW)
- Disaster management
- Language, culture, and fine arts protection
The Judicial Committee is a three-member quasi-judicial body at each local level comprising Vice-Chair/Deputy Mayor as Coordinator and two members nominated by the Assembly. It has jurisdiction to decide cases including land boundary disputes, crop damage, pasture disputes, unpaid wages, house rent up to NPR 25 lakh annually, building setback violations, and obstruction of public roads. For mediation-only jurisdiction, it handles land encroachment, unauthorized construction, divorce, physical assault (up to 1 year imprisonment), defamation, and other civil disputes. Mediation must be completed within 3 months; appeals go to District Court within 90 days.
Ward Committees perform grassroots governance functions including:
- Participatory plan formulation at settlement/tole level
- Tole Development Organization formation
- Users' committee formation and monitoring
- Data management of households, heritage sites, public spaces
- Child park and early childhood development management
- Library and community learning center operation
- Ward-level health center management
- Solid waste collection and sanitation
- Personal events registration (birth, death, marriage)
- Social security allowance distribution
- Recommendations and certifications (kinship, citizenship, economic condition, guardian)
The local assembly (Village Assembly or Municipal Assembly) functions as follows:
- Meets at least twice a year
- Called by Chair or Mayor; special meeting if one-third members request
- 7 days notice required for meetings
- Quorum: one-fourth of total members
- Chaired by Chair/Mayor or in absence by Vice-Chair/Deputy Mayor
- Decisions by majority vote; Chair has casting vote in ties
- Chief Administrative Officer serves as Secretary
- Assembly may form Accounts Committee, Legislation Committee, Good Governance Committee
- Bills passed by majority become Acts after certification within 15 days
Local governments can impose:
- Integrated Property Tax: On house and land under single ownership
- Land Tax: Based on land utility (if integrated tax not levied)
- House Rent Tax: On rented properties
- Business Tax: Based on capital investment and transactions
- Rent/Tenancy Tax: On municipal markets and shops
- Parking Fee: For parking services
- Herbs and Wildlife Tax: On wool, herbs, wildlife products
- Service Fee: Tourism, adventure sports, infrastructure use Certain taxes like vehicle tax and entertainment tax rates are determined by province but collected by local governments.
The budget process follows these steps:
- Resource Estimation Committee determines ceiling by Falgun
- Budget ceiling provided to wards by Chaitra 15
- Ward committees submit plans to executive
- Deputy Mayor/Vice-Chair presents budget to assembly by Asar 10
- Budget includes previous year actuals, current year estimates, next year plans
- Assembly completes discussion within 15 days
- Assembly approves by end of Asar
- Executive can transfer up to 20% between budget heads
- Unspent amounts automatically transfer to consolidated fund
Building construction regulations under Chapter 7 require:
- Design approval before construction
- Application with prescribed documents
- Chief Administrative Officer examines within 7 days
- 15-day notice to neighbors for objections
- Technical examination by engineer/sub-engineer
- Permit issued within 7-30 days
- Construction must complete within 2 years (extendable by 2 years with 5% fee)
- Penalties: NPR 500,000 for construction without approval; NPR 200,000 for unauthorized changes
- National building code enforcement mandatory
- Appeal to District Court within 35 days
The Chief Administrative Officer (CAO) serves as the administrative head with functions including:
- Secretary of Assembly and Executive
- Implementing decisions of Assembly and Executive
- Formulating annual programme and budget
- Maintaining financial records and conducting audits
- Protecting movable and immovable property
- Summoning meetings as directed by Chair/Mayor
- Certifying executive decisions
- Maintaining administrative and financial control
- Developing public procurement plans
- Operating consolidated fund jointly with accounts chief Until permanent appointment, Government of Nepal deputes officer-level civil service employee as CAO.
The District Coordination Committee (DCC) under Chapter 12 coordinates between local governments within a district. Functions include:
- Coordinating development issues between local governments
- Monitoring development works and providing recommendations
- Capacity building coordination with province and federation
- Coordinating federal/provincial offices with local levels
- Facilitating dispute resolution among local governments
- Coordinating disaster management
- Conducting annual review programs The DCC meets at least monthly with more than 50% quorum required. District Assembly meets at least annually.
Under Section 68, local governments may raise domestic loans subject to:
- Assembly approval required
- Limited to productive, employment-oriented, capital works
- Within limits recommended by Natural Resource and Fiscal Commission
- Maximum loan period of 25 years
- Government-guaranteed loans not paid on time will be deducted from grants
- Loans cannot be raised except as per law The provision enables local governments to finance development projects while maintaining fiscal discipline through multiple approval requirements.
The Provincial Coordination Council under Section 105 coordinates between province and local level on policy adjustment, strategic partnership, concurrent jurisdiction, and natural resource sharing. Composition includes Chief Minister (Coordinator), provincial ministers, Chief Secretary, provincial secretaries, District Coordination Committee Chiefs, and all Rural Municipality Chairs and Municipality Mayors. The Council meets at least once a year to ensure harmonious implementation of federal governance at provincial and local levels.
Employee provisions include:
- Organization structure based on workload and revenue capacity
- Provincial Service Commission recommends permanent appointments
- Municipal police through open competition (max 5-year contracts)
- Drivers, office assistants, cleaning staff only through service contracts
- Temporary posts cannot be created
- Retirement fund: 10% deducted from salary, 12% contributed by local government
- Salary scales prescribed by Provincial government
- Employees from repealed acts automatically adjusted to local levels
- First advertisement examination allows existing employees without age bar
Key differences include:
- Constitutional basis under federal structure vs unitary system
- Three-tier government (federation, province, local) vs centralized control
- Exclusive, concurrent, and residual powers clearly defined
- Judicial Committee with quasi-judicial powers at local level
- Stronger financial autonomy with own consolidated fund
- Assembly can enact local laws (Acts) with legal force
- Ward committees with defined functions and certification powers
- Integration with provincial coordination mechanisms
- District Coordination Committee replaces District Development Committee
- Building construction regulations with clear permit process and penalties The Act represents fundamental transformation from delegated local governance to constitutionally empowered local governments.
