A deal between the government and the Maoists to abolish monarchy has injected fresh hope for peace in Nepal but ethnic tensions in the southern plains are expected to remain a major challenge.
After months of pressure from the former rebels, the government agreed on Sunday to abolish the monarchy, a decision that will become effective after next year's elections for a constituent assembly.
The Maoists will also rejoin the cabinet they quit three months ago, ending a deadlock that had stalled last year's peace deal which ended their decade-long civil war that killed more than 13,000 people.
But Upendra Yadav, chief of the Madhesi People's Right Forum that organised violent protests this year in the southern plains called the Terai, said the deal had failed to address problems there.
"They have not addressed the Madhesi issue," Yadav said on Monday. "By ignoring Madhesh no problem of the country can be solved."
More than 200 people were killed this year in violent protests by the Forum or in other disputes and clashes involving dozens of armed rebel groups in the region, home to nearly half of Nepal's 26.4 million people.
These groups say they represent the ethnic Madhesi community and want regional autonomy, more seats in parliament and government jobs for their people, who they say were discriminated against for decades.
Analysts said the government must engage Madhesi groups soon or face fresh uncertainty ahead of elections that have already been postponed twice.
"The main obstacle for elections is the law and order situation, specially in the Terai," said Kunda Dixit, editor of the weekly Nepali Times. "How are you going to have free and fair elections there with the level of violence?"
Those elections will be Nepal's first national vote in more than eight years and are meant to map the country's political future. That body will also have to approve the decision to turn the Himalayan nation into a republic. "Since the elected representatives of the people will have to endorse the abolition of the monarchy, it will have legitimacy," Dixit said, brushing aside criticism of the decision.
"It would have been even better if the decision was taken through a referendum."
There were no public celebrations on Monday but the Nepali media hailed the move.
"The country is a republic," read a headline in the leading Nepali daily Kantipur.
Maoist chief Prachanda, who uses one name, said it was a big step forward.
"For the first time in Nepal's history a republic will be written in the constitution," he told reporters. "This is not an ordinary achievement."
The popularity of the monarch, traditionally revered as an incarnation of the Hindu god Vishnu, has plunged since King Gyanendra took absolute power in 2005, only to be humbled by street protests last year.
Declaring Nepal a republic was the war cry of tens of thousands of protesters who poured into the streets in 2006.
"The republic agenda has gone much ahead now and will be written in the constitution," said Lok Raj Baral, head of Nepal Centre for Strategic Studies, a private think-tank.
The United Nations, which monitors the peace deal, says both sides were responsible for failing to fulfill their past commitments.
The government now says it will start the integration into the armed forces and society of Maoist soldiers living in camps. The Maoists have also promised to return the property and land seized during the war, and to end extortion and intimidation.
"The deal is very positive for the peace process. But its future depends on how honestly they operationalise it," Baral said.
Ordinary Nepalis seemed unfazed, with some saying they were more concerned with livelihood issues such as a shortage of some essential goods.
"The politicians must stop fighting among themselves," said Kathmandu taxi driver Santosh Rayamajhi. "It is now time for them to start thinking about the people and make essential goods easily available."