We develop a framework for a political restructuring of Federal Nepal and provide a model of electoral system. We identify the natural homelands of 11 ethnic, linguistic and caste (ELC) groups — called ELC focus regions — and argue that these regions must be an essential component of federation, but federation based on them is not desirable economically. The main intended outcome of making Nepal a federation of such ELC groups — inclusiveness in political power sharing — could be achieved by making these regions electoral constituencies. We further argue that the political constituencies of the federation should be provinces that extend from north to south by combining few ELC focus regions. This north-south corridor will generate immense benefit from the complementarities in natural endowment and comparative advantage between northern and southern regions which is not possible if federation is made up of the ELC regions.