This study suggests that transfer of State forests to the local communities is the least cost policy option to improve prevailing deforestation problem in Nepal. However, there are few problems at operational, institutional, and policy levels, which are restricting community forest (CF) transformation. The critical review of seven representative case studies and modern forest policy of Nepal identifies following important issues in CF transformation in Nepal. They are low marginal flexibility, incomplete and uncertain property rights transfer, equity problem, specific demand adjustment problem, and inconsistent forest policy. This work recommends for amendment of modern CF policy guidelines to reduce CF transformation costs, increase present value of future returns, and reduce present value of enforcement costs. These amendments will be effective to improve prevailing CF work situation in Nepal.

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