By Bhagirath Yogi
BBC Nepali service
Nepal is now entering what could be a dangerously uncertain phase
With the resignation of Maoist leader and Prime Minister Pushpa Kamal Dahal, popularly known as Prachanda, Nepal faces the gravest threat to its peace process since a ceasefire was agreed in the country's civil war in 2006.
As political parties squabble over how the army is run - with the Maoists wanting to dismiss the military commander and other parties insisting that he should remain - the country now stands at a crucial juncture.
There is a possibility Nepal could descend into chaos, with political infighting and instability preventing the smooth functioning of a constitutional democracy, as had been hailed after elections last year.
But analysts say the prospect of a return to full-scale violent conflict is still remote, as the Maoists have repeatedly said in the past that they will agree to play by the rules as outlined in the country's interim constitution.
The more likely outcome is that the Maoists will continue to remain a major political force in Nepal and work towards gaining strength in order to dictate future political developments.
The international community wants Nepal to be a model peace process
After signing the Comprehensive Peace Accord (CPA) in November 2006, the Maoists joined the interim legislature and entered into the Singha Durbar - the main seat of the government - by joining the cabinet led by then-Prime Minister Girija Prasad Koirala.
Once there, they successfully pressured the government to declare the country a republic, which was later made official by the first meeting of an elected constituent assembly.
The Maoists took part in constituent assembly elections of April 2008. They defied all predictions and emerged as the single largest party - though short of majority - in the 601-member assembly.
Maoist chairman Prachanda was appointed prime minister in August last year as head of a coalition government.
But his administration has courted controversy after controversy.
The most bitter of these erupted last month when Prachanda accused the head of the Nepali Army, Gen Rookmangad Katawal, of defying the government's orders.
The general, in his defence, said he was working under the guidelines of the interim constitution by refusing to recruit "indoctrinated" former Maoist rebels.
The government, however, sacked him on Sunday saying that his explanation was not satisfactory. Nepal's latest crisis was precipitated.
Control of the army will be a key issue in the coming months
"The government is committed to establish civilian supremacy over the army and we are ready to quit if that doesn't happen," said Finance Minister Baburam Bhattarai, a senior Maoist leader.
Given this objective, what happens next?
In his televised address to the nation on Monday, Prachanda maintained that his government was "encircled" from all sides and was not allowed to function independently.
He also demanded that the existence of "parallel power centres" within the country must come to an end.
This tussle - as to who really pulls the levers of power in Nepal - will no doubt dominate the political landscape in the months ahead.
Prachanda is known to be deeply aggrieved over President Ram Baran Yadav's order that the army chief should stay put, despite the government's express desire to sack him.
Senior Maoist leaders have said they will now go to the general public to "expose designs against their government".
They have also warned that they may take to streets and play the role of opposition within the constituent assembly.
The first outcome of the latest developments is likely to be a delay in the proposed rehabilitation and integration of around 19,000 ex-Maoist combatants who are living in various UN-monitored cantonments across the country.
Prachanda has only served as PM since elections in 2008
Prachanda had earlier said that the government wanted to conclude that process by July this year.
But that is not now going to happen, not least because the Army Integration Special Committee (AISC) - which comprises representatives from the Maoist party and the main opposition Nepali Congress party - has not yet even laid down the ground rules for proposed integration.
Equally difficult will be the target of drafting a new constitution by May 2010, the deadline set by the constituent assembly itself.
There are differences among the major political parties on key issues, including on the form of the next government - whether presidential or prime ministerial - and differences over how to divide the country into a federally-administered state.
Amid all the uncertainty, one thing is not in dispute. The stakes have never been so high for the Maoists.
Their main difficulty now will be how to retain their revolutionary credentials on the one hand while performing within the ambit of the interim constitution on the other. This constitution, after all, was drafted with their active participation.
Analysts say the Maoists have enough organisational strength to disrupt a government both within the parliament and on the streets. Their participation will be vital if a new constitution is ever to be drafted.
Similarly, the main challenge facing the major political parties - including the Nepali Congress and the CPN (UML) - will be to engage the Maoists and make sure that the journey from "bullet to ballot" is irreversible.
The international community too will no doubt be looking upon the latest developments with some concern.
They are eager to portray Nepal's peace process as a success story - a model which many other conflict-hit zones could follow.
But now they will no doubt be worried that template for peace is in danger of disintegrating.