AIR DYNASTY: Babu Ram Bhattarai and Pushpa Kamal Dahal in Chitwan last week before taking a helicopter to Siklis. Dahal is expected in Kathmandu for talks with Prime Minister Koirala on Friday.

These were scenes that would have been unthinkable even a month ago: Pushpa Kamal Dahal flying into Kathmandu in a helicopter and riding the home minister's flagged car into town for a meeting with the prime minister in his official residence.

After marathon 10-hour negotiations on Friday, the government and rebel sides made a truly historic power-sharing agreement that makes the prospect for peace more real than it has ever been in the past 10 years.

Dahal and Prime Minister Girija Prasad Koirala first had a three-hour long talk on Friday morning at his official Baluwatar residence. As hordes of journalists waited outside all day, leaders of the seven parties drove in one by one for another round of talks.

The 'summit' meeting between Koirala and Dahal appears to have been brought forward because the prime minister leaves Saturday for his postponed checkup in Bangkok.

The leaders finally emerged late in the evening and held a joint press conference to announce the agreement: dissolution of parliament, dissolution by both sides of their governments, setting up a task force to forge a new interim constitution in three weeks and then forming a government that includes the Maoists to hold an election to an assembly to draft a new constitution after that.

There is also an agreement to invite the United Nations to oversee the management of arms in the lead-up to the assembly elections. However, there was no renunciation of violence by the Maoists which Koirala had insisted would be a precondition to the comrades being included in a new government.

The agreement appears to have been widely welcomed by Nepalis-in shops along Kathmandu streets people were watching the Baluwatar press conference and not the World Cup. However, there was some misgiving in establishment and security circles that the government has given too much away in return for too little from the rebels.

"The minimum that should have happened would have been an announcement that they have abandoned violence," said one senior official.

Other analysts, however, contend that Dahal and the Maoist leadership would have found it hard to sell an announcement to give up arms to their rank and file. There are indications the seven parties were given verbal assurances Friday that this would happen before the setting up of a new government. The international community has insisted that the Maoists first renounce violence and agree on a timetable for decommissioning arms before joining any future government.

The Maoists will reportedly be offered cabinet posts, including deputy prime ministership. But neither Dahal nor Babu Ram Bhattarai are expected to take up any positions. A new eight-party government will decide next month on the dates and plans for an election to a constituent assembly earliest by November latest by April 2007.

Despite the momentous decisions, the road ahead is fraught with dangers because of entrenched positions and potential for derailment. The Maoists are having doubts about an ethnic-based autonomous federal structure because it would open a can of worms. The issue of Nepali citizenship for over three million people in the tarai is already a political hot potato.

And how is the interim constitution going to tackle the monarchy? Who is currently Nepal's head of state? That question has taken on new meaning because on Friday itself the new South Korean and Thai ambassadors presented their credentials at the palace to King Gyanendra. But in a departure from previous practice no government ministers were present at the ceremony. .

In the past week, Prachanda has appeared as Pushpa Kamal Dahal the politician in a lengthy tv interview. Girija Prasad Koirala has said we need a ceremonial king. The UML central committee lays down the party line for a democratic republic.

If all this sounds like an election campaign, that is exactly what it is. The first salvos were fired even before Frriday's agreement in the battle for constituent assembly elections. Political forces, including the Maoists, are now jostling for space in an election that looks set to be a referendum on the monarchy.

Parliament's radical moves last month to defang the monarchy had begun to worry the Maoists who suddenly saw themselves sidelined. Which is why they insisted on dissolution of the house and speeding up the peace process. The Maoists can't afford to keep their fighters mobilised indefinitely and need to finalise an entry into multiparty politics.

Home Minister Krishna Sitaula who flew to Pokhara on Friday morning to ferry Dahal back to Kathmandu understands why the comrades are in a hurry so he had responded earlier this week by scrapping TADO, setting Maoist detainees free and suspending parliament. Those decisions now appear to have paved the way for Friday's dramatic agreement.

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