Fear stalks the land. The army's cordon and destroy missions are sudden and deadly. To escape, the Maoists have melted into the population. Government presence is confined to district headquarters.

"We eat by about 4:00PM, fearing that the Maoists will come seeking food and shelter," one teacher in Bajhang told us. "If we let them, the police will get us, if we don't, the Maoists will kill us." In Kanchanpur, villagers cower behind their windows watching security forces patrolling on vehicles by day, and the Maoists going door to door by night. "We can't report their activities because the Maoists have threatened to kill us," one resident whispered.

Some weeks ago troops searched Binauna, a village 24 km from Nepalgunj. When they left, the Maoists returned. The village elders fled because, as one of them told us: "The Maoists think we had called in the troops." The bus service from Dang to Holeri remains suspended. It has resumed from Bhalubang to Libang, and traffic has also returned on the Tulsipur-Salyan-Rukum road. Work on a 16 km stretch connecting Rukumkot being built by the army has come to a halt. In Nepalgunj, the stream of people heading out for work in India is visibly greater, as is the exodus of rural refugees into Kathmandu Valley.

Things aren't much better in the east. Crowds have thinned at the weekly markets, there are fewer buses on the roads. The number of night buses plying from Biratnagar has gone down by half. Newspaper sales are down, says Surendra Shrestha in Lahan: "People are buying less because they find the same news in all the papers."

Tulasi Neupane, DDC chairman of Sankhuwasabha says: "The Maoist are still active in the villages, and most Congress workers have already fled." In Khotang, Hari Pokhrel of the UML told us the Maoists have gone into hiding in the villages. "Security forces do not go beyond distances from where they cannot return at night," he says. In Udaypur, the combination of Maoist and Khumbuwan violence has forced residents in some villages to flee to the relative safety of the tarai towns.

Many parts of western Nepal, including Jomsom, are cut off because the Maoists have blown up repeater stations. Troops still guarding telecom towers in Salyan's Kapurkot and Dang's Rajakot, but Maoists have blown up 56 multi-access radio telephone systems (MARTS), and six district headquarters don't have phones. The Ratamate tower in Rolpa, blown up by Maoists a month ago, used to provide connections to headquarters of Rukum, Rolpa and Jajarkot. The tower south of Baglung which was destroyed last week has cut phone connections to Jomsom and 20 MARTS terminals. The NTC is planning to replace towers with satellite systems, but the purchase and installation process could take over a year.

The government's development apparatus has ground to a halt, and donor-funded projects are either in deep freeze, or have been curtailed. Most conscientised village leaders active in development work are left-leaning, and have fled to the cities or to India to escape the wrath of both the Maoists and the security forces. Bishnu Buda of Ghartigaon in Sallyan crossed over into India last week. He did not want to talk much, but told us: "I had no choice. The bombs and bullets cannot identify who is who."

Food-for-work, non-formal education classes, social mobilisation for community development, community forestry meetings have all been affected. Villagers tend to stay away from meetings because they are afraid of being picked up.

"It is not very good, or very bad. But it is very slow," a frustrated donor representative based in Kathmandu told us. "We would definitely not like to work in a military environment because our projects depend on our ability to win the trust of the villagers."

Most development projects keep skeleton staff in the field, avoid taking unnecessary risks, and doing the little bit they can, rather than shut down. "It has become difficult to monitor on-going programs," says Hirakaji Ghale, of Namsaling in Ilam. "No one is in a state of mind to even discuss new activities. We have not been able to go into the villages."

Before the army deployment and the emergency, the government had launched the Integrated Security and Development Programme (ISDP) in seven insurgency-affected districts (with plans to expand to another 30). Today, there isn't even the ISDP. "In some settlements we don't have enough people to mobilise," a development worker told us. "After the emergency, even non-Maoists that were active in community organisations have fled fearing arrest." Indra Dahal, a grassroots activist in Butwal says: "Even the donors are telling us let us to wait until the emergency is over to begin new projects."

The sense of fear is fuelled by the lack of information. A development worker in Surkhet says: "There are gunshots at night, next morning there is no way to find out what it was all about." Radio Nepal and the media only give out the government version of events, and the people know there is plenty else that is happening. Journalists are being picked up and interrogated. Sharad KC, the BBC stringer in Nepalgunj was taken away blindfolded from his office last week and asked about his Maoist contacts. He was released after two hours. Basanta Pokhrel, another journalist in Butwal wasn't so lucky. He spent 16 days in detention, no one told him why he was arrested.

Suffering heavy casualties in the army's action, the Maoists have changed tactics. They hide in the villages and ambush convoys with booby-trap explosives along roads. The banks looted at Ghorahi on 23 November are still not fully functional. Both the district jail and the land revenue office are yet to begin business. Officials say it could take another six months just to compile the missing land records. Private helicopters have stopped ferrying vital salt and foodgrain to Kalikot and Mugu ever since Maoists destroyed one of the helicopters at Surkhet airport in November. Bajhang airport is closed. Industries in Birgunj have cut down one shift-from three to two-because travel at night has become impossible. Overnight curfews are still in effect in many parts of the country, in Jajarkot it is to end on 13 January. In Dang, Sallyan and Jumla the curfews will continue until further notice.

(Reported by Madhav Ghimere in Ilam, Mohan Bhandari in Biratnagar, Mohan Manandhar in Lahan, Chandra Kishor Jha in Birgunj, Madhav Nepal in Butwal, Sudarshan Risal in Dang, Sarad KC in Nepalgunj and Umid Bagchand in Mahendranagar.)