Nepal's King Gyanendra ended 14 months of direct rule in late April after weeks of pro-democracy protests by sidelined political parties in concert with the rebel Maoists.

"After the historic people's movement, the country has an immediate and important task of institutionalising a democratic republic," said Baburam Bhattarai, the rebel's second in command.

"To achieve this goal, restructuring of the army, revolutionary land reforms and special privileges for women and marginalised groups among others are necessary," he said in a statement.

Since the king handed back power to the coalition of parties, the new government has clipped the king's powers, matched a rebel ceasefire and met a key Maoist demand for elections to a body to redraft Nepal's constitution.

"Free and fair elections to a constituent assembly should be held as soon as possible," said Bhattarai in the statement.

The rebels are calling for Nepal to become a republic, but two of the country's three biggest political parties have said that the king could be given a ceremonial role.

The Maoist leader said the new parliament and the government should be scrapped and the 1990 constitution abandoned.

"We have stressed the dissolution of parliament, the constitution and the government and the establishment of a new interim people's representative organisation, interim constitution and interim government reflecting the new reality of the country," he said.

The new government and the Maoists have agreed on a code of conduct for the ceasefire, and the government has released hundreds of rebel prisoners.

Gyanendra sacked the government and took direct control of the impoverished nation in February 2005.

He said the takeover was needed because the political parties were corrupt and had failed to tackle the bloody Maoist insurgency that has killed at least 12,500 people since 1996.

Once former foes, the ousted political parties and the rebels formed a loose alliance late last year.