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 An aide said the 64-year-old leader, who has been in power for
just eight months, would seek cross-party talks. If those fail, a
no-confidence motion could follow in parliament, holding out the
prospect of more uncertainty.
Oli rose to power with the backing of the Maoists after promising to
resolve protests against a new constitution by southern plains
dwellers and to step up efforts to rebuild homes destroyed by
earthquakes last year.
Increasing public anger at Oli has led the Maoists - who waged a
decade-long insurgency before joining mainstream politics in 2006 -
to conclude that he was an obstacle to ending the constitutional
standoff.
Minority Madhesis, who live along the border with India, had imposed
a blockade in protest at a proposal to carve Nepal into seven
federal states. They say it would divide their homeland and deprive
them of a fair say in running the country.
 "Our party has decided to form the new government and we appeal to
other political parties to help us resolve the outstanding political
problems in the south through talks," said Narayan Kaji Shrestha, a
leader of the unified Communist Party of Nepal (Maoist).
Shrestha said the main opposition Nepali Congress party had offered
to support Maoist leader Prachanda to replace Oli.
Oli's grip on power has been in question for months, but aide Bishnu
Rimal said he would seek clarifications from the Maoists about their
concerns.
"We invite all political parties including the Nepali Congress and
the Madhesi groups to join this cabinet to make it a national
government and resolve all outstanding problems," Rimal told
Reuters. RESOLVING DEADLOCK
Kunda Dixit, editor of the Nepali Times, said Prachanda could
resolve the deadlock in the south by bringing the Madhesi parties
and the Nepali Congress on board in a government that includes major
stakeholders.
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Prakash Sharan Mahat, a Nepali Congress lawmaker, said his party was
exploring alternatives to Oli, who he said had failed to deliver on
promises.
Prachanda, who goes by the nom-de-guerre he used in the insurgency
that means "Fierce", will need the support of Oli's Unified
Marxist-Leninist Party (UML) or other groups in a fragmented
parliament to form a government.
"Any new government does not mean the constitutional issue will be
solved like that," said Lok Raj Baral, a commentator and former
diplomat. "If any new government wants to amend the constitution,
then the support of the UML will be vital."
The earthquakes last year killed 9,000 people and destroyed one
million homes. International donors pledged $4.1 billion for
reconstruction but most of it remains unspent due to political
squabbling.
(Additional reporting by Ross Adkin; Editing by Douglas Busvine and
Robert Birsel)
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