Nepal's Prime Minister Khadga Prasad Sharma Oli, also known as KP Oli, observes a minute of silence for earthquake victims, in Bungamati village
Nepal's Prime Minister Khadga Prasad Sharma Oli, also known as KP Oli, observes a minute of silence for earthquake victims during an event organised to mark the 18th National Earthquake Safety Day and the official launch of earthquake reconstruction efforts in Bungamati village, Nepal January 16, 2016. REUTERS/Navesh Chitrakar/Files
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By Gopal Sharma

KATHMANDU (Reuters) - Nepal's embattled Prime Minister K.P. Oli will not resign after the main Maoist party that props up his fragile coalition said on Wednesday it would try to form a new government, plunging the Himalayan nation into crisis.

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.