Kathmandu: Political crisis further deepened in Nepal on Saturday as the three main parties failed to hammer a way out of the deadlock, even as the Nepali Congress walked out of the meet, demanding that Prime Minister Jhalanath Khanal step down.

"The Prime Minister was neither ready to quit the post nor prepared to include the Madhesi parties in the dialogue," Nepali Congress Vice-President Ramchandra Poudyal said.

The talks failed to make any headway after main opposition NC walked out of the meeting asking Prime Minister Jhala Nath Khanal to include the Madhesi parties, the fourth force in the dialogue.

"We have been asking the Prime Minister to resign as he has failed to move forward the peace process and made tangible progress in drafting the new constitution," Poudyal said, after the meeting.

Poudyal, however, hoped that the Prime Minister might step down on Saturday evening as there was no other alternative to resolve the crisis.

Khanal was supposed to resign from the post shortly after inking the five point deal he reached with Maoist and NC on May 28, 2011.

 During the talks the Maoist leaders have ruled out the possibility of managing the combatants within the deadline given by the Prime Minister as August 13, he said.

 Khanal had announced to quit if no progress was made in the matters relating to army integration, which is the key part of the peace process.

During the meeting Khanal has asked other political parties to make sure that a national consensus government would be formed before he tenders resignation from the top post.

Prime Minister Khanal is learnt to have told other top leaders during the meeting that his resignation without a national consensus to form a new government would result in constitutional crisis as the extended term of the Constituent Assembly will expire on August end.

Both Nepali Congress and UCPN-Maoist have been claiming their stake in the government leadership.

The Maoists have projected vice chairman Baburam Bhattarai as their candidate for the next Prime Minister.

However, in Nepali Congress both Vice –chairman Poudyal and former Prime Minister Sher Bahadur Deuba have been claiming the top post.