It has submitted to the government a list of recommendations that also includes adoption of children by gay couples and which is to be discussed in the cabinet ahead of a bill on the issue.
LGBT rights activists in Nepal say such recognition on passports would help tackle widespread discrimination they face within the Hindu-majority Himalayan country.
Madhu Kinnar's wins comes after the Indian Supreme Court ruled last April that transgender people be recognized as the third sex, be accorded social acceptability and an equal standing under Indian law.
Many gay men and women also hide their sexual orientation “fearing rejection, discrimination and violence,” said the popular American weekly news magazine
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