Central Idea

• Nepal’s Prime Minister Pushpa Kamal Dahal ‘Prachanda’ recently concluded a successful four-day official visit to India, marking his third stint as Prime Minister. Compared to his previous visits in 2008 and 2016, this visit in 2023 has yielded more concrete outcomes and managed to navigate contentious issues successfully. The visit holds significance for Nepal’s political landscape and the potential for enhanced bilateral relations between Nepal and India.

India Nepal Ties: A Backgrounder

• Ancient ties: The relationship between India and Nepal goes back to the times of the rule of the Sakya clan and Gautama Buddha.
• Cultural relations: From 750 to 1750 AD period saw a shift from Buddhism to Hinduism in Nepal and witnessed widespread cultural diffusion.
• Diplomatic ties: India-Nepal Treaty of Peace and Friendship of 1950 forms the bedrock of the special relations that exist between India and Nepal.

Significance of the visit

• Strengthening Bilateral Relations: The visit signifies a renewed commitment to strengthening the bilateral relations between Nepal and India. It provides an opportunity for high-level engagement, dialogue, and cooperation, which are essential for fostering a closer partnership between the two countries.
• Concrete Outcomes: Compared to Prachanda’s previous official visits to India, this visit has yielded more concrete outcomes. The focus on economic cooperation, particularly in the hydropower sector, has resulted in progress towards realizing Nepal’s hydroelectric potential and reducing its dependence on electricity imports.
• Navigating Contentious Issues: The visit successfully managed to avoid public disagreements and controversial issues that could have strained the bilateral relationship. By prioritizing economic ties and constructive dialogue, both sides demonstrated their commitment to finding common ground and building trust.
• Political Stability in Nepal: Prachanda’s visit, along with the complex power-sharing arrangement within the coalition government, contributes to political stability in Nepal. The coalition government’s unity and consensus-based decision-making provide a conducive environment for addressing developmental issues and focusing on the country’s economic growth.
• Sub-regional Cooperation Prospects: The visit highlighted the potential for sub-regional cooperation, especially in the areas of connectivity and energy. Agreements on the expansion of transmission lines, the facilitation of trade and movement of goods and people, and the prospect of utilizing the Indian grid for Nepal’s electricity export to Bangladesh all indicate the willingness to enhance collaboration in the broader South Asian region.

Significant Progress in Hydropower Cooperation

• Increased Installed Capacity: Nepal has increased its installed capacity of hydropower from a mere 1,200 MW a decade ago to 2,200 MW currently. This growth in capacity enables Nepal to generate more electricity domestically and reduce its reliance on electricity imports from India.
• Power Export to India: During the peak season, Nepal can now export power to India. In 2021, Nepal exported 39 MW of electricity to India, and the following year, the export increased to 452 MW. This not only contributes to Nepal’s economic growth but also strengthens energy cooperation between the two countries.
• Long-Term Power Trade Agreement: Nepal and India have finalized a long-term power trade agreement that sets a target of exporting 10,000 MW of electricity from Nepal to India within a 10-year timeframe. This agreement demonstrates a shared commitment to enhancing energy cooperation and regional integration.
• Hydropower Project Initiatives: Several hydropower projects have been initiated to tap into Nepal’s vast hydropower potential. For instance, the 900 MW Arun III project, started by the SJVN (formerly the Satluj Jal Vidyut Nigam), is expected to become operational later this year. Furthermore, a memorandum of understanding (MoU) has been signed for the 695 MW Arun IV project, and the National Hydroelectric Power Corporation (NHPC) has signed agreements for two projects with a total capacity of 1,200 MW.
• Transmission Line Expansion: To facilitate the transmission of electricity between Nepal and India, work has begun on a second high voltage transmission line between Butwal in Nepal and Gorakhpur in India. Additionally, plans are in place to construct two more transmission lines under a line of credit of $679 million. These infrastructure developments are crucial for enabling efficient power exchange and strengthening the energy partnership between the two countries.

What are the key contentious issues between the two?

• Kalapani Border Dispute: One of the longstanding issues between Nepal and India is the Kalapani border dispute. The dispute revolves around the demarcation of the border in the Kalapani region, which is claimed by both countries. Nepal argues that the region falls within its territory based on historical and cartographic evidence, while India maintains control over the area.
• Treaty of Peace and Friendship of 1950: The India-Nepal Treaty of Peace and Friendship signed in 1950 has been a subject of contention. While the treaty was intended to foster close ties and cooperation, some in Nepal perceive it as unfair and imposed upon them. There have been calls to review and update the treaty to address concerns related to sovereignty and equality.
• Cross-border Trade and Transit Issues: Cross-border trade and transit have faced challenges and occasional disruptions, impacting the flow of goods and creating economic strains. Issues related to customs procedures, tariffs, non-tariff barriers, and transit routes have led to occasional trade disputes between the two countries.
• Hydropower Development and Water Resources: Nepal’s potential for hydropower development has been a subject of interest for both countries. However, disagreements have arisen over issues such as the sharing of water resources, joint projects, and cross-border impacts of hydropower development.
• Employment of Gurkha Soldiers: The recruitment and employment of Gurkha soldiers from Nepal in the Indian Army has been an issue of concern. The Agnipath scheme, which governs the recruitment process, has been a subject of revision and discussion between the two countries.

Way Forward

• Dialogue and Diplomacy: Both countries should prioritize open and constructive dialogue to address contentious issues. Regular high-level meetings, diplomatic negotiations, and bilateral dialogues can help build mutual understanding and find mutually acceptable solutions.
• Boundary Dispute Resolution: The Kalapani border dispute should be addressed through diplomatic means. Engaging in discussions based on historical evidence, cartographic data, and international legal frameworks can help find a mutually acceptable resolution that respects the sovereignty and territorial integrity of both nations.
• Treaty Review and Update: Considering Nepal’s concerns about the India-Nepal Treaty of Peace and Friendship of 1950, both countries can engage in substantive talks to review and update the treaty. This process should involve thorough discussions, taking into account the evolving bilateral dynamics and ensuring a fair and mutually beneficial agreement.
• Enhancing Trade and Transit: Both nations should work towards simplifying customs procedures, reducing non-tariff barriers, and facilitating smoother cross-border trade and transit. Establishing efficient mechanisms for resolving trade-related disputes and enhancing connectivity through improved transport infrastructure will contribute to a stronger economic partnership.
• Cooperation in Water Resources: Collaborative efforts can be undertaken to harness Nepal’s hydropower potential while addressing concerns related to water resources and cross-border impacts. Joint projects, sharing of technical expertise, and mechanisms for equitable sharing of water resources can promote cooperation and mutual benefit.
• People-to-People Exchanges: Encouraging people-to-people exchanges, cultural exchanges, and promoting tourism can foster greater understanding, goodwill, and friendship between the citizens of both countries. Promoting educational exchanges, cultural events, and tourism initiatives will help strengthen the bonds at the grassroots level.
• Sub-regional Cooperation: Exploring opportunities for sub-regional cooperation within the South Asian region can contribute to mutual growth and development. Initiatives such as the BBIN (Bangladesh, Bhutan, India, Nepal) sub-regional grouping can be further strengthened, focusing on areas such as trade, connectivity, energy, and infrastructure development

Conclusion

• Prachanda’s visit to India marks a significant milestone in Nepal-India relations. The progress made in hydropower cooperation, the avoidance of controversial issues, and the commitment to dialogue pave the way for a renewed focus on mutual growth and trust. As Prime Minister Modi and Prachanda have demonstrated, the “HIT” approach (Highways, Infoways, and Transways) provides a framework for rebuilding trust and strengthening the bond between Nepal and India

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