India-Nepal Ties Finally Easing Down, But Will the Momentum Last?

As a result of the recent political engagements between the prime ministers of Nepal and India, some gains are visible in the relations between the two countries, which, not very long ago, witnessed a strain in the combined aftermath of the map row, COVID-19 related problems and domestic politics in Nepal. Besides the dialogues between the two leaders during Sher Bahadur Deuba’s Delhi run in April and Indian Prime Minister Narendra Modi’s visit to Lumbini in May, talks have now begun at the bureaucratic level around issues like power, trade, commerce, remittance, food security, and border management and upgrading of infrastructure along the open border, among others.

In mid-June, at the 12th meeting of the Joint Working Group (JWG) in New Delhi after a period of seven years, Nepal and India discussed issues related to curbing trans-border criminal and terror activities and strengthening border infrastructure. The misuse of the open border for drug and human trafficking, smuggling of goods and small arms, fake currency note rackets, and illegal entry of third-country citizens are a few issues that have plagued both countries for long. The JWG mechanism was set up to fight precisely these problems.

• In June, at the 12th meeting of the Joint Working Group in New Delhi after a period of seven years, Nepal and India discussed several issues.

• For the first time, India has recognised Nepal as an important partner in the power sector. Nepal has started exporting the total approved 364MW of electricity to India through its power exchange market.

• The Exim bank of India is financing big projects in Nepal, such as the construction of buildings, bridges, roads, etc, through its line of credit.

• But thorny issues remain. Although there is a general opinion in New Delhi that Nepal-China relations should not impact its own relation with Kathmandu, Chinese and Pakistani activities are still raising eyebrows.

• There is an acute lack of research on various aspects of India-Nepal relations with almost a non-existent, track II diplomacy in place at present.

Nepal has always shown a willingness to address India’s security concerns emanating from the open border. India is keen on signing an extradition treaty with Nepal, an issue that was raised in the JWG meeting.

Big Plans Ahead

For the first time, India has recognised Nepal as an important partner in the power sector. Nepal has started exporting the total approved 364MW of electricity to India through its power exchange market. This is also the first time that any private sector-generated electricity is being sold to India’s market. The Nepal Electricity Authority (NEA) is now selling 37.7 MW from Trishuli and Devighat Hydropower Projects, 140 MW from Kaligandaki, 68 MW from Middle Marsyangdi, 67 MW from Marsyangdi and 51 MW from Likhu-4.

Nepal needs to further explore the Indian market for selling an additional 636 MW of electricity, which will be surplus during the rainy season. This is a good indication as power trade may help Nepal reduce the massive trade deficit with India, which accounts for 60% of the total deficit facing the country. The power sector is expected to be a “game-changer” in Indo-Nepal ties.

India’s academicians and researchers believe that these efforts can aid mutual benefit and interdependence. “There must be a convergence of interests between India and Nepal and we should look at projects that are more people-centric,” Prof Sangeeta Thapliyal of the Jawaharlal Nehru University (JNU) told this author, stressing the importance of connectivity projects in developing deep people-to-people relations.

India is also willing to supply much-needed fertilizer to Nepal to meet demand under the government-to-government modality. A purchase agreement has just been signed for the import of 60,000 mt of urea and 20,000 mt of DAP currently with Indian companies.

Besides, the Exim bank of India is financing big projects in Nepal, such as the construction of buildings, bridges, roads, etc, through its line of credit. Earlier in February, Nepal and India signed an MoU for the construction of the India-assisted 110-metre motorable bridge over the Mahakali River, connecting Dharchula in Uttarakhand state with Darchula in Nepal. In June, the testing of the third phase of the Mahakali irrigation canal began after almost 25 years of the signing of the Mahakali Treaty in 1996.

Thorny Issues Remain, Including the China Factor

It is thus clear that the leaders of the two countries are focusing on economic aspects and are willing to set aside some thorny issues. But formidable challenges remain. For instance, there has been no mention of the EPG (Eminent Persons’ Group) report that the Indian side has not acknowledged yet. The EPG was to also suggest a revision of the 1950 India-Nepal Friendship Treaty. In addition, one of the biggest challenges in bilateral relations is resolving the border dispute at Kalapani and Susta.

Second, in the area of power trade, there have been price disputes. Sources in Delhi told this journalist that Nepal is “not happy over electricity export price per unit”, and that the two sides failed to resolve the issue. Even the implementation of the Mahakali Treaty is full of challenges, with people in Nepal not particularly happy over irrigation. Displacement issues and environmental concerns have stalled the Pancheshwor multi-purpose project as well, which is part of the Treaty.

Third, India is overly concerned about the rising activities of madrasas and the spread of China Study Centers along the Indo-Nepal border.

Although there is a general opinion in New Delhi that Nepal-China relations should not impact its own relation with Kathmandu, Chinese and Pakistani activities are still raising eyebrows since India resists Nepal’s closeness with its northern neighbour.

However, for Nepal, any initiative that would alter its relationship with either of the big neighbours would be a tough decision. For instance, the proposed extradition treaty may be resisted by China or it may demand a similar agreement from Nepal in case such a mechanism is formalised between India and Nepal. Thus, Nepal could settle for a mutual legal agreement instead of an extradition treaty.

Move Beyond Track II Diplomacy

Fourth, the Transit Treaty is yet to be revised. Several changes have taken place related to the transit trade of Nepal through India. For instance, integrated check posts (ICPs) are in operation, Indian Railways has been privatised and the Vishakhapatnam port has been allotted to Nepal. Both countries are also part of the BBIN Motor Vehicle Agreement. But the Transit Treaty was last revised in 1999. “Even though there is a provision of auto-renewal every seven years, the treaty needs to be revised and updated with the recent developments in the transit infrastructure,” said Dr Nihar Nayak, a leading researcher on Indo-Nepal relations at the Manohar Parrikar Institute for Defence Studies and Analyses (MP-IDSA). “It is urgent that the inland waterways are included under the transit treaty.”

Fifth, there is an acute lack of research on various aspects of India-Nepal relations with almost a non-existent, track II diplomacy in place at present. The momentum created by the Prime Ministers of the two countries can only be sustained if it is aided by in-depth research involving think tanks, media, academia and civil society of both countries.

(Akanshya Shah is a Nepali journalist and researcher based in New Delhi. This is an opinion article and the views expressed are the author’s own. The Quint neither endorses nor is responsible for them.)