A new beginning with Nepal
Posted by Ram Kumar Shrestha on July 26, 2014
By RAKESH SOOD
No two neighbouring countries enjoy a more intimate and a more complex relationship than India and Nepal. India is where Nepalis come to study, work, spend holidays, plan weddings, invest in a second home; yet, India is also blamed for being insensitive, for meddling in Nepal’s internal affairs and often, for taking Nepal for granted.
Union External Affairs Minister Sushma Swaraj’s maiden visit to Nepal this week will be keenly watched, especially as it lays the groundwork for an early visit by Prime Minister Narendra Modi. A high-level Indian visit is long overdue; after I.K. Gujral in 1997, only Prime Minister Atal Bihari Vajpayee has visited Nepal, in 2002 for a SAARC summit. There have been several visits by Nepal’s Prime Ministers and its President Ram Baran Yadav since. A Modi visit offers an opportunity to focus on future potential and remove some of the accumulated cobwebs of mistrust.
Two examples illustrate this adequately. First, the 1950 India-Nepal Treaty of Peace and Friendship. Most Nepalis are unaware that it was Nepal that had wanted this treaty, in order to maintain the special ties with independent India that it had with British India. Nepal’s security concerns had been heightened by the Communist revolution in China and its takeover of Tibet. The treaty provides for an open border between the two countries and allows Nepali nationals to work in India without a work permit, to apply for government jobs and the civil services (except for the IFS, IAS, and IPS), to open bank accounts and buy property. Incidentally, India had waived its rights under reciprocity as a sign of goodwill. The provisions of the “secret” side letters to the Treaty, which required Nepal to consult India on its defence requirements, which Nepalis perceive as unfair and which are often used by politicians to whip up anti-India sentiment, are no longer secret or even observed. Today, the open border is used by Pakistan to infiltrate terrorists and pump in significant amounts of fake Indian currency. Although India has agreed to review and update the treaty, every time the matter is taken up, Nepal sidesteps the issue. The Modi government should declare its readiness to have open and transparent discussions with Nepal on this so that political leaders stop using it as a stick to beat India with.
The second example relates to Nepal’s hydropower potential. Today, Nepal faces a chronic power shortage, with daily power cuts up to 14 hours long. Its installed capacity is 600MW and it imports about 150 MW from India. Meanwhile, demand is growing by 20 per cent annually. Ironically, Nepal has a hydel potential of 75,000 MW of which 40,000 MW has been assessed as technically feasible and economically viable. And India remains an open market for Nepal’s surplus power! However, accumulated resentment over the 1954 Kosi Agreement and the 1959 Gandak Agreement, cited by successive Nepali regimes as unfair, has rendered progress on hydel cooperation impossible. Three mega-projects — Saptakosi with 5,000MW, Karnali-Chisapani with 11,000MW, and Pancheshwar with 6,500MW — have been languishing for 30 years. When the hydel sector in Nepal was opened up to the private sector, Indian companies (including Tata Power, LANCO, GMR, Jindal, IL&FS, L&T, and GENCO) won 27 survey licences for projects ranging from 100 to 1,000 MW each, but not a single one is even close to beginning construction.
The Modi government should declare its readiness to have open and transparent discussions with Nepal on the Treaty of Peace and Friendship so that political leaders stop using it as a stick to beat India with.
A Modi visit is an opportunity to reach out, demonstrating goodwill, generosity and timebound delivery on infrastructure. Announcing a 300-500 MW power plant to address Nepal’s electricity demands and enable a light in every Nepali home is one way to do this. A run-of-the-river project or one with “peaking” (i.e. limited storage), should be possible to complete within three to four years if its technical feasibility has been completed. The cost of the project would be in the range of $400 million and the government of India could fund half the equity (about $60 million) with project finance coming at a concessional rate from the EXIM Bank Line Of Credit. It could be undertaken jointly with Nepal Electricity Authority with the understanding that after 10 years of operation, India’s equity would be given to Nepal. Such a gesture could change mindsets and help unlock Nepal’s hydel potential, making it one of the richest countries of the region.
Resentment despite links
Not many are aware of the extensive economic linkages and cooperation between the two countries. Two-thirds of Nepal’s foreign trade is with India which also accounts for half of Nepal’s foreign direct investment. The Nepali currency is pegged to the Indian rupee. Over the years, India has built highways, optical fibre links, medical colleges, trauma centres, polytechnics, schools, health centres, bridges, etc. For flood protection and embankment construction in Nepal, India provides more than Rs.75 crore annually. To facilitate the movement of goods and people, India is providing Rs.270 crore to build four integrated check posts on the border, Rs.650 crore for extending two railway links out of the five proposed, and Rs.700 crore for the first phase of rebuilding old postal roads in the Terai region. In addition, there is a second EXIM Bank Line of Credit for $250 million available and another $125 million for the power transmission line upgrades. About Rs.1,300 crore is disbursed annually to the 1.25 lakh Indian Army pensioners in addition to other welfare schemes. The provision of iodised salt, conducting cataract and trachoma camps, gifting of ambulances and school buses in the remotest of Nepali villages are initiatives that have made a difference to life in rural Nepal. Still, an undercurrent of resentment against India has persisted.
Nepal’s current political transition began with the Jan Aandolan in 1990 and is still unfolding. Since then, no government has lasted even two years. A Maoist insurgency and the resulting civil war claimed more than 15,000 lives over a decade (1996-2006). The monarchy never recovered after the palace massacre of 2001 and finally, the 240-year-old institution was abolished in 2008, with the Royal Kingdom of Nepal becoming a republic. The historic election in 2008 had given a two-year mandate to the Constituent Assembly (CA) to draft a new Constitution. Four times the CA extended its life but it was finally dissolved in 2012 when there were credible legal challenges to any further extension and it was clear, after four Prime Ministers (2008-12), that a fresh election was necessary. A second CA was elected in November last year, with the goal of completing the Constitution-drafting exercise in a year. Outstanding issues of the type of government (presidential or Westminster) and a federal structure (ethnicity-based or geographical) are polarising, and have to be handled wisely. As the Maoists have learnt, rising expectations cannot be satisfied by laal salaam or empty rhetoric.
As a large neighbour, India has to be extra-sensitive to assertions of Nepali sovereignty during its political transition. Different ethnic groups and Nepali political parties will certainly appeal to sections in the Indian establishment for “guidance,” but such entreaties are best avoided by New Delhi. Groups like the Vishwa Hindu Parishad profess nostalgia for reverting to a “Hindu rashtra” in Nepal; some Indian political leaders would push for supporting the Madhesis who enjoy a close kinship with Indians in north Bihar and Uttar Pradesh. The Modi government should ignore these and advise Nepali leaders, both publicly and privately, to resolve their differences internally.
For too long, India has ignored the changing political narrative in Nepal. We remained content that Indian interests were safeguarded by quiet diplomacy even when Nepali leaders publicly adopted anti-India postures — an approach started by the Palace in the 1950s and adopted particularly by the Left parties as a means of demonstrating “nationalist credentials.” Ignored by India, it has had long-term negative consequences. It has led to distortions in Nepali history textbooks and created negative stereotypes in the Nepali media. Appropriately targeted public diplomacy initiatives are necessary to address this. At official and diplomatic levels, a more open and straightforward approach will prevent creating ambiguities that give rise to conspiracy theories and providing grist to the local media. Mr. Modi is well placed to put his imprint on such a diplomatic style.
(Rakesh Sood, the Prime Minister’s Special Envoy for Disarmament and Non-Proliferation till May 2014, is a former Ambassador to Nepal. E-mail: firstname.lastname@example.org)