A new template for India-Nepal ties

Jayant Prasad

By: Jayant Prasad

The Nepalese leadership have begrudged the spurning of their repeated invitations to visit Kathmandu by India’s previous Prime Ministers for over a decade-and-a-half. Prime Minister Narendra Modi’s visit, and the Joint Commission meeting — held after almost a quarter century — signals to them the beginning of a two-way political re-engagement between the two countries.

Indians and Nepalese share a common culture and terrain south of the Himalaya. Bound by languages and religions, marriage and mythology, the links of their civilisational contacts run through Lumbini to Bodh Gaya, Pashupatinath to Kashi Vishwanath, and Muktinath to Tirupati. At the people-to-people level, relations between India and Nepal are closer and more multifaceted than between India and any other country. Many partisans of Nepalese democracy also fought for India’s freedom, for which they were jailed by the British, including Matrika Koirala, B.P. Koirala, and Man Mohan Adhikari, who became Prime Ministers of Nepal.

Political evolution

Many Indians believe independent India never had foreign combat troops deployed on its soil. Nepalese troops were the exception. Aside from those recruited to India’s Gurkha Regiment, an outsized Nepalese Army brigade drawn from all its 18 regiments was loaned to India in 1948-49, when Indian troops were deployed in Kashmir and for the integration of Indian States. The commanding officer of this force, General Sharda Shamsher Jang Bahadur Rana, was the son of the then Prime Minister of Nepal, Maharaja Mohan Shamsher Jang Bahadur Rana. Yuvraj Karan Singh’s marriage to Yasho Rajya Lakshmi, Sharda Shamsher’s daughter, was arranged during the General’s stay in India.

“The open border is a ‘safety-valve’ for Nepal. Without compromising India’s security, the challenge is to turn it into a bridge, not a barrier”

Cultural affinities and familial ties provide the comfort of familiarity, perhaps also an instinct for fraternity. But closeness begets complexities too, and dependence — for essential supplies, trade, transit, investments, and employment — does not engender goodwill, especially when relations are not handled with sensitivity and care.

India’s bilateral interaction with Nepal was in a holding pattern since 2001, when King Birendra and Crown Prince Dipendra died in the Narayanhiti Palace shoot-out. At the time, Nepal was facing the Maoist insurgency. This ended with the signing of the 12-Point Agreement in New Delhi in November 2005. Meanwhile, the constitutional coup by King Gyanendra triggered public protests and brought the democratic forces together with the Maoists. He restored the previous Parliament the following year, but it was too late to save the monarchy. A Constituent Assembly (CA), elected in 2008, failed to promulgate a new Constitution. This has still not taken definite shape, though a new CA has been in place since November 2013.

During this period, India reinforced the consensus-building process in Nepal by engaging Nepal’s political leaders and assisting its institutional stakeholders. India supported the Jana Andolans of 1990 and 2006, both of which were led by the people of Nepal. Constitution writing is stuck on deeply divisive issues: the form of government, the geographies of the federal units, and the extent of devolution of authority to them. These are issues best addressed by the Nepalese themselves.

In its political journey, Nepal has traversed more difficult obstacles before. It has completed the transition from a monarchy to a republic, and from civil war to a democratic order. It has mainstreamed the Maoists, except its extremist fringe, and integrated former Maoist combatants into the Nepalese Army — a template worthy of emulation in other post-conflict peace building situations. There is an agreement across the broad political spectrum, excluding the extreme right and left, that Nepal will be a federal democratic republic, and that the new Constitution will reflect the progressive changes in Nepal’s polity.

The inclusive nature of Nepalese society gives reasons for hope that the unfinished tasks of the peace process will be completed. In spite of per capita income levels declining towards close to half of India’s average, Nepal has done better than India on several Millennium Development Goals (MDG), including infant mortality, maternal health, child malnutrition and poverty reduction rates.

If a new Constitution does not emerge, Nepal will be pregnant with possibilities hard to predict, not excluding the launch of another insurgency.

Having developed the confidence over the past decade to be able to work with any democratic electoral outcome in Nepal, India has kept the day-to-day bilateral institutional mechanisms in play. These include defence cooperation and supplies, trade access and transit facilitation, river protection works, augmentation of electricity supply during the lean season, Exim bank credit for the infrastructure sector, and development projects, including construction of Terai roads, integrated check points at important border crossings and cross-border rail links. Many of these need a strong push from the two governments to speed their implementation. There exists excellent two-way cooperation between the respective security agencies to deal with difficult cross-border issues such as terrorism, smuggling (including of fake Indian currency notes), and trafficking.

People-centric issues

India has been ready to receive Nepalese proposals to revise the antiquated 1950 Treaty of Peace and Friendship — unequal principally because of the one-way privileges it accords to Nepalese nationals living and working in India. Other tasks include resumption of the Boundary Working Group, signing of the finalised strip maps, and signature or ratification of a host of treaties and letters of exchange ranging from extradition and mutual legal assistance to transit, railways and communications.

India believes the future cooperation agenda can be energised in two broad ways: first, by introducing changes that improve the lives of people, and second, by altering its strategic setting by focussing on the big infrastructure sector issues of energy, ecology and connectivity that have not been addressed so far.

About a fifth of Nepal’s 28 million resident population lives and works in India. The open border is a “safety-valve” for Nepal. Without compromising India’s security, the challenge is to turn it into a bridge, not a barrier. Mr. Modi would do well to propose easing remittances and exchanging currencies, reducing telephone calling costs (calls from India and Nepal to Europe or the U.S. cost less than between the two neighbours), expanding educational opportunities, ensuring more dignified border crossings, increasing cross-border social and cultural linkages, improving road and rail transportation links, relaxing rules for border trade for private consumption, better managing the Das Gaja land at unmonitored border crossing points, and improving coordination between the respective border district officials for prompt resolution of local issues.

Medium to long-term prospects

The big idea on the table is for Nepal to simply tap power from the enormous body of waters that flow into the Bay of Bengal. Hydropower generation in Nepal is, unbelievably, less than half per cent of what can be produced. Nepal can become, by far, the richest country of the subcontinent, on condition that it harnesses this resource. There is recognition in Nepal today that this can transform the social and fiscal dynamics of Nepal by its employment, energy and revenue generation potential.

T.C.A. Ranganathan, then the Eximbank India Chairman, had done some back of the envelope calculations for me that were startling. If Nepal awarded production licensing for the development of over 8,000 MW of electricity offered eight years ago to independent power producers on the basis of competitive international bidding — most of them run-of-the-river projects avoiding large-scale inundation, displacement, compensation issues and ecological surprises — at the current rate of investment of $2 million/MW, the foreign direct investment (FDI) could be a staggering $16 billion. Compare this to the $350 million actual inflow of FDI into Nepal over the last 23 years. The free power for Nepal, at a conservative rate of 12 per cent just from these projects, will be more than Nepal’s total current production, besides free equity, royalties and taxes that will flow to its exchequer. If half of Nepal’s hydro potential was to be harnessed, annual revenues could top $40 billion, over $100 million a day. Mr. Ranganathan said that in 20 years’ time his successor would have to visit Kathmandu to raise capital for the bank and not go to New York or London for it.

Other big ideas include Indian partnership in cooperative watershed and environment management for the protection of the Himalayan ecosystem, including soil conservation, re-forestation, and more rational land use for horticulture and bio-agriculture. On connectivity and infrastructure, India could build a road bridge over the Mahakali, extend Eximbank loans and provide viability gap funding for the Kathmandu-Terai Fast Track road, the international airport at Nijgadh and new cross-border power grids. When the hydropower revenues kick in, Nepal could build an East-West railway (prospected by RITES), along the present alignment of the highway built by India. It could become economically viable the moment it is connected to Kathgodam in the west and Siliguri in the east, significantly shortening the route from north to north-east India.

For its transformation, Nepal needs energy, connectivity, a new Constitution that is durable, inclusive and democratic, and a political disposition that unfetters its economy and supports the entrepreneurial talent of its people. Prime Minister Modi will likely indicate that India stands ready to substantially augment its development partnership with Nepal — without dictating its destination or determining its degree — which will be for the Nepalese people to decide. His visit will set the tone for a significantly upgraded relationship, even if the big deliverables come later.

(Jayant Prasad served as India’s Ambassador to Nepal.)

The article is being reproduced from ‘The Hindu’