Indian Foreign Minister S. Jaishankar embarked on a significant diplomatic mission to Kathmandu on January 4, 2023, undertaking a two-day visit to Nepal. The primary objective of this visit was to co-chair the seventh meeting of the India-Nepal Joint Commission. Amidst the convening of this commission, the diplomatic engagement resulted in the signing of four pivotal agreements, with the electricity trade agreement standing out as the most consequential.
This diplomatic interaction bears significance on multiple fronts. The consistent convening of the India-Nepal Joint Commission establishes a recurrent platform for dispute resolution and dialogue, fostering heightened mutual trust between the two nations. Notably, this commission's inception dates back to 1987, yet over the span of 37 years, only seven meetings have transpired. The co-chairing by the Foreign Minister underscores the commission's role as the supreme body for resolving disputes between India and Nepal. However, it is pertinent to acknowledge that certain unresolved issues persist in the backlog, such as the border dispute, trade deficit, and the 1950 treaty which, Nepal says is “not in tune with time”. Despite these outstanding matters, the infrequency of commission meetings since its establishment in 1987, with only seven instances recorded, prompts contemplation on the intricacies of bilateral engagements between the two nations.
The seventh meeting, held to deliberate on an extensive array of issues, encompassed discussions on more than two dozen topics, specifically the trade deficit, rail and air connectivity, defence, security, and tourism. Before the meeting, the Indian communication to the Nepalese delegation explicitly outlined that certain matters, including border disputes concerning Limpiyadhura, Kalapani, and Lipulekh, the Eminent Persons Group Report of 2018 (EPG-2018), and aspects related to the 1950 treaty, were not to be raised by Nepal. Foreign Minister Narayan Prasad Saud of Nepal acknowledged India's position and recognized the potential for disagreement on specific issues. He emphasized the imperative of open discussions during the meeting, conceding the possibility of inconclusive outcomes. After the proceedings, External Affairs Minister Jaishankar elucidated various topics covered during the meeting via a post on platform X (Twitter), noting the positive conclusion of the engagement.
A statement from the Nepali Foreign Ministry conveyed a semblance of mutual agreement on most of the issues discussed. Nepal unequivocally communicated its stance to India concerning the border dispute and the 1950 Peace and Friendship Treaty. Concurrently, several longstanding agreements were formalized on the sidelines of the Commission meeting, with particular emphasis on a decade-long power trade agreement with implications for the energy sector, identified as the most salient among them.
The power trade agreement stipulates that Nepal will export 10,000 MW of power to India over the next decade, with the energy sourced exclusively from renewable sources. As articulated by the Energy Ministry of Nepal, this agreement possesses far-reaching implications, featuring an automatic renewal provision every ten years, ensuring its continuity for the ensuing 25 years. In the big picture, this agreement represents a pivotal milestone, constituting the inaugural concrete step toward establishing electricity trade within South Asia and interlinking the entire region into a unified electricity grid. Noteworthy is the ongoing electricity trade dynamic between Bangladesh and India, where Bangladesh currently imports 1,660 MW of power from the Baharampur (India)-Bheramara (Bangladesh) and Surajmani Nagar-Comilla branches of India's Eastern Electricity Grid.
Against the backdrop of Bangladesh's status as the fastest-growing economy globally, its energy dependence on fossil fuels, and its aspiration to have 40% of its total energy consumption derived from renewable sources by 2050 (currently at three percent), there exists a shared commitment among India, Bangladesh, and Nepal to foster regular, inclusive, and sustainable energy practices in South Asia. This commitment materialized in the 21st Joint Steering Committee meeting held in May 2023, where the three nations collectively endorsed the Tri-Party Power Purchase Agreement. Prime Minister Pushpa Kamal Dahal Prachanda of Nepal hailed the 10-year electricity trade agreement with India as a landmark development, characterizing it as a substantial leap forward in bilateral relations. Importantly, this agreement positions Nepal to extend its electricity exports to Bangladesh, further expanding the regional energy cooperation landscape.
The second bilateral agreement between India and Nepal pertains to collaborative efforts in developing renewable energy, particularly in the domain of hydropower. Notably, observers have highlighted Nepal's potential to generate up to 80,000 MW of clean energy through hydropower, a capacity currently constrained to 2,000 MW. India has actively contributed economic and technical support to Nepal in this sector. However, the financial investment by India in Nepalese hydroelectric projects has encountered irregularities, leading to significant delays, exemplified by the notable case of the Pancheshwar Multipurpose Project (PMP), which is running more than a decade behind schedule due to currency liquidity issues.
Beyond energy production and trade, two additional significant agreements have been formalized. The first agreement involves collaboration between the Nepal Academy of Science and Technology and New Space India Limited, aiming to launch a Nepali satellite into space. Per the terms, the Indian Space Research Organisation (ISRO) will deploy the Nepalese satellite into Earth's polar orbit utilizing the Polar Satellite Launch Vehicle (PSLV). The second agreement focuses on India providing a financial allocation of 200 million Nepali rupees per project under the High Impact Community Development Program (HICDP). Notably, India has offered financial assistance for regional development in Nepal since 2003 through the Small Development Program, recently rebranded as the High Impact Community Development Program. The HICDP seeks to directly benefit rural and remote areas in Nepal by establishing schools, hospitals, and training centres. Since 2003, the Government of India has financed 535 HICDPs, with 476 projects completed at a cumulative cost of 11.55 billion Nepali Rupees. In the initial phase (2003-2011), India provided 30 million Nepalese rupees per project, subsequently increasing to 50 million since 2011. The current agreement significantly raises this amount to 200 million Nepali rupees per project. One of the problems in delays in the projects is that the allocation of funds is controlled by the Ministry of Finance and not by the Ministry of External Affairs, which gives priority to governmentdomestic schemes. As a result, the funds for MEA projects are not always assured.
Opposition parties and independent organisations have voiced dissenting opinions regarding the increased financial allocation under the High Impact Community Development Program (HICDP). The Communist Party of Nepal (UML) has contended that this agreement contradicts the constitutional provisions of Nepal, which prohibit direct foreign investment in the local body development of the country. Former Foreign Minister Kamal Thapa has equated the provision of direct foreign assistance to local bodies with the establishment of a parallel government in Nepal. Despite these critiques, Prime Minister Prachanda, during parliamentary deliberations, asserted that the HICDP is in the best interest of Nepal, facilitating collaborative investment and policy-making between India and Nepal.
In addition to the HICDP agreement, Foreign Minister Jaishankar has announced a financial assistance package of 10 billion Nepali rupees for reconstruction efforts, accompanied by the fifth tranche of relief assistance to Nepal's victims of the November 2023 earthquake. Notably, 75 percent of this assistance will be in the form of a soft loan, while the remaining 25 percent will be provided as a grant.
In light of the comprehensive agreements and the joint statement, it can be asserted that the visit by the Indian Foreign Minister was of significance and deemed successful. As articulated by Nepalese Foreign Minister Saud, this meeting marked a departure from previous engagements by avoiding controversies. The ongoing high-level engagements between the current administrations of India and Nepal are instrumental in resolving the enduring disputes and fostering trust that emerged in 2015. While disparities persist regarding the border dispute and the 1950 treaty, regular diplomatic meetings provide a platform not only for consensus on pressing issues but also for negotiating substantial agreements such as the power trade agreement. The amicable bilateral relations between India and Nepal hold the potential to yield substantial benefits for regional dynamics in South Asia.