Mistrust muddies India-Nepal water relations

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The Third Pole, Kathmandu, Nepal

Confusion persists over a power trade agreement between Nepal and India to be signed during Prime Minister Narendra Modi’s visit to Kathmandu with many fearing that it favours New Delhi

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No Indian prime minister has visited Nepal in the last two decades and it is hoped that this trip will clear some of the hurdles in the way of smooth water relations. (Photo by International Rivers)

Hectic efforts are under way in the Nepal capital Kathmandu to ensure that a power trade agreement with India, critical to the relationship between the two neighbours, is signed when Prime Minister Narendra Modi visits the country on August 3.

Though India is a major investor in Nepal’s hydropower sector, there is no power trade agreement between two countries despite multiple efforts over the years to finalise one. The current agreement also finds itself in controversy with Nepali experts rejecting the document forwarded by India as being too favourable to New Delhi.

According to officials at the ministry of energy, the deal could be signed during Modi’s visit despite disputes and controversies.  Major political parties, including the rulingNepali Congress, were on the same page on the issue.  “We can’t say anything definitive now, but our efforts are under way to make it happen as it would be beneficial for both countries,” said an official on condition of anonymity.

If it indeed does happen, it will be a big deal. The two countries don’t just share a border but water sources — all major rivers that originate in Nepal end in India. But mistrust on the issue has long muddied the waters.

This was seen last week as well when Indian external affairs minister Sushma Swaraj visited Kathmandu to prepare for Modi’s visit and co-chair a meeting of the Indo-Nepal Joint Commission with her Nepal counterpart Mahendra Bahadur Pandey. The panel is a top level bilateral mechanism but this was the first meeting in 23 years and only the third since it was formed in 1988.

The power trade agreement, an important item on the agenda, could not be signed during Swaraj’s visit following huge criticism from the Nepali side.

“There should be rigorous discussion at political level but it came suddenly and it advocates Indian investors’ monopoly on water resources of Nepal which is not acceptable to us,” is how Pradip Gyawali, senior leader of Communist Party of Nepal Marxist Leninist (CPN-UML), put it.

Political parties and a section of civil society leaders have blamed India for attempting to dominate Nepal’s energy sector by unilaterally forwarding the document for discussion. However, the Indian side has said the document was forwarded only as a reference and the agreement could be finalised following rigorous discussions. “We won’t put any pressure to Nepal to sign the power trade agreement or any other agreements. It should be done after discussions and in mutual benefit of both countries,” said India’s external affairs ministry spokesperson Syed Akbaruddin.

Details of the document, though classified, became public through selective media leaks. According to a report seen in Naya Patrika, for instance, the eight-point document proposes 100% investment of Indian companies in Nepal’s hydropower, something that will result in a monopoly and also discourage other foreign investors.

“The document is not that bad but it has talked more about investments rather than overall hydropower development creating suspicion in the minds of some political parties and civil society,” said Shanker Koirala, former secretary of Nepal’s energy ministry.

The joint press statement issued after the meeting of two countries has said they have provided the mandate to discuss the power trade document to concerned authorities but not set any deadline. “The two leaders underscored the importance of harnessing vast hydropower potentials of Nepal for mutual benefits. They directed the concerned authorities to finalise the text of a Power Trade Agreement at the earliest,” it states.

Though energy ministry officials are hopeful that the pact will be signed and more discussions will be held, the signals are mixed. India has said there are slim chances of the agreement being finalised “Though we were eager to sign the document as soon as possible, the Indian ambassador (Ranjit Rae) told me that it’s not possible to do it during the next week visit of Indian Prime Minister Narendra Modi as time is very less… so the possibility of such an agreement is declining for now,” said Energy Minister Radha Gyawali.

On July 27, the day Swaraj returned to New Delhi, Nepal’s parliamentary committeedirected the energy ministry to expedite the power trade agreement process at the earliest. “We are saddened by the controversy in power trade agreement but the committee would like direct the energy ministry to expedite the agreement process and sign it as soon as possible,” said Ram Sharan Ghimire, secretary of the agriculture and water resources committee of parliament.

India and Nepal have signed various river treaties  in the past, all of them controversial. Many believe that the mistrust between two countries is high due to earlier water treaties.  Nepal’s radical left parties and a section of activists have argued they were in favour of India and have been demanding a review. “Our water relations have been complex due to lack of transparency on decision making, so we need to build trust and have transparent decision making process if we want to harness electricity for mutual benefit,” said Prakash Sharan Mahat, former energy minister.

A lot is riding on Modi’s visit. No Indian prime minister has visited Nepal in the last two decades and it is hoped that this trip will clear some of the hurdles in the way of smooth water relations.