India-Nepal: Repairing of the Himalayan Bond

By KS Tomar

It was on Feb 22, 2022 when Nepal’s parliament debated the pros and cons of the $500 million grant from the United States to fund a 187 mile long electricity transmission line and a road improvement project in Nepal through the Millennium Challenge Corporation (MCC), a U.S. government aid agency.

The then a coalition led by former Prime Minister Sher Bahadur Deuba favored the US aid gesture but was opposed by communists helmed by ex-PM KPS Oli, that too at the instance of China.

Interestingly China has started investing in Nepal with the aim of spreading the tentacles of its debt trap policy whereas the US offered it as a grant, which does not push any poor and needy nation like Nepal into the burden of debt. The US had earlier provided  an additional $10.5 million in urgent COVID assistance for Nepal through USAID.

United States Ambassador to Nepal, Randy W. Berry, along with United States Agency for International Development (USAID) Nepal Mission Director, Sepideh Keyvanshad, on August 18, 2022 had gifted Covid related equipment to Nepal. USAID’s support in the health sector reflected one of the longest standing and one of the most successful development assistance programs in Nepal. In the last 20 years alone, USAID has invested over $600 million to improve the quality of health services in Nepal, and has helped reduce maternal deaths, infant mortalities and eradicate malaria.

In this backdrop, Nepal PM Pushpa Kamal Dahal Prachanda’s successful visit and subsequent fallout of shift from China may act as a big booster to ties with the United states and India. Experts say it may lead to enhancement of investment and financial assistance from the US in the future as strategically Himalayan Kingdom is of utmost importance to keep China at bay.

India and Nepal


Despite having close relations dating back to ancient times, the Indo-Nepal treaty of peace and friendship signed between two countries in 1950, had laid the foundation of closer ties. Rana rulers of Nepal had welcomed close relations with the newly independent India, fearing a danger of ouster of their autocratic rule by China-backed communists.

But pro-China tilt of communists government led by former PM KPS Oli brought the relations between the two nations to the lowest ebb, that has witnessed a positive trend of ascendency after coalition government led by Prachanda’s communist Party of Nepal – Maoists Center (CPN-MC) and Nepali Congress took over.

Modi recalled his visit to Himalayan Kingdom in 2014 when he gave a new formula ‘HIT’ (Highways, I-ways, and Trans-ways) for strengthening of Nepal and India relations which was aimed at eliminating  the existing barriers but now he is optimist and confident to take it to a new height and make it as ‘Super Hit’ in times to come. Nepal PM Prachanda also reciprocated the gesture and appreciated Modi’s Neighborhood Policy.

Deeper Economic ties

PM Narendra Modi made significant and meaningful observations about the impact of signing seven agreements with his counterpart Prachanda which will have special bearing in shaping future economic ties which will be of mutual benefits and relevance.

Prachanda was firm in his perception when he said “the age-old ties between two nations are of special significance and multi-faceted. The relationships stand on the solid foundation which are built on one hand by the rich tradition of cultural, socio-economic, civilizational, linkage and on the other by the firm commitment of the two countries to the time-tested principle of sovereign equality, mutual respect, understanding and cooperation.”

Power Agreement

Nepal got every reason to smile as the trilateral power agreement became reality after several years of stalemate which will ensure import of 10,000 MW of power from Nepal to India for 10 years. Nepal will be earning millions in revenue and subsequently providing an advantage of additional availability of electricity for consumers in India. The agreement will also enable Nepal to start export of power up to 60 MW to Bangladesh through India.

 It is expected to prove a path breaking event as buyers and sellers can sign power agreements for 25 years and Nepal can visualize its prosperity through energy export to India or other countries. 

India is also developing a mega 900 MW Arun-III hydroelectric project in Nepal besides having a 490 MW Arun-4 hydroelectric project in the pipeline which will be taken to logical end in near future. India has also built several hydroelectric projects in Nepal which include Devighat (14.1 MW), Western Gandak (15 MW),,Pokhara (1 MW), Trisuli (21 MW), etc. which reflect old and close cooperation between two nations in the energy sector.

Foreign Secretary, Vinay Mohan Kwatra observed that two PMs had agreed to achieve tangible and time-bound progress on the Pancheshwar multipurpose project and India will cooperate with Kathmandu to set up a fertilizer plant in Nepal.

Observers feel that the approval of the citizenship bill is being seen as an attempt by Prachanda to exhibit his closeness to India and the US though it may irritate Dragon.

 Prachanda chose India over China for his maiden visit, which has sent good signals. His visit has proved very fruitful as visible from the signing of seven agreements thereby benefiting people of both countries.

Ticklish issues between neighbors

PM Modi and Prachanda refrained from touching the irritants which could have spoiled the outcome of the latter’s visit. Prachanda tactfully touched the boundary issue and suggested resolving it through diplomatic channels.

Earlier Oli government had brought Nepal-India ties to lowest ebb when a map was redrawn showing Indian territories like Lipulekh, Kalapani and Limpiyadhura as its territories which had infuriated India and it had outrightly rejected this mischievous move.

Oli had also objected to the opening of 80-km-long strategically crucial road connecting the Lipulekh pass with Dharchula in Uttarakhand by defense minister Rajnath Singh on May 8, 2020. This strategic road connects the Lipulekh pass having a height of 17,000 feet along the border with Tibet in Uttarakhand with Dharchula in Uttarakhand’s Pithoragarh district.

The Ramayana Circuit

India and Nepal have agreed to speed up completion of projects related to Ramayana circuit which comprises 15 tourism circuits thereby strengthening religious and cultural ties in future.

PM Modi and Prachanda recognized the centuries old ‘Roti-Beti’ bonds which refer to cross border marriages between people of two nations and resolved to preserve the same at all costs. Prachanda also undertook a religious trip to Mahakaleshwar temple, one of the 12 Jyotirlingas in Ujjain in Madhya Pradesh and gave right signals to New Delhi.

Analysts opine that outcome of four-day visit of Prachanda may not be in consonance with the policy of China to wean away Nepal from India. It is also a hard fact that new economic cooperation especially in the hydropower sector has got tremendous potential to bring prosperity in the Himalayan Kingdom.

The well calibrated agreements having a goal of farsightedness covered various fields including cross – border petroleum pipeline trade and commerce, development of Integrated Check Posts and hydroelectric projects. “I and Prachanda took many important decisions to make partnership between the two countries a ‘Super Hit’ in future,” PM Modi said.

 KS Tomar is a political analyst based in Shimla, India. He has covered Nepal for years for Hindustan Times.

The views expressed are not necessarily those of The South Asian Times

Images courtesy of (ORF) and Provided

Share this post