July 23, 2014


[The  'much admired' Indian Prime Minister Narendra Modi is being heartily welcomed as he visits the Himalayan country this August 3 and 4.  Below is a post today, published in Republica by a former Nepalese finance and foreign minister Dr. Prakash Chandra Lohani. The author expresses optimism that Prime Minister Narendra Modi's visit will pave a way for a new beginning in Indo-Nepal bilateral relations.  With  Modi's coming to  power in India,  hopes are soaring high in Kathmandu. The author also suggests that both countries  sit together, as times have changed,  to revise the 1950's agreement which is kind of bit lopsided. -The Blogger]

By  Dr. Prakash Chandra Lohani *

Indian Prime Minister Narendra Modi
Narendra Modi, the Prime Minister of India, is probably coming to Kathmandu soon. For the last 15 years no Indian PM has visited our country, although every government in Nepal has requested such a visit. It is wonderful that the Indian PM, much admired in Nepal, is finally coming.

A visionary leader

Modi has clearly indicated that improving relations with neighbors is his priority, which was evident when he graciously invited government heads of all South Asian countries to his inauguration. He exhibits the image of a confident and forward-looking leader who wants to go the extra mile in promoting an atmosphere of trust between India and other South Asian nations. Therefore his visit is an opportunity both for India and Nepal to build the relationship between the two nations based on the principles of mutual respect and mutual gains.

Relations between nations are defined by their perceptions of national interests. In this context high level political visit provides leaders the opportunity to understand first hand areas of cooperation and other concerns as well a. We, in Nepal should be mindful that Modi is the prime minister of India and so it is his duty to look after Indian interests, even while he helps Nepal realize its socio-economic goals. We should also be aware that the development of Nepal is basically the responsibility of Nepali people and foreign help is relevant only when government and people of Nepal are clear about their interests and priorities. What this means is that the prime minister of Nepal should be clear both conceptually and in operational terms about Nepal’s national interests while outlining areas of mutual cooperation in dialogue with the Indian leader.

Mutually beneficial

From the Indian perspective, the areas of concerns are probably water resources and security. We should be aware of this and outline a course of action in the best interest of both, keeping in mind the sovereign equality among nations. Both Nepal and India to should focus on maximum utilization of water resources for mutual benefits. The question is: what would the best way to doing that?

Both India and Nepal probably agree that the water resources agreement of 1950’s cannot be a hallmark for all times. The new model must be based on two important ground realities. First, exploitation of water resources and its use both for agriculture and industrial development as well as export has been a consistent theme of Nepal’s development strategy even though our success has been limited. Second, India needs energy and water to fuel its future growth in the Indo-Gangetic region that is home to over 450 million. Both these objectives can be achieved if we design a framework of energy development and understanding on principles regarding water use for irrigation, plus navigation from large high dam projects that are economically viable and politically acceptable to both the nations.

Nepal wants foreign investments in energy both from India and third countries to fuel its development and exports. Nepal is not a small nation: by population, it is the 44th largest country in the world. As a mid-sized nation of 30 million, its power requirement will increase rapidly if the projected growth of 8 percent is to be achieved. If Nepal is to be middle-income nation in next 25 years we would need installed hydro power of around 40,000 MW.

Free trade

Nepal’s requirement for energy shows a seasonal character. In the summer there could be surplus power in the future but continued deficit in the winter. From an energy trade perspective this means Nepal could export power to India in summer and import it in winter under a power swap arrangement; or both the governments could let market determine the magnitude of trade under a power trading framework that visualizes common market for energy trade within a given time.

Free trade in power between Nepal and India has been proposed by Nepal for last 18 years. In 1996 when I was the foreign minister in Sher Bahadur Deuba government, the two countries had signed a power trade agreement in Bombay, incorporating some of the provisions I have outlined above. Again in 1997, the then Nepali state minister for water resources Rajiv Parajuli and his Indian counterpart S. Venugopalachari signed an expanded version of 1996 agreement and it was general understanding that we would enter a new area in energy cooperation with market playing the central role. There was also expectation that the Pancheswor agreement, then signed by Pranab Mukherjee, who is now the President of India, and myself as the foreign minister of Nepal, would be launched and the power trade agreement would be instrumental for the project’s success. But for the last 16 years there has been no progress and Nepal and India acted as if both were frozen in time.

The new twist

Suddenly we are now told that the government received a new draft on this issue three months ago from India. The draft, it is argued, ignores the spirit of past agreements on power trade. The Indian draft has created a controversy that needs to be settled quickly with sense and reason. For this both India and Nepal need to agree on three basic propositions. First, any agreement on power trade and cooperation with India should not in any way restrict Nepal’s right to decide on projects inside its territory and in dealing with investors or other countries. The present draft, as many experts and media have argued, is ambiguous and leaves scope for multiple interpretations. Second, we should focus on power trade and allow market forces to set tariff rates towards building a common power market.

Perhaps a new beginning could be made if the proposed agreement clearly states in its title that it is power sector cooperation and trade agreement. And trade means both exports and imports also. The articles of the agreement should reflect the spirit of the new title and deal with various issues (like tariff) both for exports and imports of power. Third, as pointed by experts in the field, any new agreement should be cognizant of the spirit of the 1997 agreement between Nepal and India as well as the new draft agreement sent by Nepal in 2010. Somewhere along the line this point has been ignored and it is surprising that Nepal has not raised this issue.

Basically, there is now need for reason rather than accusations. It is unfortunate that the Indian draft was kept secret for over three months by the Energy Ministry, fuelling all sorts of speculations. People have the right to know their government’s position on crucial issues that affect the future of the nation. Regrettably, utter neglect of the political and administrative officials of Energy Ministry in responding to the Indian initiative has only muddied the political atmosphere. The government should rather have studied the Indian proposal thoroughly keeping past agreements in mind and come to an informed opinion after discussions with agencies concerned, both administrative and political.

But this was not done. I talked to Foreign Minister Mahendra Pandey recently and he was honest enough to admit that his ministry had been completely bypassed and he simply did not know what was happening. It seems that in the current government the left hand does not know what the right is doing, a dangerous sign. In fact one wonders if there is anyone in charge of the Energy Ministry at all.

Boldness needed

Finally, it has been reported that Nepal has been asked to identify projects that need Indian help. This is a gesture of friendship that should be appreciated. My suggestion would be to concentrate on implementing the agreed projects with the potential to benefit both the nations. The project that meets this criterion would be Pancheswor Multi Purpose, which, apart from other benefits, is expected to generate 6,000 MW of power. We signed an agreement to implement this project 17 years ago and it has been ratified by the Nepali parliament. It needs the vision and determination of a bold and decisive leader like Modi to push it from India’s side. Nepal for its part has been waiting for a long time.

* The author is a senior leader of the Rastriya Prajatantra Party, former finance and foreign minister of Nepal.

@ Republica