Strategic milestones: Nepal-India forge key agreements in landmark joint commission meeting

Nepal and India solidified ties with landmark agreements in trade, energy, and development during the historic Joint Commission Meeting, enhancing regional cooperation and stability.

During the seventh meeting of the Nepal-India Joint Commission held in Kathmandu, Foreign Minister NP Saud and his Indian counterpart S Jaishankar co-chaired the discussions, encompassing a comprehensive review of bilateral ties. The dialogue covered a spectrum of crucial issues, including trade and economic relations, land, rail, and air connectivity projects, defence and security cooperation, agriculture, energy, power, water resources, disaster management, tourism, civil aviation, people-to-people and cultural exchanges, and development partnerships. The active engagement of both foreign ministers underscores the commitment of Nepal and India to nurturing and fortifying their longstanding relationship. These high-level talks serve as a platform for addressing mutual concerns, fostering cooperation, and promoting regional stability through collaborative efforts across various sectors.

The Nepal-India Joint Commission, serving as the apex political forum for bilateral discussions, played a pivotal role during its recent meeting in Kathmandu. The collaborative efforts were marked by the signing of several agreements and understandings between the two nations. Notably, India announced a substantial grant of Rs10 billion to support Nepal’s reconstruction endeavours in the aftermath of the November 3 earthquake in western Nepal. This financial commitment reflects a shared commitment to regional stability and the well-being of both nations. The agreements reached during the meeting, including a notable power export deal, signify a deepening of cooperation and mutual understanding between Nepal and India across various domains.

It is distinct from the assistance provided after the 2015 S Jaishankar, where India had pledged $1 billion in aid, comprising both grant and loan components. However, officials have clarified that the current assistance of Rs10 billion is entirely in the form of a grant, signalling a generous and non-repayable contribution from India. Notably, the earlier $1 billion aid package had a split of 25 per cent as a grant and the remaining 75 per cent as a soft loan, intended for jointly agreed-upon reconstruction projects. Despite this, a complete realization of the initially promised sum has not entirely materialized. The recent grant reaffirms India’s commitment to supporting Nepal during times of crisis and underscores the evolving dynamics of their bilateral relations.


Energy Pact

The recent discussions between Nepal and India have resulted in the formalization of a significant long-term power trade deal. This agreement sets a goal of exporting 10,000 megawatts of power to India within the next decade. According to Sandeep Kumar Dev, the Joint Secretary at the Ministry of Energy, this 25-year deal outlines the export of 10,000 megawatts to India in the initial 10 years, with an automatic renewal provision every 10 years after the first quarter-century. This landmark agreement not only solidifies a sustained energy partnership between the two nations but also creates a framework for medium- and long-term power purchase agreements spanning up to five to ten years. The deal is poised to have a considerable impact on the energy landscape of the region, fostering greater cooperation and stability in the power sector between Nepal and India.

The momentum of collaboration between Nepal and India in the energy sector culminated in a significant milestone as Gopal Sigdel, the Secretary at the Ministry of Energy, Water Resources, and Irrigation for Nepal, and Pankaj Agarwal, the Indian Energy Secretary, formally signed a memorandum of understanding. This historic agreement, inked during a meeting at the Yak and Yeti Hotel in Kathmandu, is part of a comprehensive set of four agreements signed on Thursday. Prime Minister Pushpa Kamal Dahal expressed his elation, deeming January 4, 2023, as a pivotal moment in the realm of energy trading for Nepal. The signing of these agreements underlines the commitment of both nations to fostering bilateral cooperation, particularly in the critical domain of energy, and sets the stage for enhanced collaboration in the years to come.

During his visit to India, Prime Minister Dahal recalled that an agreement had been reached to sell energy to India, and the subsequent formalization of this agreement marks a pivotal moment in the bilateral relationship. He highlighted that this accomplishment not only solidifies the energy partnership with India but also opens avenues for energy trading with Bangladesh. The prime minister articulated that the agreement has paved the way for trading energy with Bangladesh through the Indian grid, illustrating the broader regional implications of this historic achievement.


Other Agreements

An agreement was reached to enhance Indian aid for small development projects in Nepal. Previously, India had been providing Rs50 million for the execution of each small development project. However, as per the new agreement, the budget allocation has been significantly increased to Rs200 million. This increased financial support for small development projects represents a substantial boost to collaborative efforts between the two nations in addressing local development needs. The agreement specifies that the enhanced grant will be extended through both government organizations and other entities involved in development projects. Initially labelled as ‘small grant or development projects,’ the initiative has been recently renamed as High-impact Community Development Projects (HICDPs), reflecting its emphasis on making a tangible difference in local communities. This financial commitment underscores India’s commitment to supporting Nepal’s grassroots development and fostering a more robust partnership between the two neighbours.

The economic assistance program initiated by the Indian Embassy in Nepal, initially launched in November 2003, has played a pivotal role in supporting various local-level projects such as schools, colleges, and hospital buildings. Under this scheme, local bodies and other government entities can now request projects through the Ministry of Federal Affairs and Local Development. The requests are subsequently examined by the Local Development Ministry, which forwards them to the Ministry of Finance. The finance ministry, in turn, communicates with the government of India to execute these projects based on priority.

The process is streamlined to ensure effective collaboration and timely implementation of projects. Additionally, if project requests come from non-governmental organizations, relevant ministries such as health, local development, or education are required to recommend them to the Ministry of Finance for approval by the Social Welfare Council.

Under the High-impact Community Development Projects (HICDPs) scheme, each local unit is required to establish a counter fund for the execution of projects that receive funds. To ensure effective implementation and monitoring, a dedicated mechanism has been established involving government entities and the Indian Embassy in Kathmandu. The agreement’s term is set for five years, indicating a commitment to sustained collaboration in local development.

In addition to the comprehensive discussions, the meeting between Foreign Minister NP Saud and his Indian counterpart S Jaishankar witnessed a significant agreement between the Nepal Academy of Science and Technology (NAST) and New Space India Limited (NSIL). The agreement pertains to the Launch Services for the Munal satellite, which is scheduled to be launched on India’s Polar Satellite Launch Vehicle (PSLV). This collaboration is facilitated under the umbrella of the Indian Space Research Organization (ISRO), showcasing cooperation in the realm of space technology and satellite launches.

Despite India’s request, the Nepali side took the opportunity to raise the issue of boundary disputes, emphasizing the importance of an early resolution through relevant mechanisms. It’s noteworthy that, during the meeting, the issue of receiving the report of the Eminent Persons Group on Nepal-India relations did not prominently feature in discussions. However, the boundary issue was brought to the forefront, indicating the ongoing relevance of addressing territorial concerns for both nations.

The joint meeting between Foreign Minister NP Saud and Indian counterpart S Jaishankar also highlighted their mutual satisfaction with the support extended in regional, sub-regional, and multilateral forums on common interests, as per a statement from the Ministry of Foreign Affairs. The discussions encompassed various issues, including additional air entry routes, floods, and inundation.

The statement further outlined that views were exchanged on the review of the Treaty of Peace and Friendship of 1950, as well as security and boundary-related matters. Notably, the meeting delved into the activities of the boundary working group (BWG), responsible for tasks such as clearing no-man’s land, repairing and maintaining boundary pillars, and installing new ones where needed. The Indian side mentioned its ongoing construction of two bridges in western Nepal.

However, there was no commitment from Indian officials regarding the provision of an air entry route to facilitate the operation of two international airports in Pokhara and Bhairahawa.

During the joint meeting between Nepal and India, various cross-border projects and infrastructure-related initiatives were discussed. This included the extension of the Indian rail up to the Biratnagar cargo yard, comments on the proposed Raxaul-Kathmandu railway, and the timely construction of two integrated check posts in Chandani and Dodhara.

However, it was noted that there was no significant progress on finalizing the detailed project report of the Pancheshwar Multipurpose Project, as indicated by the Nepali participant. The Pancheshwar project is a multipurpose initiative involving the construction of a dam on the Mahakali River, aiming to generate hydroelectricity and provide other benefits, but the detailed project report appears to be still under consideration.

One notable concern raised by the Nepali side was the delay in implementing India-funded projects that were supported through loans extended by the Exim Bank of India. The member of the Nepali delegation pointed out that certain conditions set during negotiations were causing delays in these projects. The Indian foreign minister expressed a positive stance toward reviewing the conditions set by the Exim Bank of India, signalling a willingness to address the concerns and expedite the project timelines.

Additionally, a memorandum of understanding for cooperation in renewable energy was signed between the Nepal Electricity Authority and National Thermal Power Corporation (NTPC) Limited of India. The two foreign ministers jointly inaugurated three cross-border transmission lines connecting various regions in Nepal with Bihar and Uttar Pradesh states in India, enhancing connectivity and power distribution infrastructure.

India also handed over the fifth tranche of post-Jajarkot earthquake relief supplies to Nepal, including prefabricated houses, blankets, tents, and sleeping bags. The Joint Commission, in a statement issued by India’s Ministry of External Affairs, expressed appreciation for the achievements in bilateral cooperation since the last meeting in January 2021. These developments underscore the multifaceted nature of the bilateral relationship and the ongoing collaboration between the two nations across various sectors.


China Factor

China’s focus on Nepal’s hydropower sector aligns with its broader economic and geopolitical interests in the region. The BRI provides China with an avenue to invest in infrastructure projects, including hydropower, facilitating economic cooperation and influence. The strategic location of Nepal as a buffer between China and India makes it a key player in the regional power dynamics. As both nations vie for political sway, Nepal’s decision on hydropower projects could significantly impact its economic development and geopolitical alignment. Balancing these competing interests will be crucial for Nepal to harness its hydropower potential effectively.