The Prime Minister of Nepal, Pushapa Kamal Dahal (Prachanda), visited India from 31 May to 3 June 2023. He was accompanied by an 80-member delegation that included Nepal’s Minister of Foreign Affairs, Minister of Finance, Minister of Physical Infrastructure and Transport, Minister of Industry, Commerce and Supplies, Minister of Energy, Water Resources and Irrigation, among others. During the four-day visit, six projects were launched and seven MoUs signed between the two countries, largely those that enhance cooperation in the energy and connectivity infrastructure sectors.[i] An analysis of the recent visit is indicative of two broad geopolitical trends. First, India and Nepal have moved towards a revived partnership anchored on the infrastructure sector, a relationship that had slowed in the recent past. Second, while Nepal’s leanings towards China, especially in the context of infrastructure cooperation, are well known, Beijing’s influence in this regard cannot be taken for granted.
Cooperation over modern infrastructure between India and Nepal dates back to 1951, when the Gauchar Airport (renamed Tribhuvan Airport) was built in Kathmandu with Indian assistance.[ii] Though such examples can be found over the decades, traditionally, infrastructure was not the focus of the India-Nepal relationship. In recent times, however, India’s engagements with Nepal have tilted towards the energy and connectivity infrastructure sectors, especially as India’s focus on connectivity with its neighbours gained priority and New Delhi has positioned itself as a development partner of eminence in its neighbourhood.
In 2014, Prime Minister Narendra Modi, during his visit to Nepal, provided a HIT formula, i.e., focus on highways, inland waterways and trans-ways, as a driving force behind the India-Nepal relationship.[iii] It was also the time when India promoted its Neighourhood First policy, bringing renewed attention to its ties with its neighbours. Over the next few years, India signed various agreements that led to enhanced connectivity with regard to transport, people-to-people exchange, trade and energy deals between India and Nepal. It was such cooperation that continued to nourish the bi-lateral relationship even during times when economic and political relationships were low.
At a sub-regional level, under the Bangladesh-Bhutan-India-Nepal (BBIN) framework, the Motor Vehicle Agreement signed in 2015 identifies major transport corridors not only between India and Nepal, but the four BBIN states. For example, India and Nepal are working towards connecting Kathmandu to Kolkata and Vishakhapatnam through multimodal networks. Similarly, India is to be a transit route connecting Nepal and Bangladesh through Kakarbhitta/Panitanki-Siliguri-Fulbari in Nepal to Dhaka-Mongla-Chattogram in Bangladesh.[iv] These trans-national corridors find support in cooperation at a bi-lateral level. Take for instance the railway network made operational in April 2022, from Jaynagar to Kurtha as part of the Jaynagar-Bardibas railway link, the first cross-border broad gauge rail project in Nepal. Along with this, the Jogbani-Bairatnagar rail link under construction and the Raxaul-Kathmandu rail link under survey, form a crucial part of the transit and transport corridor under the BBIN framework. Out of the examples in the energy sector, that stands out in the India-Nepal bi-lateral relations, the commissioning of the Motihari-Amlekhgunj Petroleum Pipeline in 2019 is noteworthy as it is the first cross-border petroleum product pipeline in South Asia.[v] Further, the first Integrated Check Post (ICP) in Nepal was set up at Birgunj with cooperation from India. Though there are various other examples of cooperation between India and Nepal in a few other sectors, such as education, health, community development, etc., the engagements in the connectivity and energy infrastructure sectors stand out. This was also reflected during the recent visit of Prime Minister Dahal to India.
On 1 June 2023, the Treaty of Transit that exists between India and Nepal was renewed with amendments, which, among other aspects, now gives access to India’s inland waterways for cargo transportation to seaports.[vi] As regards rail connectivity, the extension of the Jayanagar-Kurtha line to connect up to Bijalpura was handed over to the Government of Nepal, and is due to be operational soon. A cross-border freight line on the Jogbani-Biratnagar rail line has also been added, with the inaugural run taking place recently, while the final location survey report on the Raxaul-Kathmandu rail link was handed over to Nepal. With Indian grant assistance, the Rupaidiha-Nepalgung ICP was inaugurated, ground-breaking ceremony of the mirror ICP in Sunauli-Bhairahawa was conducted, and an MoU was signed to construct another ICP at Dodhara Chandani. On the energy infrastructure front, the Motihari-Amlekhgunj pipeline will be extended to Chitwan through Phase II. An MoU to establish a new pipeline between Siliguri and Jhapa was also signed. Additionally, the Agreement for Long-Term Power Trade was finalized under which India will import 10,000 MW power from Nepal over ten years. India imports 452 MW of power from Nepal. This is a result of the Joint Vision Statement on Power Sector Cooperation signed in April 2022, as per which India is also constructing the 900 MW Arun-3 hydro-electric project in Nepal. Both countries also signed an MoU for development of the 480 MW Phukat-Karnali project and a project development agreement to build the 669 MW Lower Arun project.[vii] A decision was taken to facilitate the first trilateral power transaction from Nepal to Bangladesh via India, a step that will boost cooperation under BBIN. Enhancing digital connectivity, building two bridges across the Mahakali River, setting up of a fertilizer plant in Nepal, construction of the Tanakpur Link Canal were among other areas of cooperation during the recent visit.
It may be noted that this was Prachanda’s first visit to India after becoming Prime Minister for the third time in December 2022. His first term as Prime Minister in 2008 was marked by a maiden foreign visit to China to attend the closing ceremony of the Beijing Olympics. This was a departure from earlier trends of Nepali Prime Ministers visiting India first after assuming office. This clearly signaled towards a change in the Nepal-China relationship. Moreover, a communist party led Nepal was good news for China, a point that Beijing took note of to further its influence in the land-locked country of Nepal. In 2016, Prachanda assumed office for the second time as Prime Minister and the India-Nepal relationship did not make much progress. Nepal’s China leanings became more prominent as Nepal became part of the Belt and Road Initiative (BRI) in 2017 and signed various MoUs and agreements over a range of infrastructure projects. This is why when Prachanda became Prime Minister for the third time in 2022, joining hands with the K.P. Oli-led Communist Party of Nepal-Unified Marxist Leninist at the time, a party that is known to be pro-China, Indian observers were cautious. However, Nepal does not seem to be drawn as easily into the Chinese fold as is imagined.
When then Chinese Foreign Minister, Wang Yi, visited Nepal in 2022, a clear push for projects under the BRI was met with caution by Nepal. Kathmandu insisted that a loan for projects must be offered as ‘soft loans’ or ‘concessional loans’ and must not exceed an interest rate of 2%.[viii] In fact, out of the nine agreements signed between the two countries at the time, reportedly none related to the BRI.[ix] BRI has not done well in Nepal. In 2016, Nepal and China signed a Transit Agreement, especially as the usual routes via India were inaccessible at the time. As per this agreement, Nepal has access to seven Chinese ports (four sea ports and three land ports). Yet, despite signing the protocol agreement to implement this in 2019, both states are yet to develop a standard operating procedure in this regard, a point that is expected to be taken up during Prachanda’s reported visit to China next month. Nepal’s intention was to import petroleum from Kazakhstan via China, which would meet 30% of its needs. With better relations with India, this plan looks unviable. More recently, Prachanda has been seen as a pro-business statesman, and therefore, relationships with foreign partners have been driven less by political leanings than expected. It is to be kept in mind that Nepal’s Parliament has also ratified the $500 million compact of the US’s Millennium Challenge Corporation (MCC) in 2022. Now, the visit of such a large delegation led by Prachanda to India signals an upward shift in the India-Nepal relationship as well.
In conclusion, it may be said that Nepal’s foreign policy vis-à-vis its two giant neighbours, India and China, is undergoing re-balancing. While Nepal’s renewed relationship with India, a country that has traditionally been a strong partner, is being described as reaching ‘Himalayan heights’, Chinese engagements in Nepal have found limited success despite a communist party leader at the helm in Nepal. The deliberations between Nepal and China next month are expected to put the ball in the Chinese court, if Prime Minister Dahal visits China, as reported.
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*Dr Shrabana Barua is a Research Fellow at the Indian Council of World Affairs, New Delhi
Disclaimer: Views expressed are personal.
Endnotes
[i] Ministry of External Affairs, GoI, ‘List of Outcomes: Official visit of Prime Minister of Nepal to India’, 1 June 2023, URL: https://www.mea.gov.in/bilateral-documents.htm?dtl/36632/List_of_Outcomes_Official_visit_of_Prime_Minister_of_Nepal_to_India. [Accessed on 5 June 2023]
[ii] Embassy of India, Kathmandu, ‘About Development Partnership’, URL: https://www.indembkathmandu.gov.in/page/about-development-partnership/. [Accessed on 6 June 2023]
[iii] Ministry of External Affairs, GoI, ‘English translation of Press Statement by Prime Minister Shri Narendra Modi during the visit of Prime Minister of Nepal’, 1 June 2023, URL: https://www.mea.gov.in/Speeches-Statements.htm?dtl/36631/English_translation_of_Press_Statement_by_Prime_Minister_Shri_Narendra_Modi_during_the_visit_of_Prime_Minister_of_Nepal. [Accessed on 5 June 2023]
[iv] CUTS International Report, ‘Multimodal Connectivity for Share Prosperity: Towards Facilitating Trade in the BBIN Subregion’, February 2023.
[v] Embassy of India, Kathmandu, ‘About Development Partnership’, URL: https://www.indembkathmandu.gov.in/page/about-development-partnership/. [Accessed on 6 June 2023]
[vi] Ministry of External Affairs, GoI, ‘Visit of Prime Minister of Nepal Rt Hon’ble Mr. Pushpa Kamal Dahal ‘Prachanda’ to India’, 2 June 2023, URL: https://www.mea.gov.in/press-releases.htm?dtl/36643/Visit_of_Prime_Minister_of_Nepal_Rt_Honble_Mr_Pushpa_Kamal_Dahal_Prachanda_to_India. [Accessed on 6 June 2023]
[vii] Ibid.
[viii] Prithvi Man Shrestha, ‘Loans on commercial terms could greatly increase Nepal’s debt burden’, Kathmandu Post, 29 March 2022, URL: https://kathmandupost.com/national/2022/03/29/loans-on-commercial-terms-could-greatly-increase-nepal-s-debt-burden. [Accessed on 6 June 2023]
[ix] Kathmandu Post, ‘Wang visit: Nepal, China sign nine agreements, none on BRI’, 27 March 2022, URL: https://kathmandupost.com/national/2022/03/27/wang-visit-nepal-china-sign-nine-agreements-none-on-bri. [Accessed on 6 June 2023]