Modi’s visit to Nepal: A fresh start, full of possibilities

India’s Prime Minister Narendra Modi has done what his predecessors could not, for nearly two decades – barely months after taking charge, he has flown to Nepal for a friendly bilateral visit that is set to impart a fresh momentum to India-Nepal relations. In this wide-ranging conversation with Manish Chand, Editor-in-Chief, India Writes Network, www.indiawrites.org, Mr Jayant Prasad, a former ambassador of India to Nepal, speaks about the importance of Prime Minister Modi’s August 3-4 visit to Nepal, the potential of hydropower cooperation which can transform Nepal into the richest country in South Asia, and his response to speculation about a developing India-China rivalry in the Himalayan state, a nascent democracy which is navigating its journey to national renewal.

(Excerpts from the interview)

Q) How do you look at the ongoing visit of India’s Prime Minister Narendra Modi to Nepal – the first visit by an Indian prime minister in the last 17 years.

A) This is an opportunity for India to make a fresh beginning with Nepal. It is not always that between two countries the substance is important, but the cosmetics also becomes equally meaningful. Especially between two countries where there is imbalance in terms of resources, population and comprehensive national power. India and Nepal are really very fraternal countries; they have ties of geography, of history, they share a common civilisational space. But there has been a hiatus that has developed because although there have been high-level political exchanges between India and Nepal, so far it has been a one way traffic –- at least for a decade and a half now.

Q) This visit is happening within months of a new government taking charge in New Delhi? What is the signal and focus of this visit we are sending Nepal?

A) The focus is simply to nurture very vital relations with a country with whom we have deep ties. The signal that is going out to the Nepalese people is that the new government wants to engage with it in terms of equality, and develop a habit of cooperation between India and Nepal. This is a fresh start. We have always welcomed visitors from Nepal, all the previous prime ministers of Nepal, with maybe one or two exceptions, have come to New Delhi and Prime Minister Modi’s decision to go to Nepal, soon after his visit to Bhutan, underlines the very great importance India places on this relationship, in preference to all the other neighbourly relations that India has. While all neighbours are important, ties with Nepal and Bhutan are special.

Q) What outcomes do you expect from the prime ministerial visit this time around?

A) As this a first visit by an Indian prime minister in 17 years, the importance lies in the fact that Prime Minister Modi is going to Nepal as a matter of priority. In terms of what we can deliver, we have so many agreements that are pending, which have been finalised, which need to put into effect. We have so many plans for Nepal, but we are waiting for a word from Nepal for what their prioritises are. We don’t want to push our plans on any of our neighbours, especially Nepal. The two areas of very great common interest to both countries, which can transform the fiscal balance of Nepal, which can lead to generation of employment, redressal of their trade imbalance with India and the rest of the world is the development of hydro-power. Nepal is sitting on 100,000 MW plus of electricity, of which half is through run-of-the-river projects. Were Nepal to harness this potential it would become the richest country not only of South Asia, but of Asia as a whole. So one area we have to pursue is of how to make the best use, for the Nepalese interests, of the natural endowment of Nepal, which is unparalleled in the South Asia. But on that, Nepalese people and politicians will have to take a decision.

The second is, and I would give it high priority, is the protection of the Himalayan eco-system, because on that depends the future environmental viability and sustainability of India, Nepal and other countries of the subcontinent. These two are critical sectors of cooperation between India and Nepal.

Q) Could you please amplify a little more on what we could do together to nurture the Himalayan eco-system?

A) For a starter, we can develop large- scale community development programme under our small development projects and medium size development projects, of the Churia hill region of mid-Nepal. There is tremendous erosion in the innumerable river and riverlets that flow from the Himalayan region into the Indian plain and drain out the Bay of Bengal through the Ganges. Kosi is a huge river in the monsoon, it is known in Bihar as the river of sorrow. The depredations of Kosi floods which come once in 10 years with huge ferocity can be greatly ameliorated if there is a social forestry programme upstream in which India can make a major contribution financially, and the Nepalese government can make a great contribution by organising social groups in a manner that they are able to absorbed the partnership possibilities that can be provided. This is something in which India and Nepal have to think on a large scale. So far India has tried to help in the area by providing embankments on Nepalese rivers which are flowing southwards.

The other way is a very long-term solution which we aren’t even considering now, is building reservoir and storages which are associated with big dam projects like Panchaeswor or Kosi or Sapthkosi. But these will take 10 to 20 years.

Q) Apart from hydropower, how can we address the trade imbalance?

A) Without new commodity coming in from Nepal, which can be bought by India, trade cannot be balanced because Nepal depends on India for all supplies, including salt and petroleum. The petroleum imports from India to Nepal include 1/3of all Nepalese inputs. But the problem is not Indian export to Nepal, we import petroleum products and we pass them on to Nepal through our agencies because Nepal is a land-locked country. So to count is as part of adverse India-Nepal trade is unfair. We can do a lot of things on improving Nepalese goods access to Indian markets; for example, we can build phytosanitary laboratory testing facilities in the integrated check-post under construction — four of which will be operational within 2 to 7 years –- and the laboratory can be attached to these big ICP’s which will cut down transportation, not only for Nepalese goods to India, but also the good heading to the ports of Kolkatta and Visakhapatnam. And also to Bangladesh which we have permitted under our trade and transit treaty. There are a number of small things we can do, for the simple reason that India already absorbs over 2/3 of Nepalese exports. China takes in only 2 percent of Nepalese exports, and all of Nepal’s third country trade, expect that which does to China, passes through India. So the way to export more from Nepal to India, is if Nepal converts its natural endowment into assets which will help them export more to India. So if they have energy produced in Nepal, Nepalese industry could produce more goods that can be exported to India, because we such liberal access for Nepalese good. But they are not able to produce these goods, because there is no electricity there. There are 16 power cuts in Nepal today. In fact, instead of Nepal supplying electricity to the rest of South Asia and China, it imports electricity from India, specially during the lean season.

Q) What is holding back this potential from being realised? Where is the trust problem?

A) The conditions for hydro-power development in Nepal to take off are very promising today compared to 40 years ago, or 20 years ago or 10 years ago. There is today a greater political consensus that this is the direction in which Nepal has to proceed. But if you recall India’s experiments with external capital in the energy sector, we made mistakes. In Nepal there is great uncertainty among the policy maker and strategic decision makers in this area because they are scared of making a wrong move, for that they need assistance from experts which they are trying to seek. The consensus now is that Nepal is losing the opportunity because historically the river has been flowing downstream without any benefit for the Nepalese people and so the opportunity cost the Nepalese people are paying is extremely high, and today the time is ripe for a major breakthrough in the area.

Q) The two sides plan to sign a power agreement during the prime minister’s visit. What is at stake in this power agreement?

A) This power agreement is nothing but an enabling statement of intent. It symbolises the commitment of the two governments to work together on power projects according to the principles of mutual benefit. How each agreement is going to evolve, what are the terms and condition of the financial package which will be associated with these agreement will have to be worked out specifically in case of each river system. And India is not saying, as is being alleged in certain quarters in Nepal, that we will have a monopoly over power development in Nepal. This is a statement of intent over power development between the governments of India and Nepal; India cannot start talking about the involvement of third countries. It is up to the Nepalese government to enter into similar agreement with other governments. What we are basically saying in this agreement at the request of the Nepalese side, because they are the ones who wanted such an agreement that the government of India will extend every possible assistance to further the cooperation. That is the intent of this agreement, but each separate agreement will have to be worked out in detail in terms of the specific offer that has been made. The best way to develop power, in my mind, is to not let go of large scale projects which involve huge storage dams, because they involve displacement and ecological risk because the Himalayas are quite unstable region in the sub-continent. They also involve rehabilitation projects of displaced people, something in which the government of India, and the government of Nepal have not distinguished themselves. So why not turn to run-of-the-river projects. The 3000 MW projects that they had tendered and Indian companies have applied and have done considerable work, those involving GMR, TATA Power account for 3000 MW of power and these are run of the river projects, which don’t involve displacement, or diversion of river on a large scale and don’t disturb local people. And this brings payback to the Nepalese government and energy sector immediately. They all have included clauses for putting back a percentage of electricity produced free of cost into the Nepalese grid.

Q) Nepal is critical to India’s national security. Could you give a sense of Nepal’s importance to India’s national security priorities?

A) Nepal is one country in our neighbourhood, where the inhabitants of the Nepal don’t need a visa for entry in India; therefore the border becomes very porous. It abuts the Indian heartland. We have seen in the past that a large part of fake currency notes come into India from Nepal, earlier the routes that were deployed were from Pakistan, from Bangladesh, from Bangkok, from various Middle Eastern station, but of late we have detected, and the Nepalese security agency have nabbed major consignments of fake Indian currency notes coming in from China. So this is one type of economic threat that we face from Nepal, the other threat that we face is that terrorist take shelter or transit from Nepal into India. And for this we have exemplary cooperation between the law enforcement agencies of the two countries. This type of cooperation must continue between any two neighbours where there is free movement of people, there is common immigration. Ultimately, we will have to have a system in place where India and Nepal develop a common immigration system, because the free movement of people across the border is incompatible without at the same time having common immigration facilities as you have in Europe between countries which follow the Schengen visa policy. We must have some kind of common arrangement in place and the existing arrangement will have to be stepped up for that purpose.

Q) In what other ways, we can we step up security cooperation or improve legal instruments in the future?

A) I don’t think our insistence on legality is of major consequence. The more legal instruments there are, the better it is, but the existing cooperation between law enforcement agencies of India and Nepal is of an extraordinary quality. And that must continue and must intensify.

Q) How do you look at speculation and theories of rivalry and competition between India and China in Nepal?

A) This is something that should not trouble or bother us. Because if you put yourself in the shoes of a Nepalese leader, Nepal has only two neighbours, India and China, Nepal will do its utmost to have friendly relations with both. From the time Nepal has tried to balance India and China, the Chinese leadership has always told Nepal, in public or in private, to maintain the best of relations with India, because 66 to 70 percent trade is from India, almost half the investment is from India, 5000000 Nepalese work and live in India, about 500000 people cross the border every day, the connectivity is so great, the energy dependence is absolute. We have a relationship which is unparalleled. China knows it. If China is increasing its footprint in Nepal, it is also expanding its engagement with India. If China is investing more in Nepal, so is it investing more in India. We don’t necessarily need to develop a phobia of the Chinese presence in Nepal, but because there is a certain degree of competition, we have to be watchful of our security interest without doing anything which is detrimental to China’s interest in Nepal. Basically, we have to watch our interests and ensure that any developments in China-Nepal relationship has no shadow on the India Nepal relationship. And I don’t think the present trends are in that direction.

Q) What lies behind Nepal’s oft-voiced dissatisfaction with the 1950 Treaty of Peace and Friendship?

A) I am glad you asked this question about the India-Nepal treaty of friendship of 1950, and this really illustrates how the relationship is caught up in cosmetics. The India-Nepal Friendship Treaty is a highly unequal treaty, it gives to Nepalese nationals in India the privileges that Indian nationals don’t enjoy in Nepal. We have abjured use of the same facilities which in theory are provided to us because we are the larger country. If fraternal Nepalese people live and work in India we have no problem, and we don’t want similar reciprocity in Nepal. The problem with the treaty was that when the treaty was finalised, the Nepalese government decided that it should be signed quickly and on the Indian side it was signed by our ambassador and on the Nepalese side, it was signed by their head of state. Optically it seems to be an unequal treaty; we have recently revised the India-Bhutan treaty of friendship and we can similarly revise the treaty of friendship with Nepal as well. We are ready for it, we are waiting for a word from Nepal about the manner in which they want it done.

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