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Event Report

The event was jointly organized by Centre for Land and Warfare Studies (CLAWS) and Nepal Institute for International Corporation and Engagement (NIICE). It was chaired by Dr. Pramod Jaiswal, Research Director, NIICE. There were four speakers who each touched upon an aspect on India- Nepal relations. Each speaker was given 20 minutes for presentation and then the question answer session followed. The first speaker was Lt. Gen. (Dr.) Shokin Chauhan who spoke on the topic ‘Infrastructural Development between India and Nepal’. He was followed by Prof. Dr. Meena Vaidya Malla. She spoke on the topic ‘Nepal-India Cultural Ties’. The third speaker was Mohak Gambhir who spoke on the topic ‘India-Nepal Energy Cooperation’ and the fourth speaker was Sunil Kumar Chaudhary and he spoke on the topic ‘Strengthening Economic Integration between Nepal and India’.  The session was brought to an end with the concluding remarks of Lt. Gen. (Dr.) Vijay Kumar Ahluwalia.

Infrastructural Development between India and Nepal

Lt. Gen. (Dr.) Shokin Chauhan started his presentation with special emphasis of his personal ties to Nepal. He stressed that India and Nepal are two nations but one people. The nation of Nepal and India share much in common such as geography, rivers, culture, language, strategic space and threats such as terrorism, pandemic, transnational crimes, impact of climate change etc. He highlighted the fact that India and Nepal share 1850km of largely open border. The focus was on shared infrastructure as well as looking in other areas of cooperation. The speaker asked can India and Nepal share their infrastructure such as defensive infrastructure and train together to bolster their relationship and also how the two countries help each other in cases of natural disasters. He also highlighted the need to strengthen the Nepali soldiers training program in India as well as Indian soldiers training for high altitude warfare in Nepal. The next aspect of his talk was on Water. He highlighted the importance on rivers flowing from Nepal to India and why they are important especially if we look at the fertile region of the Ganga basin. He also looked at the hydrological ties that bind the two countries. He stressed on the importance of developing irrigation infrastructure as well as using the rivers of Nepal which are considered the backbone of Nepalese economy for mutual growth and development especially exploiting the energy sector.  He then talked about the Indian Terai Road project. Out of 1204km India has already built 807km of this East-West highway. The Terai Road project was signed in 2010 and consists of 19 link roads in the Terai region out of which 605km is being constructed in phase one. The internal connectivity is important for a more integrated region. He laid emphasis on the fact that border issues should be kept aside till solved and more energy should be spent on cooperation which are mutually beneficial. Lastly, he signed off with the need to ensure mutual trust and cooperation so that transnational crimes do not take place for this he suggested a strict surveillance along the borders which will also ensure that the country’s infrastructure is also secure.

Nepal-India Cultural Ties

Prof. Dr. Meena Vaidya Malla started her presentation on ‘Nepal-India Cultural Ties’ by first talking about the ancient and historical ties between the two countries. She stated that the relations between the two countries are unique since time immemorial. The two shares spiritual philosophy which is guided by religious epics and the Vedas. The two countries also stand for better life and better world and are connected by ‘Bishwo Shanti’ and ‘Bashudhaiba Kutumbakam’. The relationship between the two countries is based on legacy of shared norms, shared clothes, socio-cultural historical traditions, political and economic ties and geographic proximity with open borders. This relation runs on state to state and people to people. The spiritual, civilizational and cultural ties bring the two countries together. She also touched upon the soft power aspect of the cultural ties which can facilitate and be a tool for furthering influences. The two countries cultural ties also influence each other’s music, language, sports and science. She stressed upon the point that despite the differences between the two countries there is a need to understand each other through culture. In her presentation she refers to culture as all the accepted patterned ways of values, behavior and understanding and dealings of a given people and nation that includes their material achievements, intellectual activities and spiritual ideas. She then touches upon the present context in global politics. She sees the emergence of Regionalism, the rise of China and the rise of India as a major global event. She also states that interest based regional geopolitics is at play in South Asia. She sees the strategic location of Nepal as an important factor for Nepal, that can help it turn into a vibrant bridge for super powers in the region. She also states that Nepal’s geostrategic location must ensure that its vital interests are met but it needs to ensure that super power rivalry does not undermine and disturb its relation with its neighbor. She then states that cultural ties in the region can also be used to ensure human security. She then brings into focus the difficulties marring India Nepal ties which she highlights that India has been trying to mend under a realist framework. She states that cultural connect has been used as a tool in resettling bilateral relations and the cultural philosophy guided by panchasheel can be used to move forward in the relationship and also people to people ties will provide a great anchor to move the relationship forward. She brings into focus the Eminent Persons Group (EPG) a joint mechanism which was formed in 2016 with the mandate to review various aspects of the bilateral relations including Nepal-India Friendship Treaty 1950. She states that EPG is waiting for appointment of the Indian Prime Minister for two years. She states that diplomatic insincerity will not help grow the Nepal-India bilateral ties. She states that delays make issues more complicated. She then states that the cultural ties are walking in parallel with the ‘culture of neglect and not culture of concern and consideration’. She states that foreign policy is always dynamic and that serious efforts are needed from both sides. The relation needs restructuring, reassessment and reorientation with the changing realities of the world. This should lead to win-win situations for both countries. She states that culture is a golden thread that can bind the two countries together with a trust-based relationship.

India-Nepal Energy Cooperation

Mohak Gambhir in his presentation focused on power sector and electricity trade. He stated that India and Nepal have been steadfast development partners for decades and electricity demand in both sides of the borders are increasing rapidly. The consumers that Nepal Electricity Authority (NEA) serves have increased from 3.26 million in 2016-17 to 4.5 million in 2021-22which is about a 30 percent increase in 5 years. Independent power producers (IPP) have also played an important role.in the power sector and according to the presenter it is more than the Nepal Electricity Authority. The fourth point in the overview was that the imports from India are supporting Nepal’s power sector. The presenter then proceeds to talk about Cross-Border Energy Trade (CBET) which is the essence of the energy cooperation between India and Nepal. The current status is that there are more than 20 transmission interconnections between India and Nepal. It is used for power exchange at local level. The presenter also lad stress on dealing in bulk power trade between India and Nepal. He also proceeds to talk about the power projects that have been completed in Nepal with the help of line of credits extended by Government of India to Nepal. He also highlighted that energy trade is not a one-way street by stating that India is currently supplying about 600 Megawatt of power to Nepal. The next aspect touched upon was on Broad Mechanism guiding the trade. The main agreement guiding this trade is the Agreement on the Electric power trade cross border transmission and interconnection. It also helps in strengthening the overall transmission system between the two countries. The other two key mechanism are 1. Joint Working Groups and 2. Joint Steering Committee. They regularly meet to ensure a smooth functioning of the energy cooperation. The presenter recommends that as the CBET routes between India and Nepal should be divided into two regions which are the Western Terai and the Eastern Terai region with the central point located in Butwal. The reason for this division is that the internal flows from East to West or vice versa in Nepal or East to West in India are quite minimal. Each North to South CBET path could have its own economic dynamics. The Eastern Terai witnesses the majority of CBET trade. This is due to two key factors. First is that majority of electricity generation capacity in Nepal exist in the Eastern Terai region and the second factor is that the Eastern region is more densely populated.

The presenter in his next slide list the two factors for the shift in CBET pattern which is the Price factor and the Demand factor. The presenter explains the price factor with the help on an example. In Nepal the NEA pays domestic power producer for energy. In the dry season the producer is payed 81.75 US dollar per megawatt hour and during the regular season they are payed 46.72 US dollar per megawatt hour. Then the presenter states that if the market prices in Bihar during the dry season are less than 46.72 then the producer will have no incentive to export the energy, if they can sell it to NEA. The presenter then goes onto explain how the Northern Regional Load Dispatch Centre (RLDC) is a net importer of energy due to its energy mix and the high prices compared to the Eastern RLDC, and the Eastern RLDC a net exporter of energy due to lower prices of energy. In the Eastern Terai region, the seasonal factors come to play while considering the demand factor but the Western Terai sector is more consistent due to high penetration of renewable sources in Northern RLDC. He goes on to state that that the Eastern states of India are well positioned to import power from Nepal especially during monsoon season as at that time Nepal is generating power at a high capacity and have the flexibility to import power.

The speaker then moves into how bilateral CBET can be improved. He lists out development of domestic infrastructure, Grid integration and market liberalisation as important aspects to be considered to improve CBET. He then goes in and also proposes that Bangladesh should also be included in the energy trade under the market liberalisation which would make the trade more efficient. Under infrastructure development he states that the Western Terai region does not have a lot of generational capacity which can be improved upon. Then the presenter talks about the high points of CBET in recent times. He highlights the Butwal-Gorakpur transmission line as well as Trade via Energy Exchage as high points of CBET. He highlights an important development in the India Nepal cooperation. The transmission line on the Indian side will be constructed by a joint venture while Nepal will take develop the transmission line on its side solo. The cooperation has enabled the transfer of technical skills and know-how from India to Nepal unlike other instances of cooperation where the actual technical knowledge is not shared.  While talking about the Energy trade he highlights that the actual trade began in April 2021 through the Indian Energy Exchange. The presenter then moves onto the key challenge of energy corporation. The presenter highlights that over emphasis on mega hydro projects which is also marred by legacy issue and environmental destruction is a key challenge. The emphasis should be on run of the river power generational projects as well as other alternatives. The mega hydro projects have associated issues such as high costs, delay and local opposition to it also.

Strengthening Economic Integration between India and Nepal

Sunil Kumar Chaudhary started his presentation by explaining the term economic integration. Economic integration is a process in which differences and differentiations among national economies are gradually eliminated. The arrangement among nations includes reduction or elimination of trade barriers, and the coordination of monetary or fiscal policies.  Then he went on to describe the Levels of economic integration. The 7 levels are Free trade, Customs Union, Common Market, Single Market, Economic Union, Economic and Monetary Union and Political Union. In the next part he talks about the benefits of Economic Integration. The benefits include reduction in costs of trade, improvement in availability of goods and services, increase in purchasing power of the consumer, increase in employment opportunities, technology sharing and cross border investments.

The next section of the presentation is economic linkages between India and Nepal followed by commercial and economic relations. Here the presenter states that India will have to bear more responsibility for maintaining friendly relations with Nepal but more importantly India will have to help in Nepal’s development through various linkages such as trade, investment and economic assistance. He also states that the economic integration needs to improve between the two countries and both countries need to develop certain niches or specialize in certain economic activity for trade to accelerate. The commercial relationship with India is of utmost importance to Nepal. He states the fact that India is the largest trade partner of Nepal as well the biggest source of FDI in the country. He then talks about the trade imbalances which is in India’s favor. The next section is on the Bilateral Framework for Trade and transit between Nepal and India. The bilateral framework for trade is anchored on the India-Nepal Treaty of Trade and Agreement of Cooperation to control unauthorized trade 2009. This trade agreement is renewed after 7 years and allows Nepal unilateral duty-free access to Indian market. India and Nepal also have a treaty on Transit. It allows Nepal’s goods to move seamlessly through Indian roads, railways and ports.  He states that the Trade Treaty revised between the two countries in 1996 can be seen as a turning point as since then Nepal’s export to India has grown more than 11 times and bilateral trade more than seven times. The presenter then touches upon the Problems between the two countries. These are Trade imbalances which favor India, Informal trade due to more than 1600km of open border, which has been misused by criminals, smugglers and subversive elements, limited infrastructure in the border region and delay in implementation of the projects. The presenter then moves to recommendations which are cooperation in areas of trade, investment and environment, an Inter-Governmental Committee (IGC) meeting on trade, transit and cooperation to control unauthorized trade between Nepal-India at Secretary level is necessary at regular intervals. The other recommendations are to improve infrastructure facilities between the two countries especially the railway connectivity in Nepal, improve trade and logistics systems, proper cooperation to develop a friendly business environment, resolving issues relating to transit facilities provided by India to Nepal which facilitates trade with third countries etc.

Prepared by Shashwat Bharadwaj, Intern at NIICE, Nepal