Nepal, India strike cross-border infrastructure deals

Nepal and India are working to increase cross-border connectivity and energy cooperation, sealing a number of deals, including a long-term energy cooperation plan that paves the way for Nepal to export up to 10,000 megawatts of electricity to India within a decade.

The agreements were reached during Nepalese Prime Minister Pushpa Kamal Dahal's official visit to India last week, which included meetings with Indian Prime Minister Narendra Modi.

In a joint press conference, Modi said many important decisions were taken to "deepen cross-border physical connectivity."

Other cross-border projects include a new railway and two bridges, a transmission line and expanding cross-border oil pipelines, according to a statement released by Nepal's Foreign Affairs Ministry. The visit also drew more Indian investment commitments to further develop Nepal's hydropower sector.

During the visit, Nepal and India also renewed a treaty allowing Nepal the use of Indian railways and inland waterways for trade and business with a third country.

Geopolitical analyst Chandra Dev Bhatta told DW that, unlike the previous high-level visits between Nepal and India, this time economic issues affecting the general public took priority.

"Earlier, hard issues like politics, border issues and strategic topics used to occupy center stage. Now, soft issues such as physical and financial connectivity, trade and investment, and cultural ties have entered with prominence," Bhatta said.

"This is a bottom-up approach in our diplomatic dealings with India, instead of the previous top-down approach, which used to be largely confined at the government and political levels," she added.

India facilitates Nepal energy exports

During the visit, India said it was ready to facilitate electricity trade between Nepal and Bangladesh, with Nepal permitted to export up to 50 megawatts of electricity to Bangladesh using India's power grids.

Although Nepal and Bangladesh already signed a power trade agreement, this depended on the use of Indian transmission lines.

Analysts say India's readiness to import additional electricity from Nepal and willingness to facilitate Nepal-Bangladesh power trade will help promote foreign direct investment (FDI) in Nepal's hydro-energy sector.

"Earlier, it was difficult for Nepal to garner FDI in the hydropower sector owing to lack of energy markets," Indra Adhikari, an expert on Nepal-India relations, told DW. "The new understanding with India has created a favorable environment for prospective foreign investors— no matter if they are from India, Bangladesh or other countries."

Before the deal was closed, the Indian side had insisted on buying electricity only from those projects developed by India or an Indian joint venture company. Now, New Delhi has become more flexible.

Adhikari said long-term energy cooperation with India, along with its willingness to facilitate Nepal-Bangladesh energy trade would not only help reduce Nepal’s widening trade gap with India, but also promote sub-regional cooperation between Nepal, India and Bangladesh in the long run.

Nepal runs a massive trade deficit with its largest trading partner, India. In the fiscal year 2021-2022, Nepal imported $10 billion (€9 billion) worth of goods and services from India, while exporting $1.3 billion, according to the statistics compiled by the Department of Customs.

Border territory issues remain

Nepal and India have a competing territorial claim over Himalayan land—called Lipu Lekh, Limpiyadhura, and Kalapani— located near the borders of Nepal,India and China.

Prime Minister Dahal said after the meeting that Nepal and India will resolve border disputes through diplomacy. Dahal added that he discussed with the Indian side about a possible land-swap option as a long-term solution.

He said Nepal could consider swapping Lipu Lekh, Limpiyadhura and Kalapani with India in exchange for a similar area of Indian territory that would allow a land link with Bangladesh.

Nepal and Bangladesh are separated by a 27 kilometer (16 mile) stretch called the Siliguri Corridor, which is part of India.

"Since India and Bangladesh achieved success in resolving border issues by swapping their territories, we discussed that experience could also be helpful for us," he said.

In 2015, India and Bangladesh resolved a long-standing border dispute through a historic land swap agreement.

Edited by: Wesley Rahn