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In a major boost to India-Maldives relations under the ‘neighborhood first’ policy, India hosted Maldivian President Ibrahim Mohamed Solih in the first week of August. President Solih led a high-level business and political delegation to discuss a range of bilateral and global issues with India. This was President Solih’s third visit to India after assuming office in October 2018 and the first post-pandemic.

The visit happened amid an internal crisis in the Solih-led Maldivian Democratic Party (MDP) coalition government and difficulties for the island country in grappling with development projects, with low volumes of foreign direct investment and tourists. Since the assassination attempt on Mohamed Nasheed (May 2021), his supporters, and Nasheed himself, have been speaking openly against Solih. He is also opposed to Solih’s candidature in the 2023 presidential elections and has accused him of pandering to Islamist hardliners. Interestingly, in the 2022 MDP party chairmanship elections, Solih’s candidate won over Nasheed.

Given the comprehensive partnership with the Maldives, India gave the visit high priority. The two sides discussed a wide range of bilateral and regional issues including investment, trade, human-resource development, infrastructure, cooperation in multilateral forums, defense, security, and strategic cooperation. As this was the first high-level visit after a two-year gap, the MEA felt it could “advance the exemplary ties of friendship” between the two countries. President Solih met Indian President Droupadi Murmu and had one-on-one as well as delegation level talks with PM Modi. He had a separate meeting with External Affairs Minister Dr. S. Jaishankar.

Ever since the establishment of diplomatic relations between the two countries in 1965, the ties have been characterized by mutual trust, understanding and maturity.  The relationship is free from any major controversy. The one-time claim of the Maldives to Minicoy Island was resolved by the Maritime Boundary Treaty of 1976. Despite many asymmetries, the two countries depend on each other and acknowledge each other as equal partners in their collective endeavor for economic growth, consolidation of democracy, and regional peace. 

The two sets of leaders feel that India’s ‘neighborhood first’ and Maldives’ ‘India first’ policies are complementary. This was reiterated during this visit too. Moreover, the importance of India’s strategic role in that part of the Indian Ocean has been well-recognized by the Maldives given India’s geographical advantage in the region. India is seen as a net security provider to the Maldives both in conventional and non-conventional senses. India was the first to assist the Maldives during the 2004 Tsunami as well as during Male’s water crisis in December 2014.

There are several institutional arrangements between the two countries in areas like hydrographic survey, trade, economic, defense, development cooperation, tourism, disaster management, education, and capacity-building. India was a key trading partner of the Maldives with over $300 in trade in 2021. India was also the fifth largest source of tourists in the Maldives with around 6.1 percent (90,474) market-share before the Covid-19 restrictions. Apart from annual aid and technical assistance, in December 2018, India announced a $1.4 billion financial package in the form of budgetary support, currency swap, and a concessional line of credit to manage the rising external debt created during the presidency of Abdulla Yameen Abdul Gayoom (November 2013- 2018).

Defense and security cooperation is an important aspect of bilateral relationship. India has a wide range of security arrangements with the Maldives including joint maritime security cooperation, SAAGAR, counter-terrorism and capacity building of the Maldivian defence forces.  During this visit, the two PMs acknowledged that the ‘security of India and the Maldives are interlinked’, further strengthening mutual trust and cooperation on security.

This reassurance was both timely and essential. The island country has been witnessing multiple challenges like political instability, Islamic radicalism, extra-regional powers’ interests, and climate change-induced disasters. These challenges are difficult for a small country like the Maldives to address alone. Moreover, given its strategic location and increasing presence of global powers in the Indian Ocean region, these challenges have been a concern for India too. Only a stable, progressive, and democratic government in Male can manage these risks.

Despite being committed to multiparty democracy and a new constitution in 2008, the Maldives has witnessed several autocratic regimes, including, most recently, Yameen’s. India has always pushed for strengthening of multiparty democracy in the Maldives. It played a crucial role in restoring multiparty democracy by supporting the MDP in 2018. India believes autocratic regimes in the Maldives often engage with elements inimical to India. Yameen was the best example of that. The current crisis in the MDP could still affect the continuation of democracy there.

The Maldives is scheduled to have presidential elections in 2023. Current speaker Nasheed and President Solih have shown an interest. If the Solih government continues to be obstructed by Nasheed, then the Progressive Congress, a coalition of the opposition Progressive Party of Maldives (PPM) and the People’s National Congress (PNC)—which has been spearheading an “India Out” campaign—could have an advantage in the elections. The Yameen-led Progressive Congress is known for serving Chinese interests. 

Back to Solih’s visit, it appears to have been successful given the release of the 30-point joint statement on 02 August and the signing of six MoUs in areas of mutual interests. India’s commitment to a new LoC of $100 million to finance infrastructure in the Maldives would support several large projects and boost the fragile Maldivian economy.

Politically, the MDP currently enjoys the majority in parliament. If the tussle between Nasheed and Solih continues, the MDP might lose the same in the upcoming elections. India would wish for the continuation of the current inclusive combination of radical, conservative, and liberal democratic forces to tackle critical issues like religious extremism and Yameen-led ‘India Out’ campaign.

As India treats emerging security issues of Maldives as a challenge to its own national security, it would prefer to further strengthen democracy there and protect its sphere of influence.

Democracy is known as a system ‘by the people, for the people, and of the people’. If a democracy deviates from this principle, it could bring disasters, as happened in Sri Lanka on 09 July 2022. On that day, thousands of protesters stormed President Gotabaya Rajapaksa’s office, secretariat, and the personal house of the Prime Minister Ranil Wickremesinghe. In two and half years, the democratically elected President of Sri Lanka was forced to resign.

The protestors, who came from different parts of Sri Lanka to Colombo, had demanded the resignation of both the President and Prime Minister for failing to manage the economic crisis, overseeing pervasive corruption, and living luxuriously while the commoners struggled to get food, fuel, fertilizer, and other essentials. They also demanded an all-party interim government barring the current corrupt political leader, and the drafting of a new constitution to get rid of the presidential system. Although both the President and the PM announced to resign by 13 July, the protesters say they will continue to occupy the president’s office until both formally do.

There is a general understanding that the financial crisis developed due to the Covid-19 pandemic, rising oil prices, and the 2021 ban on import of chemical fertilizers that devastated agriculture. The problems were compounded by growing debt which was rooted in corruption perpetrated by President Gotabaya, other members of the Rajapaksa family, and Prime Minister Wickremesinghe. Inflation had soared to 54.6 percent by the end of June 2022. The island ran out of foreign exchange to import fuel.

Media reports indicate that the protests were spontaneous.  The involvement of opposition parties or any other political entities was not seen. The movement gradually picked up with the support of civil society actors—like Aragalaya (a loose alliance of like-minded people) and the Bar Association of Sri Lanka (BASL)—who initially organized small street protests in front of local administrative offices. As the government failed to manage the economic crisis and citizens across the social spectrum, including government and security personnel, were affected by shortage of essentials, various trade unions joined the civil society to make the public voice louder and build pressure. Nearly 1,000 unions from a number of sectors had allegedly joined the protests under the theme ‘Gota go home’.

The peaceful movement garnered further public and student support in May 2022, when President Gotabaya refused to resign and initiated military action against peaceful demonstrators. Eight people were killed and over 200 civilians were wounded as weeks of demonstrations escalated into bloody clashes between those supporting and opposing the government. In a Twitter message opposition leader Sajith Premadasa observed that the violent unrest had been orchestrated on 09 May 2022 as a pretext for a coup. “In the guise of angry mobs, violence is being incited so the military rule can be established.”

When mainstream political parties were afraid of openly extending support to these protestors due to their negative public perception, the Janatha Vimukthi Peramuna (JVP) and the Front-Line Socialist Party-FLSP (Peratugami Samajawadi Pakshaya), a dissident offshoot of the JVP, played a key role in mobilizing trade and student unions respectively.

In the second week of April, the JVP declared a massive public march for three days from 17 April to support the ongoing protest. JVP General Secretary Tilvin Silva said at a press conference: “We are ready to give a new impetus to the struggle and turn it into a people’s power that will end victoriously”. The JVP utilized its association with senior leaders of trade unions of various government sectors.

Although the JVP and FLSP had many operational and ideological differences, anti-government public sentiments gave them an opportunity to build trust among the public by mobilizing their cadres. The citizen groups did not oppose JVP and FLSP cadres’ presence as they were thought of as relatively less corrupt in comparison to other major political parties and they had never formed a government in Colombo. Moreover, as the JVP-affiliated trade unions had limited capacity to organize massive rallies due to the higher age profile of t cadres, the FLSP, which has good control over colleges and university student unions, mobilized students.

The July 09 anti-corruption protest has pushed Sri Lanka into political instability and uncertainty, which would aggravate the ongoing economic crisis. First, neither the President nor the Prime Minister has directly announced resignation. Their decision was rather conveyed through the speaker of the Parliament. There have been speculations in Sri Lanka that Prime Minister Wickremesinghe would be waiting till the resignation of President Gotabaya, which would automatically make him President.

Second, if both the leaders resign, then the speaker of Parliament would be appointed as acting President and the parliament would vote for a new President within 30 days. Third, opposition party leaders have so far failed to find a consensus candidate to lead the interim government. At the same time, the main opposition party, Samagi Jana Balawegaya (SJB), has been negotiating with other smaller parties to make Sajith Premadasa the President.

Fourth, as the public has set up a new criteria—a non-corrupt, morally and ethically committed person—for the next government head, and the public finds all political leaders corrupt, there is no guarantee that an opposition-led new government would be acceptable to the protestors.

Lastly, in the absence of a credible people’s representative in Sri Lanka, global economic institutions would take time to offer any economic bailout. Sri Lanka has $50 billion in external debt and needs to pay $28 billion by 2027.

The anti-corruption agitation could spread to other countries. A Sri Lanka-like situation could happen to any country struggling to cope with the double whammy of Covid-19 and Ukraine. Countries that depend on tourism, remittance, external energy, and smaller economies appear especially vulnerable. Many SAARC countries have had a difficult time post-Covid-19. Pakistan, Bhutan and Nepal have been struggling to maintain their forex level for the import of oil and other essential items.

Moreover, the negative impacts of Covid-19 and Ukraine are not going to end soon. In that case, the economic problems of smaller SAARC countries could aggravate and some could witness political instability if public sentiments are not addressed on time.

The author is a Research Fellow with MP-IDSA, New Delhi. Views are personal

In a major blow to Chinese engagement in infrastructure development in the Himalayan region, the Nepali Army (NA) on June 3 temporarily suspended the contract of two Chinese companies working on the Kathmandu-Terai Fast Track for failing to expedite construction. The army had signed two separate contracts, worth some Rs 25 billion, with China State Construction Engineering Corp. Ltd and Poly Changda Engineering Co. Ltd on 14 May 2021 for the construction of three tunnels, a few bridges, and a partial road under the project. One group in the army was reportedly reluctant to suspend the contracts.

The suspension happened in the backdrop of growing Nepal-US rapprochement after the July 2021 government-change in Kathmandu, followed by Nepal’s clear position on developing BRI projects ‘only’ under Chinese grant/assistance or investment. There was a brief diplomatic squabble via media between the US and China over the ratification of the MCC compact by the Nepali parliament. While China attempted to prevent the ratification, the American response was interpreted by Global Times as interference in Nepal’s internal affairs.

In fact, Chinese Foreign Ministry Spokesperson Wang Wenbin on 18 February 2022 stated that “China opposes coercive diplomacy” while commenting on news that the US had urged Nepal to endorse the compact. Moreover, there has been a flurry of high-level visits from the US, including of Under-Secretary of State Uzra Zeya on 20 May 2022. Nepal Army chief and Prime Minister Deuba are scheduled to visit the US in June and early July respectively.

The contract was given to Chinese companies during the tenure of CPN-UML’s KP Oli as prime minister, who is commonly seen as a pro-China leader, despite the parliamentary Public Accounts Committee’s (PAC) advice to follow due process. The same contact has been suspended by the ruling Congress under Sher Bahadur Deuba, who is known for his pro-US bent.  Earlier, the Budhi Gandaki project, which was allocated to a Chinese developer by UML-Maoist coalition government in June 2017, was similarly canceled in November 2017 by a Congress government. There is a strong belief among Indian business community and policymakers that Indian projects face inordinate clearance delays at concerned ministries whenever there is a left government in Kathmandu.

Broadly, there are two reasons for the suspension of Chinese contracts. First, the government found that the Chinese contractors have failed to maintain the desired work pace. In a review meeting in January 2022, a parliamentary committee had directed concerned ministries to expedite the Kathmandu-Terai-Madhes fast track project.

Second, the CPN-UML government had overruled the PAC’s April 2021 directive which found that the army had flouted the country’s financial regulations in giving the contract to Chinese companies. The army had selected only two of 43 interested companies as suitable. The PAC had instructed a halt to the contract process as it lacked transparency. The committee had also instructed the Public Procurement Monitoring Office to remove obstruction by preparing necessary documents, guidelines and procedures as soon as possible while proceeding with the contract for the participation of international companies. This could have been one reason behind the misunderstanding between the then CoAS and the former Defence Minister, Ishwar Pokharel who was sacked by Prime Minister Oli in October 2020.

Taking into consideration the PAC suggestions, which were ignored by the Oli government while giving the project to two Chinese contractors, the Congress government has put the contract under review and ordered a temporary halt.

This is not a new thing with Chinese companies and contractors in Nepal. Media reports speak of frequent clashes between Nepali and Chinese workers and delays in delivery of projects across the country. Interestingly, most of these cases are either suppressed at the government level or misinformed to the media under Chinese pressure. For example, China Railway Construction Corporation (CRCC), which was responsible for road-building in Nepal's Sindhupalchowk district, witnessed local resistance over landslides and damages to houses in June 2021. Similarly, the China-sponsored Damak Clean Industrial Park faced stiff opposition from locals in January 2021. The Butwal-Narayanghat road section expansion project was delayed due to protests by laborers demanding minimum wage.

The Chameliya project has seen cost overruns and the contractor being dragged into a corruption case. China Gezhouba, which bagged the engineering procurement construction (EPC) contract of Upper Trishuli 3A, unsuccessfully tried to upgrade the project's capacity to 90 MW in 2013, flouting the contract document. Further, the government had to terminate the contract with China Railway 15 Bureau Group because of slow progress in tunnel-digging works of the Melamchi Water Supply Project. Chinese contractors have also been blamed for delays in building a substation of a transmission line at Dhalkebar as well as the Kulekhani III Hydropower Project.

After their tactic of acquiring projects through political means and flouting contract norms failed, Chinese Embassy officials in Kathmandu started criticizing the new Deuba government over delays in allocating projects to Chinese companies. Speaking at a virtual press meet on 22 April 2022, Chinese Ambassador to Nepal Hou Yanqui said “the policy inconsistency of the Government of Nepal has put Chinese investors into trouble.”

Moreover, China has been dissatisfied with the Congress government’s decision to build Budhi Gandaki with national investment. At the same time, China understands the importance of having a left government in Kathmandu to address its security (Tibet) concerns and safeguard economic interests in the Himalayas. So China would want a return of a communist government after the forthcoming parliamentary elections.

The author is a Research Fellow, MP-IDSA. Views are personal

Prime Minister Sher Bahadur Deuba just completed a three-day official visit to India upon the invitation of Indian Prime Minister Narendra Modi. Since the visit was arranged in a short period, there were anxieties and speculations in Nepali media on its purpose, even though regular exchange of high-level visits has been an integral component of bilateral ties. The visit happened two days after the Chinese Foreign minister Wang Yi’s three-day trip to Kathmandu and one day after the BIMSTEC meeting.

It also took place on the backdrop of Nepali parliament’s ratification of the US-funded MCC compact, which was strongly resisted by the front organizations of left parties. Most interestingly, while both extra-regional powers—the US and China—have been competing for strategic space by offering special development packages to Nepal under the BRI and the MCC, India has adopted a more astute diplomacy.

The MCC compact perhaps was not a major concern for India given its broad strategic-level partnership with the US globally and the latter’s acknowledgment of India’s geographical advantage in the region. Moreover, as per their 13 January 2017 joint statement, India and the US share a commitment to promoting economic growth, development, regional cooperation and connectivity under the MCC.

As far as the BRI is concerned, India might have felt more comfortable after the formation of a new government in Kathmandu under Deuba. Prime Minister Deuba categorically urged the Chinese to develop projects under the BRI ‘only under grant and aid assistance or through investment’. Moreover, Chinese influence in Nepal has been waning since the Supreme Court’s scrapping of the Nepal Communist Party. China failed to prevent the MCC’s passage despite using all its diplomatic, soft power, and coercive tools, going to the extent of effectively blocking the two China-Nepal trading points since the onset of the MCC debate in Nepal.

Given the closeness and warmth in bilateral relations and their mutual dependency, this kind of high-level visit was overdue. It happened after a gap of four years and following wrangling over border issues since November 2019. There was a vacuum in political communications after Nepal’s issuance of a new political map in May 2020. Although some high-level official visits happened after the map’s ratification.

Another driving factor behind the visit could be the pressing need to support each other in tackling a looming energy crisis in the subcontinent due to the Ukrainian conflict. Although Nepal depends on India, both for electricity and fossil fuel, in the long term, India needs the support of Nepal to achieve its Paris and Glasgow commitments on climate change and to realize Prime Minister Modi’s vision of “One Sun One World One Grid”. Therefore, of the four agreements signed during PM Deuba’s visit, two were related to energy including one concerning Nepal’s joining of the India-led Global Solar Alliance. The other one was an exchange of agreement on the supply of petroleum products between the IOC and the NOC.

This visit stood out from other more recent high-level visits from Nepal, as it went beyond routine delegation-level meetings and signing of MoUs. The first attraction of the visit was PM Deuba’s trip to the BJP headquarters. This was the first time a Nepali prime minister officially visited the party office of the ruling Indian party. It suggests a deep level of relationship as well as political maturity of the Nepali Congress and the BJP, both of which strongly believe in multiparty democracy, democratic values, norms, and constitutionalism.

Moreover, despite the many similarities between the NC and the BJP, there was no party-to-party MoU, unlike between the then NCP and the Chinese Communist Party in September 2019. This again shows that each party respects the independent functioning of the other and avoids imposing its values. This visit also sent a message to other Nepali political parties that the NC could be the priority party of the BJP in Kathmandu.

Another important part of PM Deuba’s India visit was his Varanasi sojourn. Uttar Pradesh has a special relationship with Nepal given its geographical contiguity, cultural linkages, as well as its status as an educational hub for many Nepalis. Most importantly, it is the birth center of the democratic movement in Nepal. Most Hindu Nepalis believe that taking a holy dip in the Ganges in Varanasi could help them achieve salvation. The only Nepal study center in India is located at Banaras Hindu University.

The Varanasi visit again shows that India has upgraded high-level visits from Nepal to the level of those from major countries like Japan, the US, and China. High-level visits from these countries since 2014 were hosted in provincial cities like Varanasi, Ahmedabad, and Mamallapuram respectively. PM Deuba was received by UP Chief Minister Yogi Adityanath and thousands of other city dwellers and cheering students standing by the roadside. This too was a first in Nepal-India relations.

Although PM Deuba stayed in India for under 72 hours, the visit was well received by people of both the countries. During their joint press briefing, both leaders acknowledged fruitful discussions on wide-ranging issues. They reviewed progress in implementation of Indian projects in Nepal and agreed to further deepen and facilitate trade, energy, investment, and connectivity ties. In another major achievement of the visit, India acknowledged Nepal as one of the main pillars of its ‘neighborhood first’ policy.

The Himalayan region has witnessed a series of major disasters over the past decade: the 2013 Kedarnath floods, the 2014 and 2021 Nepal landslides, and the 2020 Eastern Himalayan and Uttarakhand floods. Although disasters are not new to South Asia in general and the Himalayas in particular, the frequency, severity, and loss of humans and public property have been phenomenally more than in previous decades. In this context, the IPCC’s sixth assessment report is an eye-opener. The average temperature of the Himalayas mountain range is expected to increase up to 2°C by 2050. This will increase disaster-frequency and imperil food and water security. Climate change impact on cryospheric water sources in the Himalayas will have consequences for the Indus, Ganges, and Brahmaputra basins. Given the centrality of the Himalayas in the global weather system, its costs will be felt across the globe.    

The sixth IPCC assessment report on climate change (CC), published in February 2022, has urged immediate actions against rising global temperatures. While previous reports were mostly warnings to the global community to prevent CC impacts, this one emphasizes the urgency of actions to avoid catastrophic disasters. It also highlights the vulnerability of the poorest countries, islands, and mountainous regions. For the first time, the IPCC acknowledges climate change-induced migration, including in South Asia, with evidence. This 3,760-page report prepared using thousands of scientific reports and studies on climate change has analyzed impacts of climate change both regionally and on a thematic basis like snow-fed water, precipitation, migration, food, livelihood, etc.

South Asia

Like the previous reports, this report identifies South Asia as one of the vulnerable regions in the world given its topographical structure, population density, and poor socio-economic profile. Climate-induced hydrological changes are projected to spur migration. There is already evidence of increase in frequency, intensity, and severity of floods, cyclones, droughts, landslides, and heatwaves in the region, leading to climate-induced internal migration in Nepal, Bangladesh, and India. 

As the global temperature continues to increase, the region may witness increased risks to food security due to low levels of adaptation. Food security risks due to climate change will be more severe, leading to malnutrition and micronutrient deficiencies in South Asia. 

Moreover, an increase in the number of disasters is expected to push 122 million more people into extreme poverty by 2030. Around 330-396 million could be exposed to lower agricultural yields at warming beyond 1.5°C—and most of them will be in South Asia and Sub-Saharan Africa.

The Himalayas

Apart from the coastal regions of India and Bangladesh, the Himalayas are identified as most sensitive to climate change in South Asia. The report refers to the entire Himalayas as the Hindukush Himalayas (HKH) region. The Himalayas are considered the third pole or the water tower of Asia due to their abundant freshwater sources. Referring to some studies on water availability in mainland South Asia, the report says decreasing precipitation have contributed to increasing incidents and severity of droughts. Water-stress is relatively higher in the western compared to the central and eastern region Himalayan regions.

There could be more flood events in the Ganges-Brahmaputra region. Floods and extreme events can change river channel systems and exacerbate transboundary conflicts. For instance, the floods on the Indus in July 2010 altered the river’s course in Pakistan, moving it closer to the Indian district of Kutch. The Koshi River has shifted more than 113 km to the west in the past two centuries.

Livestock could be affected by climate change-induced heat stress and reduced water availability through the degradation of rangelands, pastures and forests. The report says glacier retreat and increasing runoff variability could affect cultural beliefs and practices in high mountain areas. For example, the loss of glaciers threatens the ethnic identity of the Indigenous Manangi community of Nepal’s Annapurna Conservation Area.

Most importantly, the report points to rapid urbanization in the Himalayan region especially in Nepal due to internal migration from high altitudes to the mid-hills and Tarai. Quoting a study, the report says 39 percent rural communities have at least one migrant, of whom 80 percent are internal and 20 percent international. Around 10 percent migration is reported as environmental displacement. While earlier reports found women were worst affected by climate change, this one says most migrants are males. Growing urbanization in the Himalayas generates many challenges, especially in climate-change adaptation.

As reported in some Nepali media outlets, over the past decade, hundreds of people in Mustang, Manang, Bajhang, Sankhuwasabha, Sindhupalchowk and Dolakha districts have been relocated due to landslides, floods, drying up of streams, and decreased water-flow. An independent study found that close to 15 percent of the springs in Mustang and Manang have dried up, and water flow has declined by up to 70 percent in other places of Nepal. There are also reports of vector borne diseases (VBDs) in high latitude regions of Nepal like Kalikot, Mugu, Jajarkot, Humla, Jumla, and Salyan districts. Warmer temperatures will only exacerbate the VBDs.

Conclusion

Climate change risks are imminent in the Himalayan region. Both individual states and HKH member countries as a whole have failed to adapt. Except for China and India, other countries that share topography with the Himalayas, struggle to implement resilient and adaptation programs due to insufficient funds and technology. Developed countries responsible for the current crisis ignore the concerns of these countries. Moreover, the developed countries have also avoided their commitment (for instance, to mobilize $100 billion a year from 2020, as per the 2015 Paris Agreement) to mitigate climate change impacts in developing countries.

Protection and preservation of the Himalayan biodiversity and ecology is not just the responsibility of Nepal and Bhutan. These are global ecological heritage. Millions of people in Asia directly benefit from Himalayan resources; millions more do so indirectly. Therefore, instead of waiting for the developed countries’ support, it is the responsibility of the Asian countries to act to protect the Himalayas.

Already, back in October 2020, eight HKH countries declared an ‘Action to sustain mountain environments and improve livelihoods in the Hindu Kush Himalaya’. But there has been little progress perhaps due to Covid-19 and differences between member countries. Collective actions need to be expedited by keeping aside bilateral differences on the geopolitical front.

After a gap of over two years, the Nepal-India joint steering committee (JSC) consisting of energy secretaries of Nepal and India met in Kathmandu on 23 February 2022. The meeting happened amid concerns of the Nepal Electricity Authority (NEA) and private investors over restricted electricity export to India and Bangladesh under India’s new export/import guidelines issued in February 2021. For Nepal, the meeting was crucial to clarify matters in order to enhance inter-country electricity export as Nepal will be adding 300MW by July 2022.

With the guideline as a reference for future energy cooperation, Nepal adopted a new approach of wooing India by proposing joint investment in hydro projects and transmission lines. A day before the meeting, the NEA proposed a revised list of operational hydro projects—Upper Tamakoshi (456MW), Upper Bhotekoshi (45MW), Kaligandaki (144MW), Marshyangdi 69 (MW), Middle Marshyagndi (70MW) and Chameliya (30MW)—for India to import 814MW electricity.

In July 2021, the NEA had approached the Central Electricity Authority of India (CEAI) to export its surplus electricity after the operationalization of Upper Tamakoshi. After three months, the CEAI expressed its interest in purchasing 39 MW from the 24MW Trishuli and the 15MW Devighat as only these two projects were eligible to export electricity to India as per the new guidelines.

As per the guidelines, most Nepali power projects cannot sell electricity to the southern neighbor as they have the support of the countries with no energy cooperation with India. Only the projects either developed by NEA or with India’s support qualify.

For example, out of the five NEA-proposed projects, the civil works of the Upper Tamakosi were undertaken by a Chinese company (Indian companies carried out other works). In Upper Bhotekoshi, a JV between China and Nepal, only hydro-mechanical work is done by an Indian company. More such projects are being developed by contractors from multiple countries with 100 percent domestic investment.

Apart from this, there are concerns in India that a large number of these projects have Chinese investments, like shares in electrical-mechanical units and turbines. As Nepali companies failed to secure bank loans to purchase mechanical parts and turbines, they negotiated with Chinese companies, which supplied cheaper machines on the condition of owning shares in those projects. If so, this could create misunderstanding in India-Nepal energy trade given the uncomfortable state of relationship between India and China. 

As per the press release following the JSC, the meeting was successful and both sides committed to bilateral energy cooperation for regional and mutual benefit. Both agreed to explore developing storage hydropower projects. In this regard, they agreed to constitute a Joint Hydro Development Committee (JHDC). India’s SJVN is already developing 900MW Arun III, a storage-type project. The SJVN is also developing 669MW Lower Arun.

In any important development, during the meeting, the Indian side acknowledged enhancements in Nepal’s installed power generation capacity. The two sides reaffirmed power sector cooperation as a strong pillar of India-Nepal partnership and agreed to further strengthen it by joinly developing projects and cross-border power transmissions infrastructure. But there was no mention of Nepal’s new proposal to export 814MW from the five hydro projects. The issues and contents in the press releases of India and Nepal differed slightly, indicating a degree of disagreement on energy trade cooperation.

Nepal aspires to be a regional energy hub by 2040. That won’t be easy. First, for sustainability, the hydroelectricity projects, both run-of-the-river and storage types, are highly dependent on weather, river drainage systems, connectivity, transmission lines, and markets. Several studies have found the Himalayan region vulnerable to rising global temperatures. According to the Independent Power Producers’ Association (IPPAN), floods and landslides damaged 16 under-construction projects in 2021. Ten projects generating electricity, both small and big, incurred damages worth around $83.9 million.

Apart from that, the impact of climate change will determine Nepal’s production, with a lean winter, as most of the current operationalized projects are designed as run-of-the-river. Except Arun III, other storage-based projects are yet to take off. There is also domestic resistance to the shortage-type projects on the grounds of possible earthquakes and people’s displacement.

The second challenge is marketing. Given the small market and the huge gap between domestic energy consumption and production, a guaranteed market is needed to attract investments. Nepal is perhaps motivated by growing renewable energy requirements in the region and perhaps by the prospect of trans-border energy trade under the BBIN framework and the setting up of an energy bank in South Asia. But India will purchase electricity only from those projects that are developed either with 100 percent investment of the exporting country or of Indian investors. As per the new guidelines, only a few Nepali projects are eligible. But the implementation of these guidelines will also depend on the future geopolitical situation in the sub-Himalayan region.

Lastly, domestic politics of Nepal has been a major hurdle in hydropower development. The decade-old Maoist insurgency hindered infrastructure development. And other old issues remain as they were. Despite having a constitution in 2015, political instability, policy paralysis, corruption, and bureaucratic apathy toward the energy sector continue.

Hydropower has the potential to support peak-hour demand, cheap and clean energy, and operational flexibility, which may not be possible with fossil fuels. The role of hydropower would also be critical for the stability of the national, bilateral, and sub-regional grids.

In that context, Nepal’s importance as a major energy source will only grow. Despite its potential of over 40,000MW electricity, Nepal’s energy dependence on other countries has not ended. Although there have been certain improvements in energy production, Nepal needs to devise new energy policies to address existing challenges and to project itself as a reliable and sustainable energy supplier in South Asia.

The author is a Research Fellow with MP-IDSA, New Delhi. The views are personal