Repairing The Complex India-Nepal Relationship

Published in the Hindu on April 7, 2021

Nepal Prime Minister, Sher Bahadur Deuba, paid a long-awaited visit to India last week (April 1-3). Sworn in July 2021, this was his first bilateral visit, in keeping with tradition. The outcome might appear modest but what is significant is that both sides effectively managed to steer clear of divisive issues. At 75, Mr. Deuba is a political veteran and first became prime minister in 1995. In his fifth stint, he is no stranger to the complex relationship between the two countries.

Positive outcomes

Among the highlights was the operationalisation of the 35 km cross-border rail link from Jayanagar (Bihar) to Kurtha. Two further phases will extend it to Bijalpura and Bardibas. The Rs. 787 crore project had been ready for over a year but operationalisation was held up because of necessary administrative requirements in Nepal to set up a company that could recruit staff. The Konkan Railways Corporation will provide the necessary technical support, initially.

The second project that was inaugurated was the 90 km long 132 kV double circuit transmission line connecting Tila (Solukhumbu) to Mirchaiya (Siraha) close to the Indian border. Constructed with an Exim Bank concessional loan of Rs 200 crores, there are a dozen hydro-electric projects planned in the Solu corridor for which the Nepal Electricity Authority has concluded PPAs of 325 MW.

In addition, agreements providing technical cooperation in the railway sector, Nepal’s induction into the International Solar Alliance, and between Indian Oil and Nepal Oil on ensuring regular supplies of petroleum products were also signed.

The Mahakali Treaty, signed in 1996 during Mr. Deuba’s first visit as Prime Minister, covers Sarada and Tanakpur barrages as well as the 6700 MW (approximately) Pancheshwar Multipurpose project. Both sides have agreed to push for an early finalisation of the DPR. An ambitious $7 billion project, it needs political will to move it forward. The Joint Vision Statement on Power Sector Cooperation recognises the opportunities for joint development of power generation projects, together with cross border transmission linkages and coordination between the national grids; it can provide the momentum.

China’s growing role

On February 27, Mr. Deuba pushed through the ratification of the agreement with the U.S. Millennium Challenge Corporation (MCC), despite reservations of his coalition partners, the Maoists and the UML (Unified-Socialist). The agreement provides a grant of $500 million for building 318 kms of high voltage transmission lines along with sub-stations and maintenance of 300 kms of the East-West highway. The Chinese Embassy in Kathmandu had actively sought to sabotage the agreement by planting stories that it was part of the U.S.’s Indo-Pacific strategy aimed at containing China. The agreement had been signed in 2017, during Mr. Deuba’s fourth stint as prime minister and was awaiting ratification. Together with the Pancheshwar project, it provides a welcome synergy.

During the Monarchy, China maintained a link with the Palace and its concerns were primarily related to keeping tabs on the Tibetan refugee community. With the abolition of the monarchy, China has shifted attention to the political parties as also to institutions like the Army and Armed Police Force and considers Nepal an important element in its growing South Asian footprint.

In recent years, India’s relations with Nepal have had both ‘highs’ and ‘lows’. Prime Minister Modi has often spoken of the “neighbourhood first” policy. He started with a highly successful visit in August 2014 but then saw the relationship take a nosedive in 2015, with India first getting blamed for interfering in the constitution drafting process and then for an “unofficial blockade” that generated widespread resentment against India. It reinforced the notion that Nepali nationalism and anti-Indianism were two sides of the same coin that Mr. Deuba’s predecessor, Mr. K P Sharma Oli, exploited successfully.

In 2016, Mr. Oli visited Beijing to negotiate an Agreement on Transit and Transportation. Three years later, a Protocol was concluded with China providing access to four sea-ports and three land ports. The first ever visit of the Chinese Defence Minister took place in March 2017, followed by joint military exercises a month later. A military grant of $32 million was also announced.

China has overtaken India as the largest source of FDI and in 2019, President Xi Jinping visited Kathmandu. Annual development assistance was hiked to $120 million. Today, China is also engaged with airport expansion projects at Pokhara and Lumbini. Rather than compete with China, India needs to up its own game.

The growing Chinese presence means that India cannot afford to let issues linger but reach out actively to find resolution.

Managing differences

Over the years, a number of differences have emerged between the two countries that need attention. The political narrative has changed in both countries and these issues can no longer be brushed under the carpet or subsumed by invoking a ‘special relationship’ based on ties of a shared culture, language and religion. Part of the success of Mr. Deuba’s visit was that none of the differences were allowed to dominate the visit. Yet, to build upon the positive mood, it is necessary these issues be discussed, behind closed doors and at Track 2 and Track 1.5 channels.

As one of the oldest bonds, the 1950 Treaty of Peace and Friendship was originally sought by the Nepali authorities in 1949 to continue the special links they had with British India. It provides for an open border and right to work for Nepali nationals in India.  However, it is today viewed as a sign of an unequal relationship, and an Indian imposition. The idea of revising and updating it has found mention in Joint Statements since the mid-1990s. It has been discussed sporadically, but in a desultory manner, by the Foreign Secretaries beginning in 1997 and even at the ministerial level at the 2014 Joint Commission.  

In 2016, an eight-member Eminent Persons Group was set up to discuss it. The report is available with both governments but a perception has been created in Kathmandu that it be formally presented to the two governments. As long as it is clearly understood that this only a report by well-intentioned experts in their individual capacity and not binding on governments, it should be possible for the two Foreign Ministers to acknowledge it publicly. It could even be made public to kickstart Track 2 conversations.

Demonetisation is another irritant. In November 2016, India withdrew Rs 15.44 trillion of high value (Rs. 1000 and Rs. 500) currency notes. Today, over Rs 15.3 trillion has been returned in the form of fresh currency. Yet, many Nepali nationals who were legally entitled to hold Rs 25000 of Indian currency (given that Nepali rupee is pegged to the Indian rupee) were left high and dry. The Nepal Rashtra Bank, which is the central bank, holds Rs. 7 crores and estimates of public holdings are Rs. 500 crores. After more than five years, it should certainly be possible to resolve this to mutual satisfaction.

On the boundaries

In 2019, Mr. Oli, facing domestic opposition within his party, needed a distraction and found one in the Kalapani boundary issue. These boundaries had been fixed in 1816 by the British, and India inherited the areas over which the British had exercised territorial control in 1947. While 98% of the India-Nepal boundary was demarcated, two areas, Susta and Kalapani had remained pending. In November 2019, India had issued new maps following the division of the State of Jammu and Kashmir Union Territories, Jammu & Kashmir and Ladakh. Though the new Indian map did not affect the India-Nepal boundary in any material way, Mr. Oli expanded the Kalapani area dispute. By whipping up nationalist sentiment, he got a new map of Nepal endorsed by the legislature through a constitutional amendment. While it did not alter the situation on the ground, it soured relations with India and added a new and emotive irritant.

The need today is to avoid rhetoric on territorial nationalism and lay the groundwork for a quiet dialogue where both sides display sensitivity as they explore what is feasible. India needs to be a sensitive and generous partner for the “neighbourhood first” policy to take root.  

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The Long Shadow Of Political Turmoil In Nepal

Published in The Hindu on 27th May, 2021

Nepali politics entered another phase of uncertainty last week. The country’s President, Bidya Devi Bhandari, dissolved the House of Representatives (lower house) late night on Friday, at the suggestion of Prime Minister K. P. Sharma Oli, in a partisan move that disregarded the Constitution. Fresh elections were announced for between 12 and 18 November. Announcing elections was just to ensure that Oli continues in office, controlling the state machinery, even as Nepal battles a second and deadlier COVID-19 wave.

Oli’s opportunistic politics

Mr. Oli came to power after the 2017 elections, the first undertaken in the federal republic of Nepal, established under the 2015 Constitution. He led his party, the CPN(UML) to an impressive tally of 121 seats and together with Maoist Centre’s 53, enjoyed a near absolute majority in the 275-strong House. In May 2018, the two allies merged to cement their alliance and created the Nepal Communist Party (NCP).

Relations with India saw positive movement. Delhi was willing to overcome its reservations about Mr. Oli’s anti-Indian nationalist tirades. Prime Minister Narendra Modi visited Nepal in May 2018, shortly after Mr. Oli’s visit.

However, Oli’s autocratic tendencies soon began to surface. The power sharing arrangement worked out with former Maoist leader Pushpa Kamal Dahal ‘Prachanda’ started fraying. The original idea that both would take turns at being Prime Minister and run the NCP as co-chairs became irksome for Mr. Oli. While he weaned away the Maoists cabinet members, senior disgruntled UML leaders led by former Prime Ministers, Madhav Kumar Nepal and Jhala Nath Khanal, gravitated towards Prachanda. Differences emerged in the open and a growing demand surfaced for honouring the ‘one person one post’ policy. Prachanda was willing to let Mr. Oli continue the full term as Prime Minister, provided he gave up his role as co-chair of the party. Mr. Oli decided otherwise.

Mr. Oli needed a distraction and by end-2019, found one in the Kalapani boundary issue. India issued new maps following the division of the State of Jammu and Kashmir Union Territories, Jammu & Kashmir and Ladakh. While 98% of the India-Nepal boundary was demarcated, two areas, Susta and Kalapani had remained pending. Though the new Indian map did not affect the India-Nepal boundary in any material way, it was an opportunity for Mr. Oli to don his nationalist mantle. He expanded the Kalapani area dispute from one covering approximately 60 square kilometres on Nepal’s northwest tip with Uttarakhand and China by raising the demand for restoring an additional 335 sq kms. The boundaries were fixed in 1816 by the British, and India inherited the areas over which the British had exercised territorial control in 1947.

Domestic politics takes over

Caught up in the first COVID-19 wave, India kept deferring bilateral talks, perhaps not realising the domestic political pressures on Mr. Oli. In May 2020 when Defence Minister Raj Nath Singh inaugurated the 75 km road through Kalapani that linked to the Kailash-Mansarovar pilgrimage route, Mr. Oli upped the ante by whipping up nationalist sentiment, getting a new map of Nepal endorsed by the House and adopting a constitutional amendment to sanctify Nepal’s new territory. While this did not alter the situation on the ground, it cramped the prospects of any dialogue with India. It was a short reprieve and Mr. Oli’s political troubles soon returned to haunt him.

President Bhandari has been Mr. Oli’s close comrade since she entered active politics after the untimely demise of her husband Madan Bhandari, a charismatic UML leader, in a car accident in 1993. Mr. Oli was her political mentor and backed her elevation as President. She reciprocated by ignoring constitutional propriety and approving dubious ordinances including amending the Constitutional Council Act that enabled Mr. Oli to pack constitutional positions with his loyalists.

Amid rumours that Prachanda and Mr. Nepal were planning to move a no-confidence-motion against him after he had studiously ignored the meetings and decisions of party’s Secretariat and the Standing Committee, Mr. Oli got President Bhandari to approve dissolution of the House on December 20, paving the way for elections in April-May. The President’s decision was uniformly criticised as unconstitutional as the NCP enjoyed a near-absolute majority.

India decided to steer clear of the mess, calling it an ‘internal matter’ while the Chinese Ambassador continued to actively push for a rapprochement between the NCP factions. A five-judge constitutional bench of the Supreme Court unanimously called for a restoration of the House on February 23 strengthening the Prachanda-Nepal faction but on March 7, delivered a bombshell by overturning the UML-Maoist merger of May 2018, against which an appeal had been pending for two years.

Mr. Oli took over the reins of the old CPN(UML), reviving prior structures but now excluding Mr. Nepal and his supporters. Some were served suspension notices. The Nepal faction was reduced to a minority; under the law, a split in the party requires a 40% of both the parliamentary party and the central committee. Prachanda, heading the Maoist Centre with 49 members since four had joined hands with Mr. Oli, needed new allies to wage his battles.

Though Mr. Oli had lost majority in the House as Maoist Centre was no longer supporting him, he challenged the opposition to file a no-confidence-motion, certain that the Maoists, Nepali Congress (NC) and the Janata Samajbadi Party (JSP) would fail to reach an agreement on a new Prime Minister. He was proven right but overtaken by hubris, he took another gamble. He called for a trust vote on 10 May that he lost as 28 UML dissident members were absent and half the JSP voted against him while the other half abstained.

Presidential improprieties

The opposition again failed to present an alternative. In a questionable decision, Mr. Oli was sworn in by President Bhandari on 14 May as Prime Minister under Article 76(3) that permits the leader of the largest party to be sworn in and given thirty days to demonstrate majority. Within a week, Mr. Oli announced that he would not seek another vote of confidence. Without resigning, however, he advised the President to explore other options. Within a day, as rumours gained ground that NC leader Sher Bahadur Deuba had managed to gather support from 149 members, including 49 Maoists, 26 UML dissidents and 12 from the JSP, Mr. Oli rushed to the President and gave her a list of 153 supporters that included all 121 UML and 32 JSP members, including UML dissidents and JSP members who voted against him on May 10. Without bothering to verify, President Bhandari dissolved the House and announced fresh elections, justifying that the rival claims exceeded the strength of the House.

Since 2008 when a new Constituent Assembly was elected to prepare a constitution for a federal republic, Nepal has seen three NC Prime Ministers (G. P. Koirala, Sushil Koirala and Deuba), two Maoist Prime Ministers (Prachanda twice and Baburam Bhattarai), three UML Prime MinisterMs (Nepal, Khanal and Oli sworn in thrice) and a Chief Justice as caretaker PM in 2013. None has damaged the constitution and the political fabric of Nepal as much as Mr. Oli, together with an obliging Ms. Bhandari. Opposition leaders have challenged the House dissolution in the Supreme Court but its outcome is uncertain. Meanwhile a raging COVID-19 puts a question mark on the election. In case an election is held, Mr. Oli will campaign on a nationalist anti-Indian platform.

It is clear that political uncertainty will continue. India has traditionally supported constitutionalism and multi-party democracy in Nepal. At this juncture, it needs to remain actively engaged with all the political actors, and equally importantly, avoid being perceived as partisan.

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