India putting China on its backfoot in Nepal (GS Paper 2, International Relation)
Context:
- Nepal’s Prime Minister Pushpa Kamal Dahal’s will be arriving India in early May.
- Relations between Nepal and India started improving further when former Maoist guerrilla Pushpa Kamal Dahal became Prime Minister on 26 December 2022, after the general elections in Nepal in November 2022.
Indo-Nepal ties:
- The open-border system and the close people-to –people connection between Nepal and India have made their relations vibrant and dynamic for many years now. Therefore, whenever Nepal faces any difficulty, it turns to India first and vice versa.
- This was the case even during the deadly earthquake in 2015 in Nepal when India sent relief materials and rescue teams to Kathmandu in under six hours. Later, during the COVID-19 period in 2020–21, at a time when the border between the countries was closed.
- Because of these close ties, occasional irritants, especially at the political or government-to-government level between the two countries evaporate in no time.
Nepal-China ties:
- On the other hand, the Himalayas still poses a barrier to Nepal’s relations with its northern neighbour, China.
- After Nepal’s deadly earthquake in 2015, China had to close the Tatopani-Zhangmu land border with Nepal due to heavy damage. Even the Rasuwagadhi-Kerung border remained closed for a long time. After the outbreak of COVID-19 in 2020-21 when Nepal needed China’s support on the trade and commercial fronts, the Tatopani-Zhangmu route was completely closed while the Rasuwagadhi-Kerung route was opened only intermittently to China’s advantage.
- Thus, most traders engaged in trade with China are irritated with the Chinese authorities and often accuse China of imposing an undeclared trade blockade on Nepal.
Hydropower projects being developed by India:
- India is developing the 900-MW Arun III project in Nepal through its subsidiary Satluj Jal Vidyut Nigam (SJVN). Alongside this, the SJVN and Nepal Electricity Authority signed an MoU to develop the 679 MW Arun-4 hydropower project in May 2022.
- Another Indian corporate, the GMR group, has been given a license to construct the 900-MW Upper Karnali project and the SJVN has now been awarded the 450 MW Seti River 6 Project.
- The NHPC Limited of India was awarded another prestigious 750 MW West Seti Project in August 2022, which earlier was awarded to China’s Three Gorges Corporation.
- Work on some cross-border transmission lines, including the Dhalkebar-Muzaffarpur transmission line, is also in progress.
Upcoming Infrastructural developments:
Raxaul-Kathmandu railway:
- Expectations are high that some remarkable agreements would be signed on the eve of Prime Minister Pushpa Kamal Dahal’s visit to New Delhi in early May, which could include agreements for the construction of the 136-kilometre-long Raxaul-Kathmandu railway with India’s financial assistance worth US$ 3.15 billion.
- Its detailed project report (DPR) has already been made by the Indian consultant Konkan Railway Corporation Limited (KRCL).
- With the completion of this project, the Indian border town Raxaul will be connected to Kathmandu, the capital of Nepal, mostly through hilly terrain.
- India has already connected its border town Jaynagar with Janakpur, which is now being extended further to Bardibas closer to the foothills of the Himalayas in Nepal.
Other projects:
- Moreover, Nepal and India are also expected to sign an agreement for the construction of the 480 MW Phukot-Karnali hydroelectric plant and the 669 MW Lower Arun hydropower Project during Prime Minister Dahal’s visit to India.
- On the same occasion, India could agree to allow Nepal to export its surplus hydropower to Bangladesh through Indian territory.
- Besides, India might sign an agreement with Nepal for the purchase of Nepal’s surplus electricity for 25 long years, which could end uncertainty in the power supply between the two countries.
A check on China’s growing influence in Nepal:
- Apart from increasing its engagement with Nepal, India is silently trying to check China’s growing influence in Nepal through economic diplomacy.
- Towards this, India made a decision not to buy electricity from Nepal if it has been developed with Chinese investment. This decision came as a serious blow to the Chinese companies in Nepal, which have been involved in different hydropower projects in the country. Now the Chinese companies feel that their investment in Nepal in the hydropower sector is unsafe.
Ban on commercial explosives:
- Another decision, by the Indian authorities, to not supply explosives to those projects in Nepal in which Chinese companies are working either as developers or even as contractors has also been a great setback to the Chinese.
- To tighten its grip on the Chinese companies working in Nepal, India sought an end-use certificate from Nepal. To get this certificate, the buyer is expected to be the final recipient of the explosive materials. There is also a condition whereby the buyer in no case can transfer such explosives to others.
- However, Nepal imported commercial explosives from China for the first time after India refused to supply them to Nepal.
Nepal’s dependence on India for explosives:
- Both the Hongshi Shivan Cement Factory (Nawalparasi) and the Senjen Khola Hydropower Project (Rasuwa) in which the Chinese had certain engagements received explosives from China. But Nepal’s requirements for explosives for different projects are not fulfilled through the explosives imported from China.
- All such projects in Nepal, including the Kathmandu-Nijgadh Fast Track Project, the 140 MW Tanahu Hydropower Company, and Huaxin Cement Narayani Pvt. Ltd., in which the Chinese companies are working are still facing an acute shortage of explosives.
- It is well realised that China is no alternative to India in the matter of importing explosives as rules and regulations are most cumbersome in importing such materials from China.
- Nepal needs about 3,500 to 4,000 tonnes of explosives each year to meet its demands for construction projects, but it is unlikely that China would meet this demand at least in the near future.
India’s economic diplomacy:
- India’s economic diplomacy towards Nepal seems to have worked well in recent years; a win-win situation for both Nepal and India.
- In the emerging situation, many Indian companies have taken an interest in developing mega hydropower in Nepal, while China has been facing a setback in working in this country. Nepal at the moment produces only about 2,600 MW of power, though it has the potential to harness 50,000 MW of hydropower.
- Between June and December 2022, Nepal exported power to India worth NPR. 11 billion, which is likely to thrive with added production of hydropower in the years to come.
Way Forward:
- Strong Indo-Nepal cooperation in the hydropower and connectivity sector can not only help Nepal generate revenue and create employment opportunities on a massive scale, but it will also substantially reduce the country’s huge trade deficit with India.
