Existing water treaties are in India's favour, which troubles Nepal and prevents the much needed development of hydro-projects there.

Water is currently a source of some tension between India and Nepal but could become the greatest asset to the relationship if a more confident, respectful and cooperative approach is engineered by the two governments.

India's ever-increasing energy requirements speak to its potentially most important interest in Nepal — the latter's largely untapped hydro-power capacity. A major part of the downstream discharge of the Ganga is contributed by flows either originating in Nepal or transiting Nepal from sources in Tibet, most notably the Kosi, Gandak and Karnali river systems. Because of the terrain, Nepal also provides the best, if not the only, option for downstream flood control and dry season augmentation. A change in course of the Kosi in 2008 caused massive flooding in Bihar (as well as in Nepal), displacing millions and occasioning much loss of life.

Early negotiations

The first recorded water resource negotiations between Nepal and India occurred between 1910 and 1920 when British India needed to harness the Sarda (Mahakali) river, which formed the western boundary between Nepal and British India, to develop irrigation in the United Province (now Uttar Pradesh). Nepal agreed to the 1920 Sarda treaty, involving an exchange of territory, but not an advantageous one for Nepal.

India enjoys most of the benefits of the Kosi and Gandak treaties (of 1954 and 1959), leading to the construction of dams primarily irrigating and protecting Indian lands. The outcome was viewed by many in Nepal as a “sell out” of their natural resources (although it was resistance in Nepal that prevented construction of larger dams that would have accrued more benefits to that country).

However, since then, the Nepalis have learned the value of their consent to India's plans pertaining to water, and have expressed this mostly through the blocking of hydro development in Nepal that would also benefit India.

Meanwhile, Indian insistence on management control and refusal to allow independent assessment of downstream benefits have induced suspicion in Nepal, encouraging stalling tactics. The relationship between the two countries on water resources has been inconclusive and often unsettled.

In this climate of mutual distrust, despite discussions between the two nations on several multi-purpose projects over three decades, little progress has been made on any of them. In Nepal, as in India, environmental concerns, worries about the displacement of people, and misgivings about large projects in the seismically active Himalayan region have militated against large-scale generation of hydro-electric power (particularly since, in Nepal's case, the power would mostly be exported).

Alternative view

An alternative view in Nepal advocates rejecting large-scale water development and favours decentralised, relatively small, environmentally benign projects (whether for irrigation or for hydro-electric power) primarily for Nepal's own needs. Export of electricity is not ruled out but large generation primarily for export to a single buyer (India) is not, in this view, desirable. This alternative approach of national capacity building, local government participation, and use of cheap and reliable electricity to provide national industries with a competitive edge could help resolve some of the challenges Nepal faces.

Barriers

Nepal does not have much of a manufacturing base but the hydroelectric potential of the country is more than sufficient to transform the economy. Nepal's apprehensions regarding the inadequacy of its arable land and, therefore, the potential political unpopularity of creating large water reservoirs is understandable. So are worries over the related displacement of people.

But Nepal's inability, amidst its political and governance travails, to take decisions favouring long-term development is unfortunate. Until decisions are taken in Kathmandu on a strategy for hydro development, Nepal will, unnecessarily, remain a net importer of electricity from India.

Another Indian neighbour, Bhutan, has forged a different path on hydro-electric development; one benefitting both countries. Thimphu has financed much of the country's impressive economic growth, political modernisation and social development in recent years through revenue from Indian-designed hydroelectric projects on its soil that provide power both to Bhutan and to India's North-East. (Bhutan is today inclined to open tenders for more such hydro projects to other international bidders. Under any scenario, India will continue to benefit as the main client for the electricity produced.)

Nepal's full natural resource wealth is not yet charted since very little has been explored. But its considerable hydroelectric potential should contribute more than it does to meeting the needs of its fledgling industries, and, if Nepalis wish it, contribute mightily to export earnings.

New strategy needed

However, with Kathmandu alternately convulsed by political intrigue or inertia in policy development, such major decisions have been on the backburner and the success of Bhutan's approach, so nearby, has been ignored. Once Nepali politicians of all stripes tire of their endless manoeuvring for advantage in their country's new democratic dispensation and remember to tend to the country's economic development, a new strategy for the hydro power sector will have to be given high priority.

And, if it hopes for a positive outcome relative to its own power needs, New Delhi would be well advised to adopt a more open, generous approach in engaging with Nepal's interested communities on water and power than it has in the past when it foisted on Nepal unequal treaties that have generated long-lasting resentments.

(Rajeev Ranjan Chaturvedy is completing his Ph.D. at Jawaharlal Nehru University in New Delhi. David M. Malone is president of Canada's International Development Research Centre of Canada. They have both contributed to the collective volume From People's War to Fragile Peace in Nepal, to be published by Cambridge University Press in 2012.)

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