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India-Nepal ties in 2016: A relationship that remained troubled
Posted:Jan 14, 2017
 
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By Dr. Binodkumar Singh
 
Diplomatic relations between India and Nepal, established on June 13, 1947 and subsisting at the governmental and people's level, are moving towards consolidation of mutual understanding, prosperity and peace after passing through various ups and downs. 
 
India and Nepal, as close neighbours, share a unique relationship of friendship and cooperation characterised by open borders and deep-rooted people-to-people contacts of kinship and culture. Modern-day India and Nepal initiated their relationship with the India-Nepal Treaty of Peace and Friendship of 1950 and accompanying secret letters that defined security relations between the two countries, and an agreement governing both bilateral trade and trade transiting Indian territory. 
 
But, since late 2015, cultural and political issues have strained relations between the two countries with anti-Indian sentiment growing amongst the government and people of Nepal.
 
Nepal, in a historical step forward, promulgated its new Constitution on September 20, 2015. But, the Madhesis, the Janajatis and the Tharus, who are considered as the marginalised groups, felt they were being left out in the new Constitution. These groups, Madheshis in particular, blockaded the border points from September 23, 2015 and ended the protest action on February 5, 2016, after 135 days. More than 50 people were killed in protest-related violence. 
 
The Nepal government called it an undeclared blockade by India -- it systematically raised the anti-Indian nationalism sentiment; and it tried to cozy up to China and use it as an alternative source of supplies. However, rejecting the Nepali allegations, India’s Ministry of External Affairs’ spokesperson Vikas Swarup on October 1, 2015, observed: “We can only take goods up to the border and beyond the border it is the responsibility of the Nepalese side to ensure that there is adequate safety and security for the trucks to enter that side.”
 
Remarkably, Nepal’s Prime Minister K.P. Sharma Oli, during his visit to India from February 19-24, 2016, signed seven agreements and memorandums of understanding (MoUs) including establishment of Eminent Persons Group (EPG) to comprehensively review bilateral relations and recommend measures including institutional frameworks to further enhance bilateral ties. 
 
Conversely, just prior to the visit, linking his maiden foreign trip to India and the then ongoing ‘border blockade’, on January 26, 2016, Oli alleged that “India has imposed an ‘unofficial border blockade’. It would not be appropriate for me to visit India unless the situation returns to normal".
 
Oli also made a week-long official visit to China from March 21 to 27, 2016, sealing 10 separate agreements and MoUs on using the northern neighbour’s sea port facility, building a regional international airport in Pokhara, exploring the possibilities of signing a bilateral free trade agreement and finding oil and gas reserves in Nepal, among others. 
 
At the height of the blockade, as critical fuel supplies from India were choked off, Nepal turned to China and signed an MoU with the China National United Oil Corporation on October 28, 2015, to import petroleum products. 
 
Before this, Nepal had relied exclusively on India for its energy needs. India usually sends Nepal about 100,000 tonnes of fuel every month, including diesel, kerosene and LPG.
 
Further, on December 29, 2016, China has agreed to provide grant assistance of NR 15.7 billion (one billion yuan) to Nepal for the implementation of three key infrastructure projects. 
 
Beginning a new level of bilateral military engagement, Nepal will hold its first ever joint military exercise with China on February 10, 2017 named Pratikar-1 that will be on training Nepali forces in dealing with hostage scenarios involving international terror groups. However, trying to play down the significance of the exercise, Nepal's ambassador to India Deep Kumar Upadhyaya on December 26, 2016, noted: "We have done similar exercises with some other countries too in the past to be able to deal with the Maoists. There's really not much in it. Whichever way you look at it, Nepal has a special relationship with India and that's not going to change because of any such exercise.”
 
Indeed, India heaved a sigh of relief after Pushpa Kamal Dahal aka Prachanda, Chairman of Communist Party of Nepal-Maoist Centre (CPN-Maoist Centre) was elected as the new Prime Minister of Nepal on August 3, 2016. 
 
New Delhi had got tired of and frustrated with the predecessor K.P. Sharma Oli regime, which appeared determined to undo the new warmth that had crept into the India-Nepal bilateral relationship after Narendra Modi became Prime Minister in May 2014. Modi was quick to congratulate Prachanda and invite him to India.
 
Outstandingly, Dahal visited India from September 15-18, 2016, and held wide-ranging talks with Modi and sealed three significant deals during his four-day visit. The two Prime Ministers reviewed the entire gamut of bilateral cooperation and underlined the need to further deepen and expand bilateral cooperation in all areas for the mutual benefit of the people of the two countries. They directed that all bilateral institutional mechanisms be convened regularly and their decisions be implemented expeditiously. Both sides agreed to hold the next session of the India-Nepal Joint Commission in 2016.
 
In the interim, on October 5, 2016, the EPG during its second meeting in New Delhi agreed to review and contextualise the India-Nepal Treaty of Peace and Friendship of 1950. Both the sides decided to change the 66-year-old treaty as per the changed bilateral, regional and global context. Further, the fourth Joint Commission meeting led by the Foreign Ministers of both countries held in New Delhi had noted the automatic renewal of the India-Nepal Trade Treaty for another seven years from October 27, 2016, without any changes in the existing treaty. The Treaty was revised the last time on October 27, 2009. The India-Nepal Trade Treaty offers many preferences to Nepal on non-reciprocity, but it is not all about non-reciprocal trade preferences provided by India. The next session of the Joint Commission will be held in Nepal at mutually convenient dates. The third session of the Joint Commission was held in Kathmandu in July 2014.
 
Meanwhile, Indian President Pranab Mukherjee while addressing a seminar organised by India Foundation, Neeti Anusandhan Pratishthan Nepal and Nepal Centre for Contemporary Studies on the theme of India-Nepal relations, in Kathmandu on November 3, 2016, said: “As our security interests are inter-linked, we must continue to consult and coordinate closely to safeguard our shared security interests.” He also appreciated the contribution of Nepali Gurkhas to India’s defence. As many as 40,000 Nepalis are serving in the Indian Army and have fought in critical war zones.
 
Further, Minister of State for External Affairs V.K. Singh on January 4, 2017, said: “I am also the Honorary General of the Nepali Army. A large number of ex-Indian Gurkhas receive pension from India.  That’s the kind of relations we have.  Our relations with Nepal are so unique that this kind of relationship stands on its own footing.”
 
In addition, Nepal and India have planned to build Integrated Check Posts (ICPs) on their respective sides at ports of entry in Birgunj, Biratnagar, Bhairahwa and Nepalgunj. On December 15, 2016, a Nepal-India senior officials’ meeting on ICP that concluded in Kathmandu also decided to complete such ICPs in Biratnagar by December 2018.
 
In the first phase, ICPs were to be built in Birgunj of Nepal and Raxaul of India, and Biratnagar of Nepal and Jogbani of India. The Indian side has already completed the ICPs in Raxual and Jogbani and the ICP of Raxaul has already come into operation, while it is being operationalised at Jogbani soon. Meanwhile, the Nepali side has urged the Indian side to operationalise ICPs at both sides of border -- Raxaul and Birgunj -- simultaneously.
 
More recently, India’s scrapping of high-value bank notes on November 8, 2016, has dragged down economic growth in neighbouring Nepal with trade, remittances and tourist numbers all down as Nepal’s economy was heavily reliant on India for trade, jobs and aid. Even Banks and Financial Institutions (BFIs) in Nepal have substantial amount of INR 500 and INR 1,000 notes because the Indian currency is widely accepted in the country and the Indian government also allows both Indian and Nepali nationals to carry up to INR 25,000 in cash.
 
Ahead of the December 30 deadline announced by the Indian government to deposit banned INR 500 and INR 1,000 notes, Nepal’s Ambassador to India, Deep Kumar Upadhyaya, in an exclusive interview on December 24, 2016, said: “The demonetised currency was also a legal tender in Nepal and almost all household in Nepal had some or the other amount of the demonetised Indian currency because of their personal relations with India. But Nepal also has some remote areas, which have not been able to exchange their notes yet, and people there are worried about their currency and I get calls every day enquiring about what is being done for them through India. We have requested the Indian Government to look into the matter and extend the deadline for Nepal by at least 15 days so that people living in the remote areas can have access to the banking system.”
 
To promote tourism, India and Nepal agreed to adopt the open skies policy in their respective aviation sectors. Nepal’s Ministry of Culture, Tourism and Civil Aviation Joint Secretary Suresh Acharya and India’s Civil Aviation Ministry’s counterpart Arun Kumar signed an agreement in New Delhi on December 21, 2016 in this regard.
 
During the meeting, the Indian side had proposed to Nepal to revise the policy, upon which Nepal agreed. But, Nepal maintained that airport infrastructures should be properly developed for the same. The two sides have also agreed to hold next rounds of discussions in February 2017 to discuss various technical issues, including air routes and entry points.
 
New Delhi appears to have repaired relations with Kathmandu for the time being, and might have more say with the new CPN-Maoist Centre–led government, but it has a long way to go to regain the popular adulation that was visible during Prime Minister Modi's first visit to Nepal in 2014, and during India's humanitarian response following the April 2015 earthquake.
 
Moreover, amending the Constitution to address Madhesi demands to redraw boundaries of federal provinces, is a domestic affair and needs to be addressed internally. Nevertheless, the current trend and cozying up of Nepal and China is troubling for India as Nepal is considered as a natural ally of India and conventionally close to it.
 
(Dr Binodkumar Singh is Research Associate at the Institute for Conflict Management, New Delhi. Comments and suggestions on this article can be sent to editor@spsindia.in)
 
 
 
 
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