Energising India-Nepal ties

In News 

Nepal signed a Memorandum of Understanding (MoU) with India to develop the West Seti and Seti River (SR6) projects — a total of 1,200 MW.

Background 

• In an MoU in 2012, China was assigned to develop the project, but it withdrew in 2018, citing issues of resettlement and rehabilitation.
• Subsequently, Nepal tried to develop the project by mobilising internal resources. However, increased costs resulted in further delays. 
• Finally ,Nepal decided to grant the project to India

Potential of hydropower cooperation

• For India: The decision to involve India is a sign that Nepal is reposing its faith in India to complete the project. If completed, it is expected to provide India the much-needed leverage in future hydropower cooperation.
  • India is already involved in the Mahakali Treaty (6,480 MW), the Upper Karnali Project (900 MW) and the Arun Three projects (900 MW) in western and eastern Nepal, respectively.
    • This will also help India minimise the geopolitical influence of China and firm its presence in Nepal, considering that the West Seti Hydroelectric Project was a major Chinese venture under the Belt and Road Initiative. 
  • Similarly, India’s severe deficit in coal-based thermal power plants in recent years, which meet 70% of India’s electricity demand, has compelled the Government to arrange supplies through coal imports, accelerating the search for better alternatives. 
  • Given the growing energy demand, the West Seti Hydroelectric Project can provide an added alternative and viable way to address power deficits.
• For Nepal : It is ironic that despite its huge hydropower potential, Nepal experiences power shortages during peak time, increasing its dependence on India to bridge the shortfall. With an estimated potential of 83,000 MW, Nepal’s electricity exports to India are expected to increase foreign exchange and address the power shortage.
  • It is estimated that if the hydropower potential is fully harnessed, Nepal can generate revenue to the tune of ?310 billion in 2030 and ?1,069 billion per year in 2045 by exporting electricity to India.
• The project has the potential to enhance cross-border power exchanges between the two countries.

Issues 

• Boundary dispute points: The Lipulekh pass is a far western point near Kalapani, a border area between Nepal and India.
  • Both India and Nepal claim Kalapani as an integral part of their territory.

• Strategically crucial road: The bilateral ties came under strain under then prime minister K P Sharma Oli after India opened an 80-km-long strategically crucial road connecting the Lipulekh pass with Dharchula in Uttarakhand in 2020.
• Entry of China: The Chinese Propaganda and debt diplomacy is luring Nepal.
  • Nepal too is using the China Card to negotiate with India.
• Sometimes progress of hydro power projects were affected due to investment and environmental concerns.

Conclusion and Way Forward 

• Both sides need to address boundary issues in a responsible manner through discussion and dialogue in the spirit of close and friendly relations.
• There is a need to build an environment of trust between the political leadership of the two countries. 
• Since investment-related constraints have delayed  hydro power projects , there needs to be a careful study of investment scenarios, particularly a conducive investment environment, distribution and transmission network and cost of resettlement and rehabilitation, at the preliminary stage.
  • The project can also be extended to other regional partners under the Bangladesh-Bhutan-India-Nepal (BBIN) framework for cross-border energy cooperation.