The bilateral associations between Nepal and India is multifaceted, encompassing a range of sectors including economic cooperation, trade, cultural exchanges, and strategic partnerships. The nations share deep cultural and religious ties, with a history that includes shared traditions, festivals, and religious practices. Hinduism and Buddhism are predominant in both countries, fostering a sense of shared heritage. The nations are connected by an open border, allowing citizens to move freely without the need for a visa. This policy has facilitated strong people-to-people connections and cross-border trade.

But beyond the socio-cultural and historical links, the two countries also share freshwater resources. Four significant rivers that flow into the Ganges—the Mahakali, the Karnali, the Sapta Gandaki, and the Sapta Kosi—are few of the many that have their sources in the Himalayas.These rivers traverse the valleys and plains of Nepal, into the level subtropical plains of India, eventually merging into the Bay of Bengal. India and Nepal have significant potential for collaboration in hydropower projects due to Nepal's abundant water resources and India's growing energy demand. The hydropower sector can play a critical role in the energy security and economic development of both countries. Nepal’s topography, characterized by its numerous rivers originating from the Himalayas, provides an ideal setting for hydropower development.

Potential of Hydropower in Nepal

Nepal is endowed with vast hydropower potential due to its numerous rivers and favourable topography. Theoretical estimates suggest that Nepal has about 83,000 MW of hydropower potential, out of which about 42,000 MW is economically feasible. This potential remains largely untapped, with only around 1,200 MW currently developed and operational.

Key Hydropower Projects and Agreements

Several bilateral projects and agreements highlight the potential and ongoing cooperation between India and Nepal in the hydropower sector:

Arun-III Hydropower Project: This is one of the largest projects, with a capacity of 900 MW. It is being developed by India's Satluj Jal Vidyut Nigam (SJVN). The project includes a 70 km long transmission line to export electricity to India.

Upper Karnali Hydropower Project: With a capacity of 900 MW, this project is being developed by GMR Group, an Indian company. It aims to export a significant portion of the generated electricity to India.

Pancheshwar Multipurpose Project: A joint initiative between India and Nepal, this project on the Mahakali River has an estimated capacity of 5,600 MW. It also includes irrigation and flood control benefits.

Bheri Babai Diversion Multipurpose Project: This project, primarily aimed at irrigation and drinking water supply, also includes a small hydropower component.

Sapta Kosi High Dam Multipurpose Project and Sun Kosi Storage-Cum-Diversion Scheme: A joint technical team from Nepal and India has begun a feasibility study for the construction of a high dam on the river.The Saptakoshi River is one of Nepal's largest rivers, with seven tributaries. An ambitious multibilliondollar project, it would control floods, provide yearround irrigation to twelve districts from Jhapa to Parsa, and generate 3,000 MW of electricity.

Benefits and Challenges

Benefits:

Energy Security: For India, importing hydropower from Nepal can help diversify its energy sources and enhance energy security.

Economic Growth: For Nepal, developing hydropower can significantly boost economic growth, create jobs, and provide a reliable source of revenue.

Environmental Impact: Hydropower is a clean and renewable energy source, helping both countries reduce their carbon footprints.

Challenges:

Financing and Investment: Large-scale hydropower projects require significant investment. Securing financing can be challenging, particularly in a developing country like Nepal.

Environmental and Social Impact: Hydropower projects can have significant environmental and social impacts, including displacement of communities and changes to local ecosystems.

Political and Regulatory Issues: Bilateral projects can be complicated by political and regulatory differences between India and Nepal.

Shared Interests between two countries also include-

Economic Cooperation

Trade: India is Nepal’s largest trading partner. The two countries engage in extensive trade, with India accounting for a significant portion of Nepal’s imports and exports. Key commodities include agricultural products, textiles, and manufactured goods. Also, Nepal being a land-locked country uses Indian ports for its overseas trade. Nepal uses the ports of Kolkata, Haldia, and Visakhapatnam, and it has also requested access to additional ports, including Mundra Port in Gujarat and Dhamra Port in Odisha.

Investment: Indian businesses have significant investments in Nepal, particularly in sectors such as hydropower, telecommunications, and tourism. Indian companies have been involved in various infrastructure projects, including road construction and energy generation.

Aid and Development Assistance: India has been a major provider of development assistance to Nepal, funding projects in infrastructure, education, health, and rural development. The Indian government has also provided aid during natural disasters, such as the 2015 earthquake in Nepal.

Strategic and Security Cooperation

The two countries cooperate closely on defence and security matters. This includes joint military exercises, training programs for Nepalese military personnel in Indian institutions, and intelligence sharing to combat terrorism and cross-border crime. While the open border policy promotes ease of movement, it also necessitates robust border management to prevent illegal activities. The two countries work together to address issues such as smuggling, human trafficking, and illegal migration. The development of hydropower projects is strategically important for both India and Nepal. For India, it aligns with the broader goal of regional energy cooperation and stability. For Nepal, it represents a path to greater economic independence and development.

Diplomatic Relations

Regular high-level visits by political leaders from both countries strengthen diplomatic relations. These visits often result in agreements and Memorandum of Understanding (MoUs) aimed at enhancing cooperation in various sectors. Various bilateral mechanisms and committees have been established to address issues of mutual concern and to facilitate continuous dialogue. These include the India-Nepal Joint Commission and the India-Nepal Border Coordination Committee.

Despite the overall strong relationship, there have been occasional border disputes. The most notable recent dispute involves the Kalapani-Lipulekh-Limpiadhura area, which both countries claim as their own. Resolving these disputes requires diplomatic negotiations and mutual understanding. Nepal’s immense hydropower potential represents a significant opportunity for collaboration. Indian investments in this sector can help Nepal become an energy exporter, benefiting both countries economically. Both countries are members of regional organizations such as the South Asian Association for Regional Cooperation (SAARC) and the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC). These platforms offer additional avenues for enhancing regional cooperation and addressing common challenges.

Conclusion

As per the Ministry of Power's annual review, India’s total electricity generation including renewable sources 2023-24 is about 1176.130 BU as against 1092.520 BU during the same period last year showing a growth of 7.7%. Even though the average availability of power has increased to 20.6 hours in rural areas and to 23.8 hours in urban areas, many in the rural sectors do not have access to electricity. Strengthening bilateral agreements for energy trade can facilitate smoother project development and implementation, as well as investment in capacity building for local stakeholders that can enhance project sustainability and local acceptance. Also, aligning hydropower projects with the Sustainable Development Goals (SDGs) can attract international support and funding. The hydropower sector holds immense potential for India-Nepal cooperation, if the countries work in developing a regional power grid. This can enhance energy security and allow for efficient energy distribution across South Asia. With proper planning, investment, and management, these projects can bring substantial benefits to the states and the overall region, fostering economic growth and regional integration. By leveraging Nepal's vast hydropower potential and India's growing energy needs, both countries can achieve economic and environmental benefits. Continued collaboration when addressing challenges, while focusing on sustainable and inclusive development, will be key to realizing this potential.