Narendra Modi pledges US$1 billion in Indian aid to Nepal during visit

Prime Minister Narendra Modi makes pledge during a rare visit to Kathmandu, as part of bid to check China's growing influence in region

PUBLISHED : Sunday, 03 August, 2014, 3:01pm
UPDATED : Monday, 04 August, 2014, 7:16pm

Indian Prime Minister Narendra Modi announced US$1 billion in aid to Nepal as he sought to speed up progress on power agreements while also aiming to counter rival giant China's influence in the region.

Announcing the line of credit for various development projects, Modi told the Nepalese parliament that he wanted to help develop the landlocked country's infrastructure.

Admitting it was a mistake that no Indian prime minister had visited Nepal for 17 years, he promised that "this will not happen again".

Modi, a right-wing nationalist, has sought to shore up ties with India's neighbours since sweeping to power at national elections in May, in a bid to check China's sway in the region.

"I hope my visit will open a new chapter in India-Nepal relations, characterised by more frequent political engagement and closer cooperation," he said late on Saturday.

Nepal's Prime Minister Sushil Koirala greeted Modi at Kathmandu's international airport, where the Indian leader received a 19-gun salute while an army band played.

Energy security was on top of Modi's agenda, with a push to revive stalled projects and develop hydropower plants using Nepal's abundant water resources and Indian investment. Earlier proposals to develop joint ventures between the two countries have stalled due to disagreements over perceived threats to Nepalese sovereignty, allowing China to step into the breach.

A recently leaked draft plan to develop the hydropower sector using Indian investment sparked a furore in Kathmandu, with politicians and commentators saying it would grant New Delhi exclusive rights to Nepal's water resources.

"Nepalese politicians want India to pay attention to them, but they are also fearful that given a chance, it will take over their resources, being a bigger, more powerful country," said Lok Raj Baral, former ambassador to New Delhi.

India had traditionally exerted huge influence in Kathmandu, leaving many in Nepal wary of New Delhi and eager to embrace Beijing, whose investments they did not see as politically motivated, Baral said.

But Modi took care to ally such fears during his speech to the parliament.

"We have always believed that it is not our work to interfere in what you do but to support you in the path you decide to take."

Stalled Indian projects include a hydropower agreement to develop Nepal's Karnali River signed by Kathmandu and Indian infrastructure giant GMR in 2008.

Nepal cannot meet its own energy needs, forcing the country to endure power cuts of up to 12 hours a day and purchase fuel from India, itself an importer of petroleum products.

Beijing is funding a 60MW power plant on the Trishuli River, already under construction, and a US$1.6 billion, 750MW joint venture plant on the Seti River, which is due to be completed by December 2019.

"Despite geographic proximity, cultural intimacy, economic interdependence and shared political values, India has stumbled in Nepal," wrote C.Raja Mohan, a columnist for The Indian Express.

Citing a growing perception in Nepal that "India promises, China delivers", he wrote that "India's record of project implementation in Nepal is awful".

While India has sought to develop other energy sources at home and in the region, striking deals with Bhutan and Bangladesh, Beijing has made forays into Sri Lanka and Nepal, leaving New Delhi anxious over the contest for resources.

Agence France-Presse, Associated Press, Bloomberg