What West Seti power project can mean for India-Nepal ties
GS 2, IR.


  • West Seti, an ambitious hydropower project in Nepal, will be taken over by India nearly four years after China withdrew from it, following a six-year involvement between 2012 and 2018.
  • Following the Indian Prime Minister’s visit to Lumbini, India’s National Hydro Power Corporation (NHPC) has already begun preliminary engagement of the site in far-western Nepal.
  • During a local body election campaign in early May, Deuba said that West Seti will be ceded to India because India was Nepal’s power market and it had a policy of not buying electricity from China-executed projects.

Nepal-India Relations:

  • The bilateral ties between India and Nepal are known as India–Nepal relations. The 1950 Indo-Nepal Treaty of Peace and Friendship and accompanying secret documents specified the two nations’ security relations, as well as an arrangement managing both bilateral commerce and trade traversing Indian territory.
  • The 1950 treaty and letters exchanged between the then-Indian government and Nepal’s Rana rulers stated that “neither government shall tolerate any threat to the security of the other by a foreign aggressor,” and obligated both sides to “inform each other of any serious friction or misunderstanding with any neighbouring state likely to cause any breach in the friendly relations subsisting between the two governments.”
  • These agreements established a “special partnership” between India and Nepal. The pact also offered Nepalese citizens the same economic and educational prospects as Indian residents in India, while giving Indian citizens and enterprises preferential status over other nationalities in Nepal.

Power dynamics between India and Nepal:

  • Nepal is abundant in electricity resources, with over 6,000 rivers and an estimated capacity of 83,000 MW.
  • India has formally approached Nepal on many times, requesting preferential rights over Nepali waterways if it can match proposals from other countries.
  • Although India is considered as a viable market for Nepal, there has been significant concern in Nepal about India’s failure to execute projects on time. India has begun or stated its intention to harness key rivers in the north.
  • An ambitious Mahakali treaty was signed in 1996 to create 6,480MW.
  • For years, little progress has been made on the Upper Karnali project, for which the multinational GMR signed a contract. In addition, one of the reasons SMEC had to close was its failure to engage into a power purchase deal with India.
  • Nepal has a major power shortage since it generates just about 900 MW compared to its installed capacity of almost 2,000 MW.
  • Although it is now supplying 364MW of power to India, it has imported from India in the past.

Diplomatic relations:

  • After a dispute between Nepal and India resulted in the 2015 economic blockade, the equations shifted when Deuba took control in July, displacing Oli.
  • It is unclear what revisions or expansions the NHPC would propose to the project, which was originally intended at 750MW, but the project will be a storage system generating electricity all year to be delivered to India, either for local consumption or for sale via its national grid. And its success is projected to improve India’s reputation in Nepal and give it weight in future hydropower project evaluations, when competition is expected to be fierce.
  •  As a result, West Seti has the potential to be a defining paradigm for Nepal-India power relations in the future.

What are the Irritating Factors in India-Nepal Relations?

  • Territorial Disputes: India and Nepal have a 1,800-kilometer-long open border that runs across West Bengal, Uttar Pradesh, Bihar, and Sikkim
  • The two nations encouraged a well-defined and publicly recognised “open border” between them after the Peace and Friendship Treaty of 1950.
  • An “open border” indicates that individuals can pass freely and unrestrictedly from either side. The open border has improved social and economic connectedness between the two nations, resulting in what is known as ‘roti-beti karishta.’
  • The Kalapani border dispute is a major source of friction in Indo-Nepal relations. The British established these limits in 1816, and India inherited the territory over which the British had exercised territorial sovereignty in 1947.
  • While 98 percent of the India-Nepal border has been delineated, two sections, Susta and Kalapani, remain undefined.
  • In 2019, Nepal issued a new political map claiming the Uttarakhand districts of Kalapani, Limpiyadhura, and Lipulekh, as well as the Susta region (West Champaran district, Bihar) as part of its territory.
  • Issues with the Peace and Friendship Treaty: The Nepali authorities wanted the 1950 Treaty of Peace and Friendship in 1949 in order to maintain the particular relations they had with British India and to give them with an open border and the right to work in India.

However, it is now regarded as a symptom of an unequal relationship and an Indian imposition.

  • The Demonetisation Irritant: In November 2016, India withdrawn Rs 15.44 trillion in high-value currency notes (Rs 1,000 and Rs 500). Today, almost Rs 15.3 trillion in new money has been returned. Despite this, many Nepali people who were legally entitled to Rs 25,000 in Indian money (due to the Nepali rupee’s peg to the Indian rupee) were left high and dry. India’s reluctance to accept demonetised banknotes at the Nepal Rastra Bank, as well as the uncertain status of the report presented by the Eminent Persons Group (EPG), have not improved the country’s image.

The Way Forward:

  • The objective now is to avoid territorial nationalist rhetoric and establish the framework for peaceful discourse in which both parties demonstrate sensitivity as they investigate what is realistic. For the neighbourhood first policy to take root, India must be a sympathetic and giving partner.
  • India could engage Nepal more aggressively in terms of people-to-people connections, bureaucratic interactions, and political interactions.
  • The electricity trade deal must be structured in such a way that India can gain Nepal’s trust. Despite the fact that additional renewable energy projects (solar) are being developed in India, hydropower remains the only source capable of meeting peak demand.
  • The Bilateral Investment Promotion and Protection Agreement (BIPPA) signed between India and Nepal requires more attention from Nepal.
  • India must begin implementing its projects on time. The business in charge of Arun Three will also be in charge of the 695-MWArun Four project, which will be followed by the decision to award West Seti to NHPC.


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