In Nepal, maintaining the momentum

In his second visit to Nepal, Narendra Modi will face a tricky and polarised political environment.

In a few days, Prime Minister Narendra Modi will be in Nepal, his second time in a short span. Though this visit is for the South Asian Association for Regional Cooperation (SAARC) summit, it is the bilateral relationship and meetings with the Nepali leaders that will attract greater media attention. The reason is simple — his first visit was hugely successful which makes it a difficult act to repeat. Second, with the deadline for completing the Constitution-drafting exercise coming closer (January 22, 2015), the domestic political environment is becoming increasingly polarised. At such moments, India is often first invited to play the role of peacemaker and then blamed for interfering in Nepal’s internal affairs.

Mr. Modi’s visit to Nepal in August, early in his tenure, was the first by an Indian Prime Minister after a gap of 17 years. It was a signal that Nepal would get more high-level political attention in Delhi than it had so far. Second, his speech at the Constituent Assembly (CA) was a masterful exercise in touching all the issues that have troubled the India-Nepal relationship over years, and in striking the right notes. He spoke about respecting Nepali sovereignty and reiterated his readiness to revise the contentious 1950 Treaty in line with Nepali wishes, offering encouragement to the Constitution-drafting exercise. He wisely refrained from anything more, while expressing support for a federal, democratic Nepali republic but steering clear of the “secular versus Hindu rashtra” debate, speaking about the cultural and religious ties but without bringing in the Madhesi linkages and promising accelerated cooperation and generous terms for Nepal’s power exports to India. Even though the earlier $250 million line of credit was yet to be exhausted, a generous new line of credit of a billion dollars was announced.

Focus on development

Positive momentum generated by the visit was sustained: the two governments signed a Power Trade Agreement (PTA) while GMR also concluded a Project Development Agreement (PDA) regarding a 900 MW hydel project on Upper Karnali. Much work needs to be done on both before either can be operationalised, but their conclusion, after being held up for years, showed that both governments are keen to move forward. Out of the 28 survey licences granted to private entities over the last decade, amounting to a total of 8,000 MW, GMR was the first to conclude a PDA. Nepal has an installed hydel capacity of 700 MW with an annual shortfall of 450 MW which is only partially made up through imports from India, leading to power cuts of more than 14 hours a day in the dry season. Despite a technically feasible and economically viable proven potential of more than 40,000 MW, development of the hydel sector has remained politically blocked. It is expected that during Mr. Modi’s visit, the Satluj Jal Vidyut Nigam (SJVN) Limited will also sign a PDA for the 900 MW Arun III project.

While hydel projects will take years to come on stream, these developments have generated optimism. Three new international airports at Nijgadh (near Kathmandu), Pokhara and Bhairahawa (to service Lumbini) are being planned. A new Kathmandu-Terai highway is being fast-tracked along with the Kathmandu-Hetauda tunnel project. Nepal’s Planning Commission has pointed out that in order to graduate from a ‘Least Developed Country’ to a ‘Developing Country’ by 2022, Nepal would need an investment of nearly $100 billion in infrastructure, of which more than two-thirds will have to come from private sector and multilateral institutions. The Asian Development Bank (ADB) and the International Finance Corporation (IFC) plan to issue long-term bonds amounting to a billion dollars each in local currency in order to provide greater depth to the capital market. There is talk about the need to create a new financial institution to undertake infrastructure financing. While all the buzz is not due to Mr. Modi’s first visit, it certainly added to it because Nepal felt that India was politically engaged, with a new decisive leader at the helm of affairs.

Quicksand of Nepali politics

Wanting to build up on his successful visit in August, Mr. Modi had wanted to visit Janakpur (site of the historic Janaki Mandir), Lumbini (birthplace of Gautam Buddha) and Muktinath (Vishnu temple), in addition to the SAARC engagements in Kathmandu. Janakpur borders Sitamarhi (Bihar) in India and Lumbini is barely 22 km from the Indian border. At both sites, Mr. Modi sought to address public gatherings which would have attracted huge numbers, including from Indian border towns and villages. Initiatives regarding border connectivity, the tourism potential of the Ayodhya-Janakpur circuit and the Lumbini-Bodhgaya-Sarnath circuit, and development of irrigation in the Terai which is the breadbasket of Nepal would have resonated with the audience and presented Mr. Modi as the tallest leader in the region. This evidently made Nepali political leaders uneasy. Nepal’s government has therefore cited security concerns to turn down the idea of public gatherings, proposing civic receptions instead where Nepali leaders would share the platform and Mr. Modi’s interaction would be limited to (selected) local community leaders.

The key reason is the deep-rooted suspicion about the Indian agenda which surfaces time and again, particularly when domestic politics deteriorates into a polarising slugfest. The Constitutional Political Dialogue and Consensus Committee (CPDCC) chaired by Maoist leader Dr. Baburam Bhattarai and mandated by the CA to resolve disputed issues is at an impasse. Sensing a hardening of positions all around on the issue of ‘federalism’, Mr. Bhattarai has threatened to quit more than once. Meanwhile the coalition government (Nepali Congress or NC, UML and Rastriya Prajatantra Party or RPP) that enjoys a two-thirds majority in the CA has said that it will push its proposal for a federal Nepal with seven provinces to a vote, if there is no consensus. Maoists resent this brinkmanship and would like to tap into Madhesi resentment who are unhappy about the fact that not only are they being presented with a divided Madhes but the districts containing the Kosi, Gandak and Karnali river basins have been excluded from the two Madhesi provinces proposed.

The ruling coalition parties (NC, UML and RPP) have traditionally been dominated by the pahadi Bahuns and Chettris who have little sympathy for federalism, a demand associated with Maoists and Madhesis. Both these groups have fractured: from three parties in 2007, Madhesis now have over a dozen and the ruling coalition could well tempt some with offers of ministerial positions. Maoist leader Pushpa Kamal Dahal Prachanda is desperate, looking for a role after the new Constitution is promulgated and ready to play spoiler in the bargain. Mr. Prachanda’s hold weakened when his colleague Dr. Bhattarai became the Prime Minister in 2011 and the hard line faction led by Mohan Baidya split. The Baidya group is again in the throes of a split with Netra Bikram Chand wanting to adopt a more aggressive position. Mr. Prachanda is eyeing this with interest as it might open the way to get a weakened Mr. Baidya back into the fold, thereby increasing his strength vis-à-vis Mr. Bhattarai.

Mr. Prachanda is not alone in his manoeuvrings for a role after the Constitution is concluded. While the CA will continue till 2017 (it was elected for a four-year term in 2013), the positions of president, vice-president and prime minister will open up. Prime Minister Sushil Koirala has announced that he will step down once the task of Constitution drafting is completed. Leaders within the NC and UML are also positioning themselves accordingly.

Under such circumstances, if the Constitution is pushed through with a two-thirds majority, it can lead to the alienation of large sections of the population. The Madhesis would feel let down by India and the Janjati groups would gravitate to hard line Maoist positions. The challenge is therefore to develop a broader consensus than rely on two thirds. In the past, faced with such deadlines, the political leaders would just kick the ball further down the road and extend the deadline. But this has been done too often and the Nepali people are getting impatient. They want the Constitution so that they can get on with the economic agenda.

Modi’s challenge

Mr. Modi will face a tricky and polarised political environment in Nepal this time. He will have to draw a fine line in terms of remaining politically engaged with all groups and yet keep the focus on the economic issues where he can promise, and should ensure, quick delivery. He will need to convey the convergence of interests between the people of the two countries while being generous to Nepal. He will need to reassure India’s friends without appearing to promote their interests. He will need to go beyond what he said last time and still expand on the positive sentiment generated in August. He will need to adopt an open style of diplomacy so that, in a break from the past, Nepali nationalism is not reduced to anti-Indianism.

(Rakesh Sood, the Prime Minister’s Special Envoy for Disarmament and Non-Proliferation till May 2014, is a former Ambassador to Nepal. E-mail: rakeshsood2001@yahoo.com)