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Pancheshwar Multipurpose Project

Why is it in the news?

  • Despite recent high-level meetings between India and Nepal, consensus on sharing the benefits of the Pancheshwar project remains elusive.

About Pancheshwar Multipurpose Project (PMP)

  • PMP is a significant bilateral hydropower initiative between Nepal and India, situated on the Mahakali River which forms the border between the two countries.
  • It is governed by the integrated Mahakali Treaty signed in 1996, symbolizing mutual cooperation in utilizing shared water resources for development.
  • The primary objective of PMP is to generate approximately 6,480 MW of electricity, with equal shares for both countries, promoting energy security and economic growth.
  • Additionally, the project aims to facilitate irrigation across a substantial land area, targeting 130,000 hectares in Nepal and 240,000 hectares in India, fostering agricultural productivity and rural development.

Areas of Differences

  • Disagreements arise primarily concerning the distribution of benefits. While electricity generation is to be shared equally, India receives a larger portion of irrigation and flood control advantages.
  • Nepal perceives water as a valuable resource, often referred to as ‘white gold,’ and advocates for compensation from India for its utilization.
  • India, however, resists this notion, fearing that such a precedent could challenge established principles in other water-sharing agreements, such as the Indus Waters Treaty with Pakistan.
Overview of India – Nepal Relations

·       Shared Border: Nepal shares a border of over 1,850 km with five Indian states, including Sikkim, West Bengal, Bihar, Uttar Pradesh, and Uttarakhand.

·       Transportation Dependence: Landlocked Nepal heavily relies on India for the transportation of goods and services, with access to the sea facilitated through India.

·       India-Nepal Treaty of Peace and Friendship: Signed in 1950, this treaty serves as the foundation of the special relations between India and Nepal, ensuring Nepalese citizens access facilities and opportunities on par with Indian citizens.

·       Defence Cooperation:

1) India assists in the modernization of the Nepal Army (NA) by supplying equipment and providing training.

2) Joint Military Exercise SURYA KIRAN is conducted alternately in both countries.

3) Additionally, honorary ranks of General are exchanged between the two countries’ Army Chiefs since 1950.

·       Recruitment: Gorkha regiments of the Indian Army are partially raised from hill districts of Nepal.

·       Connectivity and Development Partnership: India supports Nepal in developing border infrastructure, including upgrading roads in the Terai area, establishing cross-border rail links, and setting up Integrated Check Posts.

·       Water Resources Cooperation: Cooperation in managing water resources from common rivers is vital in bilateral relations, supported by a three-tier bilateral mechanism established in 2008.

·       Energy Cooperation: Since 1971, India and Nepal have a Power Exchange Agreement to meet the power requirements at the border, with India currently supplying about 600 MW of power to Nepal.

·       Trade and Economic Relations: India is Nepal’s largest trade partner, while Nepal ranks as India’s 11th largest export destination. In FY 2021-22, Nepal constituted 2.34% of India’s exports, with exports from India contributing almost 22% to Nepal’s GDP.

·       Mahakali River Bridge: A Memorandum of Understanding (MoU) was signed between India and Nepal for the construction of a motorable bridge across the Mahakali River, connecting Dharchula (India) with Darchula (Nepal), with Indian grant assistance.

·       Operation Maitri : Following the 2015 earthquake in Nepal, the Government of India conducted Operation Maitri, its largest disaster relief operation abroad, providing significant assistance in post-earthquake reconstruction.

·       Cultural Ties: The relationship between India and Nepal is strengthened by cultural bonds, including the age-old ‘roti beti’ relationship, which refers to cross-border marriages between the two countries’ people.

Issues between India & Nepal

·       Treaty of Peace and Friendship of 1950: Initially aimed to strengthen ties and perpetuate peace between Nepal and India, but over time, Nepal perceived it as incompatible with national self-respect.

·       Kalapani Dispute: Nepal claims the Kalapani region, currently under India’s control, citing historical and cartographic reasons. This dispute encompasses at least 37,000 hectares of land in the High Himalayas, representing a significant territorial disagreement between the two nations.

·       Susta Border Dispute: Susta is a contested territory administered by India as part of West Champaran district in Bihar. Nepal claims Susta as part of West Nawalparasi District under Susta rural municipality, alleging over 14,860 hectares of Nepali land have been encroached upon by India.

·       Political Interference: Nepal has accused India of interfering in its internal political affairs, particularly during periods of political instability or transition, leading to strained relations at times.

·       Security Concerns: Both India and Nepal share security concerns, including issues related to cross-border terrorism, trafficking, and border security, necessitating collaborative efforts to address common challenges.

·       Perception of Unequal Relationship: Some segments of Nepalese society feel that the relationship with India is unequal, alleging economic dependence and a lack of reciprocity in the bilateral relationship, contributing to tensions and grievances.


·       The initiation of the Pancheshwar project necessitates political consensus and administrative foresight from both India and Nepal, a consensus that has yet to materialize.

·       Despite prevailing challenges and disputes, the historical ties between the two nations remain robust, as evidenced by ongoing dialogue and diplomatic engagements.

·       Recognizing the significance of their relationship, both countries are dedicated to resolving differences through mutual dialogue and cooperation, fostering friendship and mutual benefit for their respective populations.


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