Saurav Raj Pant, a correspondent and columnist for Bindu-Oped, interviewed Riya Sinha, an Associate Fellow working on foreign policy and security at the Centre for Social and Economic Progress (CSEP), a think tank based in New Delhi, India. At CSEP, Riya Sinha coordinates the regional connectivity project. The interview focuses on topics such as Nepal–India relations, connectivity, geopolitics, and more. Presented below is the edited excerpt of that discussion.

1. Energy Cooperation:
How do you assess the long-term implications of the recent Nepal-India agreements on cross-border electricity trade for Nepal’s energy security and export potential?

For decades, despite its huge hydropower potential (approx. 83000 MW), Nepal remained a net importer of electricity from India to meet its domestic needs. A number of reasons for this – structural challenges, political instability, lack of investment in infrastructure, and regulatory challenges, limited Nepal’s potential to harness its rivers.

The recent India-Nepal agreement on cross-border electricity trade, under which India has committed to purchasing 10,000 MW of electricity from Nepal over the next 10 years, represents a transformative milestone. For the first time, Nepal has become a net exporter of electricity to India. This shift carries many long term implications for Nepal and for Nepal-India relations, including, revenue generation for Nepal and reducing reliance on imported electricity, leveraging this for Nepal to become a regional clean energy provider, and exploring further regional trilateral energy trade with Bangladesh and further to the east. With increasing Indian investment in Nepal’s hydropower sector, this becomes a crucial energy connectivity development between both countries, and changes the relationship to a symbiotic one.

2.⁠ ⁠Infrastructure Development:
Many connectivity projects face persistent delays and cost overruns. What are the main structural or political bottlenecks slowing down implementation on both sides?

Delays occur in different stages of project agreement and implementation – starting from the time between project identification and signing of an MoU, getting necessary approvals, to feasibility study, to land acquisition, to contractor hiring and management, and finally project completion. Political factors include, frequent political transitions, shifting governmental priorities, and high political mistrust.

That said – I think we have made major improvements when it comes to project completions, Compared to legacy projects like the Hulaki Rajmarg, which were under construction for many years, mainly due to land acquisition and contractor issues, today, India has delivered on several projects like the petroleum pipeline and the ICPs, now 3, in much shorter timeframes.

Given the historical relations and baggage, political tensions will come and go between both countries. Prime Minister Oli has still not visited India. Despite this, work on cross-border connectivity projects is ongoing. This reflects a functional relationship between both countries, where the mutual benefits of connectivity are recognized.

3.⁠ ⁠Trade Facilitation:
To what extent have improvements in transport infrastructure, such as upgraded border crossings and highways, actually reduced trade costs for Nepali exporters?

I will answer this in two part – direct cost reduction and indirect cost reduction.
First, improvements in transport infrastructure have definitely led to an increase in cross-border movement of goods. For instance, after ICP Raxaul was operationalized, the trade increased by 30%. This could either be creation of new trade and shift of trade through formal channels. Furthermore, the waiting time for trucks has reduced from 2-3 days to upto 12 hours. This reflects the benefits of improved road infrastructure, better customs procedure, and better cargo handling. Faster border clearance enables the traders to reduce the delivery time of their goods in India, leading to cost savings.

Similarly, opening the Visakhapatnam port for Nepal’s third country trade also led to faster and predictable movement of goods via rail between India and Nepal.

Second, on indirect cost reduction – the implementation of measures such as the Electronic Cargo Tracking System (ECTS) has led to a reduction in pilferage for transfer of Nepal’s cargo from Indian ports. While ECTS entails a cost to traders, the protection it provides offsets potential losses, enhancing cargo security and predictability. Such mechanisms have also led to a reduction in informal payments and rent-seeking behavior across the trade routes.

However, there is still a long way to go when it comes to trade facilitation. A lot more work is needs in terms of improving procedural efficiencies and digitization.

4.⁠ ⁠Geopolitical Balance:
Given China’s growing infrastructure investments in Nepal, do you think deeper connectivity with India risks creating a geopolitical imbalance, or does it provide needed diversification?

Depends on whose perspective you’re looking from. From a researcher’s pov, I’d argue that more opportunities for strategic diversification is good for reducing risks, provided it is managed well by the affected parties.

Nepal is a landlocked country and has been dependent on India for trade and transit. Even today, approx. 70% of Nepal’s trade is with India. Over the years, several connectivity initiatives have strengthen linkages between both countries. And most of these projects have been developed by India on a grant basis.

Comparatively, China’s projects such as the road corridors or the Kerung- Kathmandu rail, do offer Nepal additional options, but these remain slow-moving and are offered on the basis of a loan.

However, the infrastructure investment by different partners need not be a zero-sum game. It needs to be understood that deeper connectivity with India does not inherently create geopolitical imbalance. Kathmandu needs to the explore the cost-benefit options while exploring infrastructure investments from countries. And there are other partners to explore beyond India and China – Australia, the EU, etc. This is particularly important in the light of suspension of the MCC.

Ultimately, it is upto Nepal to balance these relationships. What Kathmandu needs is to strengthen institutional and bureaucratic capacity to manage these relations without creating any strategic or economic vulnerability.

5.⁠ ⁠Public Perception and Inclusivity:
How well are local communities and stakeholders consulted in these connectivity initiatives, and what risks do you see of backlash or resentment over land acquisition and environmental impacts?

This is again a mixed response when comparing who is the implementor, the type of project and the older projects vs new ones. For instance, multilateral projects such as the ones implemented by the ADB or the World Bank tend to have higher safeguards than bilateral projects when it comes to Social Impact Assessment.

Most of the disputes in infra projects arise out of land acquisition, when compensation disputes significantly delay the project. Hulaki Rajmarg was delayed in several chainages, for instance, due to protests and obstruction over fair compensation for land acquisition. Similarly, alarms were raised by local groups regarding the environmental impact of large hydropower powers. Furthermore, unless there is local buy-in, there can also be perceptions of local projects only benefitting the foreign interests that develop the projects. These issues have been common in several India-Nepal connectivity projects and have led to delays and cost overruns.

While connectivity projects can bring several benefits, one must remembers its several layers of society that gets impacted by it – from the center to the provinces to the local stakeholders. Therefore, it is upon the beneficiary government to communicate and consult, early and effectively, with the local stakeholders about the infra projects.