The initialling of the treaty, the circumstances that preceded, attended and followed it, its ratification followed by nearly immediate descent into disgrace and the limbo it has since lapsed into are part of a larger saga that has its roots in history. This saga spans several regime changes in Nepal, beginning with the Rana dispensation, followed by the brief democratic interlude that gave way to monarchic control through the Panchayat institutions and culminating eventually in multi-party democracy. It has ramifications that extend beyond hydraulic technicalities. It embraces political economy, diplomatic relations between India and Nepal, as well as larger questions of governance in South Asia. It concerns a riparian border and is therefore enmeshed as much in the skewed ‘bilateral geo-politics’ of India and Nepal as it is in the calculus of the hydro-technological establishments of both countries.
This being so, the ratification process of the Mahakali Treaty inevitably raises questions about the sociology of political and technical decision-making. It touches on the paradigms of development that dominate in both countries. It also points to the infirmities of the political arena, the subversion of stated principles and instituted protocols. In the case of Nepal, it draws attention to the gap between Parliament as the putative repository and guardian of the sovereign will, and Parliament as the venue for the final surrender of the sovereign will, through a forced consensus achieved by institutionalised corruption. It is above all a saga of gross dereliction by those invested with responsible office and a capitulation to the pressures of a more powerful neighbour.
Because of its multiple implications, a forensic scrutiny of the Mahakali episode will yield lessons of import not just to India and Nepal, but to South Asia and indeed to the entire developing world that has been subjected to ‘maldevelopment’ behind the smokescreen of ‘development’. These lessons can be usefully applied to settling resource sharing disputes, to critiquing growth and development choices that unleash distortionary effects, to evolving appropriate principles of co-operative bilateralism and multilateralism, to deepening the basis of democracy in the interest of greater transparency in matters that impinge on the lives of large numbers of people, and to the exercise of reducing the institutional and economic imbalances that enable an oligarchy of interests to seize a nation and its assets. This narration of the events that went into the making of the impasse is intended to spur such forensic studies.
Chronology of events
The story begins with a border river. In 1816, by the Sugauli Treaty with which the British brought Nepal literally down to size following the 1814-16 war, the Mahakali River (called Sarada in India) was fixed as the western boundary between Nepal and British India. But the braided southern reaches of the river as it debouches onto the plains do not lend themselves to such neat demarcations. Neither the thalweg (the line of maximum depth in a meandering flow) nor the centre-line (the line of equidistance from both banks) principle could be satisfactorily used to define the boundary. Eventually the mid-stream of the river was taken as the boundary with reference pillars on either side. The shifting nature of the river’s course led to a realignment of the boundary in 1912.
A border constituted by a commonly shared resource is one whose use must necessarily be based on bilateral agreement. But bilateralism by itself does not ensure an equitable arrangement. The Sarada Barrage, irrigating the western United Provinces (today’s Uttar Pradesh), was based on the 1920 Sarada Treaty between the Rana regime and the British India government. This treaty transferred 4000 acres on the eastern bank of the Mahakali to India to build the Sarada Barrage in exchange for 4000 acres of forested land in areas further to the east as well as Rs. 50,000 compensation for Nepal. Furthermore, the treaty allowed Nepal to withdraw 4.25 cumecs (cubic metres per second) of water in the dry season and 13 cumecs in the wet season; the wet season flow could be increased to 28.34 cumecs if water were available. What India could withdraw out of the approximately 650 cumecs average annual flow of the Mahakali was not specified. In effect, it was limited only by the scale of the technology it was able to employ. Quite apart from the under-valuation of the Sarada Barrage’s left (Nepali) bank, the question of where exactly the 4000 acres of land received from the British were located has not been satisfactorily answered at the public level in Nepal.
This inability to defend Nepal’s interests adequately was to manifest itself in the post-Rana democratic interlude of the 1950s. After a major flood in the Mahakali in 1953, India, between 1954 and 1958, extended the left afflux bund (embankment) of the Sarada Barrage about 100 m beyond the border pillar BP 6A into Nepali territory. It is not known if the Nepali government gave permission for this activity in any form. If it was an incursion, however, there is no record of a protest by the government in Kathmandu then or afterwards.
The 1950s were also the period when, to further its irrigation initiatives in the north Ganga plain, India entered into two major river treaties with Nepal’s characteristically unstable and short-term governments. These were the Kosi Agreement signed in 1954, subsequently revised in 1966, and the Gandak Treaty concluded in 1959 and amended in 1964. These treaties, and the associated projects, have had their own less than salubrious impact on Nepali polity and popular perceptions in Nepal of India as the ‘big brother’.
In December 1960, King Mahendra’s royal military take-over replaced parliamentary democracy with Panchayat institutions controlled by the Royal Palace. In 1971, Nepal began the Mahakali Irrigation Project with a loan from the World Bank to utilise its share of the waters of the Mahakali as allowed under the Sarada Treaty of 1920. Nepal’s water resource development activities had by now begun to acquire a donor-led, statist bias, precluding other private or community-based institutional possibilities. From 1985 onwards, the ministry of water resources was preoccupied with the 402 MW Arun3 project (which was later scaled down to 201 MW, and finally abandoned in August 1995 after the World Bank pulled out of it because the project was criticised for its excessive cost). The exclusive preoccupation with Arun3 had serious consequences, for it made Nepal’s water and power establishment oblivious to what was happening at Tanakpur on the Mahakali.
In 1983, India completed the technical study of a 120 MW hydroelectric project on the Mahakali River near the town of Tanakpur in Nainital District of Uttar Pradesh. Nepal raised its concerns with India regarding possible damage to Nepali land and territory, especially its Mahakali Irrigation Project. India’s planned 120 MW Tanakpur power plant would use all the waters of the Mahakali during the dry season, and empty its tailwater into the Sarada canal feeding the UP system and not into the river upstream, from which Nepal’s Mahakali Irrigation Project receives its water as per the 1920 treaty. India agreed to redesign its project and release the Mahakali water back into the river so that Nepal’s existing irrigation project would not be left high and dry. It also agreed to, and did construct, some river abutments to ameliorate bank-cutting on the Nepali side that resulted from the project’s construction. The statist bias in all of this, both in Nepal and India, is evident in the fact that amelioration measures were limited to civil engineering structures: during the construction of the barrage, the bank-cutting in Nepal from India’s diversion works affected about 80 families, which were never compensated.
The Tanakpur Barrage and powerhouse were completed in 1988, with the exception of the left afflux bund required to tie the barrage to the high ground on the left bank in Nepal. India went ahead with this project on a shared river unilaterally. But now, despite its earlier insistence that this was an Indian project on Indian territory and of no concern to Nepal, it became necessary for India to request Nepal for 577m of Nepali land for this purpose. However, at this time, relations between the two countries had deteriorated to the point of India imposing a peacetime economic blockade of Nepal in March 1989. This matter was, therefore, not pursued further.
In November 1989, with a change of government in New Delhi, the foreign ministers of the two countries were able to meet in New Delhi in January 1990. The royal regime in Kathmandu, faced with a rapidly accelerating anti-Panchayat agitation, toned down its opposition to the 1950 Treaty of Peace and Friendship with India, and agreed to India preparing a new draft treaty on mutual cooperation. To extract maximum benefit out of the political turmoil in Nepal, India put forth a draft text on 31 March 1990, which included more stringent demands on Nepal vis-à-vis Indian security concerns than did the 1950 Treaty. The new draft included Article III of Part VI “Economic, Industrial and Water Resources Co-operation”, which states:
The two Contracting Parties being equally desirous of attending complete and satisfactory utilisation of the waters of the commonly shared rivers, undertake to: (i) plan new uses or projects subject to the protection of the existing uses on the rivers; and (ii) co-operate with each other to formulate and modify the planned new uses or project taking into consideration the water requirement of the parties.
“Pervasive and long term”
On 9 April 1990, multi-party democracy was restored in Nepal even as speculation persisted that had the King acquiesced to India’s proposals of 31 March 1990 regarding the proffered Indian security umbrella, India would have helped smother the anti-Panchayat agitations. Whatever may have been the case, the fact remains that the Indian proposal was rejected and a week later the King ended the Panchayat system by royal fiat. The Tanakpur issue, till now wrapped in bureaucratic secrecy, began to unfold slowly in the public arena. The restoration of democracy furnished a new context and introduced a new set of equations. The post-Panchayat interim government, headed by Krishna Prasad Bhattarai and consisting of the Nepali Congress and the United Left Front, came under pressure from the Indian government on the construction of the left afflux bund of the Tanakpur barrage, particularly since the economic blockade had now been relaxed. Nepal’s new Constitution, promulgated on 9 November 1990, significantly, required, under Article 126, parliamentary ratification, by a two-thirds majority, of any resource-sharing agreement of “pervasive, serious and long-term nature”.
Krishna Prasad Bhattarai visited New Delhi on the invitation of Indian prime minister, V P Singh. The entourage included Sahana Pradhan, then chairperson of the United Left Front and a minister in the government. On 10 June 1990, at the conclusion of his visit, a joint communiqué that included the phrase “common rivers” and the need to expedite their development was issued. The agreement was to become an election issue in the first polls of May 1991 as an alleged example of Nepali Congress’s ‘sell-out’ to India.
Soon thereafter, the interim government did try to find a way out of the problems created by India’s unilateral construction of a barrage on a common border river. Because of the geometry of the land swapped in 1920, if India tied the afflux bund to the high ground in its territory, a significant portion of Brahmadeo Mandi in Nepal would be submerged. A technical team of Kathmandu’s water resources ministry in February 1991, recommended the variant that would cause least submergence and specified Nepal’s needs for additional irrigation in Kanchanpur District as well as for a highway connection to the Mahakali Barrage, which is the only AA class bridge over the river in that area. On 15 April 1991, the interim government authorised its negotiating team to conduct discussions with India within certain parameters, including the least harmful afflux bund variant, and provision of 1000 cusecs (cubic feet per second) of irrigation water and “some electricity” for Nepal in return for the use of 577 m of Nepali land.
Soon after, on 27 May 1991, the first general election of the post-Panchayat era led to a Nepali Congress government headed by Girija Prasad Koirala. The tempo of events quickened and the plot began to get more intricate as the decision-making complex expanded to include new, more volatile factors. Vacillations of stance and rhetoric marked the conduct of the political establishment. And through it all, the only constant factor was the steady drift towards capitulation and the acceptance of compensatory terms about which successive governments had no clarity whatsoever. The speed of the capitulation is surprising and shocking.
In June 1991, responding to the renewed Indian request for permission, the prime minister insisted that this could be granted only after a detailed study and an agreement between the two governments. In December, the prime minister visited India. Possibly because of inadequate preparation, discussion of Tanakpur seems not to have been on the agenda. Neither the water resources minister and the secretary of water resources nor any water resource experts were included in the 72-member delegation. But this absence notwithstanding and despite the prime minister’s stated position of June, expressed in the letter to his Indian counterpart, a set of last-minute agreements was in fact entered into. Apart from trade and transit and development issues, they included plans to develop major high dams in the Nepal Himalaya. This agreement, described as an ‘understanding’ and not a treaty, also allowed India the use of the requested 577 m of Nepali territory. Nepal was to receive ‘free of cost’ 10 million units of electricity as well as 150 cusecs of water for irrigation. The other water projects included in the MoU were studies of the proposed high dams of Pancheswar, Karnali Chisapani, Burhi Gandaki and Sapta Kosi. The linking of Pancheswar to Tanakpur was to be the cause of much heartburn in the days to come.
On 24 December 1991, to counter allegations of any ‘secret treaty’, the details of the agreement were published in the official Nepal Gazette. Instead of settling the matter, this raised a lot of suspicion and hackles. India had been allowed to hastily start the construction of the left afflux bund by 15 December, before the details of the ‘understanding’ had even been made public. Construction of flood protection works was stated, in what obviously was a hasty ‘typo’, to start in November 1991 even before the ‘understanding’ was initialled in Delhi. And the newspaper reports and gazetted notices continued to confuse 10 million units (Kilowatt hours) of electricity with 10 Megawatts of power, confusing further the debate about what Nepal had actually received for allowing its left bank to be used for the Tanakpur project.
Treaty or understanding
In December 1991, a writ filed in the Supreme Court pleaded for the ‘understanding’ to be declared a treaty requiring ratification by a two-thirds majority in Parliament. On 28 February 1991, during the winter session of Parliament, the opposition United Marxist Leninist (UML) gheraoed the rostrum of the Lower House for eight hours and obstructed proceedings in a bid to force the government to table before the House all documents related to the Tanakpur ‘treaty’. The treasury bench, on the other hand, maintained that what had been reached was only an ‘understanding’ and that all related materials had already been published. A 19-member all-party special committee of Parliament was formed to try and find a consensus. Street agitation against the treaty dominated national politics and newspapers for months.
Despite extensive meetings and consultations with government and external specialists, the committee was unable to reach a consensus. It eventually presented three different reports to the Lower House in September 1992. In a memorandum submitted to the chairman of the Upper House dated 9 September 1992, eight communist factions (including the UML, Unity Centre, United and the Masal) stated that the Tanakpur ‘understanding’ was a treaty requiring parliamentary ratification by special majority. They argued that it was wrong to link the Pancheswar Project with Tanakpur, since the former was a separate project requiring a separate treaty.
The 1991 ‘understanding’ was ambiguous about the 150 cusecs of water that Nepal was to receive from the Tanakpur barrage. This provision seemed to limit Nepal’s share of water from the Mahakali River to a maximum of 1000 cusecs, inclusive of the replacement flow that Nepal would receive if the Sarada Barrage were to become non-functional. It was interpreted that this flow would be made available after the modification of the Mahakali’s flow on the completion of the Panches-war project. This was seen as an imposition of unilateral solutions on a resource having features of shared ownership.
In October 1992, India’s prime minister Narasimha Rao, on a state visit to Nepal, renegotiated the Tanakpur ‘understanding’. The quantum of electricity that Nepal was to receive from the project “free of cost” was raised from 10 to 20 million units. Future upstream water developments, such as the Pancheswar Multipurpose Project, were disassociated from the agreement on Tanakpur with the provision that both countries were free to negotiate upstream projects independent of whatever was agreed to at Tanakpur.
On 15 December 1992, the Supreme Court of Nepal decided that the Tanakpur agreement was indeed a treaty and not just an ‘understanding’, and hence required parliamentary ratification. The Court, however, refrained from specifying whether the ratification required a simple or special majority. This matter was left for Parliament to decide.
A month after the Supreme Court decision, the government constituted the Baral Commission to evaluate the impact of the agreement. The committee fixed six criteria to define whether the agreement and the associated river development initiatives constituted “pervasive, serious and long-term” issues. The definition would apply if:
(a) a single treaty were made regarding the use of several different river basins of Nepal;
(b) a treaty were made for an entire river basin;
(c) storage projects have capacity greater than 1,000 MW or a capacity factor less than 0.3 (capacity factor is the real time operation of a plant in a given period as a proportion of its projected potential capacity);
(d) projects costs are large compared to economic indicators such as annual GDP, or involve sovereign loans which would have to be paid back not just by the generation making the decision but by future generations or which would be difficult to pay given the state of the economy; and
(e) projects entail large reservoirs requiring resettlement which are difficult to handle within Nepal’s finances, land availability, etc.
But would not apply for
(f) run-of-river hydroelectric projects (with no water storage).
Based on these criteria, the Baral Commission concluded that the Tanakpur Agreement was of a simple nature and not a “pervasive, serious and longterm” one.
The government then moved to present what was by then the ‘Tanakpur Treaty’ to Parliament as one requiring ratification by simple majority. Parliament was not consulted for the purpose of building a ‘national consensus’, nor had it approved any criteria. A meeting of the parliamentary committee of the Nepali Congress was called just before the matter was to come before Parliament. The Nepali Congress ‘supreme leader’ Ganesh Man Singh refused to attend the meeting and wrote a letter to the chairman of the party on 8 March 1992, declaring, “Passing the Tanakpur Treaty by a simple majority of the Lower House would be the equivalent of signing a death warrant.“
Like the Supreme Court’s decision, Ganesh Man Singh’s letter, which came popularly to be called a “letter bomb”, skirted the difficult but germane issue of defining the criteria for calling Tanakpur Treaty a “pervasive, serious and long-term” matter. Given the play of factional politics in the Nepali Congress, the letter effectively derailed any chance of the issue being resolved politically in Parliament through an initiative from the prime minister. It was thus left to hang in imbo.
In December 1993, the Indian water resources minister, V C Shukla visited Nepal and secured from the government an ‘action plan’ for proceeding with the implementation of the Tanakpur agreement even though the main treaty had yet to be approved by Parliament. One of the principles enunciated on this visit, that the “water needs of Nepal will be given primacy”, was to find itself invoked in the national consensus document signed by senior functionaries of major Nepali political parties just before the signing of the Mahakali Treaty, and in subsequent discussions about Nepal’s benefits from the Treaty.
In July 1994, the Koirala government fell and the mid-term general elections held in November 1994 resulted in a hung Parliament. The United Marxist and Leninist (UML), which had vociferously opposed the Tanakpur Agreement, emerged as the single largest party and formed, on 9 December, a minority government. In the heat of the election campaign, the UML had called for renegotiating the Tanakpur Agreement, but India saw no reason why it should respond to the hype generated by the Nepali opposition leaders. To resolve the impasse, the UML government, ostensibly after receiving signals from the Communist Party of India (Marxist), put forward a ‘package deal’ in April 1995. This plan proposed increasing the quantum of electricity and water to be made available to Nepal, but Nepal would concede to the construction of a massive (315-metre-high, 6,480 MW) storage dam at Pancheswar in the mountains upstream of the Tanakpur Barrage on the Mahakali River. It was this very linkage of the Tanakpur Barrage with the Pancheswar that the UML had previously opposed, and whose disassociation was secured with so much effort during prime minister Narasimha Rao’s visit to Nepal in October 1992.
Pancheswar was a dam that India had wanted for over two decades but in which Nepal had not shown much interest because of its smaller requirement of water and power. There was also a lack of clarity from the Indian side regarding the purchase price of power as well as the valuation of irrigation benefits and India’s security concerns over the control of the dam that would have compromised Nepal’s sovereignty. The minority UML government, however, was not able to push its ‘package deal’ through because of internal differences about its implications, the details of which were not made public.
The nine-month-old minority UML government was unable to continue in office and was replaced by a three-party coalition of the Nepali Congress, the Rashtriya Prajatantra Party (made up of Panchayat-period politicians) and the Tarai-based Sadbhawana Party. The coalition was headed by Sher Bahadur Deuba of the Nepali Congress. By now, “Tanakpur fatigue” had overtaken all parties and Nepali politicians were too embroiled in infighting among parties and groups for perks and privileges to worry about long-term interests.
During November and December 1995, in what came to be known as the “Pajero scandal”, the Deuba government allowed MPs initially, and later senior bureaucrats and judges, the privilege of importing luxury vehicles duty-free without declaring their source of income. Only a handful of MPs did not avail this privilege, and an even smaller number openly criticised the government’s move, which was seen as institutionalising corruption and as buying parliamentary votes. This institutionalisation of corruption among senior state functionaries may or may not have had something to do with what was to transpire.
Soon thereafter, on 26 January 1996, just before the arrival of Indian foreign minister Pranab Mukherjee, at a meeting called with two representatives each of the three major parties—the Nepali Congress, the UML and the RPP—a document called the “National Consensus on the Use of the Waters of the Mahakali River” was signed. This so-called consensus by-passed parliament and its committees. Smaller parties and dissenting factions within the major parties were excluded. The document basically furthered the earlier UML-proposed ‘package deal’ on the Mahakali. The members who put their signature on the so-called ‘national consensus’ were Madhav Kumar Nepal and Khadga Prasad Oli of the UML, Prakash Chandra Lohani (then foreign minister) and Pashupati Shumshere Rana (then water resources minister) of the RPP, and Chiranjivi Wagle and Bimalendra Nidhi of the Nepali Congress. The consensus document specified the following provisions:
Regarding Tanakpur Barrage:
a) make efforts to secure additional water (more than the existing 150 cusecs) from the Tanakpur Barrage; and
b) secure free of cost up to 50 percent of electricity generated per year by the Tanakpur Barrage.
Regarding Sarada Canal:
If the Sarada Canal becomes non-operational, the quantity of water to be made available to Nepal to be supplied from the Tanakpur Barrage. India should provide water from Sarada Canal to irrigate the Dodhara-Chandani area in Nepal, west of the Mahakali river.
Regarding Pancheswar Project:
Secure the national interest of both countries in terms of utilising the border river water. In consonance with this fact, the project will be based on the following principles:
a) establish equal capacity power houses in both countries;
b) arrange equal utilisation of water by both countries to operate these powerhouses;
c) arrange to bear the cost in proportion to the benefit acquired from the project;
d) apply the principle of maximum net benefit while implementing other projects that use the border river water, including Pancheswar; and
e) ensure that both countries seek consensus on using the water of the Mahakali River.
a) accord priority to Nepal’s needs in the utilisation of water; and
b) analyse the available benefits in terms of electricity and energy, irrigation and flood control to both countries and bear the cost of the project in proportion to the benefit acquired.
The treaty is signed
On 29 January 1996, the Foreign Ministers of Nepal and India, Prakash Chandra Lohani and Pranab Mukherjee, respectively, signed the “Treaty concerning the Integrated Development of the Mahakali River, including Sarada Barrage, Tanakpur Barrage and Pancheswar Project”. The Indian foreign minister had reached Nepal on 27 January and flew home with the agreement on the 30th. History had repeated itself. Three decades earlier, Indian minister Gulzarilal Nanda too had managed to walk away with the Kosi treaty in all of three days.
The Mahakali Treaty extracts Nepal’s consent for the Pancheswar High Dam, which would generate nine billion units of electricity, to be consumed mostly by India. It provides 50 million units of electricity to Nepal from the Tanakpur Powerhouse over and above the 20 million agreed in October 1992. It provides water for irrigation from the Tanakpur Barrage as well as protects the environmental needs below the Sarada Barrage. The real problem arose after the implications of its clauses began to sink in. Clause 3 of the Treaty states that “… both the parties agree that they have equal entitlement in the utilisation of the waters of the Mahakali rivers without prejudice to their respective existing consumptive uses of the waters of the Mahakali river.” The water-sharing provision was further qualified by Clause 3 of the letters exchanged with the Treaty, which said, “It is understood that Paragraph 3 of Clause 3 of the Treaty precludes the claim, in any form, by either party on the unutilised portion of the shares of the waters of the Mahakali River of that Party without affecting the provision of the withdrawal of the respective shares of the waters of the Mahakali River by each party under this Treaty.” In terms of benefit-sharing, Paragraph 3 of Clause 3 of the Treaty made the following provision, “The cost of the project shall be borne by the Parties in proportion to the benefits accruing to them…” The treaty, significantly, does not mention India’s water share.
The agreement was clearly and without doubt of a “pervasive, serious and long-term” nature and needed ratification by two-thirds majority of Parliament. It also became clear that Article 3 of the treaty, as well as Clause 3 of the accompanying Lohani-Mukherjee exchange of letters, had compromised Nepal’s rights to a 50 percent share of the waters of a border river. The wording of the clause is such that if Nepal does not use its equal entitlement of water of the border river and allows it to flow downstream, she cannot trade or claim financial or other benefits from this unused portion of its rights.
During the visit to India of prime minister Sher Bahadur Deuba on 12 February 1996, the prime ministers of Nepal and India re-initialled the treaty. A day later, on 13 February 1996, the Communist Party of Nepal (Maoist) led by Puspa Kamal Dahal (Comrade Prachanda) and the United Peoples’ Front led by Baburam Bhattarai declared the Maoist ‘people’s war’, which has by now taken more lives than most past revolutions in Nepal. Among their many demands was, and is, the abrogation of the unequal treaty on the Mahakali.
On 17 February, India and Nepal signed an umbrella ‘agreement’ concerning the electric power trade which allows any governmental, semi-governmental or private enterprise in Nepal or India to develop hydropower sites and to buy and sell power to each other. It thereby essentially marginalises the role of governments, especially Nepal’s government. Simultaneously, in Bombay, Nepal’s minister of water resources, Pashupati Shumshere Rana, solicited foreign investment to develop the country’s water resources thus: “In a range of 100 identified projects, you can take your pick from the shelf whether you want a 10 MW or a 10,000 MW project.”
Public debate in Nepal began to heat up in the days leading up to the parliamentary vote on the Mahakali Treaty. The left and right parties were particularly strident. There was, however, practically no debate or discussion within the centrist Nepali Congress that had, since coming to power in 1991, jettisoned the principles of ‘democratic socialism’ in favour of economic liberalism. There was, instead, only a high profile defence of the treaty by foreign minister Prakash Chandra Lohani, of the RPP. According to him, “there was some disagreement on the saving that would be achieved when hydropower displaced coal. Agreeing to share the profit on a 50-50 basis solved the disagreement.” He went on to add, “it is for the first time in history that pricing has been fixed on the principle of saving in cost.”
Two weeks after the treaty was initialled, the Central Committee of the UML formed a working group, called the Oli Commission, to study the treaty and its implications. On 2 September, the Oli Commission presented its report to UML’s secretary general. Among the flaws reported (for the first time) was the presence of Indian troops at Kalapani in Nepal near the headwaters of the Mahakali. In terms of the seriousness of matters pertaining to Nepal-India relations, the issue of Kalapani subsequently overshadowed the Pancheswar High Dam issue. The report virtually split this main opposition party (without whose votes the treaty would not muster the required two-thirds majority in Parliament) into two—the majority ‘Bolsheviks’ who felt that the treaty should be ratified first and the negative points taken care of during the preparation of the Detailed Project Report (DPR) of the high dam project, and the minority Mensheviks who argued the treaty should not be ratified until all the flaws had been cleared up with India. The “Mensheviks” later broke away to form the Marxist-Leninist (ML) faction.
On 20 August 1996, Pashupati Shumshere Rana tabled the Mahakali Treaty for parliamentary discussion and ratification. In what was widely seen as an effort to pressurise the UML into ratifying the Mahakali Treaty, the British minister of State for Parliamentary Affairs, Liam Fox and the US assistant secretary of State for South Asia, Robin Raphael hinted during their visits to Nepal around 26 August 1996, that non-ratification of the Mahakali Treaty would send a wrong signal, and drive away private international investments in Nepal.
The distress sale
At the penultimate moment before the parliamentary vote for ratification, the central committee of the UML approved by 17 votes to 16 to ratify the treaty. The chairman of the party, former prime minister Man Mohan Adhikari, who had spoken out against the treaty, claimed indisposition, and a temporary replacement chosen by the General Secretary Madhav Kumar Nepal, voted in favour of ratification. The party’s “Mensheviks” called this a “counterfeit majority”. Students ransacked the UML parliamentary party office and locked up the leaders, who had to be rescued by the police. There was an attempt by small parties opposed to the treaty to encircle Parliament but police action, and the arrest of some opposition politicians, including the Panchayat-period prime minister, Kirti Nidhi Bista, prevented this from happening.
The drama outside Parliament was matched by the drama inside. Discussions in Parliament mainly focussed on the status of the river, the presence of Indian troops in the disputed upstream territory of Kalapani, the issue of water rights, and the selling price of electricity. Differences also persisted on the interpretation of the clauses of the treaty, particularly Clause 3. According to the government’s interpretation, “Clause 3 means that both countries have equal rights to the water of the Mahakali and not equal rights to the water remaining after accounting for existing uses.” On 20 September 1996, the Mahakali Treaty was ratified close to midnight by a majority of more than two-thirds of the joint Upper and Lower houses of the Nepali Parliament.
But that was not all. Before the Treaty was ratified, Parliament unanimously passed a stricture (sankalpa prastav) on the Treaty, which is binding on the Nepali government. The four elements of the stricture are:
(1) Nepal’s electricity bought by India will be sold as per the ‘avoided cost’ principle;
(2) When the Mahakali Commission is constituted, it will be done only upon agreement by the main opposition party in Parliament as well as by parties recognised as national parties;
(3) “Equal entitlement in the utilisation of the waters of the Mahakali River without prejudice to their respective existing consumptive uses of the Mahakali River” means equal rights to all the waters of the Mahakali; and
(4) Saying that “Mahakali is a boundary river on major stretches between the two countries” is the same as saying it is “basically a border river”.
The unanimous passage of this stricture essentially meant that the treaty had been given conditional ratification. According to those who favoured ratification, the provisions of the parliamentary strictures and the defects of the treaty, would be taken care of during the preparation of the detailed project report (DPR) of the Pancheswar High Dam Project, which was to be prepared within six months of the treaty coming into force. But what exactly the DPR is and when and how it should be completed were and still are points of intense debate.
Because the treaty had been passed with a unanimous parliamentary stricture, Parliament on 10 October 1996 constituted a joint parliamentary committee to monitor the Mahakali Treaty. There were 10 members from different parties in the committee, which was chaired by the speaker. Like the previous all-party parliamentary committee on Tanakpur, this committee too, was unable to provide any guidance. The members visited the site and came back as confused as before. To add to their worries, India’s Joint Secretary of Water Resources, responding to questions from Nepali journalists regarding the sankalpa prastav, said that India was not concerned with what such prastavs say. Instead, India was concerned with only the wording of the treaty itself. The much heralded statements by political leaders that all defects in the treaty would be taken care of during the preparation of the DPR and that India had agreed to do so were thus proved wrong.
Even as the two governments remained unable to prepare the DPR of the Pancheswar Project, an Indian team visited Nepal from 7 to 9 January 1997. During the visit, the Deuba government signed a memorandum of understanding with India to study the Kosi High Dam and Sunkosi Kamala diversion projects. This agreement allowed for the establishment of liaison offices in Nepal by India for the purpose of preparing these projects, and committed Nepal to providing data to India on its water projects within the area from Birganj to Biratnagar inside of a month without India reciprocating along the same lines.
The MoU also included provisions that were included in the Mahakali Treaty and Clause 3(4) stated that “power benefits shall be assessed on the basis of, inter alia, saving in cost to the beneficiaries as compared with relevant alternative available”. The signing of this MoU to build a high dam was regarded by the Nepali Congress MPs representing constituencies from the regions involved, as heralding a new era of Green Revolution in the region lying east of Birganj and west of the Kosi. It gradually became clear later that the MoU was signed at Indian behest more to placate Bihari grievances following the signing of the Farakka Treaty to share Ganga water whose provisions had greatly upset the establishment there.
The response of the Nepali government, indulging in the indiscriminate signing of agreements and MoUs, has to be understood in terms of the hype of water-led development in the mainstream political parties. Nepali party functionaries fear political allegations that a project, any project, is not moving forward due to their action or inaction regardless of the technical, economic or developmental demerits of such projects. Hence they prefer to be seen ‘for’ projects rather than against them even if they have little to do with Nepal’s development requirements. In line with this kind of thinking and in order to be seen as promoting water resources development, the Deuba government continued its ‘distress sale’ approach to large-scale water resources development.
At the end of February 1997, the centre-right Deuba government collapsed and was replaced by an incongruous right-left coalition. Lokendra Bahadur Chand of the RPP became prime minister on 3 March 1997, leading a coalition of ex-Panchas and the communist UML. This government exchanged the instruments of ratification of the Mahakali Treaty with the Indian government on 4 June 1997, during the visit of prime minister Indra Kumar Gujral to Kathmandu. The exchanged instrument did not include the provisions of the sankalpa prastav. The last prime minister of the Panchayat period, Marich Man Singh Shrestha, broke his long silence and accused the government of caving in before India, and claimed that his government had rejected the Mahakali Project proposed by India because of the border problem at the headwaters. He further claimed India had imposed the economic blockade of 1989 because of his government’s nationalistic stance regarding Tinkar (Kalapani) and the Mahakali river.
The treaty’s troubles were to continue. By September 1997, the preparation of the DPR for the Pancheswar Multipurpose Project ran into deep trouble after the proposal for water-sharing put forth by an Indian technical team became known. Highly placed government sources who participated in the meeting of a joint group of experts reported that during the talks, India came forward with an altogether new and unheard of proposal which stunned the Nepali technicians. Their proposal was that the Mahakali waters should be shared only after ensuring that the flow of water to the canal of the lower Sarada Project, situated about 160 km downstream from the Sarada Barrage at the Nepal-India border, was assured prior use. In fact, India made prior rights claims based on the size of its canals (built without Nepal’s co-operation or concurrence), which amounts to more water than there is in the river itself.
The 1994 report by Electricity Development Centre of Nepal had presented a schedule of existing consumptive use in Sarada Command. The average of these uses would be 449 cumec. The water use claimed in January, February, March and April is more than the actual flow available in the river. India thus used Clause 3 of the Mahakali Treaty to its advantage as had been expected by many when the treaty was first initialled.
What the likely existing consumptive use India would claim under the treaty remained unanswered when the treaty was signed and remains so even today. Because the treaty was signed hastily before a scientific DPR had been prepared, several scenarios depending upon use and assumption are plausible, each of which would present a different regime of sharing (see Table). Nepal could be receiving anywhere from 4 to 40 percent of the share, depending on which interpretation is invoked. Had a thorough scientific study first been done before the treaty was concluded, such ambiguities would not have surfaced to bedevil bilateral relationship.
The way forward
The result of the convoluted trajectory of events and the accumulated misgivings of Nepal is that the euphoria that existed at the time of the signing of the Mahakali Treaty in 1996 has completely evaporated. Impasse it is, and the issue of Tanakpur Barrage and Mahakali Treaty is dramatically bracketed between the first visit of Prime Minister Girija Prasad Koirala in December 1991 which saw furious opposition in Nepal and his second visit of July 2000, which raised no hackles. What learning curve has or has not been traversed, by all concerned, in these 10 years is worth reflecting upon. But that is a separate exercise.
At a more immediate, prescriptive level, the resolution of the Mahakali impasse requires initiatives that manage to rise above partisan interests. If Nepal is to realise that objective, there are certain fundamentals that must be addressed. To begin with, Nepalis should stop reflexively blaming the Indians, who are only taking advantage of an attractive bargain offered by Nepalis who do not do the necessary homework.
Ironically, the homework that should have been done before the treaty was formalised, has not been done even five year after it was signed and ratified. Unless this is done there is little scope for taking advantage of Clause 12(3) of the treaty, which allows for a review of the treaty: “This treaty shall be reviewed by both the parties at 10 years interval or earlier as required by either party and make amendment thereto if necessary.”
As part of this exercise Nepal must first arrive at a consensus on the criteria for defining what is a “pervasive, serious and long-term” issue as per its Constitution, since all resource-sharing agreements, whether bilateral or multilateral will require clarity on this matter. Otherwise, the Tanakpur-Mahakali kind of unworkable formula will merely be exported into future projects of a similar nature.
But there cannot be a way out unless there is also a change of perspective in India’s approach. India’s victory in wresting the Mahakali Treaty from the cantankerous Nepali political class has been pyrrhic. Agreements wrested under duress from a small country may possibly fetch some short-term gain, but, as Mahakali has shown, nothing will really move forward in the long term. And even if it does, the social and political costs may make the victory too expensive.
There must also be a more sagacious recognition of the realities of the water situation in the region where requirements on the ground in India and Nepal are quite different from those projected by the construction-oriented water bureaucracies. Inevitably, this calls for an urgent and credible review of past projects, a task that is made more difficult by the colossal vested interests built into the political economy of development-construction in India. This calls for greater effort on the part of Indian activists who question the very paradigm of development that gives rise to such interests which hijack the developmental agenda. But in the case of the Mahakali, even such activists have been found wanting, for what they explicitly reject as a developmental choice for India, they either endorse or are indifferent to when it comes to Nepal.
The situation can be redeemed only through farsighted statesmanship and that clearly is something that has to be learned by all concerned—in both countries—be they of the bureaucracy, the political establishment or civil society.