Nepal informs India on Small Development Projects – No renewal now

Nepal Foreign Affairs (KATHMANDU, 5 August 2017) –  The agreement between Nepal and India on the Small Development Project undertaken by the government of India expired on Saturday. Nepal government should have taken decision on Friday whether or not to extend the deadline of  the agreement. But  the Ministry of Finance didn’t take decision in this regards. This means the projects are now postponed until the further clear decision is taken.

Despite the India’s continued pressure to extend the deadline of the projects, the Finance Ministry at the end declined to continue. India had been constantly  asking Nepal government to  renew the projects.  This issue brought in to discussion at a time when Prime Minister Sher Bahadur Deuba’s India visit had been proposed by the Ministry for Foreign Affairs.

As a line Ministry, MoFA should have dealt such issues but  Ministry of Finance has been the focal authority to deal such projects undertaken by the Indian Embassy in Kathmandu. According to the sources at Ministry of Finance, the Ministry is writing to the Indian Embassy clarifying the complexities and changed political dispensation that remained as major obstruction to extend the deadline such projects.

Due to some constitutional provisions, new political dispensation after the local elections, formation of the local federal units and a lack of institutional arrangements, the agreement is not extended now but once the institutional arrangements are made, the two sides can discuss how to move ahead, The Kathmandu Post reports on Saturday.

Launched in November 2003, the Nepali side had extended the agreement in June 2006, August 2008, August 2011 and August 2014.The political leadership has  been divided over giving exclusive rights to India to directly disburse projects worth up to Rs50million at the local level. Signed in 2003 during the premiership of Surya Bahadur Thapa, the agreement allows the local bodies to reach out directly to the Indian Embassy with proposals to receive up to Rs50 million in grants for small development projects.

Not only that, China has been asking Nepal government to allow such projects.  The Nepal-India Economic Cooperation programme has an outlay of over Rs76 billion with more than 529 large and small projects, completed or currently being implemented, in all the districts of Nepal. Finance Ministry officials said top political leaders have expressed concerns time and again about the agreement but they informed them about the constitutional obligation and the lack of institutional arrangements in relation to the grants.

Another senior Finance Ministry official said the ministry had concluded after an internal discussion that the modality of India-funded projects should be modified. “This is not only due to constitutional compulsion or the lack of institutional arrangements. It is about aid effectiveness. We need aid and assistance from India but its modality should be changed.”

The ongoing projects will continue, the official explained, “but for the new ones, we have to either wait until the provincial elections or make a full-fledged institutional arrangement”.According to the official, the Indian side has to reach an agreement with the central government that would allow disbursement of grants to the projects on the basis of separate agreements between the Indian side and the concerned local units.Some political leaders have questioned the way India got exclusive rights to distribute projects, expressing fears that China or another country might also seek similar leverage from Kathmandu.


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