India-Nepal Transit Agreement


In a recent visit of Nepal’s Prime Minister in India, both sides have signed a series of agreements on energy and transport including the export of Nepal’s hydropower to Bangladesh through Indian Territory.

About the Power Trade Agreement:
  • Objective:
    • To take forward the 2022 India-Nepal vision document for cooperation in the power sector that sets an ambitious goal in India-Nepal power trade and transmission.
    • It will help Nepal’s population access India’s inland waterways.
  • Key points:
    • Under this Agreement, a target of importing 10,000 MW of electricity from Nepal has been estimated in the coming years.
    • A new pipeline will be constructed from Siliguri to Jhapa in eastern Nepal, connecting Nepal and Bangladesh via India’s land.
    • A MoU between NHPC and VUCL (Vidyut Utpadan Company Ltd), Nepal has been signed for the development of Phukot Karnali Hydroelectric Project and a Project Development Agreement for Lower Arun Hydroelectric Project between SJVN (India) and Investment Board of Nepal.
    • Gorakhpur-Bhutwal Transmission Line: It was also announced that the two countries signed the revised Treaty of Transit under which Nepal will get access to India’s inland waterways.
  • Other Projects inaugurated:
    • Two Prime Ministers jointly inaugurated the Indian Railway cargo train from Bathnaha in India to Nepal Customs Yard.
    • An Integrated Checkposts (ICPs) at Nepalgunj in Nepal and Rupaidiha on the Indian side was also started.
    • India has also announced to cooperate with Kathmandu to set up a fertilizer plant in Nepal.
  • India-Nepal ties:

    • India and Nepal shares a cordial relationship under the India-Nepal Treaty of Peace and Friendship, 1950 and its provisions.
    • It is a bilateral treaty between Nepal and India establishing a close strategic relationship between the two South Asian neighbours.
    • The treaty was signed in Kathmandu on 31 July 1950.
    • This treaty allows free movement of people and goods between the two nations and a close relationship and collaboration between the two countries on matters of defense and foreign policy.

    About BIMSTEC:

    • The Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) is a regional organization comprising seven Member States: five deriving from South Asia, including Bangladesh, Bhutan, India, Nepal, Sri Lanka and two from Southeast Asia, including Myanmar and Thailand.
    • This sub-regional organization came into being on 6 June 1997 through the Bangkok Declaration

Reason behind India’s closeness with BIMSTEC countries:

  • Geographical relevance: The Bay of Bengal is the largest bay in the world.
  • Over one-fifth (22%) of the world’s population live in the seven countries.
  • Economic: Despite economic challenges, all these seven countries have been able to sustain average annual rates of economic growth between 3.4% and 7.5% from 2012 to 2016.
    • They have a combined GDP close to $2.7 trillion.
    • The Bay of Bengal is the route for about 25% of global trade.
  • India’s robust relation with BIMSTEC will ensure its access to huge untapped resources especially in the energy sector in the form of massive reserve of natural gas in the Bay of Bengal region over China and other major powers.
  • One-fourth of the world’s traded goods cross the Bay every year.
  • In the era of growing protectionism there is a need for India to diversify its export market.

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