Nepal Prime Minister KP Sharma Oli’s visit to China last week was significant in more ways and has more implications for India than is immediately apparent. First, in strengthening a bilateral partnership designated in the 2019 Strategic Partnership of Cooperation. Second, it holds consequences for India’s Act East framework, particularly through some important steps on regional connectivity.
Para 5 of the elaborate Joint Statement of China and Nepal cements Kathmandu’s 2017 agreement to join the Belt and Road Initiative. It is stated that, “The two sides agreed to strengthen the synergy of their development strategies and pursue deeper and even more concrete high-quality Belt and Road Cooperation. The two sides expressed their readiness to sign the MoU on building the Trans-Himalayan Multi-Dimensional Connectivity Network and the Framework for Belt and Road Cooperation between two countries.” Both sides further committed to strengthening connectivity in many sectors including the railways.
The Joint Statement of 3 December was followed by signing of the Framework for Belt and Road Cooperation between the two sides on 4December. According to media reports, both sides agreed to a term, ‘aid assistance financing’ under this framework. However, the details of the BRI Framework agreement are not yet available. Nepal’s Ministry of Foreign Affairs’ tweet of 4December only confirms that the Framework for Belt and Road Cooperation has been signed.
The signing of BRI Framework Cooperation between Nepal and China assumes significance when seen in the backdrop of similar developments taking place in other South Asian nations. Railway projects under BRI framework in India’s neighbourhood already cover Pakistan, Bangladesh, Myanmar, and Sri Lanka. China-Myanmar Economic Corridor (CMEC) includes Muse-Mandalay rail line in Myanmar, China-Pakistan Economic Corridor (CPEC) plans for rail connectivity from Kashgar in China to Gwadar port in southwest Pakistan and stand-alone railway projects of Dhaka-Jessore in Bangladesh and Matara- Beliatta in Sri Lanka. India too has been providing support through its line of credit to several railway-related projects in Bangladesh, Bhutan, Sri Lanka, Nepal and Myanmar.
Better placed than China, Indian Railways already has operational links with Bangladesh, Pakistan, and Nepal. It is yet to be seen whether the Birgunj- Kathmandu rail link between India and Nepal is jointly approved for construction and commissioning early. In any way, Kathmandu getting rail connectivity with India by a southern link and a rail connection with China in the North could well be termed the cliched win-win situation for all.
Before going through the cross-border rail connectivity between India-Nepal/China-Nepal and what could possibly be the implications of this development on bilateral relations, a certain perspective may be kept in view about Nepal’s existing and potential regional rail connectivity projects.
Nepal’s railway network, both existing and planned, can be seen in three geographical tiers. The southern tier is the Terai region with three operational cross-border rail connections with India i.e. Raxaul- Birgunj, Jayanagar-Bijalpura, and Jogbani-Biratnagar. Most of the rail freight traffic is handled at Raxaul-Birgunj and passenger traffic on Jayanagar-Bijalpura sections.
Given the Indian railways network’s proximity to southern Nepal at different junction points, there is potential to extend rail links across the border. About half a dozen surveys are underway, covering routes from Kakrabitta-Naxalbari in the east to Nepalgunj Road in the west. The most important of these potential links is the 140 km rail line Birganj- Kathmandu. The final location survey for this link has been recently completed. India-Nepal rail connectivity is integral to South Asia regional rail integration and the same is being strengthened albeit slowly.
The middle tier is the proposed East-West rail link. Nepal plans to develop a 945 km electrified East-West rail link, connecting 24 central and southern districts in the Mechi-Mahakali belt.
The uppermost tier involves connecting Kathmandu/Pokhra to the Chinese rail network at Gyirong. This trans-Himalayan rail link is about 120 km from Kathmandu to the Gyirong land port in northern China. Gyirong to Shigatse is the missing link which is under active consideration of China Railway. Shigatse onwards, via Lhasa, the China Rail network provides seamless connectivity.
In this scenario, Nepal is looking at India to connect Kathmandu with Birgunj on priority, while simultaneously working on linking Kathmandu to China via Gyirong, Shigatse, and Lhasa. The financing arrangement for Birgunj-Raxaul between India and Nepal is yet to be worked out. Due to the difficult hilly terrain, the cost of this 140 km line could well be around Rs 30,000 crore ($4 Billion).
For its ambitious East-West Rail line, Nepal is exploring funding options through multilateral financial institutions (MFIs) and public-private partnerships (PPP). Meanwhile, for its northern connectivity—Kathmandu to Gyirong—the latest Belt and Road Initiative (BRI) Framework Cooperation financing model appears to have been finalised.
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In South Asia, many rail connectivity projects are being currently financed under the BRI Framework, including the China-Myanmar rail link (Kunming-Yangon) via Lashio, in Bangladesh (Dhaka-Jessore), CPEC Kashghar to Karachi via Kunjerab, Lahore. Some of these are at the nascent stage of consideration, a few at drawing boards and a few are under construction and being operationalised.
India remains Nepal’s largest trading partner, followed by China. A key project for Nepal is establishing rail connectivity to Kathmandu. India is placed in a better position, having completed the feasibility and the final location survey for the Birgunj- Kathmandu 140 km rail link, along with progress on other cross-border projects. However, financing remains to be an issue with such cost-intensive projects, even through line of credit. Nepal could look at other modes including PPP, MFIs and Millenium Challenge Corporation (MCC) etc. With geo-economics becoming more of a force for change than geopolitics or geo-strategy, trade and commercial gains should guide investment decisions for the future.
India’s Neighbourhood First Policy (NFP) is aimed at enhancing physical, digital and people to people connectivity across the region as well as augmenting trade and commerce. The Look East Policy of 1992 has been upgraded to India’s Act East policy, aimed at strengthening ties with countries of South East Asia, and recognises connectivity in its broadest sense as the key for growth and prosperity. Similarly, the Think West and Connect Central Asia Policy with the Security and Growth for All in the Region (SAGAR) present more comprehensive regional cooperation models. However, financing of projects along with national priorities continues to impact cost-intensive projects, especially in South Asia.
India has taken the lead through the Bangladesh, Bhutan, India, Nepal (BBIN) framework of cooperation, supporting the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) and bilaterally undertaking project financing through its line of credit in South Asia. It is, therefore, imperative that a very crucial Birgunj-Kathmandu rail link project gets approved by both India and Nepal on priority and completed in a time-bound manner. This will not only open Nepal to the world through the Indian Railways network but also help the two nations, which are linked by centuries of history and culture, achieve mutual growth and shared prosperity.
M. Jamshed is Former Member Traffic, Indian Railway Board. Views are personal.
(Edited by Ratan Priya)
