Kathmandu is seeking an economic package worth more than $2 billion comprising lines of credit and grants from New Delhi as Prime Minister Balendra Shah prepares to visit India later this month.

To lay the groundwork for the prime minister’s visit, Indian Foreign Secretary Vikram Misri is visiting Kathmandu on Wednesday. During his visit, Misri is expected to indicate the possible scale of the economic package that Kathmandu is seeking from New Delhi, two senior officials at foreign and finance ministries told the Post.

A preliminary proposal was presented during Finance Minister Swarnim Wagle’s visit to India in September. However, a detailed breakdown of the proposed package, including the projects for which Indian assistance would be sought, is expected to be communicated during Misri’s visit.

Negotiations on the package are expected to conclude and an announcement is likely during the prime minister’s visit to India, a finance ministry official told the Post.

According to the proposal prepared by Kathmandu after consultations with various government agencies, Nepal is seeking more than $1 billion in lines of credit from New Delhi. The funds would primarily be used to construct several domestic transmission lines and implement other infrastructure projects.

Foreign Minister Shisir Khanal on Monday convened a meeting of government secretaries to discuss the list of projects that Nepal plans to present during Misri’s visit and consolidate the agendas of various ministries.

The meeting also reviewed the status of Indian-funded projects in Nepal, new projects for which Nepal is seeking Indian assistance through concessional loans and grants, and issues discussed during Khanal’s visit to India in May-June, Wagle’s September visit, and subsequent meetings between the two sides, according to two government secretaries.

Misri will also hold delegation-level talks with his Nepali counterpart Amrit Bahadur Rai, the foreign secretary, during which Rai will formally hand over Nepal’s list of priority projects to Misri for consideration by the Indian side.

In addition to the line of credit, Nepal is seeking another $500 million in grants from India to upgrade the Siddhartha Highway, which connects Sunauli on the Indian border with Pokhara. During his official visit to India in May-June, Foreign Minister Khanal had requested for the $500 million grant from India, in addition to a line of credit.

Yet another $500 million, most likely in the form of a grant, is being sought for the reconstruction and rehabilitation of infrastructure damaged by the August 26 Bhotekoshi flood. This amount is also included in the proposed economic assistance package.

In total, Nepal is seeking an economic package worth more than $2 billion from New Delhi, two officials familiar with the developments told the Post.

Although no formal announcement has been made, Prime Minister Shah is expected to make his first bilateral official visit to India, most likely on November 22.

In preparation for the visit, India's new ambassador to Nepal, Sudhakar Dalela, landed in Kathmandu on Tuesday, while Misri is scheduled to arrive on a two-day visit on Wednesday.

India had previously extended two lines of credit to Nepal. The first was announced during Indian Prime Minister Narendra Modi’s state visit to Nepal in 2014, while the second was announced at the 2015 donor conference following the earthquake.

However, Nepal was unable to fully utilise either line of credit because of stringent conditions imposed by India.

"Indian local-content requirements, including the use of Indian raw materials, technicians, engineers, and machinery, have hampered our ability to utilise the Indian soft loans," said former Nepali ambassador to India Shankar Sharma.

"There was a standing request for a $750 million line of credit from India, which was under consideration. Now we need more following the Bhotekoshi flood. Separately, we had also requested grants from India. The entire negotiations cannot be concluded during this [Misri's] visit, but we should formally present our proposal for their [Indian] consideration," Sharma, who served as Nepal's ambassador to New Delhi until May 4, told the Post.

Former finance minister Rameshore Khanal said Nepal could not rely on grants alone to meet its reconstruction needs. The government's responsibility to reconstruct infrastructure damaged by the recent floods has prompted it to seek additional resources from bilateral and multilateral donors, with India being among the primary partners, said former finance minister Rameshwor Khanal.

"Some initial discussions may take place now, but a final understanding will come later. As grant assistance is declining globally, Nepal should also seek grants from Japan, South Korea, and other donors," Khanal said.

During Wagle’s visit to India in September, he and his Indian counterpart, Nirmala Sitharaman, also discussed ways to unlock the lines of credit that India had offered Nepal nearly a decade ago.

India had pledged Rs100 billion for the reconstruction of infrastructure damaged in the 2015 earthquake. Of this, Rs25 billion was allocated as a grant, while Rs75 billion was offered as a soft loan through the Export-Import Bank of India.

However, Nepal could not utilise the loan component because of various conditions imposed by the Indian side. The issue was also discussed during Khanal's visit to India in May, when he proposed using the soft loan in the energy sector.

Besides discussing the economic package, the prime minister's visit is expected to feature the inauguration of several Indian-funded projects, groundbreaking ceremonies for new projects, and announcements of additional initiatives.

Projects scheduled for inauguration include the Nepal Police Academy in Panauti, Kavrepalanchok; a bridge in Darchula; the integrated check post in Bhairahawa; and a motorable bridge over the Mahakali River.

The two prime ministers are also expected to jointly mark the beginning of construction on the integrated check post in Dodhara Chandani, the Lower Arun hydropower project, and a petroleum pipeline extending from Siliguri in India to Jhapa in Nepal.

Officials are also considering including several major hydropower projects on the agenda, as most bilateral mechanisms have already completed their meetings. These include the 750MW West Seti, the 480MW Phukot Karnali and the 450MW Seti River-6 projects. India's state-owned NHPC is involved in all three.

Other issues expected to feature in the discussions include a project on the Koshi River, the Ayodhya-Janakpur railway connection, and Indian support for Nepal's ambitions in artificial intelligence.

Nepali officials are working to reach an understanding with India on several longstanding and contentious bilateral issues. These include the boundary dispute, additional air-entry points for Nepal, the Pancheshwar Multipurpose Project, and trade and transit arrangements.