Indian Ambassador Ranjit Rae arrived in Kathmandu in September last year, when the country had embarked on the election cycle. He has largely managed to avoid major controversies, something not all his predecessors managed to do and has taken up the mantle at Lainchour, arguably Kathmandu’s most important diplomatic mission, at a time of relative calm in Nepal-India ties. Crucially, Rae was Joint Secretary (2002-06) with the Indian Ministry of External Affairs at its North Desk, which looks after Nepal affairs. That was a period when New Delhi actively facilitated a peace deal between Nepal’s parliamentary parties (the Seven Party Alliance, SPA) and the Maoists, who were still underground. Right through the 2006 Janaandolan and the subsequent peace process, New Delhi has remained an active player in Nepal’s transition, often courting ire from various quarters in Nepal. In an hour-long exclusive interview with Editor-in-Chief of The Kathmandu Post Akhilesh Upadhyay and Editor-in-Chief of Kantipur Sudheer Sharma, Rae described current Nepal-India ties as excellent and explained that Nepal’s ‘stability, security and prosperity’ were fundamental strategic objectives of India’s foreign policy towards Nepal.

How would you describe the current state of Nepal-India relations? 

I can describe it in one word, ie, excellent. Our relations are very ancient, wide-ranging, warm and cordial. And in the new global context of economic reform and globalisation policies in India, they have opened up many new opportunities. So the challenge before us today is to build upon the age-old friendship we have and see how to make it even more dynamic. 

What are New Delhi’s major foreign policy goals in Nepal? 

India and Nepal are very close friends and neighbours that share an open border. Our prime minister has said on more than one occasion that if India is to prosper, if India is to grow, if India is to reduce poverty amongst her people, then India needs peace, stability and friendship in her neighbourhood and especially in a country like Nepal with which we share open borders. If there is no peace and prosperity in India, Nepal will not be able to prosper either. The most important thing is to have peace, stability, security and prosperity in Nepal. So that is clearly a very fundamental strategic objective that is common to both Nepal and India. 

Second, how do we make this relationship even stronger? I would specially identify economic areas. If we can take our economic cooperation to new levels that will really cement the relationship between our two countries. So I think these are the two fundamental objectives that we feel are common between India and Nepal. 

Currently, we are in the middle of completing a peace process and a constitution. Do you see these processes heading towards the right direction, or what challenges do you see in completing them? 

I think the peace process has been a great achievement for Nepal. It is a very positive development that has brought peace and stability in this country. Second, as far as transitions are concerned, I think Nepal is going through multiple transitions. There is the transition from monarchy to a republican system; the transition from a Hindu state to a secular state and the economic transition. There is also the process of constitution formation. So, if you see step-by-step, considerable progress has been made: elections have been held, a government has been formed and everyone is committed to enacting a constitution within a year. I think that will consolidate multi-party democracy and provide a very strong framework for development, stability, prosperity and inclusive growth. If you look at all of South Asia today, I think the one striking feature is that all the countries in the region are now multiparty democracies.   

In light of the ongoing transition, and that the Nepali Congress (NC) is now leading the government after a fresh mandate, what kind of relations does New Delhi have with our political parties—the NC, CPN-UML, UCPN (Maoist) and parties to the right of the centre?

The first thing I would like to say is that both our countries are multiparty democracies; India and Nepal both have many political parties with different views. But the important thing is, on an issue like Nepal, all political parties in India share the same view and attach the same importance to the relationship with Nepal. There is consensus in terms of the way we look at Nepal in India, in terms of both approach and policies. I feel that the same is true of the political parties in Nepal. 

The second point is, many political parties in Nepal and India share a very ancient and historic connection. With some political parties, the relationship is many decades old, with others it may be relatively new and there may be no relationship with some other parties right now. I feel that this relationship between the political parties is very important. 

NC leaders were in India during its freedom struggle, for example. A number of our party leaders, likewise, have relationships with Indian leaders and there are party-to-party relationships too.

I have already made a general comment and certainly, we have great respect for the NC and for the contributions its leaders made to the Indian freedom struggle. I don’t think you would find this kind of example in many other countries of the world. This is certainly something we greatly appreciate and admire. It has contributed to the strong cooperation between the two countries. But that does not mean that the relationships with the parties that have come up subsequently are in any way different. I think every party, in its own way, has made significant contributions to Nepal and India-Nepal cooperation.  It is our desire to strengthen our political relationship with every political party that is active in Nepal.

How do you view the second largest party, the CPN-UML? 

We have very good relations with the CPN-UML, the UCPN (Maoist) and the Madhesi political parties. We have worked closely with each of these parties. As they have all been represented in the government, political leaders are known to us and we are committed to further stepping up our cooperation, not only between the two governments but also at the level of leaders and political parties. 

To focus on party relations, one charge against the Indian establishment has been that it engages in a certain degree of micro-management of Nepal’s political parties, which are fundamentally independent institutions. 

First, I would like to say that the Government of India and the Indian Embassy have no intention of micro-managing anything in Nepal. The only objective we have and what we wish for our friends in Nepal is stability and prosperity. And we hope very much that whatever we do in Nepal is for the mutual benefit of Nepal and India. My very firm conviction is that, at a fundamental level, there is convergence in terms of our national interests. I don’t see any fundamental divergence. Of course, in any close relationship, especially between neighbours with open borders, there will be irritants from time to time. Let me tell your readers that we have nothing but the best wishes and support for Nepal. There may be a perception of micro-management, which I see from the perspective of some newspapers and articles. 

It is often said that as far as Delhi is concerned, three actors basically decide the larger bilateral relations: the Indian Ambassador, the National Security Advisor and the Research and Analysis Wing (RAW) chief. 

I think this is a gross oversimplification of the way policies and decisions are made in the Government of India. We are a democracy and there is a certain process of decision making. It is also based on the political leadership. Eventually, the political leadership gives the political line in terms of what our approach should be. Then decisions are taken through a very comprehensive discussion across organisations and institutions involved in any approach. So I wouldn’t simplify it in the manner in which you have presented your question. I think it is a much more complex process and, as I said, there is wide political consensus in India in terms of policy and approach towards Nepal. 

On some occasions, you have mentioned that India and Nepal could have common interests, mainly on security and development issues. Can you elaborate? 

Let me talk about security first.  In this era of globalisation and interdependence, peace, prosperity and security have become indivisible. When something happens in one country, it affects another country and they may not even be neighbours, as we have seen in the last 10-15 years. India and Nepal are neighbours with open borders. So clearly, peace and stability in one country has a direct impact in terms of peace and stability in the other. Security is thus a very important element of this bilateral relationship. And I am very happy to inform you that both our countries see our security as interlinked. So India and Nepal are coming together to ensure that nothing happens which causes insecurity in the other country. Second, we have very good cooperation between our security forces, whether it is the police or the military. This is in the traditional sense. In a broader sense, if you look at economic security, climate change or disaster management, security has a wider dimension. We are cooperating on those areas too. 

In so far as economic cooperation is concerned, the India of today is very different from India before the 1990s. Post our liberalisation programme, we have clearly unleashed the entrepreneurial energies of our people. India is now growing at a much higher trajectory. We are almost a two-trillion-dollar economy. Of course, this year, we are expected to grow at about 5 percent but we were growing at 8 to 9 percent. Every year, we are adding something like $180 billion to the size of our GDP. I see great opportunities for Nepal in benefitting from this huge economic growth that is taking place in India. I think the challenge is to identify sectors where Nepal can take advantage of this economic growth. 

Going back to the question of security, what are the specific areas of concern India has with Nepal vis-à-vis the open border? 

There have been terrorism-related cases, fake Indian currency smuggling, gold smuggling and trafficking of protected species. Also, because we have an open border, someone commits a crime in one country and runs to the other. I think this is a problem for both countries. 

The open border between India and Nepal can bring a lot of positive advantages but sometimes, unfortunately, they are also misused by people who do not have the best interests of the two countries at heart. I think both countries are committed to ensuring that this misuse is minimised and prevented. 

On that, how would you describe the current framework for cooperation vis-à-vis border security? And what level of satisfaction do you have in terms of our security establishment’s execution of the existing framework? 

We have very good cooperation between the Indian and Nepali security forces. I think the legal frameworks could be improved. At a political level, we have to be very conscious of each other’s interests and requirements. At the execution level too there is good cooperation now. What is good about this cooperation is that it is now taking place in smaller units at the operational level. Of course, it is important at the central level but to improve security, it is more important to have good cooperation at the level of the border districts. This is moving on very satisfactorily. We have regular border district coordination meetings where these issues are discussed. 

You talked about the porous border. Do you think putting a registration mechanism in place for citizens of both countries would help control fake currency smuggling and other terrorist activities? 

At the fundamental level, I think open borders are a very good thing. If you look at all the regional cooperation and organisations wherever they exist, they have completely open borders like in the European Union. The Association of Southeast Asian Nations (Asean) is also moving in that direction. But an open border sometimes leads to problems. Clearly, we have to step up our cooperation and coordination to ensure that the benefits are maximised and the problems are minimised. To do so, you definitely need to have regulation and more patrolling along the border but the border needs to remain open. This has been so traditionally for centuries. People of the two countries have such close relationships across the border, you may even go shopping from one country to the other or a school. People cross the border many times in a day. This lies at the heart of the relationship between the two countries. So I would like to encourage this, rather than control it. 

One area where Nepal has clear potential is hydropower. Nepal’s hydropower establishment has requested India to reciprocate in a power-sharing agreement but that has not happened at the government level. Should it occur, prospective investors would at least know that there is a power-exchange mechanism in place and they can invest within that framework knowing very well that they have an assured market in India.

For your readers’ information, I would like to say that, India, despite being a power-deficit country, actually exports power to Nepal. We have committed to export some 200 megawatt of power to Nepal. Second, hydropower possibly offers the most significant opportunity to strengthen economic cooperation between the two countries. There are many ways in which this can be done. It can be done at the government-to-government level, as we have committed in the Pacheshwor Multipurpose Project under the Mahakali Treaty. It could be done at the private sector level, as is being done in the case of Upper Karnali or Upper Marsyangdi or even Arun III where Indian private companies have been given the opportunity to develop them. What has happened over the years is that progress has been extremely slow. In fact, we have not had a major hydropower project for many decades. And sometimes, people tend to become cynical. 

As to the power-trade agreement, it is certainly very important. But if I may inform you, India has already put power-trade under the OGL (Open General Licence). So you are free to trade power with India without any licence or specific approval. As far as I understand, from a technical perspective, in hydropower projects, a certain basic minimum has to be sold through a long-term Power Purchase Agreement (PPA) and you trade at the margins. So the viability of the project is not actually determined by the share of the power you trade but by the long-term PPA you have. The power trade price can go up and down, that is on the margin. So I don’t think that the power trade between the two countries, whether it be at the government or private sector level, is held up because of the power trade agreement.  But yes, we do have a proposal for a power trade agreement, which is under consideration at the Government of India. And we will do whatever is required to promote and step up cooperation. 

The current transmission line that runs from Dhalkebar in Nepal to Muzzafarpur in India is not complete yet. During our rainy season, we have a power surplus which can be exported to India. But we haven’t been able to do so because of the current infrastructure, ie, the transmission line does not support it. Progress on the Indian side has not been very satisfactory. 

I agree with you. I think it is very important to set up infrastructure that will allow for power exchange and trade. Right now, we are engaged in the development and renovation of three transmission lines. It is currently a point-to-point power exchange. Eventually the idea should be to connect the two (Nepal and India’s) electricity grids so that there is seamless transmission of power. I remember reading in one of the newspapers a couple of weeks ago that because of the lack of Indian customs clearance, loadshedding in Nepal is going to increase by so many hours everyday. We, of course, rebutted that very strongly. 

This is a very high priority project. India is already committed to exporting more than 200 MW of power to Nepal and that can only happen if the transmission lines are upgraded. In order to make sure that the transmission lines are upgraded, certain procedural things and customs and other related formalities have to be completed. All these have been explained to the Nepal Electricity Authority and I am happy to say that are working very strongly on all these issues.  

India is helping Nepal in various small projects like building schools and health centres all over the country. Some people wonder, why doesn’t India concentrate on investing in large infrastructural projects rather than providing such scattered assistance to Nepal? Is there a possibility for doing so instead? 

First of all, thank you for raising this question. I would like to give you some information about the scope and range of our assistance. India is assisting in some 484 projects in Nepal at a total cost of something like 60 billion Nepali rupees. It is a very huge assistance programme. This does not include the concessional lines of credit that we have given. In recent years, we have two ongoing lines of credit of 350 million dollars for infrastructural development. So India has a huge assistance and partnership programme and this covers both large and small projects.  The Mahendra Highway, the East-West optical fibre network to facilitate internet and mobile telecommunications in Nepal, the BP Koirala Institute for Health Sciences and trauma centre in Kathmandu are some of the large infrastructural projects. There are also some irrigation projects and Tarai roads projects: some 1,400 km of roads are to be developed. We are developing railway lines along the India-Nepal border, integrated check posts. And we have over 225 small projects like schools, dispensaries, small roads. 

Our approach is a combination of large and small development projects. But I agree with you that we need to review some of our schemes and particularly our small development schemes. I am very keen to ensure two things now. First, that the local community is a genuine stakeholder in that project; they want the project. Second, we must ensure that these projects are sustainable.  

The other component of the question is, are there any large infrastructural projects with Indian assistance that coming up? 

Well, we have the Tarai roads projects and the integrated check posts project. These are two very large infrastructural projects. We also have the transmission lines projects financed under Indian lines of credit. There are also other projects in the pipeline in which more discussions need to be held: like a bridge on the Mahakali River and talk of a Mid-hill highway. But I think we must focus our energies on what we have.

That brings us to our last segment, international relations. Do you see any cooperation between India and China in large infrastructural projects in Nepal? 

First of all, cooperation between India and China is very robust. Our bilateral trade is around $65 billion and likely to go up a $100 billion in the next couple of years. Cooperation between the two cou-ntries is very vibrant, robust and mutually beneficial, including in the power sector in India. Certainly, there could be cooperation between our companies. 

The point is, has there been any discussion regarding India and China jointly investing in a large infrastructure project in Nepal? 

For many large projects you need huge amount of resources. And where are these resources going to come from? You need companies that have to undertake engineering, procurement and construction contracts. Most of these projects are through global contracts. Clearly, there are opportunities. As far as India or Nepal is concerned, the primary objective is to develop power. You need energy to fuel your economy, just as India needs it for the same. I think there are opportunities and the private sectors engaged are conscious of it. But the first thing to do is get a power development agreement. Only then can you start talking about financial closure and awarding of contracts and so on. Right now, even the PPAs have not even been finalised, though discussions have been going on for a long time. 

What are convergent and divergent views of India and China regarding Nepal’s politics and transition? 

I can talk about India. I think peace and stability in Nepal is very important for India. I think that is the same for China. Clearly, there is convergence in terms of the objective of peace, security, stability and prosperity in Nepal. I must say that the international community as a whole has worked very closely in recent years, even in terms of political transitions that have been taking place in Nepal. You would recall, 10 days prior to the last Constituent Assembly elections, people were skeptical including many journalists. There were questions whether the election would be held or not even one week before the election. And the international community stood as one and supported this whole process. I think it is not only India and China but this general convergence amongst the international community in terms of how they see developments in Nepal and the overall goal of stability and peace. 

There seems to be a certain level of nervousness about Chinese investments in Nepal in the Indian intelligentsia and among its think tanks, which is clearly reflected in the Indian media. 

The defining characteristic of our times is the economic rise of Asia: of India, of China and the continent as a whole. The centre of global economic gravity is shifting towards Asia. Clearly, the Asian footprint is going to expand, not only in Asia but all over the world. So the Chinese are investing in India, Nepal, South-east Asia, Europe, Africa. Indians are doing the same. We are talking about connectivity between India and Asean. We are talking about driving from Calcutta to Kunming and the Bangladesh-China, India-Myanmar forum for regional cooperation initiative. As economies get more interdependent, more interlinked, this will be a factor in promoting stability in the countries concerned. India and China have very vibrant and strong cooperation in every sector. 

So how do you explain the unease that we encounter regarding Chinese investments in Nepal?

I cannot speak for individual analysts or strategic experts. Perhaps you have to address the question to them. What I am trying to say is that this is the development of our times. And you have to see how best you can take advantage of these developments. 

Moving on, what kind of relationship does Washington, another major ally, and New Delhi share vis-à-vis Nepal? 

Let me tell you again that India and Washington also have a very vibrant and robust relationship based on shared democratic norms and values. Clearly, we discuss issues of mutual interest. If we have a bilateral discussion then we might discuss developments in the region. For instance, we would like very much to know what is going on in Afghanistan. These are normal state-to-state interactions. The ambassadors here meet from time to time; I meet with the Chinese ambassador and the American ambassador. 

As Kathmandu happens to be the Saarc capital, one of the major irritants for Saarc regionalism has been that India and Pakistan do not see eye-to-eye on regional issues. Where do you see this going? 

See, when Saarc was conceived, it was precisely for this reason. It was agreed that bilateral issues would be kept out of Saarc. The idea was, you may have political differences but that does not prevent you from having economic cooperation, which can be mutually beneficial.   

But the fact is that intra-regional cooperation has developed from strength to strength in Asean. Their intra-regional trade now runs in the billions. Saarc, however, is stuck where we started. 

I agree with you. Our progress has been slow and not at a satisfactory pace. Ideally, as I said, we should put aside political differences and focus on the economic situation, which is win-win for all the countries concerned.