Monday, June 12, 2006

Dr. Hari Bansh Jha: Bonds Beyond Borders

Indo-Nepal Economic

Cooperation and its Impact on Terai

Hari Bansh Jha

Executive Director

Centre for Economic and Technical Studies

Dhobighat, Lalitpur

Paper submitted to a



"Bonds Beyond Borders"

organized by

Consulate General of India

in cooperation with

B.P. Koirala India-Nepal Foundation (BPKF)

May 27-28, 2006


  1. Background

Nepal's importance is recognized not merely for its size and natural resources but largely due to its strategic location as a buffer state between two Asian powers, India and China. The country is divided into three ecological regions – the Terai, hills and the mountain. Of these three regions, the Terai, the flat land, covers Nepal’s 23 per cent of the total land area of 147,181 sq. kms. The normal length of Terai is 800 kms; while its width varies between 25 to 32 kms.

The boundary of the Terai starts from the foothills of the Siwalik or Churiya range of the Himalayas in the north and goes upto the Indian border in the south. However, the region called Bhitri Madhesh (inner Terai) consisting of flat land north of Siwalik or Churiya range like Chitwan and Dang Deukhari is also a part of the Terai. Of Nepal’s 75 districts, 20 districts are in the Terai, which from east to west include Jhapa, Morang, Sunsari, Saptari, Siraha, Dhanusha, Mahottari, Sarlahi, Rautahat, Bara, Parsa, Chitwan, Nawalparasi, Rupandehi, Kapilvastu, Dang, Banke, Bardiya, Kailali and Kanchanpur.

Terai accounts for 56 per cent of total arable land (GON, 2003) and 67 per cent of total manufacturing production (GON, 1991-92). The region is also rich in forest, water and other resources. However, the abundance in the Terai is only for a few as the people outside the region hold control over most of the resources of this land. As such, the majority of the local population is poor. In order to create infrastructural facilities and help eliminate the poverty in the region, a number of bilateral and multilateral organizations, apart from INGOs have made interventions.

The United Sates was the first few countries that started giving aid to the Terai region of Nepal through USAID (originally known as the U.S. Operations Mission or USOM) in 1950s. Rapti Valley Development was USAID’s major project in 1950s, which focused on equitable land distribution, local participation in self-help projects, improved farming methods, malaria eradication and improved health services, road and market development, and cooperative societies for agricultural inputs and marketing (Skerry et al, 1991). It also provided support through technical advisors and funding for a cadastral survey covering 20 Terai districts. Later on, different bilateral and multilateral bodies and also INGOs, including India, the then USSR, United Kingdom, Germany, Denmark, the World Bank, the UN agencies, Save the Children Japan, Save the Children US, ACTION AID/Nepal, CARE, DFID and Plan Nepal made their presence felt in the Terai by launching one or the other projects.

Yet of all kinds of aid and assistance made available to the Terai by different bilateral/multilateral agencies and the INGOs, the Indian cooperation has been most crucial to the development of this region. It is important both in terms of volume of amount and its proper utilization for the execution of different projects. No other agency in Nepal is as serious for the development of the region as a whole as India is. While the activities of other agencies are confined to certain pockets, the Indian cooperation widely covers the entire part of the Terai.

  1. Indian Co-operation

India itself is a developing country as Nepal. However, its contribution to the Terai, particularly in areas related to the development of infrastructural facilities and human resources development is most important. Indian co-operation to Terai is solely guided by the motive of making the region self-reliant, prosperous, vibrant and modern in all such sectors as the development of roads, airports, railways, communications, education, health, industry, urbanization and cultural promotion. India has been making consistent economic assistance strategies for the development of this region considering the very high EIRR in almost all important sectors – be it related to infrastructural development like the roads, railways, irrigation, airways or the development of agriculture, industry, trade and service sectors.

With the completion of the Koshi Project with Indian assistance, the Terai region benefited uninterruptedly from the road on the Hanuman Nagar Barrage, which connects the entire eastern part of Nepal Terai with the remaining parts of the country. The roads between Hanuman Nagar and Rajbiraj (10.4 km.) and between Fatehpur and Kunauli (41.6 kms.) are also the offshoot of the Koshi project. Terai is also benefited from Gandak project as it irrigates larger portions of agricultural land.

In 1990s, the Government of India helped renovate and upgrade the 53-kms narrow gauge rail track of Janakpur railway. Besides, it set up a broad-gauge rail link for the 5.3 km. stretch between Sirsiya (Birgunj, Nepal) and Raxaul (India) for the smooth functioning of the dry port, Nepal Multi-modal Transit and Trade Facilitation Project (NMTTF). The Indian government also opened Consul General Office at Birgunj to provide basic services for the smooth functioning of NMTTF and to facilitate trade, industry, education and other such activities in the Terai. Some of the completed projects, on-going projects under implementation and future projects under consideration for the development of the Terai under Indian assistance are given below:

3.1.1 Completed Projects

Roads/Feeder Roads

  • Over 70 per cent of the 1100 kms long East-West Highway built with Indian cooperation
  • Sunauli-Pokhara Road
  • Dhalkebar to Bhitamore Road via Janakpur
  • Rajbiraj-Koshi Barrage Road
  • Itahari-Damak Road
  • Janakpur Town Road

Bridge Construction

  • 22 bridges on Kohalpur-Mahakali sector of East-West Highway
  • Mohana Bridge in Kailali District
  • Sirsiya Bridge between Birgunj and Raxaul


  • Bhairahawa Airport
  • Janakpur Airport
  • Simara Airport
  • Biratnagar Airport


  • Telephone Connection between Biratnagar and Jogbani (1970)
  • Telephone exchanges at Janakpur, Biratnagar and Jhapa (1972)

Human Resource Development

  • Adarsh Balika Mahavidyalaya, Biratnagar

Health Sector

  • B.P. Koirala Institute of Health Sciences, Dharan

• State of the Art Medical College inaugurated in 1999

• Indian Faculty Assistance continuing till 2009

  • Other Health Institutions

• 25-bed hospital at Dhangadhi

• 15-bed hospitals at Taulihawa

• Donation of Ambulances

Irrigation and Water Resources

  • Koshi Barrage – Irrigation to 92940 ha
  • Gandak Barrage – Irrigation to 63,000 ha
  • Annual Maintenance of Koshi & Gandak embankments
  • Chatara Canal and Chandra Canal Schemes, covering 188000 ha
  • Embankment along Lalbakeya River to address inundation problem

Hydropower Development

  • Kataiya Power House on Koshi Eastern Canal in India: 10 MW committed for Nepal
  • Gandak Hydel (15 MW) completed in 1979
  • Tanakpur-Hydel Project: 70 million units of free power to Nepal since January, 2000 (NRs. 73.6 crores paid in lieu of free power for the period July 1992 to December 1999)
      1. Ongoing Projects under Implementation
  • Large Projects

• East-West Highway Optical Fibre Project

• Mahendranagar-Tanakpur Link Road Project

• Manmohan Memorial Polytechnic, Morang

  • Other Projects

• Construction of school building for the Shri Durga Janta Madhyamik Vidyalaya, Babarganj, Sarlahi

• Construction of building and establishment of library at Gauriganj Campus, Jhapa

• Creation of physical facilities for the Sarasvati Madhyamik Vidyalaya, Hajaria, Sarlahi and the Shree Panch Mahendra Janata Madhyamik Vidyalaya, Karmaiya, Sarlahi

• Construction of a gravel road (Gandhi Manmohan Marg), Morang

• Upgradation of Road from India-Nepal border to SP Mode, Bhadrapur, Jhapa

• Embankment construction along Lalbakeya, Bagmati, Kamala, and

Khando rivers to address inundation problem

• Rural electrification using Solar Photovoltaic Cell Technology in various districts

3.1.3 Future Projects under Consideration

  • Transport and Trade

Upgradation of Infrastructure in Terai

GON has proposed for Indian assistance for the construction and upgradation of roads in Terai. It includes, inter alia, development of 22 link roads of 552 kms length to connect various Terai towns to the East-West Highway, construction of 14 bridges with total span length of 616 meters along the above roads, development of about 535 kms of Postal (Hulaqi) roads including construction of bridges, as well as carrying out road development studies relating to five roads of 162 kms length. All the roads and bridges proposed in the project fall in the 20 Terai districts of Nepal. The project duration has been suggested to be five years. The responsibility for project implementation will be vested in the Department of Roads, Ministry of Physical Planning and Works, GON, subject to a detailed Project Implementation Plan which will lay down the roles, responsibilities and reporting requirements for different stakeholders.

Each of the proposed 22 roads and the proposed bridges thereon, provide a linkage to existing roads on the Indian side, eventually connecting Nepalese towns to important Indian towns and national highways. This implies that implementation of the project would facilitate movement of people and goods not only within the Nepalese Terai, but also corss-border movement to Indian cities and towns and on Indian national highways.

Upgradation of Roads and Highways on Indian Side

There is a proposal for upgradation of roads and highways on Indian side which connect to the towns in Nepal (17 in all). Some of the roads are already National Highways.

Facilitation of Passenger Traffic

An agreement has been signed between Nepal and India on the regulation of passenger vehicular traffic between the two countries on 14 routes from five border points. The proposal is reciprocal in nature and it allows five border crossing checkpoints, including Mahendranagar, Nepalgunj, Bhairahawa, Birgunj and Kakarbhitta. The buses will connect various Terai districts with Indian cities of New Delhi, Kolkata, Patna and Varanasi among others. Maximum 53 buses were allowed to ply on the agreed routes from each side. In addition, provision was also made to provide the nationals of Nepal and India free and unhindered movement to travel either way on vehicles for specific purposes such as marriages, religious functions, pilgrimages and study tours. Gains from the recent arrangement have been mentioned in Box 1.

Box 1

Transport Hurdles

The transport agreement reached between Nepal and India has added a new dimension to the bilateral relations of the two neighbouring nations. Now the only key issue is that the government of Nepal needs to take a few crucial decisions to help Nepali transport entrepreneurs reap benefits from it. Prior to this agreement, Indian vehicles were freely entering Nepal by paying certain duty at the border while Nepali vehicles were required to obtain permits from the Indian Embassy in Kathmandu by producing bank guarantees to cross the border. With this agreement, the passenger buses (53 at most from each side), tourist buses, buses carrying pilgrims and other personal vehicles can cross the major border check-points without hindrance and without having to pay any fees for the duration of five days in India.

The agreement will definitely ease the movement of people between the two countries. As there were very few Nepali vehicles crossing the border, the agreement is expected to see a sharp rise in the number of Nepali vehicles entering India in the coming days. In the case of Indian vehicles, which were already coming in big numbers due to Nepal’s unilateral concession to allow them in for up to 72 hours, the agreement has provided an additional boost to them. Now Indian vehicles will be allowed to ply inside the country for five days, and will avoid the erstwhile Rs. 440 customs duty and other fees that District Development Committees and Municipalities charged.

The transport agreement has conspicuously missed out cargo transport, the area where Nepal has been losing out to Indian transporters. Nepal should, therefore, insist on India to extend the agreement to transport of goods as well. If Nepali trucks were allowed to carry Nepali exports to different parts of India and bring back Nepal’s imports from Calcutta, they would be in a position to compete with Indian companies. The transport agreement is, therefore, a positive move but needs refinement to ensure equal benefits to Nepali transporters commensurate with their Indian counterparts. The Government of Nepal should also be serious about reaping benefits from the agreement by providing necessary support to Nepal’s business sector.

Source: The Kathmandu Post: February 26,2004

Extension of Broad-gauge Railway Links upto Nepal-India Border

Raxaul-ICD Birgunj is the single Broad-gauge (BG) rail link between India and Nepal. There is a need to provide other BG rail links at the following locations:

  • Gorakhpur-Nautanwa-Sunauli-Bhairahawa
  • Katihar-Jogbani-Biratnagar
  • Gonda-Nanpara-Nepalgunj
  • New Jalpaiguri-Kakarbhita

Upgradation of Infrastructure at Customs Checkpoints on India-Nepal Border

Four customs checkposts, including Biratnagar-Jogbani, Birgunj-Raxaul, Bhairahawa-Sunauli, and Nepalgunj-Nepalgunj Road account for 90 per cent of bilateral trade and 52 per cent of third country trade of Nepal. Project under consideration for creation of integrated complexes at these checkposts will, inter alia, include immigration, custom clearance, warehouse, parking, quarantine, accommodation and health laboratory.

  • Human Resource Development

• Providing new school buildings in Dhanusha, Sarlahi, Rautahat

• Construction of new building and library of Mahendra Multiple Campus, Dharan

  • Health Sector

• Assistance to MoH, GON for strengthening of health infrastructure in Mahottari, Kapilbastu and Dang

• Establishment of Nepal Bharat Maitri Baktawari hari Eye Hospital in Krishnanagar, Kapilvastu

• Extension of Faculty Support to B.P. Koirala Institute of Health Sciences, Dharan

  • Rural Development

• Assistance to Department of Irrigation, GON, for setting up 22 deep tube-wells in drought affected districts

• Assistance to GON for the execution of Integrated Security and Development Programme (ISDP) in insurgency affected districts

• Assistance to Nepal Electricity Authority for electrification of four VDCs of Sarlahi

  • Grassroots Level Projects

• Small and grassroots level community based projects will be implemented through local government entities like DDCs, Municipalities or NGOs

4.0 Impact of Cooperation

Despite major dose of economic cooperation by India in the Terai, it is difficult to assess the impact of the above initiatives on the economy of the region because of the multidimensional effects of cooperation. An analysis of nature of the completed projects, on-going projects under implementation and future projects under consideration clearly exhibits that there is a shift in GOI’s approach in development activities in the Terai from large projects to comparatively small and community-based grassroots level projects. In the recent years, wider coverage is given to small and community-based grassroots level projects in economic cooperation through the rural electrification programme or for the construction of complexes in academic and health institutions in various parts of the country. Additionally, the economic cooperation is also bringing within its fold many new communities and geographical locations in the Terai.

The Indian cooperation largely helped improve the infrastructure facilities like the roads, airports, hospitals, educational institutions, drinking water, and irrigation in the region. Most of these infrastructural facilities are within the reach of the grass roots helping even helpless and poverty-stricken people to improve their socio-economic conditions. The Indian investment in Terai also helped bridge the gap in economic opportunities between rich and poor and addressed issues like equity and justice. It empowered the state and its machinery and reduced rural-urban, hill-Terai, east-west and male-female disparities.

However, all is not well with Indian cooperation in Nepal. There is a growing realization that Indian assistance in Nepal, particularly in such infrastructural project as the East West Highway, promoted a large scale migration of the people from outside the region. It was so because it was more a political project rather than a project based on economic rational. As such, it had adverse impact on the bio-diversity as the thick forest of this area was depleted. This made the people in the region poorer. People from outside the region have occupied much of the agricultural land, industrial ventures and other resources, which displaced the son of the soil from some of these economic activities.

Until today, many people in Terai live in miseries and poverty and they are not even in a position to scratch out a living. Because of poverty, each year hundreds and thousands of people in the region are forced to leave their homeland in search of food and work.

Table 1 clearly exhibits that in 9 Terai districts (45 per cent) covering Saptari, Siraha, Dhanusha, Mahottari, Sarlahi, Rautahat, Parsa, Bardiya and Kailali are in worst condition in terms of poverty and deprivation. These 9 districts in the Terai are among the 25 districts identified as worst districts at the national level by International Centre for Integrated Mountain Development (ICIMOD). This brings these Terai districts in the same category of remote mountain and hill districts like Achham, Kalikot, Dailekh, Mugu, Bajhang, Humla, Jumla, Jajarkot, Baitadi and Rolpa. Even the conditions of some of the remote districts like Nuwakot, Darchula, Pyuthan, Dolpa and Myagadi which are in the intermediate category; and Parbat, Lamjung, Sankhuwasabha and Mustang ranked in best category are in better position than the 9 worst districts of the Terai.

Table 1 Terai Districts on Poverty and Deprivation Ranking

Classification of Districts %

Worst (9)

Saptari, Siraha, Dhanusha, Mahottari, Sarlahi, Rautahat, Parsa, Bardiya, Kailali


Intermediate 6

Bara, Nawalparas, Rupandehi, Kapilbastu, Banke, Dangdeukhurii

Best (5)

Jhapa, Morang, Sunsari, Chitwan, Kanchanpur

Total Districts 20 100

Source: International Centre for Integrated Mountain Development: Districts of

Nepal: Indicators of Development, Kathmandu: 1997

The literacy rate at the national level accounted for 48 per cent against the same in the Terai of 31 per cent. Among the Musahar caste people, for example, the literacy rate is as low as 4 per cent. Unemployment percentage among the Terai people is 6.5 per cent against 3.7 at the national level. As per the Nepal Living Standards Survey Report 1996, the per capita income of the Terai inhabitants is Rs. 7, 322 only; while the same in the hills is Rs. 8,433.

  1. Conclusion

Though the Indian cooperation has been crucial to the development of Terai, it is based more on the economic principle of critical minimum effort i.e. some support in each sector. Considering the ailment of the regional economy, this theory cannot work any longer. Big push approach has to be applied and for this Indian cooperation could be overwhelmingly important. In order to make the Indian cooperation in Nepal more effective, the priorities will have to be changed and changed structurally. All the projects need to be judged strictly on the basis of economic rational such as EIRR. Mistake made in the past in terms of supporting certain project such as the East West Highway on political ground need not be repeated in future. In this context, big push needs to be applied for the implementation and successful completion of the following projects without any further delay:

  • Construction of Postal/Hulaqi Road connecting the Terai from Mechi to Mahakali
  • Construction of Broad Gauze Railway Line in the Terai from Mechi to Mahakali in parallel to Postal/Hulaqi Road, including the expansion of railway line from Jaynagar to Bardibas via Janakpur
  • Major Hydro-power and Irrigation Projects, including Kamala Diversion Project should be immediately taken up for execution
  • Work on the upgradation/construction of link roads connecting major towns of Terai with Indian towns, like Janakpur-Pipraun-Durbhanga Road, Janakpur-Bhithamore-Sitamadhi Road & Birgunj-Raxaul-Motihari Road should be undertaken
  • Software Parks should be developed at appropriate locations in Terai
  • Projects related to tourism circuit connecting the tourist spots of Terai like Lumbini with Kushinagar/Gaya; Greater Janakpur Development Project, Simraungadh and other such tourist centres and the national parks should be developed
  • Mineral Explorations
  • Export Processing Zones (EPZs)


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MoAC. 2002. Statistical Information on NepaleseAgriculture 2001/2002, Kathmandu.

NPC. 2002. Population Census 2001 National Report, Kathmandu.

NPC. 2003. Tenth Plan, (Nepali), Kathmandu.

NPC. 1994. Census of Manufacturing Establishments Nepal 1991-1992, Kathmandu.

ICIMOD. 1997. Districts of Nepal: Indicators of Development, Kathmandu.

Jha, Hari Bansh. 2003. "Terai awaits better treatment from government," Kathmandu: The

Himalayan Times, August 20, 2003.

Jha, Hari Bansh. 1998. Profiles of Partnership: 50 Years of Nepal-India Co-operation,

Kathmandu: FESC

Jha, Hari Bansh (Ed.). 1995. Nepal-India Border Relations, Kathmandu: Centre for

Economic and Technical Studies.

Jha, Hari Bansh (Ed.). 1995. Duty-free Border Trade and Special Economic Zone

between Nepal and India, Kathmandu: Centre for Economic and Technical Studies in co-operation with Friedrich-Ebert-Stiftung.

Jha, Hari Bansh. 1995. “Question of export processing zone and foreign investment

climate in Nepal,” The Observer, June 2, 1995.

Jha, Hari Bansh. 1994. The Terai Community and National Integration in Nepal,

Kathmandu: Centre for Economic and Technical Studies in cooperation with Friedrich-Ebert-Stiftung.

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Assistance to Nepal 1951-91, Kathmandu: USAID.

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Press, 2005



11 June, Washington DC,

United Nations Association concluded it’s annual convention in the Washington DC. Advocate Dinesh Tripathi, Supreme Court of Nepal, on the Convention spoke on the issue Of “ Nepal Today.” He spoke on the occasion—King force to step-down under the historic, courageous movement of Nepali people. Nepali people have shown tremendous courage and brevity against ruthless, authoritarian and military regime of the king. April revolution of Nepal is set an example in the contemporary world. April evolution of Nepal established the example that people are ultimate master of their own fate and bold and courageous step of people could transform the society and topple down even well organized military regime. Historic changes are taking place in Nepal currently. But Nepal’s journey toward full and complete democracy is not the free of risk and challenges. There is whole lot of risk and challenges are ahead. Nepal’s democratization process is full of risk and obstacle. King is down but he is not out. Military is still not under civilian control. No credible peace process is started yet. Nation has long way to go to establish full and genuine democracy and ensure a socio economic justice for vast majority of people. Nepal has to chart a new course of the history to implement the mandate and aspiration of April Revolution. People are aspiring a polity based on human rights, rule of law and democratic republication. People want be full sovereign and want to make new Constitution by themselves and for themselves. People don’t want any given Constitution. Now “We the people” of the Nepal want to make a new Constitution for ourselves It is proven fact of Nepali history is that democracy and monarchy cannot go together. World community must support and respect the aspiration of Nepali people. Democracy, rule of law and human rights is not only the privilege of the rich and industrialized country but it is a global aspiration of mankind. In this globalize world it is and global and trans-national issue. So world community must give its active support to democratization process of Nepal. UN System has bigger role to play in this context. UN should actively and creatively engage in the Nepal ‘s democracy building and peace process. It should closely monitor the peace and democracy building process. UN should facilitate credible peace process and provide its expertise and resources to build sustainable peace and democratic institution in Nepal. UN ‘s role could be important in this context. UN has resources and credibility. Under the UN charter member states are agreed to respect human rights and fundamental freedoms. At this point Nepal needs huge humanitarian operation too. Vast majority of people are displaced from their habitual place of residence but this issue has not been addressed. We have to integrate rebel into society and ensure gainful employment for them. There is vast number of widow women and orphan. This issue has to be successfully addressed to manage a democratic transition. International civil society also must come forward to engage in the Nepal’s endeavor of democratic peace building. There is biggest issue of transitional justice perpetrator of human rights violation should not allow to impunity. Impunity cannot be tolerated at any cost. All those who have committed a crime against humanity must be brought to justice, whoever they are. Equality before law is civilized norm. Impunity leads towards authoritarian culture and it jeopardize democratic process. So Nepal must immediately ratified Rome statute of International Criminal court. ICC could be the most effective tool to end impunity and conduct free and impartial trial. Perpetrator must be held accountable and must be punished for their misdeeds. Un should also exert pressure to the Nepali government to ratify to ICC convention otherwise it should consider creating a special tribunal for Nepal to conduct fair trial. Now both the party should abide by the norms of international human rights and Geneva Convention. UN should closely monitor the behavior of both parties. No one should allow violating the code of conduct and disrupting the peace process. This is the defining moment in our history but our democratization process is still very weak and fragile. Failure of successful management of peace and democratic transition in Nepal will lead toward the total disaster. It will also create a huge problem of regional peace and security. It will have a big regional implication. So stakes are very high and world community should creatively and actively engage in the Nepal ‘s democratic peace building process and extend helping hand.

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