The distrust between India and Nepal over cooperation in hydropower has increased because of ambiguous content of an Indian draft agreement. Some experts in Nepal fear that provisions in Clause 3b of the proposed agreement, which would allow future investment in power projects for ‘effective harnessing of Nepal’s hydropower potential through facilitation and speedy construction of hydroelectric projects in Nepal either with 100% Indian investments or joint venture with Indian entities’, would preclude third country or Nepali investment in Nepal’s own hydropower. However, the clause does not explicitly state that investors from other countries will not be allowed to invest in hydropower in Nepal. One source in the energy sector nevertheless pointed out: “But if the Indian side sticks not to the spirit but just to the wording of this draft, it will be difficult to involve other countries in hydropower.”
The Nepali side will now specify projects in which Nepal and India have both agreed like Pancheswor, Karnali, Chisapani for projects with 100 per cent Indian equity, or to be developed in partnership with Nepal.
There are also misgivings about Article I about joint cooperation in power generation, transmission, energy efficiency and development of various types of renewable energy. Some Nepali experts say this means India will monopolise generation from not only hydropower but also other renewables.