Mainstream Weekly

Home > 2023 > India Vs China: In Himalayan Hydropower diplomacy | Santhosh (...)

Mainstream, VOL 61 No 12, March 18, 2023

India Vs China: In Himalayan Hydropower diplomacy | Santhosh Mathew

Saturday 18 March 2023


by Santhosh Mathew *


As opposed to the regarded Chinese hydro-hegemony in the South Asian and the Southeast Asian region, India is often questioned about its own hegemonic practices of conducting hydro-relations with the Himalayan nations which largely impedes cooperation. Focusing mainly on the India-Nepal hydropower diplomacy, numerous treaties like Kosi, Gandak or Mahakali treaty has been largely ineffective in cases of major disagreements ranging from hydropower generation, distribution, flood management or the building and maintenance of dams between the nations. Simultaneously, the rise and persistence of the China factor in terms of hydro diplomacy and socio-political factors in the region challenges India’s policies of hydro-poltik with the Himalayan nation.

This paper analyses the factors determining the hydro-relations between India and Nepal encompassing domestic and geopolitical conditions in comparison with China’s existing and building inroads in the Himalayan hydropower sector.

The paper talks about the impediments and opportunities in the field of hydropower diplomacy and assesses the contemporary as well as previous socio-political factors that has been dictating the perceptions and hence determining the trajectory of the said cooperation.


The Himalayan region gets its characteristic identity owing to the flowing rivers such as Ganga, Brahmaputra and Indus which often defy the spatial boundaries of the riparian states covering China, Nepal, Bhutan, India, Bangladesh, and Pakistan bringing in a confluence of multifaceted factors of bilateral and multilateral relations like socio-political, ecological, and historical aspects which dictate the cooperation dynamics amongst the nations.

Energy becomes one of the major areas of converging interests in the geopolitics and geoeconomics of these nations which trickles down to impact the micro as well as macro-economic conditions. In the contemporary sphere, the increase in demand coupled with high cost and impact on climate change has compelled all nations to look forward to renewables and the Himalayan region seems to have its own perks of having numerous rivers that makes the hydropower energy crucial in the overall Himalayan diplomacy.

Looking at Nepal, the upper riparian nation has a hydropower generation potential of 80,000 MW power. But so far it has installed a capacity of 800 MW only which leaves a huge potential for harnessing the energy. The country’s hydropower is mostly dependent on small run-of-river projects banking on the rivers. It faces huge energy scarcity during the dry season as these rivers freeze which leads to unavoidable power cuts by the Nepal Electricity Authority on an average of 15-18 hours being a common phenomenon throughout the country. Comparatively Bhutan, which has an estimated hydropower potential of a technically feasible 23,760 MW has harnessed 2326 MW of the existing potential which shows a better growth curve than that of Nepal with higher potential.

This ability of Bhutan to effectively harness its hydropower resources comes from strong standalone schemes as introduced by the Kingdom like projects which are environmentally friendly and techno-economically lower cost bearing. The second factor stems from its close cooperation with India as a large energy market. India has been largely instrumental in providing both financial and technical support to develop numerous hydro power projects in Bhutan. On the contrary Nepal has been apprehensive towards the development of its hydropower potential due to perception of Indian assertion in the hydroelectricity generation which impedes the collective potential in hydro cooperation between India and Nepal.

Irritants of India-Nepal Hydropower Diplomacy

  • Lack of mutuality in the water-sharing treaties- Examining the Indo-Nepal water sharing treaties there is a clear debate of hydro-hegemony over mutuality which largely hinders cooperation.

In case of the Kosi Agreement of 1954, it was signed to construct a barrage which was primarily meant to control massive floods and devastation in Bihar. This creation of a low-head diversion or a barrage dam has been unconventional to witness due to any lack of storage capacity at all being proposed only for flood control. Besides, upon its construction Nepal agreed to give its management rights to India on a lease for 199 years which is a cause of apprehension for a part of Nepal which seas India being given unfair controlling rights over a barrage that has a normal working life of 50 years. Additionally, the lack of any mention for the irrigation coverage in India or the lack of transparency over the amount of hydro power generation quantum and the failure to provide proper financial assistance to the people displaced as promised by India, leaves too many questions unanswered that leads to the existing threat perception in the cooperation. [1]

In case of the Gandak Agreement of 1959, in contrast to Kosi agreement it contained detailed descriptions of the irrigation cover to be provided to Nepal but did not mention the benefits to India. The overall benefits of the Gandak project are far below the projection due to less availability of irrigation water, increasing sand deposition, no compensation for the displaced people and various other factors.

In case of the Mahakali Treaty of 1966, which was ratified by more than two-thirds majority of the Nepalese parliament, despite of strong disapproval from many parliamentarians oversees the agreed upon creation of three dams at Sarada, Tanakpur and Pancheshwar. However, despite the agreed upon shared costs, there has been no progress on the projects due to various socio-political and environmental factors.

  • Territorial Disputes-

Territorial disputes between India and Nepal like the Kalapani and the Susta disputes has been two of the major impediments in the hydro cooperation between the nations. While the Kalapani issue can be tracked back to the Sagauli Treaty of 1816 passing through Nepal’s monarchy to the modern-day democracy, at the core of the contemporary issue lies the debate over the origination of the river either from the territory east of Kali or west of Kali River. Additionally, the river appears to change its course due to climate change as well as changes in flowing patters, a problem that lays at the crux of the Susta territorial dispute. Susta, bordering Bihar to the south was on the right bank of the river Gandak when the Sugauli treaty was signed to determine Nepalese territorial claims. However, in due course of time the river changed its course and falls on the right bank which is under Indian control as opposed to be on the right bank when the treaty was signed.

China’s Himalayan Hydro-Poltik

Expanding from its initial interest of using Nepal in preventing Tibet from breeding any discontent against China, today China has made several inroads in Nepal’s education, health, hydel and infrastructure sectors. As a part of the Belt and Road Initiative under the Trans-Himalayan Multidimensional Connectivity network, Nepal has a significant exertion of Chinese soft and hard power as well as its political narratives. This could be seen in numerous foreign policy decisions as taken by Nepal like not attending the BIMSTEC counter-terrorism exercise hosted by India in 2018. New Delhi expressed its disappointment as this absence was seen as Nepal’s popular reservation towards seeing BIMSTEC as an anti-China military alliance.

Similarly, the Nepali communist party has been seen to create numerous obstacles opposing the implementation of the MCC (Millennium Challenge Corporation) grant including a narrative of the grant being linked to US’s ‘Indo-Pacific Strategy’ which consecutively turned the narrative largely as anti-India.

In case of India-Nepal hydro-power trade, the possibility of buying power at a cheaper rate from Nepal and making it available over an electric grid system to consumers in Sri Lanka, Bangladesh and India could possibly become a regional game-changer but faces a roadblock as to India’s opposition to the involvement of Chinese contractors in the UTKHEP project [2] therefore delaying the process. The Tamakoshi project also known as “Nepal’s Three Georges dam” given the size and potential has been operational since 2021 and has been constructed by civil construction companies like China’s Sinohydro and Austria’s Andritz Hydro. India’s refusal to purchase power from the 456 MW Upper Tamakoshi Hydroelectric Project (UTKHEP) also comes with disallowing the Nepali government from opening the bilateral transmission from the power plant to Bangladesh which adds to the anti-India sentiment.

Similar Chinese assistance via PowerChina Resources Ltd can be seen towards the Upper Marsyandi project in western Nepal which contributes for lessening the power shortage supply of Nepal by producing electricity of two billion megawatts hours adding to national grid.

In contrast India has been holding to deliver on big-ticket projects like

Domestic Power Dynamics of the Himalayan Nations

India has always been perceived to be “selfish” in Nepal’s sensitive matters. This includes not delivering upon the river treaties and the implementation of various projects, denying to cooperate on the electric grid transmission to other nations, reluctance to respond to border encroachments, undefined trade and transit crises and embargoes.

Firstly, in cases of trade there is a huge trade deficit in India’s favor and Nepal never seems to be acquiring the comparative advantage of the increased exports as the lower-priced Indian products flood the Nepalese market making the domestic market unable to compete.

Secondly, India’s activism for an inclusive constitution has been often perceived to be intrusive along with the alleged involvement and support for the Madhesi movement as well as the 2015 blockade. During the blockade which India strictly stirs clear of any participation saw an array of economic sanctions and embargoes affecting people largely in the Pahadi and Terai region.

Thirdly, Domestic politics in Nepal with dominant communist parties like CPN (UML) has consistently protested India and has been closer to China. Even the Nepali Congress has often favored the anti-India stance. Adding this to the China influence comes the resultant 2019 and 2020 border crisis regarding the Kalapani issue and the constant redrawing of the physical map of both the nations. With the return of Pushpa Kamal Dahal as the current Prime Minister of Nepal the predictions of an equi-proximity with both China and India can be seen on various matters which has be maneuvered in the right direction if India wants to change its anti-perception in the nation.

India’s Himalayan Hydro-hegemony

Bhutan with its tremendous hydropower potential, exports around 45 per cent of its hydropower to India and has a long-standing history of mutual cooperation in the sector. The electricity generation in Bhutan was developed in 1960s by Indian assistance. Right from the beginning the Indian governments over time have been contributing to successfully accomplish the hydropower agreements, starting with the Jaldhaka Agreement of 1961. This liaison continues with other landmark projects like the commissioning of Bhutan’s first mega project namely the Chukha Hydropower project which was fully funded by the Government of India. A very recent torchbearer of this cooperation is the Mangdechuu Hydroelectric project inaugurated in 2019.

However, this idealized yardstick of hydro-diplomacy has started to fizzle away with numerous questions on what is next for India in cases of Himalayan hydro-diplomacy.

Firstly, the most common reason of this fizzling is the delay in project completions leading to unwarrantable cost escalations as argued by the National Council of Bhutan. An example of the same has been the joint venture between Druk Green Power Corporation and the Satluj Jal Vidyut Nigam Limited of India in the Pnatsangchu Hydroelectric project and the Kholongchu project [3] which failed to meet the respective deadlines causing the overall financial framework to shoot up. This delay has been due to lack of consensus regarding the feasibility of the barrage, dispute over construction work and capital as well as division of responsibilities.

Secondly, both the neighbors have not be able to efficiently negotiate the power tariff, with market price of electricity bought by India being often cheaper than the domestically available hydropower in India as well as the low average for the power imports from Bhutan there is a clear trade imbalance. While there has been a significant amount of discissions on Chinese debt trap, India stands at the entrance of the same conversation as Bhutan’s debt to India keeps on increasing with every year. In 2017 Bhutan’s debt to India revolving projects like Mangdechhu, Pnatsangchu 1 and 2 stood at the cost of INR 12,300 crores, amounting to 77 per cent of Bhutan’s debt and 87 per cent of its GDP. The World bank has also identified Bhutan’s external debt to GDP ratio as 99 per cent making it one of the top ten countries with higher external debts.

This financial burden that Bhutan faces due to India is primarily due to two reasons. First the changing hydropower project’s partnerships from a 60:40 model (60 percent grant and 40 per cent loan) to 30:70 model and second, the involvement of Indian private companies as well as the increase Indians working on this hydropower projects is seeing the questioning of Indian intentions as the local Bhutanese companies and the population feels deprived of their source of employment.

Therefore, while India and Bhutan’s hydropower diplomacy can be seen as an ideal framework, it seems to be heading the Nepal way and the only reason it will not head the same way any time soon is due to the past success and politically strong connections within which seems to avert the Chinese interest better than Nepal does.


With the rapidly changing yet continuing geopolitical functioning of South Asia, these Hydropower dominant nations of the Himalayas are often left with little to no choice but to engage with everyone to meet their own interests with policies like “amity with all and enmity with none”. In such cases the ideal approach for India would not be mindless competition with Chinese investment in the hydropower sector but also cooperation along similar lines. Because with ages of historical mishaps with these projects and the vulnerability of domestic politics does not sit well with the Indian interests. Additionally the geographic proximity of China to these nations makes it a natural stakeholder in the hydro power sector. Therefore, the Indian diplomacy should be more concerned about the substantial economic boost it can give to these Himalayan nations as well as the timely delivery of the infrastructure projects as done by China to build confidence in the cooperation for a holistic Himalayan Hydro diplomacy.

* (Author: Dr.Santhosh Mathew is Associate Professor, Centre For South Asian Studies, School of International Studies & Social Sciences, Pondicherry Central University, India)

[1Dharma Raj Bagalae. October 30, 2020. “Nepal-India water cooperation: consequences of mutuality or hegemony”. World Water Council

[2Suhasini Haidar. December 18, 2022. “Concerns over Chinese contractors holds up expansion of Nepal-India power trade for the region”.
The Hindu

[3Sohini Nayak. July 7, 2022. “India-Bhutan hydropower cooperation: Assessing the present scenario”. Observer Research Foundation

ISSN (Mainstream Online) : 2582-7316 | Privacy Policy|
Notice: Mainstream Weekly appears online only.