This article was originally published by The Wire on May 18, 2016.


On May 12, the Chinese state-run newspaper People’s Daily carried a short article with four photographs of a freight train waiting at a station in Lanzhou, before it left with 86 cargo containers for a journey to Nepal.

The international freight train will travel within Chinese territory until the current railhead of Xigaze (Shigatse) and then travel by road through Gyirong (Geelong) border post. The goods will take 10 days to reach Kathmandu, where they will, presumably, be greeted under the glare of high-voltage publicity.

Among Indian policymakers, the news about the freight train has been greeted largely with skepticism. Even as some Indian members of parliament and media persons have been ringing alarm bells about China getting a share in the current Nepali polity under the Khadga Prasad Sharma Oli government, the power corridors in the country have been comparatively unconcerned – jaded at an apparent replay of the “China” card.

According to Indian observers, the freight train is another manifestation of China “playing ball” with the Oli government’s need to show that its Chinese overture is bearing fruit. According to sources, this rail and road combination was already in use and not a new development to facilitate Nepal-China transit trade. “There have always been items coming through this route in small volumes,” a senior government official said.

The route of the freight train, from Lanzhou to Xigaze through Gyirong to Kathmandu. Credit: Google Maps

The appropriate response

Former Indian foreign secretary and ambassador to Nepal Shyam Saran is also not entirely convinced about the viability of the Chinese route. He believes that India should respond not by scaremongering, but by urgently upgrading connectivity networks with its landlocked neighbour.

Nepal’s border with China is much longer than its southern one with India – but the Himalayas are a much more formidable frontier than the Terai plains.

“Are the Chinese going to subsidise Nepali trade? For what?” Saran asked, wondering if any “cost-benefit analysis” has been conducted of goods that arrive through the Chinese route. He pointed out that China had clearly said that trade would be on a “commercial basis.”

Saran said that instead of repeating the alarmist “Chinese are coming” refrain, India should look at how it can “consolidate” its geographical advantage. The Indian response to Chinese expansion should be to take “our problems with the border infrastructure much more seriously.” “We are very slow,” he added.

India has 15 transit points on its border with Nepal, along with five transit routes to and from Bangladesh and Bhutan. Along the border with China, there are two trade posts.

But, with poor infrastructure on the Indian side, Nepal has not been able to harness the full potential of transit facilities to third countries through India.

Within the last decade, India commissioned a series of border roads, rail links, Integrated Check Posts (ICPs) and Terai roads – but most of them were delayed beyond their initial deadline over issues of statutory approvals by Nepal, land acquisition and political unrest.

Ten years after “in principle approval” of the ICPs, the ministry of home affairs has scheduled the first two ICPs at Birgunj and Jogbani becoming operational in the first quarter of 2016-17 – which should speed up the processing time of Nepal’s bilateral and third country trade through India.

The fate of Tatopani

A key reason for India’s confidence that it will not be superseded by China as Nepal’s preferred transit trade destination has been the fate of the Tatopani border post. At the height of the “blockade,” China gave about 1.3 million litres of petrol as a grant through the Kerung post, with Tatopani, the only other, and more convenient, transit point remaining closed since being damaged in the April 2015 earthquake.

While the physical security of the infrastructure at Tatopani remains precarious, there is another dimension to the whole scenario. According to sources, China has already moved the settled population on its side deeper into its territory, and it wants Nepal to similarly move its settled population as a condition for opening the border post.

“The Nepali population on this side of the border post is ‘pro-Tibet’. China remains wary of large-scale people-to-people contact, which will increase if Tatopani is upgraded. But Nepal cannot easily remove its settled population, as this will lead to a lot of resentment,” claimed a senior government official.

While the towering Himalayas may impede China, India has no such excuse, however.

Mahendra Lama, a professor at Jawaharlal Nehru University (JNU), noted that it was only around 2005 that New Delhi changed its mindset towards developing long-neglected border regions, and even so, “the pace of development (since then) is alarmingly slow and acutely dangerous for the country”.

According to the People’s Daily report, the freight train will take 10 days to reach Kathmandu, 35 days fewer compared to the ‘ocean route’. While there is skepticism about third countries using China as a transit route to Nepal because of the cost, the delivery could potentially be faster than delivery through India by rail or road.

Delhi-based think tank Indian Council for Research on International Economic Relations estimated that due to current infrastructure and procedural problems, the average turnaround time from the Kolkata port to Birgunj and back by road is 19 days, whereas the “ideal” time should be just seven days. By rail, the turnaround is even longer – 26 days, of which the actual transit time is only four days and the remaining time is spent waiting at Kolkata port or at Birgunj.

The bottleneck

The main obstacle in India swiftly improving border linkages, or executing the plans to do so, has been its arcane financial rules, which control all government projects, believes Saran.

“A suggestion was made for a kind of autonomous development agency within the Ministry of External Affairs (MEA), which would be empowered to take its own decisions financially, with its own financial advisor,” he added. Currently, India’s aid budget is administered by the development partnership administration division in the MEA, which was created about four years ago by removing aid delivery from the territorial desks.

With financial allocation for even long term projects done annually, a reduction in the budget for a single year, say for austerity purposes, throws the schedule awry, noted Saran.

Even as India struggles to whip its border infrastructure into shape, China’s heightened presence is not likely to diminish – especially with the Oli government determined to prove that China is a viable alternative to India.

A dark history

India has been in the Oli government’s black book ever since New Delhi asked Nepal to delay the promulgation of the new Constitution so that the Madheshi parties’ demands on citizenship, and provincial boundaries and their demarcation be incorporated. The disruption of fuel supplies, through an ‘unofficial blockade’ for which Nepal blamed India and India blamed the Madheshi protestors, did not improve tempers.

In January, India was quick to welcome a constitutional amendment that delimited constituencies as per population, a move that improved relations. The Madheshis, though, were not satisfied.

The end of the ‘blockade’ and Oli’s subsequent visit in February 2016 finally seemed to bring about some normalcy in ties. Letters were exchanged allowing Nepal to use Vishakapatnam for third country trade, along with a new road and rail route to Bangladesh.

A month later, Oli went to Beijing and signed a transit-trade treaty that allowed the use of Tianjin port, 3000 kilometre away from Nepal. There was also talk of extending the Chinese rail network to the Nepal border by 2020.

The freight train from Lanzhou is, therefore, a likely Chinese demonstration of Oli’s ‘success’. Nepali newspaper The Republica has argued in its editorial that “all evidence suggests that it was a one-off” rather than a “long-term project,” since Nepali government officials were kept in the dark.

A transport service for Nepal. Photo: People's Daily online
A transport service for Nepal. Photo: People’s Daily online

The latest spiral

The latest downturn in relations with India was triggered by the move of the Unified Communist Party of Nepal (Maoist) chairman Pushpa Kamal Dahal Prachanda to remove Oli with the help of the Nepali Congress. Within a day, Prachanda changed his mind, after Oli agreed to accept Maoist demands in a nine-point agreement that included three controversial provisions on the withdrawal of police cases related to violence and land distribution during the Maoist civil war. Human rights groups have already heavily criticised this agreement.

However, Oli is reportedly convinced that New Delhi was behind the move to push him out of power. On May 6, Nepal unilaterally cancelled the visit of its first woman president, Bidhya Devi Bhandari, to India, citing a lack of preparations as its reason for doing so.

The logic was unconvincing, as Indian officials maintained that all the ground work had been completed. There were no signs of crisis during the Indian ambassador to Nepal Ranjit Rae’s “pleasant dinner” with Bhandari on the night of May 5. Earlier that day, Nepal recalled its ambassador to India Deep Kumar Upadhyay – a political appointee of the previous Nepali Congress administration – citing his “non-cooperative” attitude. Upadhyay, who had been against the cancellation of Bhandari’s trip, was accused of “hobnobbing” with Rae over a visit to the restive Madhesh districts – an accusation he strenuously denied.

Oli even tried to sever India and Nepal’s connection through Buddhism. In a pointed remark, he said that the upcoming International Buddhism Conference in Kathmandu “will help remove the confusion and prove that Buddha and the Buddhist philosophy started from Nepal.”

Meanwhile, the Nepali government announced that the Kathmandu-Tarai fast track road and the second international airport at Nijgadha would be built through domestic investment rather than by a foreign firm. This had been a topic of discussion during Oli’s visit to India, with New Delhi offering a loan of $750 million for the road and airport project. A consortium led by the Indian firm IL&FS had prepared the detailed project report.

However, there was a backlash from Left politicians claiming that handing over the project to a foreign firm would be against ‘national interest’. A case has been filed in the Supreme Court, but the Oli government went ahead with the announcement. An Indian official made it clear that the soft loan would no longer be available, as terms and conditions for such lines of credit usually call for employing Indian firms.

Just a couple of days before the latest round of India-baiting began in Kathmandu, the parliamentary standing committee on external affairs tabled its latest report on the demand for grants for the ministry of external affairs. In the section about aid to Nepal, the committee directly questioned South Block as to why “anti-India propaganda had found currency in Nepalese political discourse,” despite the rising quantum of Indian aid.

“Narrow political, vested interests sometimes grossly misrepresent India’s support for an inclusive Nepal as our interference to support only one section (Madhesis) of the Nepalese population; and also deliberately use anti-Indianism to promote their extreme nationalist plank,” the MEA replied in a written submission to the committee, according to the report submitted on May 2.

This submission was probably the most explicit public criticism by the Indian government. No names were specifically taken, but the implicit finger was clearly pointed at the UML leadership.

Indian official sources insist that most statements related to India issued by Oli and other Nepalese ruling alliance leaders should be read as mere political rhetoric, with parties jostling for power and the next general elections only two years away.

“He [Oli] is convinced that India wants to get him out,” Saran said, adding that India should conspicuously “keep away from internal politics.” “Our major interest is to contribute to internal stability and economic recovery. We should not get involved in shadow play between the parties,” he said.

According to Lama, India needs to “diversify its constituency from the microscopic hegemonic elite” in Nepal to “Madheshis, Dalits, Janjatis and others.” When asked if he agreed with the Indian government’s Nepal policy that has irked many in Kathmandu, he replied, “Yes, to an extent.” He elaborated: “I support the Indian government when it says that Nepal has to be ‘inclusive.’ What I diverge from is India’s sustained interest in individuals and not in building democratic institutions.”

Chinese concerns

Anti-Indian sentiment has always been a constant underlying theme in Nepal, wielded by the Kathmandu elite under both the monarchy and democratic rule. Even if statements by Nepalese politicos are discounted, there is definitely a change in the status-quo, brought about by China. Until now, the message from China to Nepali politicians, who had no shortage of complaints about India, was that geography had to be respected. Once, New Delhi and Beijing had a common purpose of limiting the footprint of the US, out of concern for its interference outside its sphere of influence, and other Western countries in Nepal, out of concern for Tibet.

As observers have noted, there seems to be a qualitatively different kind of signalling from Beijing’s side in recent months – aimed mainly at keeping the Oli government in the saddle.

Besides keeping a China-friendly Left wing government in power, Nihar Nayak, an associate fellow at the Institute for Defense Study and Analyses, believes that one of the factors influencing China’s moves has been its big-picture perception that “India and the US are getting together internationally.”

“The Chinese believe that the BCIM [Bangladesh-China-India-Myanmar] corridor is not being activated by India because of the US’ influence. So, China is concerned that India and the US could be plotting on matters concerning Tibet,” said Nayak, who is working on a project on Chinese soft power diplomacy in Nepal.

Other factors in Beijing’s decision-making, he added, are China having enough surplus cash to deflect India’s presence and the Nepal linkage helping to push the flagship “One Belt-One Road” project into the subcontinent.

On their part, Indian officials believe that a probable reaction to China’s “visible hand” on the part of the international community, mainly the West, will be to refocus their spotlight on Nepal and especially on the doorstep of China’s Tibetan autonomous region.

With the UML-led coalition acting slowly on earthquake reconstruction, the international community is also concerned that the government’s “direction has not been positive,” claim sources.

For S. D. Muni, professor emeritus at JNU, China’s current role in Nepal is “not a new story.” “The same thing is happening in the Maldives. In Sri Lanka, see how the Colombo port project has been returned to the Chinese with almost no changes. China is very interested in South Asia as a whole,” he said.

Complex ties

Muni is critical of the NDA government for buckling under its own “hindutva baggage” and “pushing for the return of monarchy,” rather than focusing on diplomatic outreach to the ruling coalition who are “now completely alienated.” “It is very naïve to assume that the monarchy will be friendly to India,” he added.

Muni noted that Nepal’s former king, Gyanendra, was in India recently, but kept out of the spotlight.

Even as relations spiral publicly, Indian officials point out that official engagements continue unimpeded, which is, they claim, a demonstration that India-Nepal ties can’t be put in a neat box.

Sources say that Nepali Foreign minister Kamal Thapa has confirmed that he will be attending the convocation at the South Asian University in Delhi in June.

In the meantime, with the Madheshi protests migrating from the Terai to the capital, the Oli government may be obliged to demonstrate progress on the demand for changes in the Constitution, along with substantial talks with the Madheshi political parties. The silver lining of the nine-point agreement, according to Indian officials, is that Maoists are putting pressure on Oli to resolve the Madeshi agitation.

However, as cargo from the Chinese freight train makes it way to Kathmandu in the coming days, it remains to be seen if the Oli government and India will try to make amends.

Fifty-four years ago, Nepal’s finance secretary, Y.P. Pant, wrote in the then Economic Weekly about the potential of trade with China. It was published just as construction of the Kathmandu-Kodari road began, which is seen as the first infrastructural push by China into Nepal. Pant felt that the “total (trade) volume is likely to continue to be too small to deserve any great attention.” The concluding paragraphs of the article are juxtaposed with an advertisement for General Electric, illustrated with an image of a long freight train.

Cover photo: The only train in Nepal. This Nepal-India train used to run from Janakpur in Nepal to Jaynagar in India. Jules Henze.