Nepal, India set up permanent mechanism for projects under credit line

Nepal and India have set up a permanent mechanism to review projects under India's line of credit (LoC) to Nepal that stands at $350 million.

Nepal is currently pursuing energy and infrastructure projects under the LoC. In June 2006, the Indian government had for the first time agreed to provide a $100-million LoC execution of infrastructure development projects as prioritised by the Nepal government.

As a special gesture, the Indian government agreed to dilute the norms of Indian content and eligibility criterion for accessing the LoC.

The Exim Bank if India and the Nepal government signed an agreement in September 2007 following which the LoC was operationalised in January 2008.

The projects under the first $100 million LoC included 11 road development projects, the 15 MW Devighat hydropower project, development of 27 MW Rahughat hydro power project, the Nepal portion of the Muzaffarpur-Dhalkebar cross border transmission line and rural electrification projects.

After this, at the request of the Nepal government, the Indian government agreed to extend another LoC of $250 million from Exim Bank of India on similar terms and conditions.

Out of this, $175 was used for phase II of the Rahughat hydropower project, 220 KV Kosi corridor transmission line project, 132 KV Solu corridor transmission line project, and the 132 KV Modi Lekhnath transmission line project.

The rest $75 million will be injected for road expansion projects.

The first meeting of the permanent mechanism between Nepal and India that concluded recently in Kathmandu reviewed the progress made on the projects under the existing LoCs of $100 million and $250 million, said a statement issued here by the Indian Embassy.

The discussions were held in a cordial, friendly and constructive atmosphere.

"The Nepalese side welcomed the 'LoC Review Mechanism' and expressed appreciation of the government of India for its continued support in Nepal's infrastructure development. The Nepalese side stated that they look forward to government of India for assistance in bigger developmental projects," the statement said.

The Indian side stated that LoCs have become another important component of development partnership between the two countries and conveyed that India would be happy to consider extending further assistance to Nepal.

It was decided that the next LoC review meeting would be held in January 2015 in New Delhi.

The Indian delegation was led by Alok K. Sinha, joint secretary (DPA or development partnership administration-I), who was accompanied by Abhay Thakur, joint secretary (North), in the external affairs ministry.

The Nepalese delegation was led by Madhu Kumar Marasini, joint secretary in the finance ministry.

(Anil Giri can be contacted at girianil@gmail.com)