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India, Nepal to seal power, infrastructure deals

delhi Updated: Oct 16, 2011 20:44 IST

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India will roll out the red carpet for Nepal's Prime Minister Baburam Bhattarai when he comes here later this week - an important trip during which New Delhi will unveil major infrastructure and power deals for the neighbouring Himalayan state.

Prime Minister Manmohan Singh is expected to hold talks with Bhattarai Ocobert 21 (Friday) that will focus on enhancing India's developmental assistance to Nepal and intensifying economic ties between the two neighbours.

A pact for providing a credit line of $250 million is likely to be signed during the visit, said well-placed sources. The credit line, to be channelized through the EXIM bank, could be used for a swathe of infrastructure projects, including roads and irrigation. India's development assistance to Nepal is estimated at about $100 million.

Issues related to security cooperation, including the proposed extradition treaty, will figure prominently in the discussions.

With Nepal suffering from a crippling power crunch, Bhattarai, who will be here on a four-day visit, is set to request India for an additional 200 mega watt that will provide relief from the burden of frequent cuts that sometimes last for nearly 18 hours.

Ahead of his visit, the India-educated Bhattarai said his government would like "to conclude a power trade agreement between Nepal and India, which is so crucial for both importing and exporting powers".

"Power is an essential ingredient for all sorts of socio-economic development,” he said in Kathmandu.

Expanding hydro-power cooperation and enlisting Indian investment will be high on Bhattarai's agenda in New Delhi.

According to Nepal's energy minister Posta Bahadur Bogati, despite having enormous hydro-power potential with 6,000 rivers and rivulets, only about 1 % of the economically viable potential has been harnessed by Nepal.

About 33 percent of households in Nepal still rely on fossil fuel for lighting their houses and only 49 % of rural households have access to electricity.

Another issue that will engage the two sides would be to ease trade and investment by pushing the long-pending treaty on avoidance of double taxation, which will exempt investors and traders from the need to pay taxes in both the countries.

India is expected to press Nepal for a bilateral investment protection agreement, an issue that has acquired an added importance since the attack on 900 MW Upper Karnali hydropower project an Indian company has been building in Nepal by suspected Maoist cadres a few months ago.

Recently, Bhattarai promised to provide security to foreign investors coming to the country and special protection on power project sites.

The Nepali side may also take up the issue of compensation that India has to pay Nepal for the submergence of land during monsoon due to barrages built at Koshi and Gandak rivers decades ago. Nepal has been complaining that India has not paid compensation as per bilateral agreements.