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Nepal Rethinks on Umbrella Pact with India


Nepal Rethinks on Umbrella Pact with India

August 3, 2017

As the Nepal-India ‘umbrella agreement’ is about to expire on Saturday, the Nepal Government is currently thinking on whether to extend the small development projects undertaken by the Indian Government as per the agreement.

Under the agreement that was signed in 2003, the Indian Embassy has been extending its direct support to the local bodies of Nepal with regard to developmental activities, such as building educational institutions and hospitals in those areas.


The project enables Nepali local bodies to directly reach out to the Indian Embassy for financial assistance up to Rs 50 million for various developmental projects.

However, the new structure formed following the recent local body polls, restricts local units from receiving foreign funds directly from any bilateral or multilateral donors.

According to a senior Finance Ministry official, the new constitutional structure allows local bodies to receive direct financial assistance only from the provincial or central governments.

“We have already communicated this to the Indian side. But the Indian side has been insisting on extending the provision for a year, suggesting a modification to the MoU after the provincial elections,” said the official.

While confirming that ongoing projects would continue, he also clarified, “for the new ones, we have to either wait until the provincial elections or make a full-fledged institutional arrangement.”

Expressing the Ministry’s unwillingness to discontinue the provision, the official said that the Indian side will have to reach an agreement with the central government for continuation of the project.

Some other Nepali officials are of view that giving direct access to India will also stimulate other countries to make similar proposals.

Meanwhile, an Indian Embassy official said that they have not received any official confirmation from Nepal authorities in this regard. “Until the institutional arrangement is made, we will not provide grants and will continue the existing projects. But we will start distributing grants once new arrangements are made,” added the Indian official.

August 3, 2017 |

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