Nepal’s new PM Oli to deepen ties with China as lever with India; to revive dam project

Nepal's new Prime Minister Khadga Prasad Sharma Oli has said he wants to deepen ties with China to explore more options and get more leverage in his dealings with India "in keeping with the times".

Khadga Prasad Sharma Oli

The communist Oli, widely regarded as pro-China, also said he wants to "update" relations with India and favours a review of all special provisions of the Indo-Nepal relations, including the long-established practice of Nepalese soldiers serving India's armed forces.

The Nepal PM also said he will restart a Chinese-led $2.5-billion hydropower project that was pulled by the previous government considered friendly towards India, and wants to increase infrastructure connectivity with Beijing to ease the country's reliance on New Delhi.

''Political prejudice or pressure from rival companies may have been instrumental in scrapping of the project. But for us, hydropower is a main focus and come what may, we will revive the Budhi Gandaki project,'' Communist Party of Nepal (Unified Marxist-Leninist) leader Oli told Hong Kong's South China Morning Post in an exclusive interview, his first since taking office on Thursday.

The contract to build a dam on the Budhi Gandaki river in central-western Nepal turned into a political hot potato after it was awarded last June to China's Gezhouba Group by a government headed by Communist Party of Nepal (Maoist Centre) leader Pushpa Kamal Dahal as part of China's Belt and Road Initiative that Nepal joined the previous month.

The next prime minister, from the Nepali Congress, scrapped the project, in a move seen as a result of pressure from India, which has been wary of a growing Chinese footprint in what it sees as its sphere of influence.

''Our petroleum usage has been increasing but we import all of it. We urgently need to develop hydropower to reduce our dependence on petroleum,'' Oli said.

Almost all of Nepal's petroleum is imported from India. Its fuel import bill has tripled in the past five years, adding to the ballooning trade deficit with India, which stood at around $6 billion in the last financial year (15 July 2016 to 15 June, 2017). The trade deficit with India constitutes about 80 per cent of Nepal's overall deficit.

Oli's UML and the Maoist Centre formed the Left alliance that swept to power in a landmark election, Nepal's first after the promulgation of its new constitution restructuring the Himalayan country as a federal republic. The two communist parties are also inching towards a merger, which China has always advocated.

"We have great connectivity with India and an open border. All that's fine and we'll increase connectivity even further, but we can't forget that we have two neighbours. We don't want to depend on one country or have one option," he said.

About how he plans to work out relations with India, Oli said, "We've always had excellent relations with India. There were some elements in the Indian establishment that caused some misunderstanding, but Indian leaders have assured us that there will be no interference in the future and we will respect each other's sovereign rights."

Oli, 65, who had also served as the country's prime minister from 11 October 2015 to 3 August 2016, was forced to resign following the political crisis in the Himalayan nation over the Madhesi issue.

Madhesis, mostly of Indian-origin, had been demanding amendment of the new Constitution to address their concerns over representation in Parliament.

Before Oli's inauguration as the prime minister for the second time, India's external affairs minister Sushma Swaraj had visited Nepal and met him and other Left leaders. Prime Minister Narendra Modi also spoke to Oli.

About Nepalese serving in the Indian Army, Oli said, "This should be internally and mutually discussed and corrected, if necessary. We live in a new world, and Nepal is starting a new journey, we have to update whatever is considered outdated and bring it in line with the modern era."

Expectations are high in China about Oli's government as he signed the Transit Treaty with Beijing during his first stint as Prime Minister in 2015 to end dependence on India for his landlocked country to revive the Budhi Gandaki project.

China has been investing heavily in Nepal, blunting India's influence in the Himalayan country.

Oli infrastructure development as an important means to narrow the distance with China, whose physical remoteness compared with next-door India is a hindrance to deeper Sino-Nepal relations, the paper said.

He also spoke about improving rail and road network between Nepal and China through Tibet.

"Once China brings its rail network up to Shigatse and then Kyirong in Tibet, it should be easy to extend it to Nepal. It's lower in altitude than Tibet, and the terrain is actually sloping all the way down from Kyirong. Apart from that, three roads are under construction connecting China and Nepal, which should be ready in a couple of years. If we can connect this railway network to our east-west rail project, it can revolutionise China-India trade, with Nepal in the middle," he said.

China aims to extend the Qinghai-Tibet railway to the Nepal border by 2020 and has expressed interest in extending it to Kathmandu. Kyirong in Tibet is about 25km from Nepal's Rasuwagadhi border transit point, which is 50 km from Kathmandu.