A last-minute effort by leaders of six member countries of the South Asian Association for regional Cooperation (SAARC) to break the ice between India's Prime Minister Narendra Modi and his Pakistani counterpart Nawas Sharif has helped partly salvage the summit and clinch a last-minute deal to create a regional electricity grid.
The agreement to create the regional grid that would facilitate transmission and trading in electricity among member countries, would be signed at the summit's closing ceremony.
Nepal's foreign minister Mahendra Bahadur Pandey announced the deal after the leaders emerged from a mountain retreat outside Nepal's capital Kathmandu.
Modi and Pakistan's Prime Minister Nawaz Sharif, who had cold-shouldered each other during the summit, shook hands as they met briefly at the retreat, possibly under pressure from leaders of other SAARC states.
The meeting, however, was not enough to really break the ice between the rival leaders as nine people, including three Indian army officers, were killed on Thursday in the worst militant attack in Kashmir in more than a year.
The widening rift between the two rivals is widely blamed for the poor performance of SAARC, which was expected to form a cohesive regional block on the lines of the European Union.
The regional block, formed 30 years ago, forged a free-trade pact in 2006, to reduce the high tariffs to levels around 5 per cent and ease restrictions on movement among South Asian nations in a bid to boost their total trade, but has so far failed to implement it.
SAARC failed to integrate the region over the past three decades, mainly because of the India-Pakistan rivalry, which left the way open for China to step in with major infrastructure projects like ports, railways and highway development.
China, which has observer status at the grouping, has promised $30 billion for road building in South Asia over five years, and suggested increasing trade to $150 billion over the same period.
Modi, on the other hand, announced an easier regime for business and medical visas and promised to lower India's trade surplus with its smaller neighbours.
Pakistan, which wants China to play a larger role in SAARC as a member rather than as an observer, however, refused to agree on two other agreements aimed at boosting cross border road and rail traffic.
India and Pakistan have tried for years to strike a deal to share energy across their heavily militarised border in Punjab, but Pakistan's army has resisted the attempt.