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Analysis of the Indo - Nepal Mahakali Treaty

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Humans beings depend a lot on the natural resources provided by the nature for their survival. The recent period of human history differs with the earlier period in its strikingly high rate of resource utilisation. In the present environment, apart from energy the other important focus of any nation is in garnishing fresh water, one of the most precious natural resource. Water is required for the domestic use, industrial purpose and agriculture. With the increasing human population and depleting natural resources, as perceived by most, water is likely to be a source of major conflict in the near future. As per analysis, with the impact of global warming and population boom, by the year 2025 our world would be suffering from dramatic effects of hydrologic poverty. There would be great disputes and even war over water.

For a country, water is brought by two ways, either as precipitation over her national territory or as inflow from upstream countries in the same river basin. The use and misuse of water in the upstream countries affects its quality and usage in the downstream country.

South Asia is a region for both water abundance as well as water scarcity. The Hindukush - Himalayan region together with the ancillary mountains is one of the largest store houses of fresh water in the world with most of the nations of this sub continent depending on the same in one way or the other. However, water problem in Asia is already severe, with a large population not having access to safe drinking water.

Both India and Nepal share one of the largest geo hydrological region called the Ganga - Brahmaputra basin. Most of the major rivers of the sub basin of Ganges river originates from Nepal and thus are trans boundary in nature. Nepal occupies 13 percent of the total drainage of Ganges basin and in terms of annual water flow; it contributes up to 45 percent. In dry seasons, Nepal's contribution to the total run off is almost 70 percent[1]. The hydrological features bind both India and Nepal geographically as far as water resource is concerned. There is considerable scope for joint endeavour between both the nations on issues pertaining to water resource development and water management. However various issues relating to the same has not been smooth .The geopolitical influence, big small country syndrome, failure to understand each other's sensitiveness and negative approach has led to a situation which may become a source of future conflict and a major issue in shaping the eventualities between both the countries.


Statement of Problem

This dissertation attempts to analyse the genesis of the problem with regard to the Indo - Nepal Mahakali treaty and suggest measures to resolve the deepening divide.


The Mahakali treaty is formally operational. However, there is a disagreement over interpretation of the provisions. A negotiation based on equitable sharing, i.e. having equal rights on utilisation of the water resource and related benefits depending on each riparian states economic and social need can resolve the deepening divide.

Justification of the Study

Water insecurity is omnipresent in the region, visible in conflicts and tensions erupting within and across countries. As water is becoming a scanty and critical resource with every passing day, sharing and management of trans-boundary water continues to be a bone of contention in any attempts to build a common understanding, stability, peace and cooperation in the region. Though there are a numerous treaties as far as sharing of trans- boundary river is concerned, however in many places the bilateral treaties signed by different countries and India themselves have become sites of conflict.

For a fast developing economy and for a nation like India which believes in the principles of peaceful co existence, there arises a need to address issues which are of concern. As regards to the region is concerned, water governance specifically and ecological governance at large has never been as strong, nor as urgent as now with the growing impact of global warming and depleting fresh water bodies. There has always been the big versus small nation syndrome on many such issues.

The need to resolve issues pertaining to trans boundary water is very much essential for peace and cooperation in South Asia. Therefore there arises a need to institute a framework for water governance that is fair, equitable and environmentally sound and resolve such issues which when addressed appropriately could go a long way in the development of the region as a whole.


This study concentrates on the Mahakali Integrated Development Treaty under the backdrop of various principles of international law governing international rivers and thereafter advocates some suggestions to resolve the conflict. Although various other joint water resource development treaties currently in place between the two countries are inextricably linked with the subject, the same debate has been excluded from the subject.

Method of Data Collection

Information for this dissertation was obtained from documentary and non- documentary sources. Cyber media was adequately accessed to obtain the latest views on the subject. A bibliography is appended at the end of the text.

Organisation of the Dissertation

It is proposed to study the subject in the following manner:-

  1. Chapter II: Background of the Treaty. This chapter tries to examine the various issues and treaties pertaining to water sharing between the two countries which had a direct impact on the course of the Mahakali water treaty.
  2. Chapter III: The Provisions of the Treaty This chapter deals with the twelve mutually accepted articles of the Mahakali water treaty concerning the integrated development of the Mahakali barrage between the erstwhile His Majesty's government of Nepal and the government of India.
  3. Chapter IV: Issues of Conflict Though the treaty is formally operational, however the implementation of the provisions has been slow due to disagreement over interpretation of the provisions. This chapter tries to analyse the differences that had emerged between both India and Nepal on various issues pertaining to the treaty.
  4. Chapter V : Principles of International Law Governing International Rivers In this chapter the four basic theories with regard to the water rights of various riparian states are dwelled upon.
  5. Chapter VI : Possible Measures to Mitigate the Conflict. Though steps have been initiated to resolve the conflict still there are differences over the treaty. In this chapter an endeavour has been made to study various methods to mitigate the deepening divide.



Both India and Nepal share many rivers such as Kosi, Gandaki, Karnali and Mahakali. In order to harness the benefits of the Mahakali river between India and Nepal, a multipurpose project was planned. The Mahakali treaty though provides for a construction of a project on the Mahakali river however it has its background to various historical events, which led to the conclusion of these agreements.

As regard to the Indo Nepal water treaty, the water resource development dates back to 1920 when the British Indian government decided to build the Sarda barrage to irrigate the United Province. As per the treaty, Nepal government agreed to transfer 4093.88 acres of her land on the eastern banks of Mahakali river to build a barrage. In exchange Nepal received an equal amount of forest land from the British Indian government to the east[2]. In addition the British Indian government also agreed to give 50,000 rupees, a supply of 4.25 cubic meters per sec (cumsecs) out of an annual flow of 650 cumsecs during dry season and 13 cumsecs of water in the wet season which could be further increased to 28.34 cumsecs if water was available[3].

The project was undertaken by the British Indian government for its own benefit and at her own cost in addition to an equitable transfer of land with some benefits as regard to sharing of water is concerned, being provided to the Nepal government.

In 1954 India and Nepal signed the Kosi agreement which entailed construction of a dam on the Kosi river for the use of the river water. The Kosi river is one of the major rivers of Nepal. One of the peculiarities of the river being that it shifts its course frequently and used to flood the plains of Bihar. The Kosi project agreement was signed with the aim of preventing floods in Bihar, diverting the confined water for irrigation and hydropower generation (20,000 KW)[4]. The 1.15 km barrage was completed in 1962. The barrage was entirely in Nepal with the eastern main canal in India[5]. the project was seriously criticised at all levels in Nepal, the complaint being that it was a sell out of national property for India's benefits and that nothing had been obtained for Nepal in return for a huge expenditure of resources. Subsequently on Nepal's insistence, talks were held to revise the agreement in 1966. Later in 1982 the western main canal was completed of which 35 km stretch of the canal passed through Nepal which was designed to irrigate 356000 hectares of land as far as Darbhanga in India towards the west and 11000 hectares of land in Nepal[6]. Though the project was completed; however there arose a discontented feeling in Nepal. Nepal's concerns were that the project gave limited benefit to her compared to India. Though India adjusted to the concerns of Nepal, the agreement created a rift in the relations between the two countries and Nepal became cautious for initiation of any new agreement.

In 1959 India and Nepal signed the Gandak Irrigation and Power Project Agreement. As per the agreement, Nepal government allowed India to construct a barrage at her own cost. The barrage was designed to irrigate 920,000 hectares of land in the state of Bihar and 37,000 hectares in western Nepal from the eastern main canal and similarly 930,000 hectares in Uttar Pradesh and 20,000 hectares in Nepal from the western main canal[7]. The barrage was constructed on the Indo - Nepal Border. The agreement met similar criticism as had the Kosi project.

The discontented feelings arising from the Kosi and the Gandak irrigation project were the reasons which inhibited any progress on the projects to include the Pancheswar and Saptakosi to name a few later on. Furthermore a constitutional amendment made Parliamentary ratification necessary by two third majorities for any treaty or agreement relating to natural resources which affect the country in a pervasively grave manner or on a long term basis.

In the meantime, in 1983, India began constructing the Tanakpur Project. The project was started unilaterally on the land which was transferred to India under the Sarda agreement[8]. Problems started on the eastern afflux bund that required tying the barrage to the high ground on the left bank in Nepal. India needed about 2.9 hectares of Nepalese land to construct an embankment to prevent back water effects due to the barrage. In lieu Indian agreed to provide 25,000 cusecs of water as well as supply 25 MW of electricity. Nepal however demanded 50 and 59 percent share in water and electricity respectively. Nepal's public stand was that India never consulted or brought to notice any prior information on the issue. The project arrived at a political stale mate. In December 1991 during the visit of Nepalese Prime Minister to India, it was concluded that Nepal government would allow construction of the 577 meters left afflux bund in its territory so as to prevent a recurrence and to ensure poundage of water at the dam site. In return India agreed to provide 1000 cusecs of water annually with 10 million units of electricity. However the issue led to a political turmoil in Nepal. The opposition in Nepal wanted the Tanakpur project understanding to be treated as a treaty and thus requiring ratification. In October 1992 under a new Memorandum of Understanding (MoU), India agreed to provide 20 million units of electricity against the previous figure of 10 million units to Nepal[9].

The Supreme Court of Nepal affirmed its verdict on a petition filed on the issue that the MoU between the governments was indeed a treaty but left it to the government of Nepal to decide whether a simple majority or a two-third majority would be required for its ratification[10]. The political turbulence on the issue led to the Prime Minister of Nepal dissolving the parliament and in the fresh polls in 1994 none of the party received clear majority to form a government. Subsequently a new government under Communist Party of Nepal United Marxist - Leninist (CPN - UML) was formed being in majority. Under the new government renegotiations were sought on the Tanakpur project. The Nepalese government demanded increase in quantum of electricity as well as water and construction of a storage high dam at Pancheswar upstream of Tanakpur site on the Mahakali river[11].

The Mahakali Treaty

The flow of the Mahakali river is through the districts Danchula, Baitadi and Dadeldh in the hills and subsequently the river flows through the Kanchanpur district in the plains. After the river arrives into the plains it turns into a border between both the countries. The river joins the Ghagra river in the Indian territory. In 1971, Nepal began her Mahakali Irrigation project. Under the 1920 Sarda agreement, Nepal was permitted to utilise its share of river water. For the project, World Bank provided the assistance[12].

In 1977 both India and Nepal agreed to jointly investigate the possibilities of harnessing the Mahakali river further between the two countries. It was the fourth major water treaty being considered between the two countries. The treaty concerned the development of Mahakali river for the benefit of both the countries. The treaty was signed between India and Nepal in 1996. The treaty was signed under the back drop of previous treaties which had led to a feeling of mistrust as far as water agreements were concerned and to a great extent shaped the outcome of the Mahakali treaty. The treaty tried to bring within its fold other treaties and tried to arrive with principle of cost benefit sharing. The treaty provides for the construction of and use of a giant, multipurpose project on the Mahakali river called as the Pancheswar project.

In January 1996 the Mahakali treaty was ratified in Nepalese parliament by more than two third majorities. However prior to ratification, the Nepalese parliament unanimously passed a 'stricture' on the treaty which redefined the water rights. The features of strictures were as under[13]:-

  1. The electricity generated by Nepal would be sold to India as per the avoided cost principal.
  2. Constitution of Mahakali Commission on agreement with the main opposition party in the parliament as well as with the recognised national parties.
  3. Equal entitlement in the usage of the waters of the Mahakali river.
  4. The saying that Mahakali is a boundary river on major stretches between the two countries implies that it is basically a border river.



The treaty came into existence in 1996 and is called as the Mahakali Integrated Development Treaty. The treaty is designed by India with the aim of mutual sharing of the river as well as the electricity generated therein. The treaty comprises three projects as under:-

  1. The Pancheswar Multi Project[14] It is a major project entailing construction of a 315 m high dam across the Mahakali river between Pithoragarh and the Baitadi district of Nepal. This project contains the most important content of the treaty. It proposes a joint indo - Nepal hydroelectric project on the river on the basis of 50 percent cost benefit split.
  2. The Tanakpur Hydropower Project[15] As per the treaty, Nepal to continue to have sovereignty over the 2.9 hectare which was needed to build the eastern afflux bund, as well as a hectare of pondage area. In return India would provide 1000 cusecs of water in the wet season and 300 cusecs of water in the dry season. Also India would provide 70 million units of electricity to Nepal and construct an all weather road to connect Tanakpur barrage to Nepal's East West highway.
  3. The Sarda Barrage[16] As per the treaty Nepal has a right to supply 1000 cusecs of water from the barrage during the wet season i.e. between May 15 to October 15 and 150 cusecs in the dry season from October 16 to May 15. Also India is bound to maintain a flow of minimum 350 cusecs of water to preserve the river ecosystem.
  • The project tries to develop a principle of sharing cost benefit. It recognises Mahakali as a border river on major stretches between the two countries. The agreement also covers flood management and irrigation aspect apart from power generation.
  • The treaty was signed on 12 February 1996 by the Prime Ministers of India and Nepal at Kathmandu. The treaty comprises twelve articles excluding the preamble as given in succeeding paragraphs[17].

Article 1

As per the Article 1, Nepal would have the right to a supply of 28.35 cu m/s (1000 cusecs) of water from the Sarda barrage in the wet season (i.e. from May 15 to October 15) and 4.25 cu m/s (150 cusecs) in the dry season (i.e. from October 16 to May 14). Also India has to maintain a flow of not less than 10 cu m/s (350 cusecs) downstream of the Sarda barrage in the Mahakali river to maintain and preserve the river eco system. Moreover in case the Sarda barrage became non functional due to any cause, the following would be adhered:-

  1. Nepal shall have the right to a supply of water as mentioned above by using head regulators as mentioned in Article 2. The water that is supplied would be in addition to the water to be supplied as mentioned in that paragraph.
  2. India shall maintain 350 cusecs of water flow from Tanakpur Power Station downstream of Sarda barrage.

Article 2

As per the joint communiqué of 21 October 1992, for the construction of the eastern afflux bund on the Tanakpur barrage, at Jimuwa and subsequently tying it up at EL 250 m in Nepal, Nepal gave consent to about 577 m i.e. 2.9 hectares of land. However Nepal proposed to have her sovereign control on the land including the pond age area which falls in Nepalese territory and thus free to exercise all attendant rights thereto. Also in return to the land for construction of the eastern afflux bund, Nepal would have the right to the following:-:

  1. A supply of 1000 cusecs of water in the wet season and 300 cusecs during the dry season from the date of agreement and for which India would construct the head regulator(s) near the Tanakpur barrage along with the waterways of the required capacity up to the border which would be operated jointly.
  2. India would construct a 132 kV transmission line up to the Nepal-India border from the Tanakpur Power Station so as to supply 70 million kwh (unit) of energy on annual basis free of cost from the day the treaty is in force.

In case of any development of any storage project(s) including Pancheswar Multipurpose Project, the under mentioned arrangements would be made at the Tanakpur Barrage: -

  1. Additional water ways and head regulators would be constructed to supply additional water to Nepal up to the Indo-Nepal border which would be operated jointly.
  2. Nepal shall have additional energy which would be equal to half of the incremental energy generated from the Tanakpur Power Station, on a continuous basis from the date of augmentation of the flow of the Mahakali river and shall bear half of the additional capital cost at the Tanakpur Power Station for the generation of such incremental energy.

Article 3

As per Article 3, Pancheswar Multipurpose Project would be constructed on a stretch of the Mahakali river where it forms the boundary between the two countries thereby both the nations would have an equal entitlement in the utilization of the water of the river without prejudicing to their respective existing consumptive use of the waters of the river. The countries would agree to implement the project on the Mahakali river in accordance with the Detailed Project Report (DPR) being jointly prepared by them. The project would be designed and implemented on the basis of the following principles: -

  1. The project would be designed to produce the maximum benefit. All benefits accruing to both the countries would be assessed accordingly.
  2. The project shall be implemented in a way to include power stations of equal capacity on each side of the Mahakali river. Both the power stations shall be operated in an integrated manner and the net energy generated shall be equally shared.
  3. The cost of the project shall be borne proportionately by both the countries in terms of the benefits accruing to them. Both the countries shall endeavour to mobilize the finance required for the implementation of the project.
  4. A portion of Nepal's share of energy shall be sold to India and the quantum and cost of the energy would be as mutually agreed.

Article 4

India shall supply 350 cusecs of water for irrigation of Dodhara -Chandani area of the Nepalese Territory. The technical and other details would be mutually worked out.

Article 5

The water requirement of Nepal would be given prime consideration in the utilization of the waters of the Mahakali River.

Both the countries would be entitled to draw their share of water of the river from the Tanakpur Barrage and/or other mutually agreed points as provided for in the treaty and any subsequent agreement between the countries.

Article 6

Any project, other than those mentioned in these articles, to be developed on the Mahakali river, where it is a boundary river, shall be designed and implemented by an agreement between the countries on the principles established by this treaty.

Article 7

As per Article 7, to maintain the flow and desired level of the water of the Mahakali river, each country undertook not to use, obstruct or divert the water of the river which might adversely affect the natural flow and level except by an agreement between the countries. However, this would not preclude the use of the waters of the Mahakali river by the local communities living along both the sides of the river, not exceeding five percent of the average annual flow of the river at Pancheswar.

Article 8

Article 8 stipulates that this treaty should not preclude planning, survey, development and operation of any work on the tributaries of the Mahakali river, to be carried out independently by either of the country in their own country without adversely affecting the provision of Article 7.

Article 9

As per Article 9, there shall be a Mahakali river Commission guided by the principles of equality, mutual benefit and no harm to either of the country. The Commission would be composed of equal number of representatives from both the countries. The functions of the Commission would be as under:-

  1. To seek information, inspect all structures included in the treaty and make recommendations to take steps for implementation of the provision of the treaty.
  2. To make recommendations to both the countries for the conservation and utilization of the Mahakali river as envisaged and provided for in the treaty.
  3. To provide expert evaluation of projects and recommendations.
  4. To co-ordinate and monitor plans of actions arising out of the implementation of the treaty.
  5. To examine any differences arising between the nations concerning the interpretation and application of the treaty.

The expenses of the Commission would be borne equally by both the countries. The Commission once constituted would submit the rules of procedure as drafted to both the countries for their concurrence and both the nations' shall reserve their rights to directly deal with each other on matters, which may be in the competence of the Commission.

Article 10

Under Article 10, both the countries could form project specific joint entities for the development, execution and operation of new projects including Pancheswar Multipurpose Project on the Mahakali river for mutual benefit.

Article 11

Article 11 states that if the Commission fails under Article 9 of the treaty to recommend its opinion on any dispute relating to the matter within a span of three months or if either of the countries disagrees with the recommendations of the Commission, then it would be deemed that the dispute has arisen and would be submitted to arbitration for decision. In such a case also the country going for such a stand would give a minimum of three months notice to the other.

Arbitration would be conducted by a tribunal composed of three arbitrators. One arbitrator shall be nominated by Nepal, one by India and the third jointly by both the countries. However neither of the arbitrator should be a national of either of the country. The third arbitrator would preside over the tribunal. In case both the countries fail to agree upon the third arbitrator, then, in a time period of three months after receipt of a proposal, either of the nations can request the Secretary-General of the Permanent Court of Arbitration at the Hague to appoint such arbitrator who should not be a national of either country.

The procedures of the arbitration would be determined by the arbitration tribunal and the decision of a majority of the arbitrators would be assumed as the decision of the tribunal and would be accepted as final and binding.

For the provision for the venue of arbitration, the administrative support and the remuneration and expenses of its arbitrators would be as agreed upon by exchange of notes between the nations and in that, both the countries can decide on alternative procedures for settling differences which would have aroused in the treaty.

Article 12

Following the conclusion of the treaty, the earlier understanding arrived at by both the countries concerning the utilization of the waters of the Mahakali river from the Sarda and the Tanakpur barrage, which had been incorporated in the treaty was to be deemed to have replaced by this treaty.

The treaty would be subject to ratification and would enter into force on the date of exchange of instruments of ratification and would remain valid for seventy five years from the date of its entry into force.

The treaty would be reviewed after every ten years or earlier as required by either of the country and make amendments if required.



The treaty came into existence on 12 February 1996. The articles lacked specificity which led to ambiguity over the interpretation of the treaty. The differences which emerged out after the treaty came into existence are given in succeeding paragraphs.

The Issue of Border River and Prospect of Equal Sharing[18] As far as border river is concerned, the river acts as boundary river on major stretches (refer Appendix P put sketch as per pg laid water of hope). Nepal argues that the river is a border river where both the countries differ as far as the interpretation of treaty is concerned. As far as equal sharing is concerned, Nepal argues that as the river belongs to both the countries therefore each country owns 50 percent water. The river flows as a boundary river between Pancheswar and Banbassa. As Nepal has interpreted the issue of equal entitlement, it claims half of the share of the river water between the locations. However India's stand is that equal sharing implies that the river per se does not belong to either of the country and can be used by either as per the requirement. Upper riparian country cannot own any water and subsequently sell it to lower riparian country where the lower riparian country as such would receive the water due to natural flow. For India, equal sharing implies that both the countries equally share the incremental benefit and cost that is attached to the Pancheswar project.

Existing Consumptive Use[19] Another major difference that exists is regarding the protection of consumptive use. Nepal's concern is that in the treaty, only Nepal's existing consumptive usage has been quantified and not of India. Furthermore as per the treaty (Article 3), the sharing of the capital cost of the Pancheswar project would be proportionate to the relative incremental benefit which have to be considered after protecting existing consumptive use of water of the river. Nepal's concern is that the 2 mha land irrigated from lower Sarda barrage is outside the scope of the agreement as it is mostly dependent on the water from Ghagra or Karnali river for most part of the year and is dependent on the Mahakali river only from July to October. However India's stand on this issue is that the system is very much under the treaty.

The Kalapani Issue Kalapani as experts feel is a disputed area. It is roughly a 35 sq km area at the junction of India, Nepal and China[20]. Indian troops have been stationed there since 1962. There is though no relation between the boundary issue at Kalapani and the Pancheswar project but one of the strictures passed along on Mahakali in Nepalese Parliament states Mahakali as well as the location of its sources basically as a border river[21]. A Parliamentary committee took up studies to clarify the status of the Mahakali river and the issue of Kalapani emerged. As per the 1816 Segauli Treaty between Nepal and British India, Mahakali river would mark as the border between India and Nepal. The issue of contention is as to which of the stream actually constitutes as the source of the river. Nepal's stand is that the Lipu Gad rivulet should mark as the border which implies that the area of Kalapani which is to further east should be part of Nepalese territory, however Indian experts feel that the Mahakali river beings much downstream where the stream from Kalapani spring and Lipu Gad meet. India however reiterates that the issue should be settled based on old records, documents and survey reports.

Site for Re regulating Structure.[22] A site was needed below the main dam to store and subsequently make controlled release of water passing through the Pancheswar dam and then meet the irrigation requirements further downstream.

There were two locations which rose for discussion for construction of re regulating structure. First was at Rupaligad which Nepal preferred during the negotiation of the treaty. A re regulating structure at Rupaligad would generate about 240 MW of electricity owing to low height, of about 60 m. Also due to the low height, it would have limited storage capacity. For India, the site did not offer much benefit owing to lower production of energy and offers little of her irrigation demand. Indian experts feel that the site further downstream at Poornagiri would enable construction of a re regulating structure of 180 m height which would produce up to 1000 MW of energy as well as provide adequate storage. Nepal's concern on this issue is that a dam at this site would inundate 2, 50,000 hectares of agricultural land and also displace 56,000 people from Nepal hills. Nepal looks at the proposal as a project designed by India to irrigate vast tracts of agricultural land in Uttar Pradesh.

The Question of Power Tariff With the project in place a maximum of 6480 MW of electricity can be derived. As per Article 3 of the treaty, the power stations of equal capacity should be constructed on either side of Mahakali river and the total energy generated would be equally shared between both the countries. The article further points out that a portion of the Nepal's share of energy shall be sold to India on a mutually agreeable cost. Nepalese experts feel that if Nepal decides to sell 3000 MW of energy from Pancheswar project whatever energy is being sold would be a saving for India. Nepalese infer the article on 'avoided cost principle' which means that India has to pay an amount according to the cost of generation of electricity through other alternative means. Nepal experts argue that India would have produced the equivalent energy which is being sold from coal costing anything up to four to five rupees per kilowatt of power. Indian experts however argue that alternative mean need not be thermal power but can be gas based project or HEPs[23].



A river knows no boundary. It follows the law of physics and in its natural course may pass through several countries. Apparently each country through which the river flows should get certain sovereign rights to make use of the river.

In earlier times, the population was limited and so was the need of the people. Consequent to the increasing population the pressure on natural resources including water increased and then the problem of determining the extent of sovereign rights of each riparian state over a trans boundary river rose. In olden days the river was mainly utilised for navigation and transportation. In such a case, the lower riparian state enjoyed more benefits compared to upper riparian state as it had access to sea as also economic advantage by instilling tax over movement of men and material through its state. Use of river in terms of fishing and small scale irrigation etc was very limited and did not pose as a challenge as far as relations between two countries were concerned.

With the improvement in technology and construction of large dams and reservoirs for hydro electricity as well as irrigation the position changed. An upper riparian country automatically rose to a position of advantage. Upper riparian countries can even change the flow of a river to its own advantage which can affect the needs of lower riparian countries drastically. Consequently in present situation, use of river water demands an adjustment in the conflicting interest of various riparian states.

Character of International Dispute[24]

There are basically two major categories of disputes relating to the use of international river.

  1. The use and apportionment of waters of a trans boundary river and its distributaries by different countries.
  2. The question regarding payment of compensation with regard to the use of territory of the former state for the purpose of storage by another state.

As regard to the question regarding payment of compensation with regard to the use of territory of the former state for the purpose of storage by another state, further givers rise to two more problems namely:-

  1. The question of payment of compensation in terms of actual loss accrued by the state whose land gets flooded or utilised.
  2. The question of sharing of benefit between the countries. International Theories regarding Sharing of International Water[25]

There are basically four theories with regard to the water rights of various riparian states. The theories are:-

  1. The Territorial Sovereignty.
  2. Natural Water Flow Theory.
  3. Equitable Apportionment Theory.
  4. Community of Interest Theory.

Territorial Sovereignty Theory

This theory is also commonly known as the Hormone Doctrine. The doctrine came into existence in 1896 during the settlement of dispute between United States of America and Mexico over the use of the Rio Granda river. The doctrine was put forth by the Attorney General Harmon of the United States. According to Attorney General Harmon: "The fundamental principle of international law is the absolute sovereignty of every nation, as against all others, within its own territory". As per the theory, riparian states have sovereign rights over the waters flowing through their territory and thereby a country may use the water anyway it likes irrespective of the effect on other riparian states. The theory puts an upper riparian country at an advantage as it can completely appropriate all the water of the river within its territory and starve a lower riparian country.

In the present geopolitical scenario, such a theory may be difficult to put into practice. In case of the treaty of 1906 between the United States and Mexico over the Rio Grande river, though the United States affirmed the Harmon doctrine however it agreed to provide Mexico with water equivalent of what it used to get prior to the diversion. There are many treaties which have been concluded between various states on river disputes based on some extent on the Harmon doctrine. However the parties have adjusted their differences by setting some control over the asserted rights.

Natural Water flow Theory

This theory is also known as the territorial integrity theory. According to this theory river is a part of the territory of a state and hence every lower riparian country is entitled to the natural flow of the river unhampered by the upper riparian country or state. The upper riparian country can make reasonable use of water while a river is in her territory but it must allow the water to go in its natural flow to the lower riparian country in its ordinary channel. Again like the Harmon doctrine or principle, this theory is an extreme. This principle was brought into the settlement of the usage of Nile river between Egypt and Great Britain representing Sudan in 1925. Egypt asserted this position as having absolute right to the natural flow of the river as a lower riparian against Sudan. The Nile water commission rejected the stand of Egypt. However in a settlement of the conflict, Britain gave Egypt the right to veto on utilisation of water by the upper riparian. The settlement was more of a political agreement. Its standing as an international law cannot be justified.

Equitable Utilisation and Community of Interest Theory

Both the theories are interrelated. Equitable utilisation theory asserts the idea of sharing of water of an international river by the states on an equitable basis. This theory more or less is getting widely accepted in international law. Helsinki rules as given in Appendix A have largely accepted this theory as a basis of international law with regard to sharing of water of a trans boundary river between two countries.

With regard to community of interest theory, an international river is regarded to be belonging to the whole of the community which is utilising it. Under the theory the whole of the river basin is regarded as on economic unit irrespective of traditional boundaries and the waters of the river basin are vested in the community. The theory of community of interest can be regarded as move advanced to the equitable utilisation. The most important aspect is the interstate relation and understanding of the need to carryout development of the whole region as regard to the utilisation of the river water resource setting aside any kind of difference amongst each nation or community. To generate maximum benefit, integrated programme for development of a river, dam and other works have to be located at the best possible place so as to derive maximum benefit out of the project and provide the same to maximum possible people irrespective any boundary issue.

To accrue such maximum benefit a thorough understanding of each other's need is required. Also such an integrated development approach may take two shapes as under:-

  1. As a separate development programme by each riparian state with other riparian state permitting utilisation of its territory of the purpose from information gathering to construction of a dam, canal or other such project for best utilisation of the river.
  2. As a joint integrated effort by various countries or states to develop the river for joint benefit irrespective of the state boundary. The approach also includes joint planning, development, construction, expertise sharing, expenditure, management and maintenance.

The above principle has by and large been successful. An example can be stated in the settlement of differences between Turkey and Russia on the sharing or Arpa Chai river. The river is contiguous to both the countries. As per agreement both countries agreed to share the cost as well as the benefits accruing from the project.

Theory of Equitable Apportionment

Most important to understand in this principle is the theory of equitability and not equality. When it comes to equitability, compromise is arrived between two riparian states with regard to sharing of trans boundary river in terms of both sharing of benefit as well as the cost on the basis of social and economic needs of either of the riparian countries. In practice though the actual need or share of benefit is difficult to arrive at and also the willingness of each of the riparian countries to justly arrive at their priority of need based on the above two factors of social and economic need. Moreover as the need of the resource may be different or at times conflicting, the solution put forth by one may not be feasible for adoption by another. The problem further bears a complex dimension when the use of the river water by riparian states is not simultaneous. Another problem that may arise is the need of development at different location and at different point of time. Though there are inherent difficulties, certain suggested fundamental principles as mentioned in the succeeding paragraphs can also be taken into consideration.

The use of the resource which is to be protected must be beneficial to the state as governed by the Helsinki rule which states that each basin state is entitled, within its territory, to a reasonable and equitable share in the beneficial use of the waters of an international drainage basin. To clarify beneficial use it must be economically or socially valuable and not to harass one another.

Second aspect that needs to be considered is the prior use or the existing use of the resource by any of the riparian state which needs to be given substantial weight age. If any of the riparian state is not utilising the resource and does not intend to do so in the future, then it is not a problem but a new dimension is added when one of riparian state desires to use the river in the future. However it is not right and wasteful to deny the present beneficial use of the water in the hope that the other state would be using it at a subsequent date and it is better to use the water to maximum benefit rather than letting the water go as a waste. Article VII of Helsinki rule also supports the argument as "a basin state may not be denied the present reasonable use of the water of an international drainage basin to reserve for a co-basin state a future use of such water." But still one cannot disregard the fact that any riparian state embarks on an economic development at a later stage may find much development inhibited by the existing use by the other state. In such a case existing use is liable to get disturbed if it is outweighed by other factors.

Another factor pertaining to prior use that needs to be scrutinised is how much benefit does the new scheme has over the existing use. The existing use may well be protected provided the benefits accrued by the new use are of such magnitude that it outweighs the injury to the existing use. Even as per the Article VIII (i) of Helsinki rule, an existing reasonable use may continue in operation unless the factors justifying its continuance are outweighed by other factors leading to the conclusion that it be modified or terminated so as to accommodate a competing incompatible use.

There may be a number of factors as well as conflicting ideologies over implementation of the principle of equitable apportionment. Because of the difficulties of laying down a general rule with regard to the respective share of each riparian state, the Helsinki rule lay down only broad guidelines. Article V of the Helsinki rules mentions the under mentioned factors which need to be considered in working out a reasonable and equitable share of riparian state:-

  1. The geography of the basin including the extent of the drainage area in the territory of each basin state.
  2. The hydrology of the basin including in particular the contribution of water by each basin state.
  3. The climate affecting the basin.
  4. The existing as well as the prior utilisation of the waters of the basin.
  5. The social and economic needs of each of the basin as well as riparian state.
  6. The population dependency on the waters of the basin in each basin or riparian state.
  7. The comparative cost and alternative means of satisfying the economic and social needs of each basin state.
  8. The availability of alternate resources.
  9. The avoidance of waste in the utilisation of water of the basin.
  10. The practicability of compensation to one or more of the co - basin state as a mean of adjusting conflicts among uses.
  11. The degree to which the needs of a basin state may be satisfied without causing substantial injury to a co basin state.

Each of the above factors should be given appropriate weight age depending on the comparative importance in a particular situation and environment and then all the above factors should be considered as a whole in order to arrive at an equitable and justifiable share of each riparian state.

The United Nations Recommendation

As per the recommendation 51 of UN Convention of Human Environment (1972), various measures have been enunciated to settle problems connected with water resources. The recommendations of the UN Convention of Human Environment (1972) are listed in Appendix B[26].



After analysing, various international principles and to arrive at a reasonable solution, a brief study of the Lesotho Highland Water Project (LHWP) could also be considered. There are a lot of similarities which exists between India and Nepal and the Kingdom of Lesotho and South Africa as far as the geo political, socio economical and bilateral relationship is concerned. A study of LHWP brings us to a platform to analyse how a water resource can be shared between two power asymmetries based on equitable sharing.

Lesotho Highland Water Project

South Africa is classified as a semiarid country but with important variations in climate and topography. It is home to one-third of the region's population and accounts for 80% of Southern Africa's water use. However, only 10% of the region's total water resource is available in South Africa.

The Lesotho Highlands Water Project (LHWP) is the biggest and the most complex water scheme in Africa. The project has two main goals: to transfer water from the mountains of the Kingdom of Lesotho to the industrial heart of South Africa (the Gauteng Province) and to produce hydroelectricity in Lesotho. The idea laid on diverting most of the major tributaries of the Senqu River, which naturally flows south out of Lesotho into South Africa, into Gauteng Province located in the northern part of South Africa. The project consists of 4 phases is transferring a total of 70 cu m/sec of water to South Africa by 2020 amounting to about 40% of the water in the Senqunyane river basin to South Africa's Ash river. The first phase got completed by 2003. It comprises a giant storage dam, at Katse, diverting an average 17 cu m/sec of water to South Africa, a 145 m high dam (Mohale dam) on the Senqunyane river some 40 km south-west of Katse, a 32 km long transfer tunnel between Mohale and Katse reservoirs, a 19 m high diversion weir on the Matsoku River and a 5.6 km long tunnel. The Mohale reservoir and Matsoku diversion add 9.5 and 2.2 cu m/sec to the yield of Katse. [27]

Implementation of the LHWP

The project is a story of successful implementation of water resource management between two power asymmetries. To resolve the issues amicably certain measures as mentioned in succeeding paragraph were initiated.

A Joint Technical Committee comprising experts from both the countries was formed to prepare a feasibility study. These studies were completed in April 1986. As per the provisions of the treaty, three institutions were established as under[28]:-

  1. The Lesotho Highlands Development Authority (LHDA) which was in charge of the implementation, operation and maintenance of the part of the project situated in Lesotho.
  2. The Trans- Caledon Tunnel Authority (TCTA), a symmetric body of the LHDA for South Africa having the responsibility for the part of the project situated in South Africa.
  3. The Joint Permanent Technical Commission (JPTC) composed of three representatives of each delegation and possessing full legal personality in the territory of each party.

The treaty also made provisions for the creation of an arbitral tribunal if the dispute could not be resolved by negotiation. The establishment of these institutions and the presence of a dispute settlement mechanism was a good way to guarantee the principles of equality among states and that of territorial sovereignty.

Cost/Benefit Apportionment Another important part of the treaty was the dealings in financial arrangements, cost apportionment and royalty payments (Art 10, 11, 12 and 13). Article 10 provides that South Africa would be responsible for the costs of the water transfer aspects of the project, irrespective of whether the work is undertaken by the LHDA or the TCTA (95% of the entire cost of the project) and Lesotho would be responsible for the costs related to the generation of hydro-electricity on its territory (estimated at 5% of the cost of the entire project).

Benefit Sharing.[29] Under article 12 South Africa undertook to share with Lesotho, by way of royalty payments, on the basis of 56% on the part of Lesotho and 44 % on the part of South Africa, the net benefit. The means to approximate benefits of each party rested basically on a comparison between two projects: one entirely within South Africa and the other necessitating cooperation with Lesotho (LHWP). The LHWP project was compared to the Orange-Vaal Transfer Scheme (OVTS). This scheme proposed that water would be pumped from the Orange River South West of Lesotho and transferred via a canal to the Ash River Outfall, from where it would flow to the Vaal Dam. However the feasibility studies and cost analyses found that the LHWP was more cost effective than the OVTS. As a result, the royalty payments comprise two elements: a fixed and a variable component. The fixed component is calculated on the benefits gained from the investment difference between the two projects. The calculation of the variable part is based on the difference in electricity costs attributable to pumping operations and to the difference in the costs attributable to the operation and maintenance of the alternative projects.[30]

Excess Water[31]. The treaty also made provisions for water in excess of the Scheduled Monthly Demand. If South Africa agrees to accept the excess water, Lesotho would receive payment in respect of that water but at a rate reduced to 50% of the variable unit rates

An important characteristic of the LHWP treaty was to settle on an 'equitable' share of water resources based on an economic approach. In such a way that it is not the water itself that is shared but the benefits gained from the common exploitation of the project.

Similarities Between The Mahakali Integrated Development Treaty and the LHWP

Both the cases i.e. the situation between India and Nepal and that of the Kingdom of Lesotho and South Africa share some commonalities as mentioned below:-

  1. Both Nepal as well as Lesotho are mountainous countries and are water rich. Nepal has tremendous hydro electric generation potential but has developed only 0.2% of its 83000 megawatt hydroelectric capacity.
  2. Both Nepal and Lesotho in a joint venture can provide perennial irrigation and flood control benefits to their lower riparian countries.
  3. The lower riparian countries, i.e. India and South Africa are both economically as well as militarily powerful. Furthermore there exists a wide power gap between the riparian.
  4. Lesotho is 40 times smaller and 21 times less populated compared to South Africa and Nepal is 23 times smaller than India in size as well as 40 times less populated.
  5. The geographical positions are also very significant. Nepal as well as Lesotho is landlocked. Lesotho is completely surrounded by South Africa. Nepal on the other hand has access to the sea and the international markets almost only through India, as it is isolated from China by the huge natural barrier of the Himalayan range.
  6. Lesotho is largely dependent on South Africa for its economy as Nepal is dependent on India.
  7. Both the countries i.e. Lesotho and Nepal cannot exclusively finance such big projects and need financial assistance of their lower riparian counterparts. Add pg200 SAFTA
  8. Both India and South Africa are fast developing economies and are in critical need for energy.

Situation Peculiar to the case of Nepal

  • Apart from certain similarities with the situation of the Kingdom of Lesotho, there are certain aspects peculiar to India and Nepal as given under:-
  • India is the only potential buyer for electricity produced in Nepal and in that Nepal faces tough competition from Bhutan which is providing cheap hydro electricity to India.
  • Both India and Nepal need perennial irrigation. For India the criticality is for the state of Uttar Pradesh and Bihar and for Nepal, its economy itself is largely dependent on agriculture which is currently dependent of rain fed water system.
  • In Nepal's internal politics the water relationship between both the countries occupies a centre stage. The survival of many Nepalese governments was linked with policy they made with India.
  • In terms of energy, for Nepal major source of energy is in the form of hydropower or firewood .No other energy resources have been discovered in any significant quantity. Also only 20 percent of the population has access to electricity. Moreover, though fresh water is in abundance, only about one third of the population has got access to clean drinking water and of the net available land only 42 percent has been irrigated so far.

Salient Differences Between The Mahakali Integ and the LHWP

The Senqu/ Orange river flows successively from Lesotho to South Africa, whereas Mahakali is a successive boundary river.

Pancheswar project is linked to the Tanakpur barrage, however in case of LHWP, it is not linked to any other project.

LHWP project adopts a need based economic approach iMahakali treaty on the other hand is supporting right based approach.

The Present Development

In order to resolve and expedite the Pancheswar Multipurpose project a decision was taken by the Prime ministers of Nepal and India during July/August 2000 to form the Indo-Nepal Joint Committee on Water Resources (JCWR) .The broad terms of references of the JCWR are given in Appendix C.

Since the formulation of the joint committee, five meetings have been held with the most recent one held at Pokhara, Nepal in November 2009. The major developments since the formulation of the committee towards completion of the project is as under:-

  1. A new location has been chosen to minimise the submergence and displacement of people. The original venue was Poornagiri which was located downstreams of Rupaligarh the chosen site. The relocation implies less generation of power but faster cut clearance of the project.
  2. It has been decided that 5600 MW of power generated would be shared on 50:50 basis
  3. On an issue of the alignment of a 13 km road in Tanakpur - Mahendranagar link, along with the canal as decided by Nepal based on tri party meet, some minor changes in the alignment and positions of the crossing structure were reported while maintaining the original alignment of the main canal. Indian side reiterated that the detailed project report required revision after considering the re alignment and also wanted up gradation of the road to Asian Highway Network Standard. The new alignment also requires 7000 sq m of land to be acquired in Nepal which Nepal agreed to after the Link road delineated at the site.
  4. An agreement was arrived at to evolve a three tire mechanism at the level of ministers, secretaries and technical experts to oversee the project.
  5. It has been decided to set up a Pancheswar Development Authority (DPA) in accordance with the article 10 for the development, execution and operation of the Pancheswar Multipurpose project.
  6. On the outcome of joint instructions of the Tanakpur barrage in March 2005, the sill level of the head regulator has been proposed at EL 245.0 m by Indian side as against the request of EL 241.5 m as this was required to operate the power plant to allow the flow of committed discharge of water from Tanakpur barrage through the existing regulator. In response to Nepal's request to expedite the construction of canal for a capacity of 2000 cusecs to take care when Sarda barrage became defunct, India said that flow of 1000 cusecs had been planned with the already constructed crest level of the head regulator at EL 245.0 m. A new canal of additional 1000 cusecs would be made operational once the Sarda barrage became defunct.
  7. Finally the JCWR finalised the terms of reference for establishment of the PDA to be approved by January 2010.The salient aspects of the terms of reference are given in Appendix D.

The establishment of the JCWR to expedite the construction process and resolve various issues bilaterally are definitely a positive step however there are major issues which require a holistic approach so as to mitigate the differences. Detailed studies of the provisions of the article indicate that the Mahakali treaty is quite vague and ambiguous. Nepal has been advocating a right based approach and insisting on the principle of equality to share the river water and the benefits of the project which may not lead to an acceptable soln. Today there is still no agreement on the price of the Nepalese electricity to be sold to India. As far as water sharing is concerned, the treaty mentions that both the countries have an equal entitlement to the utilisation of the water of the Mahakali river. Nepal interprets it as the right to an equal amount of the river water. For that reason, Nepal had been asking for compensation for the unutilised share of the river water. The Kalapani issue still persists.

Suggested Approach to Mitigate the Conflict

After understanding various principles of international law governing international rivers, the areas of conflict, the situation of each of the country on the basis of its geo political and socio economical condition and drawing up conclusions from LHWP treaty which also revolves under similar background, the solution to the conflict lies on the theory of equitable apportionment i.e. sharing of the trans boundary river in terms of sharing of benefit as well as the cost on the basis of social and economic needs of the riparian countries. In such cases of cross asymmetry, the solution to the problem lies on equitable sharing provided the right conditions are set. The important part is to be aware that equal right does not correspond to equal share of river water but to equal right to use water depending on each riparian states social economic need and find fair ways of compensation. The areas of conflict which still needs to be addressed can be resolved in the manner as suggested in the succeeding paragraphs.

The Kalapani Issue. This issue is of a territorial dispute. The area in question is either of India or it is not and the matter has got no connection as far as the treaty is concerned. The approach should be to resolve this issue with reference to old records, documents, maps and survey reports.

Boundary River. In the context of the Nepal's stand on the issue of the river as a boundary river, no incorrect inference should be drawn. Again the reference of records on boundary should be supplemented to the issue and if there lies no conflict on territorial issue then in that respect the issue should not in anyway impede the development of the project.

The Question of Equal Sharing. The presumption that the river belongs equally to both the countries and each country has half share on the water may not be correct. Equal sharing should be based on the incremental benefits to be created by the project and the relative benefits gained by the two countries should determine the respective share of the capital cost of the project. Any loss in the project due to submergence of agricultural land or displacement of humans, the compensation should also be shared on the relative benefits gained by either of the country.

Protection Existing Consumptive Uses Under the Treaty the sharing of the capital costs of the Pancheswar project would be in proportion of the relative incremental benefits and the incremental benefits have to be reckoned after protecting existing consumptive uses of the waters of the Mahakali. India has claimed that there is such an existing consumptive use at the lower Sarda, but Nepal questions this on certain grounds. This issue too can be easily resolved by analysing how much are the farmers' dependent on Mahakali river and since when. Also if the farmers on Indian side are deprived of the river benefit, how much would they be affected? Another aspect that India needs to analyse is that is it merely a question of reckoning this against India's share of the benefits arising from the Pancheswar project and thus requiring India to pay more (perhaps a few hundred crores) towards the capital cost of the project? Or is there a danger of an actual denial of Mahakali waters to the farmers in question? In the event of the farmers being denied Mahakali waters, will they have any alternative water source, or will they be subjected to distress? As a result of this examination it may possibly be found that there is no real problem, or that it is marginal, and that solutions are available; but it is necessary to study the matte first.

Power Tariff. Finally on the issue of power tariff, the cost laid by Nepal should be such that both countries are benefitted in selling of surplus power by Nepal. As per the side letter to the treaty the power benefits are to be assessed on the basis of saving in cost as compared with alternatives available. For the alternative, all the means of generating energy should be considered and not just Thermal or Hydroelectric. The price of power is one that can be negotiated. The cost should be attractive enough for Nepal to warrant the undertaking of a big project and affordable enough for India to warrant purchase from this source. Keeping in the backdrop the geopolitical, the socio economic condition and the large dependency of Nepal on its water as a source of income, India could plan at a price which is more inclined towards the interest of Nepal.



The majority of South Asia's water problem is not attributable to an actual shortage, but rather is a result of poor water governance. As per comparative analysis conducted by the World Bank, it shows that water has never been a critical resource in the sub continent baring Pakistan. The projected water availability of all the Himalayan water fed countries in fact indicates a surplus of water. The socio economic indicator and projected water demand/ availability as per survey in 2001 have been indicated as under

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