In his 2025 book Travails of Nepal’s Water Resources, Ratna Sansar Shrestha explores various treaties and agreements related to the use of water resources, especially in relation to the irrigation and hydropower development in Nepal. Bringing his experiences as chartered accountant, advocate, and services on Butwal Power Company, boards of the Nepal Electricity, the Water Tarrif Fixation Commission (2007-2011), and so on, Shrestha explains the mistakes made in the past and the attitude of leaders at the present and recommends course correction for the future.
In this post, you’ll read about…
What Ratna Sansar Shrestha Explores in the Book
Mistakes Made in the Past
The 1920 Sharda Agreement
The history of Nepal’s shared use of water resources begins with the 1920 Sharda Agreement between Nepal and the British India. Prior to that, in 1909, the main channel of the Sharda (aka the Mahakali River) had shifted eastwards. The British India government ordered a re-alignment of the boundary in 1909, with demarcations completed by February 1912. After that, in 1916, J. Manners Smith, the Resident of British India to Nepal, wrote proposals regarding the construction of a barrage at Gaddachouki-Banbasa in the Mahakali River to the Prime Minister Chandra SJB Rana.
The agreement had following provisions in general:
- Nepal would receive 460 cusecs (13 cumecs) of water from the Sharda Barrage during the rainy season and 150 cusecs (4.25) of water during the dry season.
- The British Indian Government would construct, operate, and maintain the barrage at its own expense. Water provided to Nepal would be free of cost.
- Nepal and India would exchange 4,000 acres of land to India to build the barrage, which would be built on Nepal’s land.
- The duration of the agreement was not fixed, which means it was for perpetuity.
Nepal made some fatal errors in the agreement. Shrestha argues that Chandra SJB Rana did not understand the importance of water resources because the provisions of the Sharda agreement heavily favoured India. Neither did Rana treat the Mahakali River as belonging to Nepal. The agreement implied that the Mahakali River was a shared border river, whereas the Sugauli Treaty of 1816 says that the river completely belongs to Nepal. Also, the fixed amount of water (~1% to 3% of the total water available in the barrage) Nepal was to receive shows how little attention was paid for irrigation of Nepali fields and ultimately, the economic growth of the farmers.
Ratna Sansar Shrestha acknowledges that the only positive aspect of the agreement was the exchange of land between the parties. Nepal received 4000 acres of forested land, which could help earn some money from timber.
The 1954 Koshi Agreement
Following a huge flood that affected Bihar in 1953, the Indian Lok Sabha approved a proposal to control flood in the Koshi River in Nepal. While the Indian parliament approved the proposal as if Nepal were a part of India, Nepal’s Prime Minister Matrika Prasad (MP) Koirala signed the agreement on April 25, 1954, after a one-day negotiation.
The agreement had detrimental effect for Nepal. Not only was a flood-control barrage totally owned and managed by India built in Nepal, drowning Nepal’s land, but irrigation canals and hydropower were also built for India only. Moreover, the agreement stipulated that Nepal had to withdraw from all the projects to utilize the water of the Koshi River basin. Like the Sharda Agreement, no validity period was fixed. This agreement also set a precedent for future agreements, where Nepal has provided its water resources to India without any benefits.
The agreement was amended in December 1966, removing the clause that prohibited the use of water resources in the Koshi River basin. A validity period of 199 years was also set. During negotiations, India had proposed 199 years. Nepal, however, had wanted to set the validity for 99 years only. Just prior to the signing of the amended agreement, a “1” was added to 99 by the Nepali officer, Dwarika Das Shrestha, who was immediately fired.
The 1959 Gandak Agreement
The Gandak Agreement was another blunder. Bishweshwar Prasad (BP) Koirala, who attacked his brother for signing the Koshi Agreement, signed another treaty as treacherous as the previous one. Again, Nepal’s land was inundated by the Gandak River while only India benefited from flood control and use of water resources in irrigation and hydropower. Again, Nepal lost its right to the Gandaki River basin. Again, no validity period was set.
The agreement had come into existence after promises from BP Koirala that Indian investments in the project would benefit Nepal and threats from the Indian Prime Minister Jawaharlal Nehru that assistance promised to Nepal would not be provided. It was amended in on April 30, 1964. One of the major amendments was Nepal regaining the rights to use water resources in the Gandaki River basin. The amendment, however, did not set a validity period.
The 1991 Tanakpur Understanding and the 1996 Mahakali Treaty
After the Sarada Barrage dilapidated, India proposed to build a new barrage in Tanakpur, a town in Uttarakhand during the end times of the Panchayat system in 1989. Following the lapse of the Trade and Transit Treaty, India had economically blockaded Nepal. India had used the Tanakpur project as a bargain, but Nepal rejected the proposal. In December 1991, India again bargained the Tanakpur Understanding with the Treaty of Trade and Transit when Girija Prasad (GP) Koirala, the brother of MP and BP Koirala, became the Prime Minister.
A widespread protest followed, including a demand that the Understanding had to be ratified by the Parliament. The opposition in the Parliament also protested and occupied the rostrum for about 8 hours. PM Koirala insisted that it did not require parliamentary ratification since it was merely an understanding and not a treaty. Although the court issued a mandamus order directing the government to have the Understanding ratified by the parliament, the issue died out.
The controversy of Tanakpur Understanding was soon outshone by the Treaty concerning the Integrated Development of the Mahakali River Including Sarada Barrage, Tanakpur Barrage and Pancheswar Project, commonly known as the Mahakali Treaty. What began as the proposal to amend the Understanding eventually degraded into one of the worst treaties for Nepal.
Contrary to the Sugauli and other previous treaties, the Mahakali Treaty established the Mahakali as a shared border river. Whereas Nepal had 100% rights over the river prior to the Mahakali Treaty, now it has access to the “one-half of existing consumptive uses of the waters.” Calculations by Ratna Sansar Shrestha show that Nepal receives only 0.41% of the total available flow in the Mahakali because of the limited consumptive use blunderously settled by Chandra SJB Rana in the 1920 Sharda Agreement. Since the headwaters of the Mahakali was not established by the treaty, it also resulted in compromising of Nepal’s territorial sovereignty.
Despite high treason by Nepal’s leaders, there is some hope. First, the projects mentioned in the treaty haven’t moved forward mostly because of protests in Uttarakhand where they are based. Compensation for the inundated areas. Another silver lining is that the treaty is valid for 75 years only of which 29 years have passed since the exchange of Instruments of Ratification on June 4, 1997.
Stances during the Panchayat Era
Nepal had strong stance on the use of water resources during the Panchayat Rule (1960-1990). As mentioned before, during the reign of King Mahendra, the Koshi and the Gandak Treaty were amended despite shortcomings. No attempts for amendments have been made thereafter.
During the reign of King Birendra, proposals regarding Tankpur and use of Nepal’s water resources by India through renewed Treaty of Friendship were rejected even though they were used as bargains to conduct a new trade and transit treaty. These examples show that the Panchayat regime was more careful in dealing with India on the matters of water resources.
Attitude at the Present
Nepal’s leadership and bureaucracy at the present dream of making Nepal rich by exporting electricity. The dream is not realistic, though. Nepal shares its borders only with India and China and electricity export is viable mostly with India because of the plain southern borders. However, efficient and effective transmission lines are yet to develop. Moreover, exports to India have yielded an average of 6.35 cents per kWh whereas imports have been made at an average of about 30.6 cents per kWh.
Further, Nepal benefits less from exporting electricity. According to a study by USAID, domestic industrial consumption of electricity in Nepal adds value of an average of 86 cents per kWh. Consuming electricity within Nepal also encourages industrialization. Also, increasing the use of electricity in transportation reduces the import of petroleum, and thus decreases the trade deficit.
Despite such benefits of electrification, Nepal has signed agreement on export-oriented projects, where the generated power will be mostly exported to India.
| Project Name | Installed Capacity (in MW) | Type of Project |
| Arun 3 | 900 | Peaking run-of-river |
| Arun 4 | 490 | Run-of-river |
| Lower Arun | 679 | Run-of-river |
| Upper Karnali | 900 | Run-of-river |
| West Seti | 750 | Storage |
| Seti River 6 | 450 | Cascade project of West Seti |
| Phukot Karnali | 480 | Run-of-river |
| 4649 |
Moreover, in June 2024, Nepal has also signed an agreement with India to export 10,000 MW of electricity in 10 years. This over-ambitious agreement is impossible to achieve because of generation and transmission constraints.
Electricity transmission projects have also been export-oriented. In 2017, Nepal entered an anti-national compact with the Millenium Challenge Corporation (MCC). One of the projects to be accomplished is the transmission project primarily focused on exporting electricity to India.
Recommendations for the Future
Ratna Sansar Shrestha recommends the following elements for the use of water resources in Nepal:
- Claim the rights related to upstream river water according to the Harmon Doctrine. The doctrine, first proposed by the US Attorney General Judson Harmon in 1895 to resolve the dispute over the waters of the Rio Grande with Mexico, grants absolute sovereignty in matters related to the water resources to the country upstream. As a result, it is not obliged to provide water to the lower riparian countries.
- Monetize regulated or lean season augmented flow. In 1957, the then Prime Minsiter of Nepal K.I. Singh had proposed to charge INR 1 per acre for the regulated flow from the Gandak Barrage, but the agreement does not have such a provision. In 1986, Lesotho and South Africa entered into a treaty, according to which Lesotho received USD 69 million in 2020 for providing 780 million cubic meters of water from the Senqu River to South Africa. Nepal should apply these precedents in future agreements.
- Monetize flood control benefits. If a physical structure is built in Nepal to control floods downstream (India or Bangladesh), Nepal should ask money from the beneficiaries.
- No treaty should be perpetual. The term of the treaty should not exceed the design life of the physical structures to be constructed.
- Ensure parliamentary ratification for all sorts of treaty and agreements where Nepal’s water resources are used to benefit foreign countries. Ratification should be done not only for international treaties but for those involving any legal person, including private companies and non-governmental organizations.
- Consume electricity domestically to promote industrialization, reduce import of petroleum and trade deficit. Utilize electricity for hosting data centres and mining Bitcoin like Bhutan. Nepal’s readiness for data centres has been explored previously in the article: Is a volatile Nepal ready for AI data centres in 2026?
Overall Verdict on the Book
Travails of Nepal’s Water Resources is well-researched and discusses important historical, legal and financial aspects regarding the utilization of water resources in Nepal. Exposing the errors in the past, condemning export-oriented mentality at the present, and providing practical suggestions for the future, the book urges the policymakers to correct the mistakes. It also inspired me to study more on the history of the Mahakali Treaty which has been presented as a series on my other website.
Some points, such as the Harmon doctrine, Lesotho precedent, Nepal’s export-oriented mentality, and call for industrialization repeat in almost every chapter. The repetitions not only bore the readers but have also increased the size of the book. Despite these minor complaints, I reckon that it is one of the most important books for policymakers.
Book Details
Title: TRAVAILS OF NEPAL’S WATER RESOURCES: A Century of Misadventure & Mal-Development
Author: Ratna Sansar Shrestha
Published Year: 2025
Publisher: Ekta Books Distributors Pvt. Ltd., Kathmandu
Price: Rs. 950
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