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India's Modi in Nepal to deepen energy, trade ties

Paavan Mathema

India's Prime Minister Narendra Modi on Sunday sought to secure energy deals with Nepal at the start of a two-day visit aimed at boosting New Delhi's influence in a neighbourhood increasingly wooed by Beijing.

In an address to Nepal's parliament, Modi announced $1 billion as a concessional line of credit to the impoverished nation as he attempted to strengthen economic and diplomatic ties between the two neighbours.

"Nepal can free India of its darkness with its electricity," said Modi, whose government has pledged to end the country's frequent blackouts.

"But we don't want free electricity, we want to buy it. Just by selling electricity to India, Nepal can find a place in the developed countries of the world," he said.

Modi told lawmakers that India and Nepal have relations as "old as the Himalayas and the Ganga", after he arrived in Kathmandu for the first bilateral visit by an Indian prime minister in 17 years.

The right-wing nationalist has sought to shore up support with India's neighbours since sweeping to power in May's national elections, in a bid to check China's sway in the region.

Modi held talks with Nepal's Prime Minister Sushil Koirala during which he pushed to revive stalled power projects including developing hydropower plants using Nepal's abundant water resources and Indian investment.

Earlier proposals to develop joint ventures between the two countries have faced delays due to disagreements over perceived threats to Nepalese sovereignty, allowing rival China to step into the breach.

- Energy-hungry India -

Nepal's Finance Minister Ram Sharan Mahat said the two leaders agreed to fast forward a long-stalled plan to develop a 900-megawatt project on Nepal's Karnali river to provide power to both energy-starved countries.

The joint venture signed between Kathmandu and Indian infrastructure giant GMR in 2008 would be approved and signed within 45 days, Mahat told reporters.

During the bilateral talks, Modi also offered $1 billion worth of concessional loans to help develop Nepal's infrastructure, Mahat said.

"He (Modi) offered $1 billion line of credit towards our infrastructure, including hydropower and roads," he said.

They also agreed to commence work on a 6,480-megawatt hydropower plant on the Mahakali river, part of a treaty originally signed in 1996.

New Delhi is Kathmandu's sole provider of fuel and its biggest trading partner, accounting for a massive 47 percent of foreign direct investment in the country.

Although India has traditionally exerted huge influence in Nepal, Beijing has recently intensified its engagement with the Himalayan nation, pumping billions of dollars into infrastructure projects ranging from roads to hydropower plants.

In a sign of his ambition to bolster India's standing in South Asia, Modi said New Delhi had a responsibility to help its neighbours "fight poverty".

"India feels that it is our responsibility, this isn't charity, it is our responsibility," he told lawmakers.

"Our neighbouring countries are our friends and brothers, and we will help in their journey of development," he said.

Koirala earlier greeted Modi at Kathmandu's international airport, where he received a 19-gun salute while an army band played.

A devout Hindu, Modi will offer prayers on Monday at the Pashupatinath temple complex, a UNESCO World Heritage site near Kathmandu that attracts tens of thousands of pilgrims every year, many from India.

During his speech to parliament, Modi urged Nepal's politicians to work together to end a prolonged deadlock that has seen the constituent assembly, which also serves as parliament, struggle to draft a new constitution for the country.

"A constitution always unites, it never divides," Modi said.

Nepal has endured prolonged political limbo since 2006 when former rebel Maoists laid down arms and signed a peace deal, paving the way for constituent assembly polls two years later.