India seeks extension of aid agreement with Nepal

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India has sought a three-year extension of an agreement with Nepal under which it can directly pump in funds for flagship projects worth billions of rupees without requiring to go through official channels.

Among Nepal's numerous donors, India is the only country enjoying such a facility and privilege under which the Indian embassy in Kathmandu can directly fund projects less than Rs 3 crore (over $ 480,000) on its own without any approval from the Nepalese authorities, according to Indian Embassy sources.

The arrangement was reached through a a memorandum of understanding (MoU) first signed between the two countries about a decade ago.

The Indian Embassy here has made a request to Nepal's Finance Ministry, seeking a three-year extension of the bilateral agreement that enables India to provide aid of up to Rs 3 crore which is equivalent to Nepali Rupees 4.8 crore for each project through district development committees (DDCs) in Nepal.

The then government in November 2003, for the first time, gave such special privileges to India which was renewed last time in August, 2011.

The validity of the current MoU is until August 5, 2014.

So far, India has funded 450 such small projects across Nepal injecting billions of rupees which is often criticised in Kathmandu as being used for creating its influence and loyalty in Nepal.

India does not enjoy such facilities with any other country.

Nepal's hardliner Maoist leaders have been seeking cancellation of the agreement with India and have often instigated China to seek a similar facility.

"This provision for Indian grants has been controversial as the funds are not channeled through the government's budgetary system. Politically, it has been dubbed as an 'instrument' to wield Indian influence over local communities in Nepal," The Kathmnandu Post said in a report.

India has been funding projects of hospitals, schools, libraries, bridges, drinking water among others under the title of 'Nepal-India economic cooperation'.

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