Economic and human developments in most of the northern states of India, like Bihar, and their neighbour Nepal, have been lacklustre in recent decades. They constitute one of the most deprived regions of the world. In India, four northern states (Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh) are known as BIMARU (meaning sick in Hindi). Socially and economically, their performance, as well as that of Nepal, have left much to be desired.

Bihar is not exactly a small state. With a population of 103 million, it is nearly four times as populous as Nepal. The per capita income in Bihar was only 40.6 percent of the Indian average in 2014-15, and nearly one in three of India’s poor lives in the state. The situation is much worse in north Bihar, which shares a border with Nepal.

Nepal shares many similar characteristics. One in four Nepali lives below the poverty line and nearly 80 percent of the population lives in rural areas. In the mid-west and the far-west, rural poverty is around 45 percent, somewhat similar to rural north Bihar. As in the case of Nepal, agriculture is the largest employment sector. This is 80 percent in the case of Bihar, which however contributes only 20 percent to GDP. Both areas suffer from a lack of assured water supply.

Unemployment and underemployment are endemic in Nepal and north Bihar. People migrate to find employment: Biharis to other Indian states and Nepalis to wealthier Middle Eastern and Southeast Asian countries. They are mostly in ‘3D jobs’: dirty, difficult and dangerous.

Hydropower and irrigation

A good starting point to improve the economic situation in both Bihar and Nepal could be development of transboundary rivers, which have huge hydropower and irrigation potential. Properly planned, transboundary rivers can act as an engine for regional development for both of them. Nepal has a very large hydropower potential (42,133 MW), only 2 percent of which has been developed. India’s potential is 150,000 MW and 73 percent has yet to be developed. Since generating hydropower is a non-consumptive use of water, it can be used for irrigation after power generation.

Development of Nepal and Bihar could start with the Koshi River basin, Nepal’s largest river basin. The 88,000 sq km basin is home to over 40 million people. It has enormous hydropower and irrigation potential. In India, its catchment covers only one state, Bihar. This is a unique advantage since water is a state subject in India. All other major transboundary river basins in Nepal and India cover more than one Indian states. If two or more states are involved, the complexities of even reaching an agreement between them and then the Indian Government, and finally Nepal, are likely to increase by several orders of magnitude.

A good development plan, with structural and non-structural flood control measures, will significantly improve economic conditions of millions of people in the Koshi basin.

In order to reduce flood hazards, under the 1954 Koshi Treaty, India designed, built and maintains the Koshi barrage in Nepal, as well as 32 km stretch of embankments in the Nepali territory. After the structures were completed in 1959, high sediment loads of the river had nowhere to go and thus got deposited on the river bed. Over time, the bed level of the Koshi River in many places became 4m higher than the surrounding land. Like the Yellow River of China, Koshi became a “hanging river” for similar reasons.

2008 floods

On August 18, 2008, the Koshi embankment was breached. It was the worst flood disaster in India in 50 years and was declared a “national calamity”. The flood affected 3.3 million people and caused over $1.2 billion of damages. Crops were lost in some 600,000 acres of land, affecting 500,000 farmers. Some 300,000 houses were damaged.

Surprisingly, the 2008 flood was not particularly high. It was below average discharge of the previous year. Because of endemic corruption of the Indian and Nepali contractors, politicians, and bureaucrats, embankments were neither properly constructed, nor properly monitored and maintained. A breached embankment was thus a disaster in waiting.

The Koshi Treaty has fundamental structural problems. Bihar’s Water Resources Department (WRD) is responsible for monitoring and maintaining the embankments in Nepal. Yet, WRD cannot even communicate directly with the Nepal government. It has to go through India’s government, thus contributing to serious delays during flood emergencies.

Irrespective of past difficulties, India and Nepal need to forge better relations and formulate and implement sustainable plans for managing their transboundary rivers, especially Koshi. This will be immensely beneficial to both countries.

Ending poverty

The timing seems to be right with the current improved relations between Bangladesh, Bhutan, India and Nepal (BBIN). BBIN subgroup met in Dhaka recently, and agreed to work on specific water projects, electricity trade, inter-grid connectivity, flood forecasting, etc. Conceptually, it would be a significant win-win situation for all the four countries if this development makes further progress.

Nepal and Bhutan can develop hydropower which their energy-hungry neighbours, India and Bangladesh, can use after domestic consumption in Nepal and Bhutan is met. India can provide transmission lines in small sections of its territory (about 18 km) so that electricity could find its way to Bangladesh. As quid pro quo, Bangladesh could give transhipment rights through its territory so that goods could be transported by road to north-eastern India. With some give and take, a regional agreement could be reached by the four countries, which would significantly improve their economic and social conditions. Such an agreement has the potential to increase India’s trade with South Asia by about 60 percent.

This integration and cooperation could be further aided by a neutral and competent ‘honest broker’ in the form of the International Centre for Integrated Mountain Development (ICIMOD), which can provide knowledge-based evidence for formulation of appropriate development policies. ICIMOD, with the support of Australian Aid, has already successfully integrated issues like climate change, land use, sedimentation, and 48-hour flood warning for the Koshi basin. All this knowledge is now available for use in Nepal and Bihar.

Regional cooperation is absolutely essential if millions of people have to move away from poverty. It will not be easy, since decades of mistrust and hostility between Nepal and India have to be overcome. In addition, there is a thriving informal economy. Rent-seekers are doing a roaring business due to inefficiencies, lack of transparency and inadequacy of trade facilities between Nepal and Bihar. These rent-seekers are politically and bureaucratically well-connected. Any attempt to streamline trade and current transportation logistics will be strongly resisted by such vested interest groups.

In addition, border security issues are legitimately becoming important concerns. This may delay regional integration.

Despite these constraints, there is no real alternative but to sustainably develop transboundary rivers like Koshi. This will alleviate poverty for millions of people within a reasonable timeframe.

Biswas is Distinguished Visiting Professor at Lee Kuan Yew School of Public Policy, NUS, Singapore; Tortajada is Senior Research Fellow in the Institute of Water Policy at Lee Kuan Yew School of Public Policy. Both are editors of the International Journal of Water Resources Development and co-founders of the Third World Centre for Water Management, Mexico